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Difficulty: EasyNon-Bank Financial Institutions and Traditional Financial Systems

Match the following non-bank financial organizations and traditional credit institutions with their primary operational role in the commercial sector.

  • Insurance CompanyPools risk premiums from clients to indemnify them against specified business or personal losses.
  • Pension Fund AdministratorInvests deductions from employees' monthly emoluments to provide retirement income.
  • Building SocietyCollects periodic savings from members to grant long-term housing mortgage loans.
  • Esusu AssociationRotates pooled member contributions as a lump sum payout to one participant per installment cycle.

Answer

Insurance Company matches with risk pooling and indemnity; Pension Fund Administrator matches with managing retirement savings; Building Society matches with financing long-term housing mortgages; Esusu Association matches with rotating pooled contributions.
Each institution is correctly matched to its defined role in commerce: Insurance Companies protect against risk via indemnity, Pension Fund Administrators invest retirement deductions, Building Societies finance real estate and housing mortgages, and traditional Esusu schemes distribute pooled savings in rotation.

Step-by-Step Solution

1
Identify the primary function of an Insurance Company.
Insurance companies collect premiums to cover risks and compensate policyholders when specified losses occur.
Risk-bearing and indemnity are the core operations of insurance institutions.
2
Identify the primary function of a Pension Fund Administrator.
Pension administrators handle long-term retirement savings collected from active workers.
Their main responsibility is ensuring post-retirement financial security for employees.
3
Identify the core objective of a Building Society.
Building societies mobilize savings to fund home purchases and residential construction.
Housing mortgage financing distinguishes building societies from general banking institutions.
4
Identify the mechanism of an Esusu Association.
Esusu is an informal traditional system where pooled funds rotate to individual members turn by turn.
It relies on mutual trust and systematic rotational payouts.

Key Concept

Functions of Non-Bank Financial Institutions and Traditional Financial Systems
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Topics

Non-Bank Financial Institutions and Traditional Financial Systems