Channelling of savings into investment - Financial
intermediaries enable the savings in the economy (savings of
individuals/households, short-term investments of firms etc.) to be
channelled into their most productive uses. Financial institutions
and banks lend out these deposits as loans, and thus facilitate
investment. This leads to economic growth
Risk management - Financial intermediaries enable risk to be
managed and spread across many individuals/entities. Financial
intermediaries such as insurance companies and mutual funds enable
risk to be spread over many entities, thus enabling higher risk
taking and thus higher investment, leading to economic growth