In a broad sense, a financial institution is any organization that deals with money. They may not only deal in money directly, rather, help small or large businesses to manage their financial transactions. Financial institutions will never go out of favor because the majority of the populace seek their services on a daily basis. It may surprise you that many people do not understand or know the various financial institutions that we have.
Financial institutions play different roles in the society
With every turn of event, there seems to be a financial institution by the corner to help you get relief. Different financial institutions meet different needs although there are some that play more than one role. In general, below are some of the services rendered by financial institutions;
Close to half of those who walk into a financial institution on a daily basis is there to seek one form of a loan or the other. This topic is particularly of great interest to small businesses that are always desirous of loans to grow or expand their businesses.
Keeping good track of money would have been difficult if there were no financial institutions to keep the money safe. There are other financial institutions that keep more than money – important documents and life treasures are kept.
3. Depositing or withdrawing money
Either you are depositing or withdrawing money, there are financial institutions out there to meet your need. Imagine how difficult it would have been to send money across to loved ones in faraway places if there were no financial institutions.
4. Currency exchange
If you have stepped outside the shores of your home country, you will discover that different countries have different currencies. There are countries that accept the currency of others but when you are in a country that does not accept your currency, you will need to go to a financial institution to change it to the currency of your host country.
It is necessary to understand the various financial institutions
Understanding the various financial institutions will help you to know which services they render and how best they can fit into your financial plan. Below is a short overview of the various financial institutions;
1. Commercial banks
The prime role of the commercial bank is to accept deposits and provide security for the deposited money. They also offer loan facility for individuals or organization to meet their needs – and the interest generated in the process is how commercial banks grow their business. Commercial banks usually perform diverse duties within a country.
2. Investment bank
This type of bank differs from the commercial bank. They usually perform the role of financial mediator for various businesses and the government and are not limited to the gathering of deposits like commercial banks.
3. Insurance companies
They help individuals, businesses and organizations manage the risk involved with the loss of lives and properties. Losses can come in a variety of ways but the insurance companies will be willing to pay their clients the exact amount of money lost in the case of a disaster.
4. Brokerage firm
This firm acts as mediators between buyers and sellers. They help to secure the transactions. Brokerage firms survive by taking commissions after the transaction has been completed successfully.
5. Mortgage banks
Mortgage banks are there to help people plan for real estate. Savings done through a mortgage bank is usually for the purpose of building or buying a house. There are other emerging financial institutions with no solid structures but whose services are rendered solely online.
- Financial institutions deal with money.
- People are desirous of money to solve various needs.
- Different needs are met by different financial institutions.
- A large number of people that visit financial institutions are there to seek for loans.
- Keeping money safe is one of the duties of financial institutions.
- Transfer of money from one location to another has been simplified.
- Many countries use their unique currency and will not accept the currency of other countries.
- Different financial institutions play different roles.
- Understanding the various financial institutions will help you to choose.
- A commercial bank is the largest financial institution.
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