Financial Institution Basics
According to the World Bank most recent Findex data, the Middle East and North Africa (MENA) have the lowest percentages of adults with a formal account (18%) and of people on lower incomes with formal access to financial services (9%). 1
Banking — all the services offered by a bank or credit union — allows individuals to deposit funds, transfer money and complete transactions in a secure place with fair terms. Knowing how financial institutions operate and what services they provide is crucial to making the most of your money.
Before delving into the nitty-gritty of how financial institutions function, it’s important to understand what a bank is and what services they offer:
Banks are for-profit public companies owned by government and private shareholders who have purchased company stock. Compared with credit unions, your access to banks is generally greater and you have a wider range of services as an account holder. If you’re looking for an institution that offers online and mobile banking or international ATMs, banks are often better.
Just like any other business, a financial institution sells products to earn money so that it can run its operations and provide services. To understand how financial institutions operate, know that when you deposit money in a bank it gets pooled into a shared fund along with everyone else's.
What are the benefits of banking?
Security
Keeping your money in cash puts it at greater risk for theft or loss.
Making More Money
Banking allows you to make money with your money. It may sound too good to be true, but with interest, you can earn simply by depositing funds into an account. The bank pays you a percentage of interest on your balance, which is added directly to your account on a monthly basis.
Convenience
Money in the bank can be accessed from anywhere, whether it’s online, through an ATM, or just a call to your bank’s customer service department. With a bank account, you can arrange for your employer to directly deposit your paycheck automatically into your account, so it’s easier and faster for you to get paid.
Budgeting
Reviewing a bank statement — a record of the balance in your bank account and the amounts that have been paid into it and withdrawn from it — makes it easier to manage your finances and stick to a budget. With bank statements, you'll know exactly where your money is going, whether it is toward a car payment or your night out with friends.