Financial Institutions

Thursday, February 16, 2017

Banks 
It helps firms in providing short-term and long-term loans. 

Insurance Companies 
Insurance companies use the regular premiums paid by policyholders to invest in government securities, company shares and debentures, land and property of all kinds. The activities of Insurance companies are usually divided into two types; 
  • General Business (insurance against fire, theft and accident) 
  • Long-term business (which includes life assurance and long-term saving schemes) 
Pension Funds 
  • It is a financial institution specializing in the management and administration of personal and corporate pension schemes 
  • They collect regular contributions from individuals, employees and employers 
  • They make payments to retired beneficiaries 
  • They invest their funds in financial securities, corporate stocks and shares and property bonds 
Investment Trusts 
These financial institutions raise finance by issuing shares to the general public. The capital that they raise is invested in buying shares from other companies. 

Finance Houses 
These institutions provide loans which finance hire-purchase schemes and leasing arrangements. 

The Government 
The government is an important source of finance for small firms. It helps the firms in the form of; 
  • Grants to improve technology and to develop new products 
  • Financial assistance for the firms locating in assisted areas 
  • Employment Subsidies given to producers 
  • Grants, subsidies and tax incentives to assist small firms and to encourage establishment of new firms
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