INTERMEDIATION IN FINANCE

Abstract

Financial institutions are financial intermediaries in the process of transferring financial funds between participants in the financial system. The key participants in the financial system are: individuals, businesses, financial intermediaries and the government.Money holders are interested in investing their savings in earning income. As compensation for this, they earn profits in various forms, such as interests, dividends, capital gains, etc. Also, borrowers need additional financial funds to finance their investment or consumption programs. They are obliged to borrow those funds from financial institutions. For lending funds they pay a certain lender's price.With the intermediation of financial institutions, it is possible to transfer financial funds from entities that have surplus to entities lacking financial funds and at the same time need to be provided from external investment or consumption sources, if the accumulation of sufficient financial resources from own resources.The essence of financial intermediation lies in the collection of financial funds from many individuals and businesses that own financial savings, and their investment in various forms. With the disclosure of the financial intermediation process, we note its multidimensional aspect, on the one hand, as a pool of financial funds in various forms and their concentration, while on the other hand, as investment of shelled funds through various forms of loans to borrowers who need funding.