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Financial institution

In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries. Most financial institutions are highly regulated by government.
Broadly speaking, there are three major types of financial institutions:[1]
1. Deposit-taking institutions that accept and manage deposits and make loans, including banks, building societies, credit unions, trust companies, and mortgage loan companies
2. Insurance companies and pension funds; and
3. Brokers, underwriters and investment funds.

Functions Of Financial Institutions

Financial institutions include banks, credit unions, asset management firms, building societies, and stock brokerages, among others. These institutions are responsible for distributing financial resources in a planned way to the potential users.
There are a number of institutions that collect and provide funds for the necessary sector or individual. On the other hand, there are several institutions that act as the middleman and join the deficit and surplus units. Investing money on behalf of the client is another of the variety of functions of financial institutions.

Financial institutions can be categorized as follows:
• Deposit Taking Institutions
• Finance and Insurance Institutions
• Investment Institutions
• Pension Providing Institutions
• Risk Management Institutions
At the same time, there are several governmental financial institutions assigned with regulatory and supervisory functions. These institutions have played a distinct role in fulfilling the financial and management needs of different industries, and have also shaped the national economic scene.

Deposit taking financial organizations are known as commercial banks, mutual savings banks, savings associations, loan associations and so on. The primary functions of financial institutions of this nature are as follows:


• Accepting Deposits
• Providing Commercial Loans
• Providing Real Estate Loans
• Providing Mortgage Loans
• Issuing Share Certificates


Finance companies provide loans, business inventory financing and indirect consumer loans. These companies get their funds by issuing bonds and other obligations. These companies operate in a number of countries. On the other hand, there are insurance companies that provide coverage for a variety of risk factors and they also provide several investment options. Insurance companies provide loans for a number of purposes and create investment products.

The functions of financial institutions, such as stock exchanges, commodity markets, futures, currency, and options exchanges are very important for the economy. These institutions are involved in creating and providing ownership for financial claims. These institutions are also responsible for maintaining liquidity in the market and managing price change risks. As part of their various services, these institutions provide investment opportunities and help businesses to generate funds for various purposes.

The functions of financial institutions like investment banks are also vital and related to the investment sector. These companies are involved in a number of financial activities, such as underwriting securities, selling securities to investors, providing brokerage services, and fund raising advice

Nationalized scheduled banks
 First Women Bank Limited
 National Bank of Pakistan
 The Bank of Punjab
 The Bank Of Khyber
Specialized banks
 Industrial Development Bank
 Zarai Taraqiati Bank Limited[1]
 Punjab Provincial Cooperative Bank
 SME Bank

Development financial institutions
 Pak China Investment Company Limited, Islamabad
 Pak Kuwait Investment Company Limited, Karachi
 Pak Libya Holding Company Limited, Karachi
 Pak Iran Joint Investment Company Limited, Karachi
 Pak-Oman Investment Company Limited, Karachi
 Saudi Pak Industrial and Agricultural Investment Company Limited, Islamabad
 House Building Finance Corporation, Karachi
 Investment Corporation of Pakistan, Karachi
 Pak Brunei Investment Company Limited, Karach

Commercial banks
 Allied Bank Limited Allied Bank of Pakistan
 Bank Alfalah Limited
 Habib Bank Limited
 Bank Al-Habib Limited
 Standard Chartered Bank Limited
 City Bank Limited
 United Bank Limited
 Askari Bank Limited.
 MCB Bank Limited.


Investment banks
 BMA Capital Management Limited
 Invest Capital Investment Bank Limited
 IGI Investment Bank Limited
 AMZ Securities
 Orix Leasing (Pakistan) Limited
 Trust Investment Bank Limited
 Arif Habib Investment and Mutual Funds Co.
Discount and guarantee houses
 First Credit & Discount Corp Limited
 National Discounting Services Limited
 Speedway Fordmetall (Pakistan) Limited
Housing finance companies
 Asian Housing Finance Limited
 Citibank Housing Finance Company Limited
 House Building Finance Corporation
 International Housing Finance Limited
Micro finance banks
 NRSP Micro Finance Bank Limited
 The First Micro Finance Bank Limited
 Khushali Bank Limited
 Karakuram Bank
 Network Micro Finance Bank
 Pak Oman Micro Finance Bank
 Rozgar Micro Finance Bank, Karachi
 Tameer Microfinance Bank Limited
 Kashf Microfinance Bank Limited
Islamic banks
 AlBaraka Islamic Bank (Merged into Al Baraka Bank (Pakistan) Limited[2])
 BankIslami Pakistan Limited
 Dubai Islamic Bank Pakistan limited
 Dawood Islamic Bank Limited
 Emirates Global Islamic Bank Limited (Merged into Al Baraka Bank (Pakistan) Limited[3])
 Meezan Bank Limited-Premier Islamic Bank In Pakistan

Limitations of Financial Institutions

 • They don’t set up the markets
 – ALL MARKETS first need natural buyers and sellers
 – ENVIRONMENTAL MARKETS often also need government action
 • Many PES systems involve only direct payments
 – E.g. government or company pays forest owners directly
 • Many markets are unattractive to the big banks
 – Small
 – Insufficient legal support
 • Borrowing is not always needed
 – E.g. some tax-based systems, much of cap & trade
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