SS2 Third Term Economics Lesson Note – Types of Financial Institutions and Their Functions

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WEEK 3

TOPIC: Types of financial Institutions and their functions

CONTENT:

• Money Market institution and its function
• Capital Market institution and its function
• How the stock exchange operates, Secondary and primary market

Sub-Topic 1: Meaning of Money Market Institution

Money Market: The market is a financial market for trading in short term financial assets. It consists of individuals (and organizations) who wish to lend out money on a short term and those who wish to borrow. It is therefore a market for short-term loans and investment.

Financial institutions which operate in the money market include:

• Central Bank
• Commercial Bank
• Acceptance House
• Discount houses
• Hire-purchase companies
• Finance companies

Instruments used in the money market

• Treasury Bills
• Call money funds
• A bill of exchange
• Treasury certificate

FUNCTIONS OR ADVANTAGES OF THE MONEY MARKET

• Provision of circulating capital for commerce and industry
• Offering investment opportunities on a short-term basis for people and organization to enable them earn interest
• Provision of investment advice to customer
• Provision of opportunity for the public to participate in the management of the economy.
• Mobilization of savings for investment.

Sub-Topic 2:  CAPITAL MARKET

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