Direct and Indirect Financing Channels

Banks, which can be defined as financial institutions, which are licensed as receivers of

deposits, play a major role when it comes to financing. Direct financing and indirect financing

channels rely heavily on the existence of banks and their services. Banks play a major function in

the economy as they act as the intermediaries between depositors and borrowers (Cull,

Demirgüç-Kunt and Lin, 2013). This process is very crucial in the economy because it helps in

the circulation of money and thereby enable the economy to continue running. Without economic

activities, a country’s economy would come to a stall and thereby lead to the collapse of the

entire country’s economy. However, the existence of banks facilitates the running of the

economy and thereby the prosperity of any country…