Financial intermediaries provide the following important functions for the economy ¾ the payment mechanism, borrowing and lending, and pooling risk.

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Financial intermediaries, such as banks and insurance companies, facilitate the payment mechanism by providing payment services to individuals and businesses. They also enable borrowing and lending by connecting borrowers and savers. Additionally, they pool risk by collecting small amounts of money from many individuals and using it to provide insurance or other forms of protection against risk.

Financial Intermediaries Provide the Following Important Functions for the Economy