Financial institutions are the institutions which involve themselves with financial transactions such as mobilizing of savings, provision of credits, accepting deposits, providing advice to the traders and the government.
Types of Financial Institutions
There are two types of financial institutions, namely;
(i) Banks
(ii) Non-banks
Banks
These are financial institutions which perform the following functions:
• Mobilising of funds from the public and opening different types of accounts like savings accounts, fixed deposit and current accounts
• Other functions include, advancing of loans; providing various commercial services to the public, e.g. settling of debts through cheques, keeping valuable items, transferring of funds from one area to another, or from one person to another, through travellers’ cheques and telegraph transfers.
Non-Banks
These are institutions which do not perform banking functions such as opening of accounts to customers or provision of commercial services, but they provide specific services to the customers or members, such as insurances and pensions. Non- banks do not mobilize savings like the banks.