Special Financial Institutions

SPECIAL FINANCIAL INSTITUTIONS The major financial institutions in Kenya economy are commercial banks, savings and loans,
credit unions, savings banks, life insurance companies, pension funds, and mutual funds. These institutions attract funds from individuals, businesses, and governments, combine them, and make loans available to individuals and businesses. A brief description of the major financial institutions follows. Institution Commercial bank Description Accepts both demand (checking) and time
(saving) deposits. Also offers negotiable order of withdrawal (NOW), and money market deposit accounts. Commercial banks also make loans directly to borrowers or through the financial markets. Saving and loan These are similar to a commercial bank except chat it may not hold demand (checking) deposits. They obtain funds from savings, negotiable order of withdrawal (NOW) accounts, and money market deposit accounts. They lend primarily to individuals and businesses in the form of real estate mortgage loans. Credit union Commonly known as Savings co-operative societies (Saccos), credit unions deal primarily in transfer of funds between members. Membership in credit unions is generally based on some common bond, such as working for a given employer. Credit unions accept members savings deposits, NOW account deposits, and money market account deposits and lend funds to
members, typically to finance automobile or appliance purchase, or home improvements. Savings banks These are similar to a savings and loan in that it holds savings, NOW, and money market deposit accounts. Savings banks lend or invest funds through financial markets, although some mortgage loans are made to individuals.
Life insurance Company It is the largest type of financial intermediary handling individual savings. It receives premium payments and invests them to accumulate funds to cover future benefit payments. It lends funds to individual, businesses, and governments, typically through the financial markets. Pension fund Pension funds are set up so that employees can receive income after retirement. Often employers match the contribution of their employees. The majority of funds is lent or invested via the financial market. Mutual fund Pools funds from the sale of shares and uses them to acquire bonds and stocks of business and governmental units. Mutual funds create a professionally managed portfolio of securities to achieve a specified investment objective, such as liquidity with a high return. Hundreds of funds, with a variety of investment objectives exist. Money market mutual
funds provide competitive returns with very high liquidity.
OTHER SPECIALISED FINANCIAL INSTITUTIONS 1 .Industrial and commercial Development Corporation (LC.D.C) I. C.D.C was established in 1954 by the government. Its main objective was to promote industrial & commercial development in Kenya. Its specifically provides financial or technical assistance to small enterprises. Financial assistance may be in the form of working capital financing or purchase of fixed assets. This may take the form of equity or debt financing. Equity is provided by large-scale enterprises with more than 50 employees. Loans are given to both small and medium sized enterprise. Long-term loans repayment period is 6 years for industrial and up to 10 years for commercial loans 2 ) Agricultural finance corporation (AFC) it was established by the government in 1963. The main objective is to provide support for the agricultural sector. This is through provision of short term and long-term loans. The loans must be for a defined project by a farmer. Loans may be short term or long term and there exist flexibility to allow its repayment. 3) Kenya Industrial Estate (KIE) It was established in 1967 At inception it was a wholly owned subsidiary of ICDC. However in 1978 it was separated from ICDC and become an independent body as a parastatal under the ministry of industry. The main objective of K1E is to assist in the development of new projects and the expansion and modernization of new business enterprise. This is through the provision of finds and technical assistance. They provide both debt and equity finance. 4) Kenya Tourist Development Corporations: (KTDC)
The KTDC was established in 1960s. Its main responsibility was carrying out Investigations, formulation and study of projects development of the tourism industry KTDC Provides financial assistance in forms of loan, for tourism related enterprises. It has substantial share holdings in local hotels, which includes Hilton, Serena, and Pan Africa etc. 5) Industrial Development Bank (IDB) Was established in 1963 as a limited company. The main objective of setting this Institution was to promote industrial development in Kenya through the establishment promotion and expansion of small or large-scale enterprises. This is through financial assistance .n the form of loans, provision of guarantee and securities and underwriting 6) Hire purchase financial companies These are institutions, which provides assets on credit with an arrangement to pay the principal and interest in installment basis. However, the legal ownership of the assets remains with the hirepurchase company. The title is transferred when the last installment is made. Hire Purchase Companys in Kenya include- Kenya finance corporation (KFC), Pan-Afric credit finance Ltd, Investment and mortgage Ltd. etc. 7) Insurance Companies The main role of insurance companies is to assist individuals and corporate bodies safeguard against future risks. May also engage in other activities. The main capital for insurance companies is the premium paid by the policy holders. Forms of Insurance Companys in Kenya includes: - Life Insurance, Third party insurance etc. Examples of Insurance companys in Kenya include: jubilee insurance company, pan African insurance company, Blue shield insurance Co. Ltd. etc. 8) Building societies/Housing finance Co: These ale financial institution, which provide finance to the public so as to purchase or construct houses. The individual or corporate bodies make deposit upon which they later receive loan for acquiring or constructing house. Some buildings societies in Kenya include: Housing finance corporation (HFC), East African building society and Pioneer
building society. 9) Pension and provident scheme institution These institutions obtain funds from both employees and employers of contribution. They manage and invest these funds so as to meet the current and future obligations of the pension scheme to its members. 10) Merchant Banks It originated and also derives its name from the activities of wealth merchants who provided credit for the trading ventures. The ventures were for small-scale merchants. Before the establishment of banking systems in the 19th century, the merchants changed their role of merchants and started offering financial service. Today merchant banks performs the role of underwriting and assisting companies to raise capital in the financial markets They underwrite the security issues, buy and sell securities and provide advice in Investment in securities.

Special Financial Institutions

Uploaded by

Copyright:

Available Formats

Special Financial Institutions

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Special Financial Institutions

Uploaded by

Copyright:

Available Formats

SPECIAL FINANCIAL INSTITUTIONS The major financial institutions in Kenya economy are commercial banks, savings and loans,

funds provide competitive returns with very high liquidity.

You might also like