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 Intermediary
Famous quotes containing the words summary and/or conclusion:
“I have simplified my politics into an utter detestation of all existing governments; and, as it is the shortest and most agreeable and summary feeling imaginable, the first moment of an universal republic would convert me into an advocate for single and uncontradicted despotism. The fact is, riches are power, and poverty is slavery all over the earth, and one sort of establishment is no better, nor worse, for a people than another.”
—George Gordon Noel Byron (1788–1824)
“No one can write a best seller by trying to. He must write with complete sincerity; the clichés that make you laugh, the hackneyed characters, the well-worn situations, the commonplace story that excites your derision, seem neither hackneyed, well worn nor commonplace to him.... The conclusion is obvious: you cannot write anything that will convince unless you are yourself convinced. The best seller sells because he writes with his heart’s blood.”
—W. Somerset Maugham (1874–1966)