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The process of raising funds or capital for any kind
of
expenditure. Consumers, business firms, and
governments
often do not have the funds available to make
expenditures, pay their debts, or complete other
transactions and must borrow or sell equity to obtain
the money they need to conduct their operations.
Savers
and investors, on the other hand, accumulate funds
which could earn interest or dividends if put to
productive use. These savings may accumulate in the
form of savings deposits, savings and loan shares, or
pension and insurance claims; when loaned out at
interest or invested in equity shares, they provide a
source of investment funds. Finance is the process of
channeling these funds in the form of credit, loans,or
invested capital to those economic entities that most
need them or can put them to the most productive use.
The institutions that channel funds from savers to
users are called financial intermediaries. They
include
commercial banks, savings banks, savings and loan
associations, and such nonbank institutions as credit
unions, insurance companies, pension funds, investment
companies, and finance companies.
Encyclopedia Brittanica |
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