Financial Intermediaries

Topics: Bank, Investment, Financial services Pages: 3 (627 words) Published: January 11, 2013
Financial Management



A financial intermediary is an institution, firm or individual who performs intermediation between two or more parties in a financial context. Typically the first party is a provider of a product or service and the second party is a consumer or customer. Financial Intermediaries are financial institutions that accept money from savers and use those funds to make loans and other financial investment in their own name. These intermediaries come between ultimate borrowers and lenders by transforming direct claims into indirect claims. Financial intermediaries purchase direct securities and in turn, issue their own indirect securities to the public.

Financial Intermediation:
Financial intermediation is a process of savers depositing funds with financial intermediaries and letting the intermediaries do the lending to the ultimate investors. The financial intermediary sector of Pakistan is composed of the money market and capital markets, with primary and secondary dealers. Key FIs are comprised of State Bank of Pakistan (SBP), commercial banks, non-bank financial institutions (NBFIs) and insurance companies. Financial Intermediaries are providing credit to Pakistani industry, agriculture, housing and other sectors.

Types of Financial Intermediaries:

Financial intermediaries include:
* Deposit Institutions
* Building societies
* Credit unions
* Financial advisors or brokers
* Insurance companies
* Collective investment schemes
* Pension funds

Deposit Institutions:
These institutions include:
A banker or bank is a financial institution that acts as a payment agents for customers, and borrows and lends money. Banks acts as a payment agents by conducting agents checking or current accounts for customers, paying cheques drawn by customers on the bank and collecting cheques deposited to customers current accounts. Banks also enable...
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