Capital creation is the accumulation of capital through profitability.

Capital creation is the direct result of financing. When we finance other businesses, we actually facilitate capital creation for those businesses.

After obtaining finance from us, the borrowers invest the finance in various productive ways and get profits. In this way, they create capital for themselves by utilizing the finance in productive ways. Thus, we facilitate capital creation on part of the borrowers. The borrowers acquire and create various assets by utilizing the profits. The financial strength improves and the business also gradually grows in size though such capital creation.

There are generally 3 stages of capital formation -

1- Creation of savings and increase in the amount of savings

2 - Mobilization of savings

3 - Investment of savings