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SS1: ECONOMICS - 3RD TERM

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  1. Mining | Week 1
    3 Topics
    |
    1 Quiz
  2. Financial Institution I | Week 2
    6 Topics
  3. Financial Institutions II | Week 3
    5 Topics
  4. Financial Institutions III | Week 4
    5 Topics
    |
    3 Quizzes
  5. Business Organisation | Week 5
    3 Topics
  6. Money | Week 6
    5 Topics
    |
    1 Quiz
  7. Channels of Distribution I | Week 7
    4 Topics
  8. Channels of Distribution II | Week 8
    6 Topics
    |
    1 Quiz
  9. Business Finance | Week 9
    7 Topics
    |
    1 Quiz



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Financial Institution

What is a Financial Institution?

A financial institution is an establishment that issues financial obligations in order to acquire funds from the public. These institutions hold money balances or money from individuals and other institutions in order to make investments and loans available. It is an institution that trades with money and securities. e.g finance house, commercial bank, pension administration, etc. 

A financial institution is a financial intermediary in transferring funds from one institution to another e.g. commercial banks. They transfer money between people, firms, and government in return for interest as well as being involved in sales of securities and other financial assets.

Broadly financial institution can be classified into two 

(1) Banking Financial Institution

(2) Non-Banking Financial Institution

1. Banking Financial Institution

Banking Financial Institution refers to the liabilities of the bank that are counted as part of the total supply of money. Banking has to do with the acceptance of deposits from the public and they are subjected to withdrawal at any time or at a stipulated time.

Examples include

  • Central Bank
  • Apex Bank
  • Retail bank (accept deposits and clearing banks) e.g. Community bank, Savings bank (Microfinance bank)
  • Unit Bank
  • Merchant Bank: Wholesale bank, Acceptance house, Importer banks
  • Specialised bank: Education Bank, Development Bank, Agricultural Banks
  • Wholesale bank (Industrial or investment banks e.g. Bank of Industry etc.

2. Non-Banking Financial Institution:

This is excluded from the total money supply. Non-banking institutions are not referred to as banks because they only render some banking services without meeting the legal definitions of a bank.

Among the many types of businesses that might serve as a non-bank finance company are:

  • Insurance companies
  • Stock exchanges
  • Discount houses
  • Issuing houses
  • Pension Fund Administrators
  • Bureau de change.

Different Between Non-Banking and Banking Financial Institutions

Services offered by a Non-Financial Institution differ from the services of a bank. A major difference though is that non-banking financial institutions don’t directly accept deposits for safekeeping and their deposits are not purposely used for cheque withdrawal while the banking financial institutions accept deposits and demand deposits accounts.

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