Cooperatives and Functions of Cooperatives in Financial Intermediaries
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Financial Intermediaries
A financial intermediary or intermediator is a financial institution.
It may be a bank, building society, insurance company, investment bank or pension fund.
A financial intermediary offers a service to help an individual or firm to save or borrow money.
A financial intermediary helps to satisfy different needs of lenders and borrowers.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country
For example, if you need $/₹/Rs 5,00,000 to borrow, you should try to find out an individual who wants to lend this amount
But, this will be very time consuming and you will find it very difficult.
Therefore, rather than look for individuals to borrow a sum, it is more efficient to go to a saving and loan cooperative (a financial intermediary) to borrow money.
Cooperative raises funds from its members.
Cooperative also takes loan from commercial bank.
It lends out to those members who need it.
Cooperative takes security deposit to provide loan.
It charges more service charge and interest on loan than commercial banks.
Role and function of financial institutions in financial market
The main functions of the financial institutions are as follows:
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a. |
Financial institutions accumulate the savings from several small investors and invest the same in the security. |
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b. |
They offer margin lending opportunity to the prospective customers to purchase new securities from the market. |
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c. |
They bring funds suppliers and fund borrowers together in single platform. |
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d. |
They play vital role in transferring fund from one entity to another entity through financial market. |
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e. |
Financial institutions cooperative accepts monthly or daily deposits from its members. |
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f. |
Allocating saving in to investment. |
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g. |
Providing financial services. |
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h. |
Ensuring satisfaction, return and minimizing the risk of loss. |
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i. |
Helping business raising funds. |
Financial Intermediaries
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Depository institutions |
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Non-depository institutions |
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Commercial banks |
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Insurance companies |
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Development banks |
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Pension fund |
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Finance companies |
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Mutual fund |
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Saving and loan cooperatives |
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Accounting Equation |
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Basic Journal Entries in Nepali |
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Basic Journal Entries |
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Journal Entry and Ledger |
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Ledger |
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Subsidiary Book |
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Cash Book |
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Trial Balance & Adjusted Trial Balance |
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Bank Reconciliation Statement (BRS) |
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Depreciation |
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Final Account: Class 11 |
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Adjustment In Final Account |
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Capital and Revenue |
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Single Entry System |
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Non-Profit Organization (Non-Trading Concern) |
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Government Accounting |
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Goswara Voucher (Journal Voucher) |
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Cooperatives
Saving and credit cooperative (saving and loan cooperative) is owned and operated by its members.
It is also known as finance cooperatives.
Cooperatives are voluntary association of the people with small saving.
They are organized with common objective to serve for economy and social interest.
The members mobilize the deposit and take loan amount by members themselves.
The finance cooperatives are established with basic objectives.
They promote associate members for financial and social strength.
The goal of a saving and loan cooperatives is to act on behalf of a unified group.
They perform job like traditional banking.
But these institutions attempt to differentiate themselves by offering above-average service.
They provide loan to members at competitive rates.
In Nepal, there are different types of finance cooperatives like small farmer co-operatives, cottage industry co-operatives, savings and credit co-operatives etc.
Keep in Mind
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According to the Department of Cooperative, the major types of co-operative societies operating in Nepal |
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There are different types of cooperatives like saving and credit, multipurpose, dairy, agriculture, fruits and vegetables, bee keeping, tea, coffee, consumers, science and technology and energy etc. |
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Around 65,12,340 people are the members of 34,737 cooperatives in Nepal (FY 2018/19). |
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More than 60,517 people are employed directly in cooperative business. |
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Bakhan Multipurpose Cooperative Ltd is the first cooperative of Nepal; it was founded on 2nd April 1957 by Bakhan Singh Gurung. |
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Share (Accounting for Share) |
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Share in Nepali |
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Debentures |
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Final Account: Class 12 |
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Final Account in Nepali |
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Work Sheet |
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Ratio Analysis (Accounting Ratio) |
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Fund Flow Statement |
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Cash Flow Statement |
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Theory Accounting Xii |
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Theory: Cost Accounting |
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Cost Accounting |
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LIFO−FIFO |
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Cost Sheet, Unit Costing |
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Cost Reconciliation Statement |
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Functions of Cooperative
The main functions of saving and loan cooperatives are given below:
Saving from members
Finance cooperative generate small saving from the members on regular basis.
They provide interest on deposit.
Lending to members
Finance cooperatives lend money to members.
They provide loan according to their level of deposit.
If members need more loans, they have to pledge security.
Education and training
Finance cooperatives provide education and training to their members.
They provide orientation and expert education.
Concern for members
Finance cooperatives also show the concern for the members.
They help their members to sustain through certain policy.
This policy is approved by all members of the cooperatives.
Anti-discrimination
There are lots of discriminations in our community.
They are religious, sexual, ethnic (customs, dress, foods) etc.
The finance cooperative set ground rules for membership against any kind of discrimination.
Finance cooperatives help to reduce such discriminations.
Motivation and reward
Finance cooperatives motivate to the people to be member and encourage for regular saving.
They reward their members through financial benefit.
These benefits are interest, bonus and other financial incentives.
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