IGCSE Economics 0455: Money & Banking
Maybe we should start a bank!
Scenario:
You are part of a team tasked with launching a new commercial bank to compete against established banks in the economy. You realized that the existing competition offers poor customer service and relatively high interest rates for borrowers and relatively low interest rates for savers! Additionally, many elderly cannot access their local bank because it has been closed and now only, online access remains!
Your goal is to design a bank that will attract customers, meet the needs of the economy, and be profitable!
Start by discussing these points that friends made:
“All you need to do is offer 8% interest and you’ll attract all the money”
“How on earth will you gain people’s trust initially”!
“When the economy is growing rapidly, we’ll make easy money”
Phase 1: Research and Planning
Research key functions of commercial banks:
- What basic services do commercial banks offer?
- How is a commercial bank different from a central bank?
- What types of loans will you offer? Loans for businesses or individuals (or both)?
- What conditions will be attached to the loans? Do you require collateral?
- How will you facilitate payments (e.g., offering online banking, mobile banking)?
- Will you have a physical presence or just online? Why have you decided this?
- Consider factors affecting borrowing in your economy:
- What will your interest rates be? Why?
- How will you attract borrowers (low-income vs. high-income clients)?
- What external factors might affect your customers’ ability to borrow (e.g., inflation, income levels)?
Phase 2: Design Your Bank
Create a business plan that answers these questions:
- What will your bank be called, and what is your unique selling point?
- Example: “EasyBank – Making Loans Accessible to All”
- What savings and loan products will you provide?
- How will these meet customer needs (e.g., competitive interest rates, flexible repayment)?
- Will you lend more to businesses, individuals, or both? Why?
- How will you ensure profitability while minimizing risk?
- What innovative features will attract customers (e.g., student loans, ethical lending policies)?
