Financial Institution

• What do financial institutions primarily deal with?

  They deal primarily in money.
• How do financial institutions help individuals and firms?


  They help by making savings available to those who require them.
• What are some examples of financial institutions mentioned?

  • Commercial banks
  • Merchant banks
  • Finance houses
  • Central bank
  • Development bank
  • Stock exchange market
  • Building society or mortgage banks
• What are the types of traditional financial institutions in West Africa?


  1. Money lenders
  2. Local banks (Esusu, Isusu, AJO, Adast)
• What is the primary function of money lenders?


  They make profit by charging interest on money lent to people.
• What are local banks known for in the traditional banking system?


  They perform functions of saving and lending.
• What is a commercial bank?


  A commercial bank is a financial institution set up for the safe keeping and lending of money for profit making.
• Name three examples of commercial banks in Nigeria.

  • First Bank of Nigeria plc
  • Union Bank of Nigeria
  • Guaranty Trust Bank
• What are the functions of commercial banks?


  1. Acceptance of deposits
  2. Lending of money
  3. Safe custody of valuables
  4. Money creation functions
  5. Agency services
  6. Advisory services
  7. Solving foreign exchange problems
  8. Issuing bank drafts
• What types of accounts do commercial banks offer?


  They offer savings accounts, current accounts, and fixed deposit accounts.
• What is a savings account?


  A savings account is common among low-income earners and allows deposits and withdrawals using an ATM card.
• How does a current account function?


  A current account allows frequent withdrawals on demand by cheque without attracting interest.
• What is a fixed deposit account?


  A fixed deposit account allows money to be withdrawn only after an agreed date and yields a high rate of interest.
• What is a loan in the context of commercial banks?


  A loan is a bulk of money given to customers who have the necessary collateral security.
• What is an overdraft?


  An overdraft is a loan facility that allows a customer to withdraw more money than they have in their account.
• What does discounting bills of exchange involve?


  It involves commercial banks making payments on behalf of customers to creditors at a later date.
• What are assets and liabilities in the context of commercial banks?

  • Assets: Productive property, cash, loans, investments, fixed assets.
  • Liabilities: Claims of outsiders, capital from shareholders, customer deposits, undistributed profits.
• What is credit creation by commercial banks?


  Credit creation is the ability of commercial banks to create deposits through lending and borrowing money.
• Define Financial Institution 


  It can be defined as organization which deals primarily with money.
• What is the DSR ratio in the context of commercial banks?


  It is the actual amount commercial banks must have with the Central Bank to enable operations.