Banks the mastermind and the center of financial and economic equilibrium

The three main functions of banks: saving and investing, managing funds, and financing operations


Banks promote trade and contribute in development, which is reflected on the lives of individuals and societies

In the context of its participation in the banking awareness campaign "Diraya", National Bank of Kuwait (NBK) sheds light in this article on the instrumental role of banks as one of the mainstays of the economy by facilitating economic and financial transactions.

Let's imagine a world without banks, how it would be like? Where would we borrow money and what would we do with our savings? Would we be able to borrow or save as much as we need, when we need, and in a form that suits our needs?

Banks play a key role in the financial and economic system, as they help to ensure smooth operation of the economies. They receive the savings of individuals and business institutions, then use them to finance individuals and other business institutions, and these financial services help boost the efficiency of the economy, promote trade and contribute to economic development, which is ultimately reflected on the lives of individuals and societies.

Banks’ business includes three main functions: saving and investment, managing funds, and financing operations. Banks also contribute to facilitating individuals' access to many benefits such as: educational opportunities, healthcare, housing, transportation, job opportunities, and other aspects of the quality of life in addition to core banking services.

Banks also provide advisory services to individuals and commercial institutions and play the role of mediator in commercial and industrial businesses, and obtaining bank accounts is the main pillar of financial inclusion, as they allow their holders to keep money, send and receive cash, thus acting as a gateway to other financial services.

In addition, banks provide advisory services to individuals and business institutions and act as intermediaries in commercial and industrial businesses, and having bank accounts is the key foundation of financial inclusion, as they allow account holders to keep their money, send and receive cash, thus acting as a gateway to other financial services.

Banks’ business is governed by the regulatory authority, namely the central bank, which monitors and regulates the business of banking and financial institutions by setting prudent monetary and supervisory policies, as well as taking all measures to ensure the protection of banks’ customers.


A bank’s most important role may be matching up creditors and borrowers, but banks are also essential to the domestic and international payments system. Not only do individuals, businesses, and governments need somewhere to deposit and borrow money, they need to move funds around—for example, banks play a central role in processing payments, from the tiniest of personal cheques to large-value electronic payments between banks.

Banks also play a central role in the transmission of monetary policy, one of the government’s most important tools for achieving economic growth. The central bank controls the money supply at the national level, while banks facilitate the flow of money in the markets within which they operate.

Economic Development

Banks are vital institutions in any society as they significantly contribute to developing the economy by facilitating business. By providing credit that fuels economic activity, companies can invest beyond the cash available with them. Also, families can buy houses without paying the full cost in advance. Banks also enable governments to facilitate their spending and support investment in infrastructure and planned projects.

Banks also contribute to providing liquidity for companies and households by providing unexpected cash needs, as banks are the main direct provider of liquidity by granting credit lines.

Banks are considered the basis for rapid economic development, by providing loans of different tenures for vital sectors such as agriculture, industry and trade, in addition to providing industrial, agricultural and commercial advice, thus facilitating the process of economic development.

Given the crucial role of the private sector in accelerating the pace of economic growth, banks increase the private sector’s participation in economic development by making loans easily available at a reasonable interest rate, as the expansion of the financial sector encourages entrepreneurs to invest, which contributes to promoting entrepreneurship.

Furthermore, banks facilitate domestic and international trade, since a large part of the trade is made on credit. Banks provide references and guarantees, on behalf of their customers, based on which sellers can supply goods on credit, and this is particularly important in international trade where the two parties are in different countries and often unknown to each other.

A Pivotal Role

During the crisis of the Covid-19 pandemic, the crucial role of the Kuwaiti banking sector was manifested in mitigating the fallout of the crisis on the Kuwaiti economy, as the Central Bank of Kuwait and Kuwaiti banks played a pivotal role to mitigate its impact by ensuring the financing of basic commodities in vital sectors such as the foodstuff and medical sectors. In addition, they provided support to SMEs owners by stopping fees on POS terminals, ATMs and digital channels for 3 months, as well as raised the limit of contactless payments.

Banks have also supported individuals by deferring the payments of consumer and installment loan and credit card installments for 6 months for all banks’ customers, without any resulting interest, profits, or other fees, as well as granting soft loans as part of the commitment to their national duties.

The number of banks operating in Kuwait is 23, including 11 Kuwaiti banks (5 conventional banks, 5 Islamic banks, and 1 specialized bank). This is in addition to 12 branches of foreign banks (11 conventional banks and 1 Islamic bank). The sector as a whole is subject to the supervision of the Central Bank of Kuwait to ensure its soundness through the application of stringent regulatory rules and requirement of precautionary ratios, such as lending limits, concentration ratios, investment limits, liquidity and capital adequacy ratios. Over the past decade, the sector has shown strong resilience and high levels of financial soundness.


It is worth mentioning that the banking awareness campaign "Diraya" has recently been launched in an initiative from the Central Bank of Kuwait and Kuwait Banking Association, with a view to promote credit, financial and banking culture among banking sector customers and the society at large.

The campaign comprises many topics such as the process of borrowing, bank cards, awareness of the rights of special needs customers, as well as advice related to cybersecurity and the protection of bank accounts. It also provides guidance regarding complaint submission mechanisms, and protection of customers’ rights, and introduction of the functions of the banking sector and its role in promoting and developing the economy, so that all segments of society become more familiar with banking and financial transactions.

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