Paper Topic:

Intro. to Financial Management

The Principle Role of

Financial Intermediaries

There are evidences that financial intermediaries play a key role in improving the performance of the economy (Morawski 4 ) Not to mention that they could even act as a good predictor of long run rates of economic growth , capital accumulation and productivity improvement (King and Levine cited in Chakraborty 1 . However , what -exactly- is the principle role of financial intermediaries ? This is what this essay tries to answer

This essay aims at discussing the principle role of financial intermediaries (banks , investment companies , financial advisors or

br brokers , credit unions , mutual funds , and insurance companies . The best approach to achieve this goal is to search the literature to study what is written concerning financial intermediaries ' different roles and assess these roles to come up with the principle role of these institutions

However , first of all , it was necessary to study different definitions for financial intermediaries in case these definitions could give an idea about the principle role of them . For example , -according to Claus et al . - financial intermediaries `channel funds ' from those who have savings to those who have more `productive ' uses for them (2 . Also Jalan defined financial intermediaries as institutions which `transfer funds ' from economic agent with surplus funds (surplus units ) to economic agents (deficit units ) that would like to utilize those funds

Then , Morawski provided a better definition to `Financial intermediaries ' term as institutions which provide `channeling ' or efficiently `transfer funds ' between lenders (surplus units ) and (deficit units ) borrowers that are brought...

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