FINANCIAL

INTERMEDIARIES

D
E
F
I
N
I
T
I
O
N

SURPLUS
AGENT
BANK

DEFICIT AGENT
BORROWER

Middleman between two parties in afinancial

transaction
Offers a service to help an individual/ firm to
save or borrow money.
Helps to facilitate the different needs of lenders
and borrowers.
May be in the form ofloansormortgages

BORROWER

BANK

Financial
Intermediary
Need to borrow :RM 1000
Finding who can help on to
lend
Since time consuming
and difficult to know
how reliable the
lender is

More efficient to go
to bank to borrow
money
Raise funds from
people looking to
deposits money
Afford to lend out to
those who need it

?
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t
is

x
e
e y n? ?
h
t io
o
t
t
c
y
n
h
u
F
W
ASYMMETRIC
INFORMATION

MATURITY
TRANSFORMATION
Converting from short term
liabilities to long term assets

Proper information
Guidance and information in term
of risk, return, potential investment
to investors

FACILITATE
TRANSACTIONS

Loans
PTPTN & Students

DIVERSIFICATION
Spreading risk into free-risk
Lending to multiple
borrowers

PAYMENT MECHANISMS
Checks, Credit Cards, Debit Cards,
etc.

Retrieved: http://www.slideshare.net/Geckos/explaining-financial-intermediaries-

INSURANCE COMPANIES

EXAMPLES
CREDIT UNIONS

FINANCIAL ADVISERS

Cagamas Berhad is a National Mortgage Corporation, was

established in 1986.
help Malaysians with affordable housing
Become leader in securitisation
Promote secondary mortgage market in Malaysia
The Cagamas model is well regarded by the World Bank as a
successful secondary mortgage liquidity facility.
They issues debt securities to finance the purchase of
housing loans and other consumers receivables from financial
institutions , selected corporations and Government.
Cagamas is the leading issuer of AAA debt securities in
Malaysia as well as one of the top Sukuk issuers in the world

CONVENTION
AL

PRODUCTS

PURCHASE WITH
RECOURSE
Housing loans
Personal loans
Hire purchasing and leasing
debts
PURCHASE WITHOUT
RECOURSE
Housing loans hire purchase
loans

ISLAMIC

GUARANTEE
Skim rumah pertamaku
In
Islamic
Mortage
guarantee program
transactions
me

SKIM RUMAH PERTAMAKU

Announced in the 2011 Malaysia Budget by the
Malaysian Government
To assist young adults who have just joined the
workforce, with a gross income not exceeding
RM3,000 per month, to own their first home.
The Scheme allows young adults to obtain up to
100% financing from participating banks,
enabling them to own their first home.
This is in line with the Government's aspirations
of increasing home ownership amongst the
"rakyat".

Cagamas SRP
guarantee
10% of financing

*Apply the scheme

*Eligible for the scheme
Malaysian citizen only
First time homebuyer
Individuals up to age 35
yrs
Single borrower gross
income not exceeding RM
3,000/month

*Maximum financing tenure of 30 years

*Installment payable via monthly salary deduction or standing
instruction
*Borrowers are liable to the bank for the full financing amount (up to
100%). *The guarantee only indemnifies the bank for any loss
incurred as a result of financing above the 90% level.

ADVANTAGES

Save time
Low risk
Have liquidity
(convert asset to
money quickly)
Easy to search
Able to borrow
money (exact)

DISADVANTAGES

Charging fee
Trust (put trust on
3rd party who
might not share
same goal)
Lower return on
investment

DIRECTLY

Definit
ion
Directly channel:
There is no intermediaries therefore the process is
defined as a disintermediation as the flow from surplus
party to deficit party directly in one pathway.
Markets
Surplus units

Deficit units
Intermediaries

LOAN
SHARK
Activity of offering loans at a specific interest rates depend
on the amount of money borrowed.
There are legal and illegal loan sharks. Illegal loan sharks:
unlicensed moneylender. If licensed loan shark, they are
known as legal moneylender.
Licensed moneylenders are regulated by the Office of Fair
Trading (OFT) and must follow the OFT's codes of practice.
Because they're not licensed, loan sharks operate outside the
law.
Loan shark is referred to a person or entity that charges
borrowers interest above an established legal rate.

PROCES
S
Case a) (Interest rate on daily basis)
For a loan of RM3000 for 5 years, the repayment works out to
be RM3.62 per day. In a year, the borrower would have paid
RM1320 ( RM3.62 X 365 days) and at the end of 5 years he
would have paid RM6,600 ( RM 1320 X 5 years).
Case b) ( Interest rate on weekly basis)
If the loan shark started with RM 50, and stayed in business for
one year, how much money would he have in one year with
interest rate of 20% per week.
(20%*52 weeks= 1040 %@10.40)
F = P(1+i)n = 50(1+(10.40/ 52))(52*1) = RM 655,200

ADVANTAGES/DI
SADVANTAGES

THANK YOU