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Role of Finance

The ultimate purpose of finance should be to serve as a tool for human flourishing, enabling individuals and communities to achieve their goals while supporting sustainable economic development that benefits society as a whole.

Functions​

Finance serves several vital functions that benefit society and human development when properly structured and regulated.

Society​

Resource Allocation and Growth Financial intermediation helps allocate capital efficiently throughout the economy by connecting savers with borrowers and investors with opportunities. This enables economic growth by funding promising projects, education, and innovation that would otherwise be constrained by self-financing limitations.

Risk Management and Liquidity The financial system allows for risk diversification across firms, industries, and nations while providing crucial liquidity transformation. This enables entrepreneurs to take calculated risks and savers to maintain access to their funds while supporting long-term investments.

Price Discovery and Efficiency Financial markets facilitate price discovery through arbitrage, helping eliminate price discrimination and ensuring capital flows to its most productive uses. This creates an efficient mechanism for allocating resources across the economy.

Human-Centric Purpose​

Supporting Human Development Finance should fundamentally serve human needs rather than the other way around. This includes:

  • Enabling education through student loans
  • Supporting business creation and innovation
  • Facilitating home ownership
  • Providing retirement security
  • Funding public infrastructure and services

Social Impact The financial system should balance social and financial returns by:

  • Directing capital toward sustainable development
  • Supporting underserved communities through microfinance
  • Enabling responsible investment that considers environmental and social impacts
  • Creating mechanisms for funding social good initiatives

Required Reforms​

Rehumanizing Finance The financial sector needs to reconnect with its foundational purpose of serving society rather than extracting value. This requires:

  • Stronger regulation to prevent predatory practices
  • Greater transparency and democratic oversight
  • Simpler, more direct financial intermediation focused on core functions
  • Balancing profitability with social responsibility
  • Measuring success through human wellbeing metrics beyond just GDP