Non-bank financial intermediaries play vital roles in facilitating capital formation and risk management within an economy. Pair each financial institution listed on the left with its corresponding primary economic function on the right:
- Building SocietiesMobilizing savings from members primarily to grant long-term loans for housing acquisition.
- Insurance CompaniesUnderwriting financial risks and indemnifying policyholders against specified contingent losses.
- Pension Fund AdministratorsCollecting long-term worker contributions to invest and provide retirement benefits.
- Unit TrustsPooling funds from small investors to purchase a diversified portfolio of capital market securities.
Answer
Building Societies match with mobilizing savings for housing loans; Insurance Companies match with underwriting risks and indemnifying losses; Pension Fund Administrators match with managing retirement contributions; Unit Trusts match with pooling funds for diversified security investments.
Each non-bank financial institution performs a specialized role in financial intermediation without creating legal tender money or demand deposits. Building societies facilitate housing finance, insurance firms manage risk, pension funds secure retirement funds, and unit trusts pool collective investments into capital markets.
Step-by-Step Solution
Key Concept
Primary Functions of Non-Bank Financial Intermediaries