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Financial Intermediation

  • Is a productive activity in which an institution unit incurs liabilities on its own account for the purpose of acquiring financial assets by engaging in financial transactions of the market; the role of financial intermediaries is to channel funds from lenders to borrowers by intermediating.
  • That is to say it is typically an institution that facilitates the channelling of funds between lenders and borrowers indirectly.  That is, savers (lenders) give fund to an intermediary institution (such as bank), and that institution gives those funds to spenders (borrowers)
  • In this case the CFF through MUSCCO is an entity that acts as the middleman between two parties in financial transaction.  Other examples include commercial bank, investment banks, mutual funds and pension funds.