Financial Intermediaries-
Suppose you want to start a computer
repair business and at the same time a woman named Susan, who lives in another
state, has money to invest in a start-up business. If you and Susan could
somehow cross paths, she could invest in your business and you could fulfill
your dream of entrepreneurship. Since you probably would never find Susan on
your own, because she lives in another state, there's a process called
financial intermediation that can ensure both of you meet your goals.
Financial intermediation connects
borrowers with savers; these intermediates help channel funds from one person,
or entity, to another. The players in this process - borrowers and savers.
A financial intermediary is
an institution or individual that serves as a middleman for different parties
in a financial transaction
Types of financial intermediaries
According to the dominant economic
view of monetary operations, the following institutions are or can
act as financial intermediaries:
- Banks
- Mutual savings banks
- Savings banks
- Building societies
- Credit unions
- Financial advisers or brokers
- Insurance companies
- Collective investment schemes
- Pension funds
- cooperative societies
- Stock exchanges
INSTRUMENTS TRADED IN THE
CAPITAL MARKET
1. Debt
Instruments
2. Equities
(also called Common Stock)
3. Preference
Shares
4. Derivatives
