Financial Intermediaries

These are institutions which mediate or link between the savers and investors. There are numerous financial intermediaries in Kenya and include the following.

1. Commercial Banks.
They act as intermediary between savers and users (investment) of funds.

2. Savings and Credit Associations
These are firms that take the funds of many savers and then give the money as a loan in form of mortgage and to other types of borrowers. They provide credit analysis services.

3. Credit Unions
These are cooperative associations whose members have a common bond e.g. employee of the same company. The savings of the member are loaned only to the members at a very low interest rate e.g. SACCOS charge p.m. interest on outstanding balance of loan.

4. Pension Funds
These are retirement schemes or plans funded by firms or government agencies for their workers. They are administered mainly by the trust department of commercial banks or life insurance companies. Examples of pension funds are NSSF, NHIF and other registered pension funds of individual firms.

5. Life Insurance Companies
These are firms that take savings in form of annual premium from individuals and them invest, these funds in securities such as shares, bonds or in real assets. Savers will receive annuities in future.

6. Brokers
These are people who facilitate the exchange of securities by linking the buyer and the seller. They act on behalf of members of public who are buying and selling shares of quoted companies.

7. Investment Bankers
These are institutions that buy new issue of securities for resale to other investors.

They perform the following functions:
1. Giving advice to the investors
2. Giving advice to firms which want to invest
3. Valuation of firms which need to merge
4. Giving defensive tactics in case of forced takeover
5. Underwriting of securities.

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