FINANCIAL SYSTEM (3)

Financial System Participants

Ever heard of the saying "no system works without humans"? Well, it is true. Over the years, no system or plan has been carried out without humans being involved, with this in mind we will be talking more about those participating in the financial system and their roles.

In my previous posts in the Financial System series, we talked explicitly about what a financial system is, how it operates and why there is always a constant flow of funds in the economy, so today, I'm going to talk about those that participate in the financial system.

Who are Financial System Participants?

The financial system operates on a mechanism in which some vital constituents play a strategic role in its structural operations. They're all the people and organisations that do business in a financial market, from banks and other lenders to individual investors.

The financial system participants are divided into two components: The Primary and The Secondary Participants.

The Primary Participants

There are known as the primary operators of the system in terms of raising and supplying funds. The primary participants are funds suppliers and funds raisers. 

Funds raisers, as we discussed in one of the series, are entities that are into the production of goods and related services in the real sector of the economy that requires funds to enhance their operations. Therefore, they normally raise funds from suppliers to sustain the operational activities of their companies and institutions. Funds suppliers, on the other hand, are those with surplus funds for investment. They are also known as savers-surplus because they mostly supply their funds to savings for funds raisers to use.

The presence of the primary operators in the financial system ensures that there are financial flows among the participants in the process of supply of and demand for funds.

Examples of Funds raisers are:

1. Government
2. Business enterprises
3. Public corporations

Examples of Funds suppliers are:

1. Individuals and household units as savers of surplus funds
2. Financial Institutions as investors, e.g insurance companies, etc
3. Commercial banks and other types of banks
4. Government agencies in charge of credit

Note that; there are no permanent funds raisers and permanent suppliers of funds, a funds raiser at one time can become a supplier of funds at some other time in the financial system.

We will be stopping here for today on the financial system participants, in my next post I will talk about the secondary participants and their roles in the financial system, meanwhile, I hope you learnt a lot from today's post, kindly share which part resonates with you most with me in the comment section below.

Bye, see you soon!