Summary & Conclusion
Financial institutions (intermediaries) perform the vital role of bringing together those economic agents with surplus funds who want to lend, with those with a shortage of funds who want to borrow.
In doing this they offer the major benefits of maturity and risk transformation. It is possible for this to be done by direct contact between the ultimate borrowers, but there are major cost disadvantages of direct finance.
Indeed, one explanation of the existence of specialist financial intermediaries is that they have a related (cost) advantage in offering financial services, which not only enables them to make profit, but also raises the overall efficiency of the economy. The other main explanation draws on the analysis of information problems associated with financial markets.
Read more about this topic: Financial Intermediaries
Famous quotes containing the words summary and/or conclusion:
“Product of a myriad various minds and contending tongues, compact of obscure and minute association, a language has its own abundant and often recondite laws, in the habitual and summary recognition of which scholarship consists.”
—Walter Pater (1839–1894)
“The source of our actions resides in an unconscious propensity to regard ourselves as the center, the cause, and the conclusion of time. Our reflexes and our pride transform into a planet the parcel of flesh and consciousness we are.”
—E.M. Cioran (b. 1911)