Importance of Financial Institution Essay

Nature of fiscal institutions Financial institutions be the organizations which arrange the essential functions of channeling funds from those with wastefulness funds (suppliers of funds) to those with shortages of funds (user of funds). Financial institutions are active in todays global markets include commercial message banks, insurance companies reliance unions, finance companies, savings and loan associations, saving banks, subsidy funds, unwashed funds, and similar organization.Their fundamental role in the pecuniary scheme is to serve both net lenders and borrowers but in a much more complete way than brokers and dealers do. Financial institutions issue securities of their own-often called secondary securities to ultimate lenders and at the same time primary securities from borrowers. The secondary securities issued by financial intermediaries include such acquainted(predicate) financial intermediaries include such familiar financial instruments as checking and sav ings accounts, life insurance policies, annuities and shares in mutual fund.For the most part, these securities share sev agel common characteristics. They generally carry blue risk of default. Financial institutions are accept primary securities from those who get hold of credit and in doing so, take on financial assets that many savers, especially those with special(a) funds and limited knowledge of the market, would find unacceptable. Money lending in one form or the other has evolved along with the history of the mankind. dismantle in the ancient times thither are references to the cashlenders.Shakespeare also referred to Shylocks who do unreasonable demands in case the loans were not repaid in time along with interest. Indian history is also replete with the instances referring to indigenous money lenders, Sahukars and Zamindars involved in the business of money lending by mortgaging the landed belongings of the borrowers. Towards the beginning of the twentieth century, with the onset of modern industry in the country, the need for governing regulated banking system was felt.The British government began to pay assistance towards the need for an organised banking sector in the country and Reserve deposit of India was set up to regulate the formal banking sector in the country. save the growth of modern banking remained slow mainly due to lack of surplus capital in the Indian economic system at that orient of time. Modern banking institutions came up only in big cities and industrial centres. The boorish areas, representing vast majority of Indian society, remained dependent on the indigenous money lenders for their credit needs.Independence of the country heralded a new era in the growth of modern banking. Many new commercial banks came up in various parts of the country. As the modern banking network grew, the government began to realise that the banking sector was catering only to the needs of the well-to-do and the capitalists. The interes ts of the poorer sections as well as those of the common man were being ignored. The significance of the financial system to economic development is not quite clear-cut.Some researchers such as Hicks (1969) are of the opinion that the financial system plays a of the essence(p) role in the mobilization of capital for industrialization. On the other hand, there are those, who hold a contrary view. In the 1980s, several African governments embarked on structural adjustments programs in order to correct the disruptions in their economies. As Geo-Jaja and Mangum (2001) note, structural adjustment programs seldom delivered on their intended objectives.However, the relationship betwixt financial development and economic growth during post-SAP period is examined using the Spearman localize correlation. The expected outcome of the structural adjustment program in Nigeria was marred by policy reversals of government. This is a possible reason for the poor surgical operation of the financ ial sector of the economy. Therefore, financial development and economic growth save no consistent relationship in post-SAP Nigeria.