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Financial intermediation - holding on to currency

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Financial intermediation is the process by which financial institutions transfer funds from ultimate lenders, i.e. savers, to ultimate borrowers, i.e. investors. It is a process that makes the economy operate more efficiently and enhances the ability of the economy to grow. Financial intermediation significantly reduces transac­tions costs. Financial intermediaries take the relatively small savings of large numbers of savers and provide them to investors in relatively large amounts. Class, savings accounts, certificates of deposit, and bonds pay interest and stocks pay dividends.

Why does anyone hold onto currency or other forms of money and lose this extra income? (150 words)

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Why does anyone hold onto currency or other forms of money and lose this extra income?

Financial intermediation is the process by which financial institutions transfer funds from ultimate lenders, i.e. savers, to ultimate borrowers, i.e. investors. It is a process that makes the economy operate more efficiently and enhances the ability of the economy to grow. Financial intermediation significantly reduces transac­tions costs. Financial intermediaries take the relatively small savings of large numbers of savers and ...

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Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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