“Homework”

Subject Code: FIN-1004

Subject Name: Money and Banking

Submission Date: 08-10-2020

Submitted By
MD. KHALID HASAN
Bachelor of Business Administration
Roll: 3985
Batch: 59B (58B)
Reg.: WUB 01/18/58/3985

Submitted To
EMRAN AHMED
Sr. Lecturer
Department of Business Administration
World University of Bangladesh

World University of Bangladesh

Difference between indirect and direct finance:

Indirect finance is where borrowers borrow funds from the financial market through indirect
means, such as through a financial intermediary. This is different from direct financing where
there is a direct connection to the financial markets as indicated by the borrower issuing
securities directly on the market.

Financial intermediaries and financial markets role:

Financial intermediaries emerge to reduce the information asymmetries, extending corporate

control, risk management and mobilizing saving. Financial intermediaries play very important
role in economic, it is not much sufficient. It should be also provided foreign financial
intermediaries for practicing in business sectors.

Whether direct or indirect finance is a more important source of finds:

Indirect finance is more important than direct finance. Direct finance occurs in financial markets,
while indirect finance involves financial intermediaries. Indirect finance is arguably more
important, because transactions costs and asymmetric information make direct finance costly in
many cases. This is due primarily to the added efficiency available through the financial
intermediary. With indirect financing, the intermediary takes care of gathering together multiple
investors, reduces investor risk by performing due diligence on the borrowers.