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Question

Difficulty: EasyNon-Bank Financial Institutions and Traditional Financial Systems

Equipment leasing firms and hire purchase finance houses in Nigeria are legally authorized to accept demand deposits and operate cheque-clearing accounts for the general public.

Answer: Answer

Answer

The statement is false. Non-bank financial institutions such as hire purchase and equipment leasing companies are legally prohibited from maintaining demand deposits and clearing cheques.
The statement is false because non-bank financial institutions like equipment leasing companies and hire purchase firms provide specialized credit and asset leasing services, but they cannot legally operate demand deposits or cheque-clearing facilities for public clients.

Step-by-Step Solution

1
Examine the regulatory boundaries of non-bank financial institutions (NBFIs) versus commercial banks.
Only licensed commercial banks are permitted to accept demand deposits (chequing accounts) and participate in cheque clearing.
Financial regulation reserves checking and demand deposit operations strictly for commercial banking institutions.
2
Evaluate the funding mechanism of hire purchase and equipment leasing firms.
These NBFIs fund operations through paid-up capital, borrowings, debentures, or lease rentals rather than public demand deposits.
They provide specialized asset financing without operating retail checking accounts.

Key Concept

Operational Limitations of Non-Bank Financial Institutions
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Topics

Non-Bank Financial Institutions and Traditional Financial Systems