How do bank loans help the nation’s economy?

Question:- How do bank loans help the nation’s economy?

Answer:

Thus, bank credit is recognized as one of the primary economy’s sources and key factors for its formation. Banks help borrowers to gain loans when they extend credit instruments to individuals and business makes more money and credit available in the economy. This is in a way that allows users to buy more products with the available money, allows people of business to start new companies and projects, and existing business firms to expand their activities, run their operations and introduce new products in the market.

Bank loans help in the growth of the economy by enabling households to make expenditures on dolls, cars and other household items through loans which they can easily afford to pay, businesses can be able to get look for capital for various productive uses such as hiring employees or meeting their operational expenses among other uses. This process of lending, spending and investing turns into a cycle which brings about income multiplier, employment multiplier and financial multiplier thus stimulating the economy of the nation.