Understanding Financial Institutions

Course : Managerial Finance Lecture : Marc Credit Hours : 3 Credits Semester Sessions : 3 Semester, 2021/2022 Session Prepared By : Kenzo LECTURE NOTES Understanding Financial Institutions Financial institutions are business entities whose wealth especially in the form of financial assets or claims compared to non-financial assets or real assets. Financial institutions provide credit to customers and invest their funds in securities. Beside Moreover, financial institutions also offer various financial services among others, offering various types of savings and protection schemes insurance, pension programs, provision of payment systems, and fun transfer mechanism. Financial institutions are part of the financial system in the modern economy that serves community using financial services. Classification of Financial Institutions Financial institutions (or often also called institutions intermediation) can be grouped in various ways. The most common and easy to understand grouping is to group financia institutions based on ability to raise funds from the public direct. On this basis financi institutions can be differentiated become a depository financial institution institutions) and nondepository financial institutions banks). 1. Depository financial institutions Depository financial institutions carry out activities collecting funds directly from the community form of savings (Deposits) checking, savings, or deposits futures, issuing certificates of deposit, and providing services services in payment traffic (transfers, clearing). grouped into depository institutions are commercial banks and People's Credit Bank because these are the only banks which can carry out these functions, namely: interesting funds directly and channeling them back primarily in the form of credit, while abroad, the United States for example, next to commercial banks, too can include Savings and loan associations and credit unions in a group of depository institutions known as thrifts institutions. This institution basically collects funds and distribute it back to its members. 2. Non-depository financial institutions In some countries, non-depository financial institutions are common also called non-bank financial institutions (NBFI) or NDFI (non-depository financial institutions). Financial institutions that Included in this group are all financial institutions whose business activities do not involve withdrawals of funds directly as is done by the institution depositories or banks. NBFI can be classified into contractual financial institutions, investment institutions. Finance companies, and other non-bank financial institutions. a. Contractual institutions are financial institutions that attract funds from the public by offering contracts to protect savers against the risk of uncertainty, for example: insurance policies for insurance companies and pension program for pension funds. Group of institutions This non-bank financial institution in Indonesia is a company loss insurance, life insurance companies, social insurance, Social Security and pension funds. b. Investment institutions are institutions whose business is very important related to activities in the capital market, both as a provider services in transactions in the capital market and carrying out direct investment for the benefit of its portfolio. Institution This type of finance can include, among others, companies securities (securities companies) and investment companies. Company Securities are basically parties who provide services emission loans (underwriting), intermediaries (brokerage), perpetrators securities trading (dealer), and investment management (investment management). Meanwhile, investment companies generally carry out activities in mutual funds, in several countries, activities carried out by securities and investment companies This company is often also referred to as an investment activity bank. c. Finance companies are financial institutions that own business sector and provides several types of financing. Finance companies in Indonesia, according to applicable regulations, carrying out business consumer financing, and credit cards. Because of the company It offers various types of financing, so often too called a multi finance company. d. Other non-depository financial institutions. Apart from institutions finance mentioned above, financing services Pawning methods are currently growing. Pawnshop has become one of the players worth considering in the constellation of the Indonesian financial system. The role of pawnshops experienced a very rapid increase into the decade 1990s. This increase occurs in line with change operational management patterns and strategies, especially those related to improving service quality and creation of several new products (product development) and the most important thing is improving the quality of resources the human.