Difference Between Financial Institution and Financial Markets

Financial Institutions are engaged in the process of dealing with the financial and monetary transactions in which borrowing and lending of money value is exchanged which includes savings, loans, deposits and exchange of currencies.

Financial Market is a process where the money which is an excess is provided or offered to those who are having the shortage of money but also has the skill and ability to utilize the money in a proper way to multiply that borrowed money and repay once borrowed form an entity.

In the Financial Market the excessive money is transferred to those people who have shortage of money as a debt with some interest rate is charged on that money, the money is transferred with some conditions of rate of return on that borrowed money.

In financial there are two parties are involved in it the borrower and the lender, financial institution provide the role of an agent between these two parties it is an institute or a building in which a staff is engaged to accept deposit and allow the borrowing of money.

Lenders are the persons who are having money is excess these peoples can be the households who save their money in the institution on the interest base, these can be the business firms who invest money in the market to share the risk, government agencies to hold money or to invest locally and the foreigners with an intention to earn from the interest.

Borrowers can be the same in category, the money can be borrowed by the lenders directly without an involvement of financial institution but that can be a risk for a lender to allow funds to a person with no legality, if there is a legality then a complete legal formality process is followed which really irritates the person.

Financial Institute is a medium or channel in which funds are transferred, financial institutes like bank charge their money over borrowed funds with some mortgage provided by the customers, banks also measure the good will or the market value of that business in the market.

There are some mutual agencies as well who offer the money or funds to the borrower, in some communities the funds are provided to the institution in order to engage that money in borrowing and lending process, on the funds of that group which provide to the mutual agency the agency will issue those funds.

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