Principles of Business

1. The following are non-bank financial institutions, provide a suitable definition for each (10 marks):
 Credit unions  Government agencies
 Micro-lending agencies  Building societies
 Insurance companies

Answers: Credit unions offer a variety of other financial services in addition to accepting deposits and
making loans. A building society is a financial institution owned by its members as a mutual organisation.
A government, or state agency, is a permanent or semi-permanent organisation in the machinery of
government that is responsible for the oversight and administration of specific function. A corporation
that offers insurance protects its clients from specific dangers, such as the possibility of a car accident or a
house fire. Peer-to-peer lending programmes for new startups and small enterprises include micro-lending
initiatives.
2. Explain how the following functions apply to non-bank financial institutions. Be sure to firstly define
the functions then the explanation of how the functions apply to non-bank financial institutions. (16
marks).
 Loans/credit facilities  Making payments
 Savings and deposits  Investments
Answers: A credit facility is a specific kind of loan given in the context of corporate or commercial
finance. Instead of reapplying for a loan every time it needs money, it enables the borrowing company to
borrow money over a longer period of time.
3. Explain the following services that are offered by financial institutions (30 marks):
 Night safe deposits  Deposit boxes
 Online banking  ATM/ABM services
 Advisory service  E-trade
 Credit and Debit Cards  Settlement services
 Trustee work  Remittance services
….