GRADE 10 BUSINESS/OPTION ECONOMICS

THE FINANCIAL SECTOR

WHAT IS THE FINANCIAL SECTOR?

The financial sector is defined as the interaction of lenders and borrowers in a financial market within
a regulatory framework. (Supervised structure).

OR

The financial sector is a section of the economy made up of firms and institutions that provide
financial services to customers.

THE FINANCIAL SECTOR CONSISTS OF:

Financial Financial
Instruments Institutions

Regulatory
Framework

Financial sector

• Financial institutions (financial intermediaries): organizations whose main task is to channel

funds between institutions, lenders and borrowers

• Financial instruments: a contract between individuals or parties that holds a monetary value.

• Regulatory framework: rules and laws governing financial institutions

(REFER TO PG. 84 IN THE STUDY GUIDE FOR MORE INFO)

Sources: P a g e 1|2

Economics for CSEC Examination

Comprehensive Economics for CSEC
Economics: CSEC
Economics for CSEC Study guide
 GRADE 10 BUSINESS/OPTION ECONOMICS

THE FUNCTIONS OF THE FINANCIAL SECTOR

• Mobilization of savings
• Providing loans
• Expert investment advice
• Facilitating the exchange of goods and services
• Provides compensation and reduces risk

(REFER TO PGs. 86 IN STUDY GUIDE, 200 IN ECONOMICS: CSEC AND 112 IN ECONOMICS FOR CSEC)

THE INFORMAL SECTOR

The informal sector is that part of the economy that where economic activities are not under official
control. In the informal sector workers who are self-employed, or work for those who are self-
employed. It is also known as the underground economy, black economy, shadow economy,
or gray economy.

• Caribbean economies have a large informal sector

• Workers do not declare their income
• Income earners in this sector do not pay taxes.
• A worker can belong to both the formal and informal sectors. (moonlighting)

INFORMAL SECTOR ACTIVITIES

• Farming, market gardening, self-employed artisans, shoemakers, tailors, etc.

• Working in construction, housing, road building.
• Small scale distribution, e.g. petty traders, street hawkers, etc.
• Other services, e.g. barbers, shoe-shiners, baby sitters

IMPORTANCE OF THE INFORMAL SECTOR

• Provides a source of finance to low- income households and firms

• Provides jobs and reduces unemployment
• Facilitates the growth of entrepreneurial activity
• More convenient for people in remote locations

(REFER TO PGS. 88 IN THE STUDY GUIDE AND 113 IN ECONOMICS FOR CSEC EXAMINATION)

Sources: P a g e 2|2

Economics for CSEC Examination

Comprehensive Economics for CSEC
Economics: CSEC
Economics for CSEC Study guide