Economics » Financial Institutions » Types and Functions of Financial Institutions

Finance Companies and Discount Houses

Finance Companies

Finance companies are institutions that specialize in short-term non-bank financial intermediation. Their activities include:

  1. Mobilising funds from the investing public in the form of borrowing and providing facilities for local purchase order (LPO), project financing, equipment leasing, hire purchase and debt factoring.
  2. Helping companies to establish efficient management structures and controls.
  3. Providing corporate finance advice such as on capital restructuring and project financing services.

Discount Houses

Discount houses are financial institutions that intermediate funds between the Central Bank, licensed banks, and other financial institutions. Their activities include:

  1. Mobilizing funds for investment in short-term securities, especially treasury securities and other short-term financial instruments by providing discounting/rediscounting facilities.
  2. Assisting financial institutions to effectively manage their idle cash balances by bringing together surplus and deficit units in the money market.
  3. Underwriting issues of treasury securities thereby, promoting monetary policy objectives.

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