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Date of submission
Role of Financial Intermediaries in Financial System
Outline
1. Introduction
2. Body
I. Types of financial intermediaries
a. Banks
b. Insurance companies
c. Investment banks
d. Credit union
e. Saving banks.
f. Pension funds
g. Building societies
II. Roles of financial intermediaries
a) Risk diversification and sharing.
b) Resource allocation and mobilization.
c) Liquidity management and provision.
d) Allocating funds or resources
e) Mobilizing lines of credit and wholesale finance
f) Processing and collecting information.
g) Offering accounting, safe keeping, and means of payment
3. Conclusion
4. References
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Introduction and body

Financial intermediaries refer to the entities that usually assume the role of middlemen

between different parties in some financial transactions. Commercial banks, savings banks, Sacco,

building societies, pension funds are some of the financial institutions that falls under the financial

intermediary category (Sethi and Bhatia 58).Financial intermediaries have evolved over the years

to conduct functions that appeal to the general public, government and the corporate sector. In the

financial sectors, these intermediaries play a huge role in that a huge portion of each and every

cent financed externally is processed by such financial institutions. In this light, the function of

financial intermediaries form the basis of this research paper.

Financial institutions play a crucial role in the financial systems across the world. They

mobilize money from a country’s wholesale market and avail it for lending to a huge pool of small

borrowers. Due to their exceptional capability to hedge against the liquidity shocks, financial

intermediates are able to diversify the aggregate risk and offer inter-temporal risk sharing. They

also offer accounting, safe keeping, and means of payment. Lastly they fix all the problems that

arises with the issue of liquidity. In so doing, they help individual savers handle and diversify the

portfolio risk.
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Work cited

Sethi, Jyotsna and Bhatia, Nishwan. Elements of Banking And Insurance. PHL Learning

PVT LTD. 2012. Print.