Better use of financial resources needed

Development means impressive strides on social and economic indicators of a country. The social indicators are infant mortality rate, life expectancy, health services (immunisation), education, women's empowerment etc. Economic indicators are GDP, employment rate, literacy rate, poverty reduction and infrastructure development etc. Financial resources are needed to finance the march of development. Finance means collection and mobilisation of cash resources and also its effective utilisation. This view is referred to as macro finance view.
Development takes place when social welfare is maximised. Its prime condition is to transfer resources from surplus consumers to potential investors. Here lies the essence of financial functions in an economy. Financial resources in the form of deposits are mobilised from savers to investors through financial institutions which create legal and competitive loan and deposit markets.
Without a financial system, transformation of deposit into loan incurs a huge cost. Without it, a lender has to locate borrowers and collect information from them regarding creditworthiness which is costly and time-consuming to an individual lender. The financial institutions reduce costs associated with information and transactions and thereby influence savings rate, investment decisions, technological innovation and long-run growth rate. The basic two roles of finance in development are: Mobilisation of financial resources and Effective utilisation of resources. Mobilisation involves collecting deposit from disparate savers and providing it to investors in the form of loan. Financial systems that are more effective at mobilising the savings of individuals can profoundly effect economic development.
 Finance is also concerned with effective utilisation of resources. Because, if loan money is not properly utilised, the bad loan will not contribute to the country's economic growth. For example, if loan is given to an awful speculator who would like to endow the money in risky and noncompliant activities like smuggling, then this bad loan will blemish the country's economic growth.
Bangladesh's achievements are greater than those of our neighbouring countries in many areas. These phenomena signify the role of our banks, non-bank financial institutions and microfinance entities to mobilise money from surplus consumers for fiduciary entrepreneurs. But recent scams of several banks have raised concerns over non-effective utilisation of resources.
The writer is a student of the Department Of Finance,                      the University Of Dhaka                   shovonimran@gmail.com