Different Functions Between Bank Financial Institutions and Non-Banks

Please Wait

In a country, economic activity is certainly aided and supported by the existence of financial institutions. Financial institutions play a role in controlling the circulation of money so as not to have a negative impact on society.

Talk about financial institutions, what exactly is meant by financial institutions? Writer Management of Financial Institutions, Dahlan Siamat, defines financial institutions as business entities engaged in finance and produce inputs and outputs in the form of financial assets.

While Law No. 14 of 1967 defines financial institutions as bodies that have activities to attract funds from customers which are then channeled back to other customers.

In Indonesia, there are two types of financial institutions, namely bank and nonbank financial institutions. What is the difference between the two?

Bank Financial Institutions

Is a financial institution whose main activities are channeling services in payment and circulation of money and credit. The term bank derived from the word Banca means a table used by money changers in the market.

Basically, a bank is a place of storage, distributor, and intermediary in payments. The following are some of the functions of a bank financial institution.

1. A place to save money
The bank has a function as a place to save or deposit money. Usually this form of saving money is divided into several forms:

Newspaper account or checking account
Time deposit

2. As a Credit Buyer or Distributor
The bank also functions as a credit buyer and distributor. The bank will utilize the funds deposited by customers by channeling it to other parties who need credit.

3. As an Intermediary in Payments
The bank can also act as a liaison between customers when making transactions. When conducting transactions through banks, customers do not make payments directly, but involve the bank to complete the transaction.

In addition, the bank carries out other service activities, such as money transfers, purchases, and the sale of shares and foreign exchange (foreign exchange). The bank also collects money on behalf of customers.

4. Printing Money
Another function of the bank is to print money used in daily economic activities. Of course the money printed in is legal money in the form of rupiah. For the record, the responsibility of printing this money is the responsibility of the central bank.

Non-bank financial institutions
Is a financial institution whose basic functions are as collector and distributor of funds used to support the development of the money market and capital market. Well, below are some functions of non-bank financial institutions (LKBB):

1. Collecting funds
Nonbank financial institutions work by collecting funds from customers by issuing securities. This method is considered effective because the deposit of funds in the non-cash form is safer and more efficient.

With this fund collection, non-bank financial institutions are expected to provide assistance to the community.

2. Giving Credit
The LKBB can provide credit in the short or long term. Credit is indeed included in the main activities of financial institutions. Usually this credit is needed by business owners to develop their business.

3. Become an Intermediary for Companies
LKBB can be an intermediary for capital owners, both domestically and abroad, with companies that need capital. The function of this one LKBB certainly helps companies that are in need of capital paid by credit.

Different functions, but permanent contribution to the country's economy
Financial institutions in a country have different functions. Bank financial institutions have capabilities in various forms and main activities in the financial sector. While nonbank financial institutions can only do one financial activity. Even so, the role of financial institutions continues to contribute to the country's economy.

Powered by Blogger