FI Roles And Function
FIs supplement banks in providing financial services to individuals and firms. They can provide competition for banks in the provision of these services. While banks may offer a set of financial services as a package deal, FIs unbundle these services, tailoring their services to particular groups. Additionally, individual FIs may specialize in a particular sector, gaining an informational advantage. By this unbundling, targeting, and specializing, FIs promote competition within the financial services industry.
Having a multi-faceted financial system, which includes non-bank financial institutions, can protect economies from financial shocks and recover from those shocks. FIs provide multiple alternatives to transform an economy’s savings into capital investment, which act as backup facilities should the primary form of intermediation fail.
The financial institution sector works as a catalyst to the economic growth of the country. This sector has been contributing towards increasing both the quality and quantity of financial services and thus enhancing financial intermediation to meet the growing needs of investments in the country.
The FIs run in parallel to the traditional deposit taking commercial banks. FIs include, but are not limited to investment banks, Development Financial Institutions (DFIs), insurance companies, specialized credit institutions, modarabas, mutual funds, leasing companies, discount and guarantee houses and venture capital companies.