Question

My response: Financial intermediation is the process by which financial institutions accept savings from households and lend the savings to households, businesses, and the government. It is a middleman role that brings savers and borrowers together.

Question:1) Explain the role of financial intermediation.

Please be more specific in your response.& In your own words

Answer 1

Financial intermediary helps a company by acting as an agent to transfer the money in between two or more parties involved in an agreement or in a transaction. It ensures the liquidity, transfer of the funds, safety of the funds and the reliability. Often financial intermediary agents provide the credit default payments incase any party is yet to pay back to the other party or if it defaults in the payment. The long process cannot be handled by the usual busy parties like banks and other financial institutions and this process can be served by taking intermediaries help alone. This is a finest platform where the lenders can obtain investors and investors can look upto the lenders for the loan. Banks also acts as financial intermediary to help a small time business owner to manage his bank overdrafts or debts taken for a shorter period of time.