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ISLAMIC FINANCIAL SYSTEM (FINANCIAL INTERMEDIARIES FUNCTIONS (To offer…
ISLAMIC FINANCIAL SYSTEM
FINANCIAL INTERMEDIARIES FUNCTIONS
To offer competent and solid money and capital markets
To help in the reduction of information and provisional costs.
To be founded upon an established and secured payment system
To have a well-developed market for risk trading to protect economic agents from both event risks and financial risks
ISLAMIC FINANCIAL INTERMEDIARIES
DEPOSITORY INSTITUTION
Source of Funds: Deposits
e.g. Commercial Banks, Savings and Loan Associations, Mutual Savings Banks
NON-DEPOSITORY
Source of Funds: Premiums, Employer/employee contribution, securities, shares
e.g. Takaful/insurance companies, Pensions funds, Investment banks
BANK AS FINANCIAL INTERMEDIARIES
Definition; A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities. A bank is the connection between customers that have capital deficits and customers with capital surpluses
NON-BANK FINANCIAL INTERMEDIARIES
The key players within this segment of the financial system are pension and provident funds, insurance companies and development financial institutions
Example for Pension and Provident Funds; Agro Bank, SME Bank, EXIM Bank, Sabah Development Bank
Example of Saving Institutions; BSN, Bank Rakyat, Tabung Haji
Provident Pension Funds are a group of financial schemes designed to provide members and their dependents with a measure of social security in the form of retirement, medical, death or disability benefits.
Major PPFs comprise the Employees Provident Fund (EPF) and other approved private and pension funds.
e.g. EPF, Social Security Organisations (SOCSO), Armed Forces Fund, Pensions Trust Fund, Teachers Provident Fund
Insurance Business is a financial service whereby policy holders are given financial protection against loss of property, income or life, for a premium.
They have to spread their risks over the insured community and take calculated risks to be able to cover for possible claims.
e.g. Life Insurance, General Insurance, Reinsurance, Insurance Intermediaries