Question

What services does the financial sector provide? List at least five(Please provides brief descriptions for each one) (Please type up your answer)

Answer 1

Financial sector plays an important role in the functioning of the economy, it acts as an intermediary between savers and borrowers. It is a part of economy made up of firms that provide financial services to all commercial and retail customers. Its activities are mainly focussed at improving the efficiency of other sectors. Financial sector consists of broad range of services that manages money. It includes Banks, Insurance, Capital Market, Foreign Exchange, Investment services, Venture Capital, Mortgage Finance, Consumer Finance etc. The financial services are classified into fund based services and fee based services. Some of the services are listed below.

1. Banking Services

Its a services entity which not only lends money directly, but also help the business to raise money from other sources like bonds, stocks etc. The bank provides lots of services to its customers. Its acts as a safe custody of valuable and allow to withdraw as per requirement. Provide personal, commercial loans. ATMs, EFTs, RTGS, Internet banking, Mobile banking are some of the sevices.

2. Capital Markets

Its a financial market where securities are bought and sold.Its a part of financial system which consist of raising capital finds by dealing with shares, bods and other long term securities. The capital market is a broad term, it includes primary and seconday markets. In primary market new securities are sold to investors where as the secondary market deals with trading of existing securities.

3. Insurance

It is an act of insuring against future potential losses in exchange of periodic payment called premium. Its a contract between the two parties the insurer and the insurance company. Its a form of risk management.Insurance involves pooling of funds from insured entities to pay foe the losses that may incur in future. The entities are protected from risk for a fee. In order to claim the insurance the risk incurred must meet certain characteristics. Insurance as a financial intermediary is a commercial enterprise and a major part of financial service industry. There are different types of insurances like life insurance, health insurance, asset insurance, term insurance etc.

4. Venture Capital

The capital which is available for new venture is called venture capital. It includes lending finance to growing business. This risk associated with venture capital financing is very high, since the capital is providing to a new enterprise that use new technology to produce new product.

5.Foreign Exchange

Foreign exchange is a service that deals with currencies of different countries. The foreign exchange abbreviated as forex refers to foreign exchange market. It is over the counter market where the foreign currencies of the world are traded.It is the largest nad most liquid market in the world. The transactions in forex market can be done in spot of forward delivery.In spot the transacation can be done with in 2 business days, where as in forward the trade settles further in the future.