These are financial institutions which carry out similar functions like commercial banks only that they do not engage the use of cheques. Therefore, they do not create credit.

·       Types of non-banking financial institutions

 

The above institutions operate people's deposits just like commercial banks. They invest part of the money deposited. They make profits and they give credit directly or indirectly.

The role of non bank financial intermediaries

They tend to supplement activities of the commercial banks through mobilisation of savings, easy liquidity. They stimulate small savers e.g through post office savings banks.

They stimulate and promote capital and stock markets, which are apparently underdeveloped in LDCs.

Non bank financial intermediaries often undertake investments from the mobilized savings. They tend to invest in bonds, securities, mortgages, etc.

These institutions for instance EADB often finance long term projects for economic growth and development.

They promote rural development for instance co-operative societies, post office savings banks etc; since they can be spread all over the Country.

They help to develop both the agricultural and industrial sectors by advancing soft loans and technical assistance.

They, too, advance credit to indigenous entrepreneurs, small scale industrialists, etc. This leads to the indigenization of the economy.