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The concept of financial intermediation

After the economic and financial developments, the opening of global markets, and the expansion and diversification of economic activity, the need for the emergence of new entities whose mission is to collect and redistribute funds has become a vital necessity for economic development, continuity, and balance. expansion.

brokerage firm

Thus, financial intermediation has become a link between the owners of the financial surplus and the owners of the fiscal deficit, amid this changing and diverse environment, with the control of financial rules, banking tools, and market intervention tools. Monetary and international finance has become a vital necessity.

Financial intermediation tools are those means that allow you to establish a relationship between them and others, as well as express the means of payment by which financial transactions are carried out, the resources that they use in their various activities, and therefore represent a judgment on these. With a financial surplus to employ its surpluses and for those who suffer from a financial deficit to meet their needs.

What is financial intermediation?

Financial intermediation is those entities that make it possible to transform the direct financing relationship between potential lenders and borrowers into an indirect one because it creates a new channel through which money passes from the owners of the financial surplus to the owners of the fiscal deficit, and in this way it connects two contradictory parts in their future positions and goals.

financial intermediation mechanisms

Accounts: Accounts can be defined in the abstract because they are a code (number) associated with most of the financial transactions of their owner in his relationship with the bank, in practical and legal terms, it is an agreement or agreement between the bank and the person opens it to him. For the account holder to do the following:

Deposit process: Fund the account with money deposited in the bank to increase the balance of the customer's account.

Withdrawal: It is the collection of deductions made by a person from his account or for the benefit of another person.

Transfer Process: This process is the transfer of funds from one account to another.

Objectives of financial intermediation and its importance

The main function of financial intermediaries is to transfer assets, through their issuance of securities that are more attractive to individual savers than funds issued directly by companies, as these intermediaries purchase securities as well as bring and collect savings from capital owners and redistribute them to those who need them.

Moreover, financing and encouraging investments is one of the most important objectives that financial intermediation seeks to achieve through the redistribution of investment returns.

Brokerage firms execute clients' orders to buy and sell market-traded financial assets of any kind, currencies, forward contracts, futures contracts, and securities, whether stocks or bonds, based on the client's decision.

Despite the great challenges facing brokerage firms and the seriousness of their business, they bring many tangible benefits: first, the brokerage business will enhance competition and improve the efficiency of the performance of sectors, which will lead to the provision of financial services that are implemented at low cost and improve their quality, and diversification will lead The increasing number of brokerage services aims to improve financial and investment opportunities through the effective sectoral distribution of resources by providing better mechanisms for risk management and shock absorption.

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