Document Type

Thesis - Open Access

Award Date


Degree Name

Master of Science (MS)




Contemporary economic growth theories generally emphasize the importance of capital accumulation as requirement for growth. Capital accumulation is possible by diversion of a portion of present production from consumption into production of capital goods. If a portion is diverted from consumption, the dollar value of consumption goods available is less than the total income of the factors of production. The consumer is forced to forgo consumption and save part of his income. That portion of income which is saved by the firm may be directly invested because the firm is the investing institution. The savings of the other sectors must be channeled to a firm before they can be invested. A financial intermediary is useful to like the saver with the investor. It would be possible for the transfer of savings to the investor to be accomplished on an individual to individual basis. This is not very practical. A financial structure which makes these transfers has developed and is capable of handling large sums of savings. Savings are transferred not only from individuals to firms but often from on geographical region to another. Commercial banks are but one segment of this financial structure. Providing a medium for the transfer of savings to investors is only one of the functions of commercial banks. It is this function, the extension of credit, made possible because people save money or temporarily hold money in the form of deposits in banks, with which this study is concerned. Commercial banks can lend money, thereby creating new bank deposits, by using the money deposited and the capital accounts of the bank to back the newly created deposits. Banks, acting as a link between savers and investors, are important to economic growth because accumulation is a factor in economic growth. Individual bankers have control over how much will be loaned and for what purposes the loans will be used. The importance of banks as a supplier of credit is evident from the amount of credit they supplied to the agricultural non real estate credit market because these loans are of considerable duration which limits the flexibility of a bank’s credit policy. Banks supplied four per cent of the real estate credit in 1966.

Library of Congress Subject Headings

Economic fhistory -- South Dakota
Banks and banking -- South Dakota
Credit -- South Dakota




South Dakota State University