OVERVIEW OF BANKING

AND FINANCIAL
INSTITUTION
Definition of Banking

■ Involves an institution holding money on behalf of

customers that is payable to the customer on
demand, either by appearing at the bank for a
withdrawal or by writing a check to a third party.
■ Also provides loans to businesses and individuals.
■ Offer certified checks to customers guaranteeing
payment to third parties.
Definition of Financial Institution

■ A company engaged in the business of dealing

with financial and monetary transactions such as
deposits, loans, investments, and currency
exchange.
Attributes of Bank

Responsiveness
Responsiveness is the time a bank takes to accomplish an
action that has an impact on the customer. That action can be
the time to underwrite a credit, to produce a term sheet, to draft
closing documents or to fund a loan.
Attributes of Bank

Influencer
Influencer describes how the borrower can advocate
and be heard for their credit needs. If the borrower can
sit down and describe their business plans and needs to
the decision maker of the bank, or take the credit officer
on a tour of the factory, then the influencing factor is
high.
Attributes of Bank

Flexibility
Flexibility describes the potential of the bank
to work with a borrower even if the relationship
does not fit perfectly into the bank’s business
model or if the relationship changes because of
credit issues.
Attributes of Bank

Continuity
Continuity describes the consistency of the
relationship between borrower and lender.
TYPES OF BANK
 As to
Ownership
Government Bank
• When the bank is governed by
the management, control,
organizing from the beginning
to the organization, it is called
a public bank or government
bank.
 As to
Ownership
Private Bank
• Banks which are controlled and
managed by a particular person
are called private banks.
Although private banks are
required to be listed these banks
are operated under indirect
control from the central bank of
the country.
 As to
Ownership
Autonomous Bank
• Such banks are formed by
the special law of the
government and through the
special ordinance of the
constitution.
Roles of Banking and Other Financial
Institutions
■ The primary role of financial institutions is to provide
liquidity to the economy and permit a higher level
of economic activity than would otherwise be possible
(offering credit, managing markets and pooling risk
among consumers).
■ Still another way financial institutions serve the market
is by acting as repositories for risk.
The role of development financial
institutions in the new millennium…
Development financial institutions remain relevant
DFIs have been created by governments around the
world to promote economic growth and support social
development. They typically provide credit and a wide
range of capacity-building programs to households,
SMEs, and even larger private corporations whose
financial needs are not sufficiently served by private
banks or local capital markets.
The role of development financial
institutions in the new millennium…
Views towards national development financial institutions have
evolved over the years
Our approach towards these institutions have changed from
full support for their establishment during the 60s and 70s to a
more cautious approach during the 80s and 90s which saw more
closure or privatization of state-owned financial institutions.
Since the global financial crisis of 2008, we are seeing a more
balanced appreciation of their role and mandate.
The role of development financial
institutions in the new millennium…
Financial sustainability and good governance are critical
elements for the success of DFIs
To be effective, DFIs need to have business models
that ensure long-term financial sustainability. They
also need to have sound risk-management tools and high
corporate governance standards that insulate them from
undue political interference.