Talking about financial intermediaries will be related to the name bank.
Banks are very influential in helping the current economy, where the current condition is that the government will issue a monetary policy by lowering interest rates in order to maintain economic stability and growth.
This is not separated from the main duties of the bank as a financial intermediary institution.
How about you a businessman?
You will be assisted in obtaining external capital resources for your business through the use of productive credit facilities, both working capital loans and investment loans, so that you can maintain business continuity and develop your business.
This time we will discuss in full about financial intermediaries.
Definition of Financial Intermediaries
Financial Intermediary is a financial institution that functions as a medium of liaison between several related parties.
This liaison institution functions as a banking intermediary institution in collecting funds from the public and channeling funds to the public.
Financial intermediaries are classified into 2 types, both bank financial institutions and non-bank financial institutions.
As for bank financial institutions such as commercial banks, people’s credit banks and central banks, non-bank financial institutions such as brokers, mutual funds, securities companies, insurance and many more.
There are only 4 state-owned banks owned by the government, namely independent banks, bri banks, bni banks and btn banks.
The definitions of financial intermediaries are as follows:
According to Law No.10 of 1998, the explanation of the bank is a business entity that collects funds from the public in the form of savings and distributes them to the public in the form of credit or other forms in order to improve the standard of living of the people at large.
According to Kasmir, 2008, the definition of a bank as an agency functions as a financial intermediary (financial intermediary) from two parties, namely those with excess funds (surplus units) and those who lack funds (deficit units).
According to Sinungan, 2000, the definition of a bank as a financial intermediary institution.
In addition to maintaining public trust by ensuring the level of liquidity, also operates effectively and efficiently to achieve adequate profitability.
This also causes bank institutions to be referred to as trust institutions, meaning that parties with excess funds have fully entrusted the bank to manage their funds, including channeling them to parties who are deficient or need funds in the form of credit.
The manifestation of this trust is in the form of not interfering with the surplus parties in determining which deficit parties should be trusted. You can check vio bank reviews for instance.
Advantages and Disadvantages
The advantages of using a financial intermediary include the following:
- The interest given is usually lower than that of loan sharks / middlemen.
- Security systems in terms of confidentiality of personal and corporate data and transactions are safer and more reliable.
- Many features that help business people.
For example: a bank reconciliation is needed, which is very helpful for business people to record transactions regularly.
- Can increase the credibility of your business. This can be interpreted as the level of trust that banks provide credit to business people.
- Can help and reduce your business risk.
- Can help business people to be able to improve their products and quality.
The disadvantages of using a financial intermediary include the following:
- Always oriented towards profit so that there is less attention to social and environmental problems.
- The profit freeze system does not apply, but is replaced by the term credit restructuring (extension).
So that the absence of clear transparency is actually always oriented towards profit.
- Failure to link directly to proven development impacts.
That is an explanation of the definition of financial intermediaries and the advantages and disadvantages of financial intermediaries, especially banks.
Quoted from the fundera.com site, the survey results show that 77% of SME or UMKM business people are refused credit applications by banks and 29% of it is due to financial management problems or cash flow.
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