Financial intermediation,

Definition

Financial intermediation is the process by which financial institutions, such as banks and credit unions, act as middlemen between savers who want to deposit their funds and borrowers who seek loans. It facilitates the flow of funds within an economy, helping both savings and investments to be more efficient.

Related terms

Banks: Institutions that accept deposits from individuals, make loans, and provide other financial services.

Credit Unions:

Member-owned financial cooperatives that provide similar banking services as banks but often offer higher savings rates and lower loan rates.

Interest Rate: The cost of borrowing money usually expressed as a percentage of the amount borrowed over a specific period of time