What is financial institution?

Financial Institutions refer to all business organizations which hold money for individuals and institutions and may also borrow from them in order to give out loans or make other investments.


Financial institutions may be divided into two major group

Banking and non-banking

Banking financial institutions are counted on as part of the supply of money
Non-banking financial institutions are excluded from the money supply

Banking financial institutions includes:
1. Commercial banks
2. Central banks
3. Merchant banks
4. Development banks
5. Saving banks

Non- Banking financial institution include:
1. insurance companies
2. Hire purchase companies
3. Building societies

Definition of a bank

A bank is a commercial institution which performs various financial activities, e.g accepting and handling of deposits of its customers. Banks are institutions that create money and give out loans to people. Bank is also a place where money and other valuable
like will, jewelry, etc. are kept.

Origin of banking

Banking had its origin with the goldsmiths in London in the seventeenth century. The goldsmiths had facilities for storing
valuables from merchants for safekeeping

See also  what is literature and type of literature

The first banking function was accepting deposits for cash from merchants who had no safe place to keep their money. The second
stage came when receipts for these deposits began to be used as means of payment by merchants. this made the early bankers to issue

Types of banks

Major types of banks include:
1. commercial banks
2. central banks
3. merchant banks
4. development banks
5. saving bank

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