... and investment, and therefore economic growth (Holden, P and Rajapatirana, S (1995.) The significant economic role of the financial system is to provide a link between savers and borrowers, facilitating the transfer of funds from financial surplus units to financial deficit units through financial intermediation - financial institutions acting as intermediaries between savers and borrowers. There are two different types of financial intermediaries: bank financial intermediaries and non-bank financial intermediaries, all of which essentially perform same the role of matching primary lenders and ultimate borrowers but in a varying way. Bank financial intermediaries including retail banks deal primarily with households and small businesses, investment (merchant banks) deal primarily with large corporations. Non-bank financial intermediaries include finance houses, building societies, insurance companies, pension funds, unit trusts, stock exchange and investment trusts (Blake 2000). Financial intermediaries channel funds from the primary investor to the ultimate borrower (usually from households to the business ...

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