Financial Intermediation

Financial intermediation is the process where banks and financial institutions act as middlemen between those who need money (borrowers) and those who have extra funds to invest (savers). They collect deposits from individuals and businesses, then use those funds to provide loans or investments to others. This system helps allocate resources efficiently, manages risks, and provides a secure way for people to save and access credit. Essentially, financial intermediaries facilitate smooth capital flow within the economy, supporting personal needs, business growth, and economic stability.