Sample Essay

Banks not only engage in credit creation through deposit mobilization and channeling the savings of its customers however. It can also choose to acquire funding via borrowing from other markets such as the short term money market where funds are available at low cost of borrowing with low maturity as well (Allman, 2005).

These sources can be tapped by banks if there is a need for excessive credit in the economy which can be used to advance loans to investors which may accelerate the rate of growth of the economy with a rapid rise in commercial activity. Banks are able to do this because of their size which improves credit rating and their expertise as handlers of funds and in channeling investments.

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