Contest Entry | Banking in order to improve people's living standards

Once again an interesting contest by friend @f2i5, about the banking system and how it affects the people's living standards.

Well, according to my knowledge, we can hear about banking from way back in the ancient Greek and Roman empires. Maybe even earlier. I guess you know about the famous Medici Bank in Itali, which started in the late 15th century. So, definitely, there is a huge impact on people and economy form the banking system.

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Banks are not volunteering institutions. One of the most profitable sources despite being government or private. They take deposits from the people who have, and lend again or invest them. Just simple as that.

Name and the type of the bank

Well, there are at least 50 banks in Sri Lanka, including government and Private. Most of them maintain a high reputation with the faith and trust of the people. I, personally have a few Savings accounts in 2 government banks BoC and Peoples, and a private bank named Commercial. I use debit cards in all three and a Credit card from Commercial bank. As my salary comes to the bank of Ceylon (BoC), it's the main one I am using.

alamy.com: Peoples Bank of Sri Lanka

Even though I haven't taken a loan yet, my father used to take loans for his business regularly, from the Peoples Bank. So, I'll tell you more about that experience.

Method of Credit Disbursed

Well, being a government bank the process requires a number of prior documentation parts. Actually, there are various loan schemes, such as personal/ housing/ business/ educational/ professional, etc. We took a personal loan by using the land for the bond. Here we can use reliable personal guarantors as well. And also, if we have good sources of income, we can show them and grant loans as well. Normally banks offer 60% of your income as a monthly installment. This method of repaying is the main thing they consider in the process.

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They perform a valuation of the land from their side to finalize the loan amount. So, we can discuss the repayment period and amount and proceed. But sadly, now the loan interest rates have raised up to 30%, which is not encouraging at all.

Will it help in growing the community's economy?

Well, of course, they help the people's economy in different ways. We can continue a savings account and save something for the future and have good interest in that as well. If it's a fixed account it's more advantageous. But here we should be more intelligent. Earlier in Sri Lanka, we could have up to 16% interest rates in Fixed deposits. Now it's around 21%. But inflation has raised around 70-80%. So, now it's time to rethink whether this is a good move, as fiat currency is depreciating rapidly.

getty images: saving money

Another thing is we can have loans. Sometimes, you may feel taking loans is not a good move. But it's the perspective and what we used it for. Most economists and rich people take loans. But they used it to generate more money, per se investing, starting a business, or buying assets. This loan shouldn't be another liability that we can't afford. Taking a loan for a high rate, and constructing your house isn't always a good move. If the rate is very low, it's not a problem. Otherwise, it will make you repay 2/3 times the amount by making the bank rich. This may seem a bit radical. But it's the place where most middle-class people, like us, got trapped. I know this because my father faced the same situation.

But there is another set of people, who use this chance to generate more money. Banks always help us to have money in case of need, but we should be more intelligent not to trap in this system making debt as stress. So, always think of the way how to handle the debt. Otherwise, you will face what we face now as a country.

Thank You!
Best Regards!