Financial Intermediary

Financial Intermediary 

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A financial intermediary is a financial institution that connects surplus and deficit agents. The classic example of a financial intermediary is a bank that consolidates deposits and uses the funds to transform them into loans.^[1]

Through the process of financial intermediation, certain assets or liabilities are transformed into different assets or liabilities.^[1] as such, financial intermediaries channel funds from people who have extra money or surplus savings (savers) to those who do not have enough money to carry out a desired activity (borrowers).^[2]

A financial intermediary is typically an institution that facilitates the channeling of funds between lenders and borrowers indirectly.s.^[3] that is, savers (lenders) give funds to an intermediary institution (such as a bank), and that institution gives those funds to spenders (borrowers). This may be in the form of loans or mortgages.^[4] alternatively, they may lend the money directly via the financial markets, which is known as financial disintermediation.

In the context of climate finance and development, financial intermediaries generally refer to private sector intermediaries, such as banks, private equity, venture capital funds, leasing companies, insurance and pension funds, and micro-credit providers.^[5] increasingly, international financial institutions provide funding via companies in the financial sector, rather than directly financing projects.^[6]

financial institution (such as a bank, credit union, finance company, insurance company, stock exchange, brokerage company) which acts as the 'middleman' between those who want to lend and those who want to borrow.

Definition of 'financial intermediary'

An entity that acts as the middleman between two parties in a financial transaction. While a commercial bank is a typical financial intermediary, this category also includes other financial institutions such as investment banks, insurance companies, broker-dealers, mutual funds and pension funds. Financial intermediaries offer a number of benefits to the average consumer including safety, liquidity and economies of scale.