Non-Bank Financial Institution (NBFI)
NBFIs stand for establishments that have a connection with finances but don’t possess a specific banking license. These organizations enable clients to use different banking services among them loans and credit facilities, risk pooling and financial consulting; nevertheless, they are not permitted to receive deposits from customers. Such establishments as venture capitalists and insurance firms, currency exchanges along with pawn shops refer to the non-bank organizations.
Non-bank FIs assist banking sphere in proving services that help managing funds to individuals as well as enterprises. Sometimes they can also compete with financial establishments that have a license because they can suggest services that the bank can’t give. In addition, different NFBIs can concentrate on different areas so the client can choose the institution according to his/her specific wants.
These establishments are able to guard economies against financial shocks as well as to overcome them. There are three major kinds of NBFIs: risk pooling organizations such as insurance organizations, pension, and mutual funds refer to institutional investors and other NBFIs that suggest the lease of assets.