Question

Explain 3 functions of financial intermediaries

Explain 3 functions of financial intermediaries

Homework Answers

Answer #1

The institutions/ agencies that channel funds from savers (households) to users (Industries) are called the financial intermediaries, some of its functions are:-

  1. Act as middleman/ agent :- The financial intermediaries take's money from the lenders and provide loans to the borrowers directly and indirectly. They take certain amount of the deal as there commission.
  2. Ensuring safety of the investments:- The financial intermediaries invest the investors money in wide range of portfolios and hence suffers less risks. Eg:- Insuarance Companies, Pension Funds etc.
  3. Economies of scale:- They take part in creating the economies of scale by giving loans in large amount to various industries/ bussinesses, as this institutions are big in size, having many branches, spends large amount on advertisements, they find perspective loan takers.
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