Positive Role (Implications) of foreign commercial banks in developing countries
- They create employment opportunities. Foreign commercial banks employment to the local population in form of bank accountants, credit officers, marketing managers, cleaners etc. This increases the incomes of the people hence better standards of living.
- They help to increase efficiency in the banking sector. Foreign banks create a competitive atmosphere in the local banking sector by employing efficient techniques of service delivery. This helps to improve on the quality of the services of the local banks.
- They are a source of government revenue through taxation. Foreign commercial banks help to widen the tax base in form of taxes imposed on their profits, employment incomes and other business activities created hence generating more tax revenue to the government. The revenue realized is used to construct social and economic infrastructure like hospitals, roads, schools etc.
- They increase capital inflow in the country. Foreign commercial banks help to fill the savings-investment gap in developing countries by extending credit in form of loans to the local people. This increases investments in the country hence economic growth and development.
- They help to close the foreign exchange gap. Foreign commercial banks facilitate foreign exchange inflow in developing countries. This increases the country’s foreign exchange reserves and its monetary base. Such foreign exchange is used to import capital and consumer goods which cannot be produced locally.
- They facilitate the development of social and economic infrastructure. Foreign commercial banks promote the development of the social and economic infrastructures in form of roads, schools, hotels, hospitals etc. and this leads to economic development.
- 7. They promote technological development in the banking Foreign commercial banks facilitate technological progress through technology transfer from developed to developing countries. Local banks learn and adopt the modem techniques hence improving on their efficiency in service delivery.
- They promote the exploitation and utilization of the idle local resources. This is because they help to attract foreign investors to invest their capital in the country. This improves on the productive capacities in the economy hence economic growth and development.
- They promote industrial development. Foreign commercial banks help to mobilize financial resources which are used for development of heavy industries like iron and steel industries, electrical engineering etc. Such industries require a lot of capital which is only accessed through borrowing from commercial banks.
- They promote entrepreneurial skills in the economy. The foreign commercial banks help to train the local individuals with the necessary managerial skills required to operate modem banking enterprises. This helps to close the manpower gap in developing countries. In addition, they help to local individuals to get loans and set up business activities.
- They promote good international relationships between their countries of origin and other countries where their business activities are extended. This enhances mutual understandings among countries.
- They help to facilitate and promote international trade. This is because they finance export and import trade by providing foreign exchange and money transfer services to the traders.
CATEGORIES Economics
TAGS Dr. Bbosa Science
