Financial   intermediaries

These  are  financial  institutions   which  bring  together  the  deficit  spending   units  (borrowers)    and  the surplus  spending   units  (lenders)   together.    They trade in money as their commodity    and charge a price called interest.  There are two types of financial intermediaries   that is;

• Banking financial    These   are   financial    institutions    which   create    secondary deposits  (create  credit)  and  advance  short term  loans  mainly  to less risky  investments.    Examples are commercial   banks.
• Non-bank financial    These  are  financial   institutions   which  do not  create  credit but  they  assist  in  channeling   long  term  loans  from  surplus   spending   units   to  deficit   spending units.   Examples    include   building   societies,   Insurance    companies,    Post   office,   saving   banks, development   banks etc.