Define the direct finance and indirect finance in markets, Finance Basics

Define the direct finance and indirect finance in markets.

In direct finance, borrower-spenders borrow funds directly by lenders into the financial markets through selling them securities. Into indirect finance, a financial intermediary stands among the lender-savers and the borrower-spenders: the intermediary assists to transfer funds through one to the other. It suggests that financial markets and intermediaries are optional which perform more or less similar function but in diverse ways (and perhaps along with different degrees of achievement). Note, nevertheless, that the process of indirect finance, termed as financial intermediation, is the most significant way of transferring funds by lenders to borrowers. That contrasts with the attitude of the media to focus mostly on financial markets.

Posted Date: 9/3/2013 7:54:31 AM | Location : United States

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