Intermediation: The financial system acts as an intermediary between savers and

borrowers. It collects funds from individuals and institutions with excess funds (savers) and
channels them to those who need funds for investments or other purposes (borrowers). This
intermediation process helps allocate resources efficiently in the economy. 2. Mobilization of
Savings: The financial system encourages individuals and institutions to save by providing
various savings and investment options. It offers savings accounts, certificates of deposit,
retirement accounts, and investment products like mutual funds. These mechanisms
mobilize savings and make them available for productive investments. 3. Allocation of
Capital: The financial system facilitates the allocation of capital by directing funds to
businesses, governments, and individuals with investment opportunities. It helps determine
the allocation of financial resources based on risk, return, and the financial needs of
borrowers. 4. Risk Management: The financial system provides tools and mechanisms to
manage and mitigate various risks. It offers insurance products to protect against unforeseen
events, such as accidents, natural disasters, or health issues. Financial markets also provide
instruments like derivatives, futures, and options that allow market participants to hedge
against price fluctuations and manage financial risks. 5. Payment System: The financial
system includes payment systems that enable the transfer of funds between individuals,
businesses, and institutions. It ensures the smooth flow of money for transactions and
supports economic activities. Payment systems can include physical forms (cash, checks) as
well as electronic payment methods (credit cards, online banking, mobile payments)