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Definition, Types and Functions of Financial Institutions

Some of you may often hear the words of financial institutions, but do you know the definition of an institution engaged in finance? There are many experts who describe the definition of this institution, and in Indonesia alone we are very close to institutions that provide financial services, whether realized or not. Let's discuss one by one on this occasion.
Understanding of Financial Institutions
In general, the definition of a financial institution is defined as a business entity engaged in finance by providing fund storage services, channeling to borrowing to its customers. The main assets owned by these financial entrepreneurs are in the form of money and bills.
In addition to providing financial services, financial institutions also provide various forms of services, such as offering various forms of savings, insurance, transfer services, and programs for the future such as pension plans. So it can be concluded that the institution engaged in finance is one part of the modern financial and economic system which plays an important role in maintaining the economic condition of the community.
Types of Financial Institutions
In Indonesia financial institutions are divided into 2. The first is the type of bank financial institution. This type of institution consists of the Central Bank which is still held by Bank Indonesia with the task of maintaining monetary policy, commercial banks or commercial banks whose duty is to serve all banking services to individuals and institutions, and public credit banks that specifically serve several financial services in sub-district or village communities.
And the type of the second financial institution is a non-bank institution, the scope of this institution is broader than the type of institution that is only engaged in banking. Among other things is an institution engaged in investment, namely the capital market and money market. Furthermore, institutions engaged in credit services, such as savings and loan cooperatives, pawnshops and leasing services or leases, all of which are forms of financing or capital provided by customers. both for individual needs or business needs.
Next is a factoring business, or what is called factoring, where the business is taking over the payment of credit for a company that has a problem or managing credit for a company that needs it, almost as a factoring business is a venture capital company that also provides credit or financing assistance to companies that are at risk guarantee.
And the last type of non-bank financial institution is a pension fund, which is an institution whose main activity is managing pension funds in an agency both government and private.
Function of Financial Institutions
There are several functions of financial institutions that you need to know that include the following. The first function is to launch transactions both goods and services using money or credit, collect public funds in the form of deposits or investments and distribute them in the form of loans.
Not only that, there are several other functions, namely providing information related to economic analysis for the benefit of customers, disseminating information that will benefit customers and providing legal and moral guarantees related to the security of funds entrusted to institutions both banks and non-banks.
And finally is to create and provide liquidity or confidence to its customers that the entrusted funds will be returned. Thus some information related to financial institutions, hopefully useful ...
Description: Financial institutions are business entities engaged in finance by collecting funds from the community and channeling them to the public.

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