What are financial intermediaries?

Financial intermediaries play a crucial role in the economy by acting as agents between investors who have surplus funds and borrowers who need capital. These entities facilitate the flow of funds within the financial system, making it more efficient by matching those who seek to invest with those who require financing.

For example, banks are prime examples of financial intermediaries, as they accept deposits from individuals and businesses and then lend those funds to others in need of capital, such as entrepreneurs looking to start new ventures. This process not only helps in pooling resources but also spreads risk, allowing for a more efficient allocation of capital.

The other options do not align with the definition of financial intermediaries. Individuals who invest directly in the market do not act as intermediaries; they are direct participants. Companies providing accounting services do not serve as agents in the capital flow between investors and borrowers. Similarly, organizations conducting market research are focused on gathering and analyzing data, which is distinct from the financial intermediation process.