financial intermediary

Examples of financial intermediary in the following topics:

• Institutions, Markets, and Intermediaries

  • A financial intermediary is an institution that facilitates the flow of funds between individuals or other economic entities.
  • Though, perhaps the most well-known of financial intermediaries, banks represent only one intermediary within a larger group.
  • As noted, financial intermediaries provide access to capital.
  • By repurposing funds from savers to borrowers financial intermediaries are able to promote economic growth by providing access to capital.
  • Banks convert deposits to loans and thereby increase access to capital by serving as a financial intermediary between savers and borrowers.

• Role in Matching Savings and Investment Spending

  • Stocks and bonds are considered to be important intermediary forms of savings as these get transformed into a capital investment that produces value .
  • Financial intermediaries can assist with increasing the incentive to save through developing financial products that offer ease of liquidation but provide a higher return than a savings account.
  • In this manner, financial intermediaries are a significant component to the transformation of savings into investment.
  • Mutual funds, pension obligations, insurance annuities, and other forms of savings marketed by financial intermediaries all consist of stocks, bonds, and cash balances, which in turn pay for the investment capital that increases productivity, efficiency and output of goods and services.

• Financial Intermediation

  • Common financial intermediaries include banks, mutual funds, and insurance companies.
  • Financial intermediaries only provide this function for one reason – to earn profits.
  • Financial intermediaries provide three functions.
  • Financial intermediaries lend to borrowerswho are not likely to default on their loans.
  • Finally, the financial intermediaries reduce the risk.

• Chapter Questions

  • Why would people deposit their savings into financial intermediaries, instead of directly investing in the financial markets?
  • Why did the financial markets in the modern world become international?

• Funding the International Business

  • There are two ways in which the capital can end up at the borrower: (1) The lender can lend the capital to a financial intermediary, against interest.
  • The financial intermediary then reinvests the money against a higher rate of interest.
  • This would be an example of indirect finance. (2) The lender can go directly to the financial markets to lend to a borrower.
  • Political risk can result in a severe financial loss for a firm.
  • International finance corporation: a business can also finance through loans from specialized financial institutions and development banks or from commercial banks.

• The Cost of Intermediaries

  • While organizations gain advantage by collaborating with intermediaries, there are costs involved to consider.
  • Distribution of goods is often enabled through collaboration with partners and intermediaries.
  • Financial Intermediaries - Transactions are the core function of exchange in the modern economy, where a good or service is transferred for a capital payment.
  • Amazon will link you with a bank or other financial provider (i.e.
  • Understand the various costs which accompany product distribution when working with intermediaries

• Role of Financial Markets in Capital Allocation

  • A financial market is an aggregate of possible buyers and sellers of financial securities, commodities, and other fungible items and the transactions between them .
  • One of the main functions of financial markets is to allocate capital.
  • Intermediaries such as banks help in this process.
  • Intermediaries like banks can then lend money from this pool of deposited money in the form of loans to those who seek to borrow.
  • The Frankfurt Bond Market is an example of a financial market that allocates capital.

• The Value of Intermediaries

  • So you use a marketing intermediary, and work with companies that sell music equipment.
  • The rest are value-adding intermediaries who limit your risk and allow you to focus on what you do best.
  • Additionally, whomever the intermediary is shares this advantage.
  • As a result, organizations with many intermediaries can benefit from the specializations of their partners.
  • For example, an organization that takes on its own accounting and financial management will incur the risk of making tax mistakes and the fines that come along with it.

• Selecting Marketing Channels

  • In intensive distribution (such as candy) the manufacturer attempts to get as many intermediaries of a particular type as possible to carry the product
  • There are several types of intermediaries that operate in a particular channel system.
  • The objective is to gather enough information to have a general understanding of the distribution tasks these intermediaries perform.
  • The wholesaler should lead where the manufacturers and retailers have remained small in size, large in number, relatively scattered geographically, are financially weak, and lack marketing expertise.
  • Other possible performance criteria include maintenance of adequate inventory, selling capabilities, attitudes of channel intermediaries toward the product, competition from other intermediaries and from other product lines carried by the manufacturer's own channel members.

• Employment in Finance

  • The financial sector is a large field offering many different types of employment for a broad range of organizations that manage money.
  • The financial sector is a large field offering many different types of employment.
  • Intermediaries exist not just in the insurance business.
  • Financial employees can come from a variety of backgrounds.
  • Muhammad Yunus is a banker who grew a field in microcredit and microfinance, opening up new types of financial employment.