Malaysian Financial Structure
PB303: BANKING IN MALAYSIA/NAZRI
CHAPTER 1
ROLES
AND
STRUCTURES
OF
THE
FINANCIAL
SYSTEM
IN
MALAYSIA
Roles of Financial Systems a) Financial Intermediation Malaysia has a modern and comprehensive financial system that continues to evolve in response to changing domestic and international conditions. A financial structure consists of two major components; financial institutions and financial markets. Principally, the financial system aims to facilitate the effective use of funds. The financial institution act as an intermediary for the savers called the surplus units and borrowers called the deficit units. Many deposit products have been developed to meet the surplus units’ varying needs. Likewise, many loan products have been developed to meet the deficit units’ varying needs. In simple terms, the intermediation process involves mobilising funds from the economy’s surplus units to its deficit units to aid in enhancing economic development. In this regard, the financial system’s intermediation function has strong linkages with savings and investment decisions that can influence the pace of economic growth
LOAN SURPLUS
DEPOSIT INTERMEDIARIES DEFICIT
PB303: BANKING IN MALAYSIA/NAZRI
CHAPTER 1
Ask yourself as an individual – would you like to be a surplus or deficit unit? The response is most likely to be a surplus unit. Then, if countered by asking, that would you only save to buy a house costing, say – RM100,000? If so, how long would it take to save that much? By the time that much was saved, would the price of the house be the same? Wouldn’t it have gone up due to inflation? Therefore, the better idea would be to borrow, wouldn’t it? Having understood the rationale, one would immediately like to be a deficit unit. Now to view it from both perspectives, when one opens a savings account, one becomes a surplus unit. When the same person takes a housing loan, then he becomes a deficit unit. Therefore in reality, a person
CHAPTER 1
ROLES
AND
STRUCTURES
OF
THE
FINANCIAL
SYSTEM
IN
MALAYSIA
Roles of Financial Systems a) Financial Intermediation Malaysia has a modern and comprehensive financial system that continues to evolve in response to changing domestic and international conditions. A financial structure consists of two major components; financial institutions and financial markets. Principally, the financial system aims to facilitate the effective use of funds. The financial institution act as an intermediary for the savers called the surplus units and borrowers called the deficit units. Many deposit products have been developed to meet the surplus units’ varying needs. Likewise, many loan products have been developed to meet the deficit units’ varying needs. In simple terms, the intermediation process involves mobilising funds from the economy’s surplus units to its deficit units to aid in enhancing economic development. In this regard, the financial system’s intermediation function has strong linkages with savings and investment decisions that can influence the pace of economic growth
LOAN SURPLUS
DEPOSIT INTERMEDIARIES DEFICIT
PB303: BANKING IN MALAYSIA/NAZRI
CHAPTER 1
Ask yourself as an individual – would you like to be a surplus or deficit unit? The response is most likely to be a surplus unit. Then, if countered by asking, that would you only save to buy a house costing, say – RM100,000? If so, how long would it take to save that much? By the time that much was saved, would the price of the house be the same? Wouldn’t it have gone up due to inflation? Therefore, the better idea would be to borrow, wouldn’t it? Having understood the rationale, one would immediately like to be a deficit unit. Now to view it from both perspectives, when one opens a savings account, one becomes a surplus unit. When the same person takes a housing loan, then he becomes a deficit unit. Therefore in reality, a person