FINANCIAL INTERMEDIARIES → BANKS

Question 1

What is a Financial Intermediary (FI)?

Answer 1

A Financial Intermediary (FI) is an entity that acts as the middleman between two parties in a financial transaction, such as lenders and borrowers, investors and entrepreneurs, or households and business firms.

Question 2

What are the two main types of Financial Intermediaries?

Answer 2

The two main types of Financial Intermediaries are (1) Formal and (2) Informal.

Question 3

What role do Formal Financial Intermediaries play?

Answer 3

Formal Financial Intermediaries are regulated entities like banks and insurance companies that facilitate transactions and provide financial services within the established legal framework.

Question 4

How do Informal Financial Intermediaries differ from Formal ones?

Answer 4

Informal Financial Intermediaries are not regulated by formal financial authorities and often include microfinance institutions, money lenders, or community-based savings groups.