Tertiary Sector of an Economy

The tertiary sector of an economy is a large contributor to its growth. It grows because financial services allow people to save and purchase goods and services. The industry also allows businesses to operate with a free flow of capital and market liquidity. This allows for the growth of companies and the ability to manage risk more efficiently.

The presence of financial services helps in the promotion of domestic as well as foreign trade. Through factoring and forfaiting companies, exports and imports are promoted which leads to increase in sales in the domestic market and also attracts investment from abroad. People who are interested in investing their savings in securities, mutual funds and credit cards can do so with the help of these services. This helps in the growth of their savings as they are able to earn interest on these investments.

Besides banking and insurance, other services are provided by the financial services sector which include investment agencies, stock markets, debt resolution services and critical financial utilities like payment systems and global exchanges for stocks, derivatives and commodities. These financial services are necessary for the dynamism of any economy.

It is important to know the difference between a financial good and a financial service. For example, an orange is a consumer good but an insurance policy is a service. An insurance policy protects a person or business from large expenses, such as an unplanned house fire or an unforeseen natural disaster.

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