Economics Write Up

Name: Nathaniel Sidnauth
Form 4 B
Economics Write Up
Central Banks
A central bank is a public institution that is tasked with the management of
currency and control of the money supply of a country. Central Banks strive
to achieve financial stability. Central banks also set interest rates. An
individual cannot set up an account with a central bank as it is not a
commercial bank and is not motivated by profit. However, commercial
banks can turn to the central bank to borrow money. The central bank can
act as the lender of last resort for a commercial bank.
Functions of a Central Bank
● Central Banks act as the sole distributor of a country’s currency
● It serves as a bank for the government
● Custodian of Cash Reserve
● Clearing house for transfer and settlement
Commercial Banks
A commercial bank is a financial institution that provides various financial
services to businesses and individuals. Commercial banks provide services
such as loans, checking and savings accounts, credit cards, and bank
overdraft.
Functions of Commercial Banks :
● Acceptance of Deposits
● Providing Loans and advances
● Issuing credit and debit cards
Stock Markets
Stock markets provide a market for investors, institutions, and
organizations to trade securities issued by publicly traded companies. It
facilitates opportunities to trade the ownership of stakes in companies.
Stock Exchanges
A stock exchange is where financial instruments are bought and sold. It is a
platform that allows for the trading of securities. It allows buyers and sellers
to match their orders and carry out transactions.
Credit Unions
A credit union is a non-profit financial institution that is owned and operated
by its members. Its main purpose is to provide its members with financial
services such as savings and checking accounts, loans, and other financial
services. Profits made by a credit union are returned to the members in the
form of reduced fees, higher saving rates, and lower loan rates. Some
examples of Credit Unions are Guyana Public Service Co-operative Credit
Union Ltd, Caribbean Confederation of Credit Unions.
Benefits of Credit Unions :
● Lower borrowing rates
● Higher deposits yield
● Insured Deposits
Development Bank
The main objective of development banks is to support economic
development. These financial institutions have an emphasis on long-term
funding for development. Governments or international organizations
mostly start them.
Functions of Development Banks

1. Lending money for the construction of infrastructure
2. Lend money to companies looking for outside funding
3. To support a nation’s economic growth
Examples of Development Banks

1. Caribbean Development Bank (CDB)
2. Inter-American Development Bank (IDB)
Insurance Company
This financial institution offers insurance policies to individuals or
businesses in exchange for a price or premium. Insurance companies
provide financial protection against various risks and potential losses that
may occur.
Functions of Insurance Companies

1. Risk Evaluation
2. Premium Collection
3. Risk Pooling and Loss Compensation
4. Policy Issue
Examples of Insurance Companies

1. Demerara Mutual Life Assurance Society Limited
2. Hand in Hand Mutual Fire Insurance Company Limited
3. National Insurance Scheme
Mutual Funds
Mutual Funds are a type of investment that pools the capital of various
individuals to purchase a diverse range of securities. Mutual funds are
managed by professional fund managers or investment firms. When
investing in a mutual fund you are basically buying shares of the mutual
fund. With the pooled funds a diverse range of assets are purchased.
Advantages of Mutual Fund Investing

1. Professional Management
2. Diversification
3. Accessibility
Examples of Mutual Funds

1. Caribbean Bond Fund
2. Caribbean Growth Fund
Building Society
Building Societies are businesses created to encourage home ownership
and savings among members. Building societies offer their members
mortgages and various financial services to encourage savings.
Financial Aid Provided by Building Societies

1. Homeownership
2. Savings and Investing
3. Financial Stability
Examples of Building Societies
1. Home Mortgage Bank
2. Jamaica National Building Society
Investment Companies
Investment Companies or asset management firms, are organizations that
manage and make investments on behalf of their clients. Investment
companies pool capital from investors in order to invest in a diverse
portfolio of financial instruments.
Duties of an Investment Company

1. Diversification
2. Accessibility
3. Professional Expertise
Examples of Investment Companies

1. Guyana Stock Exchange
2. Guyana Americas Merchant Bank
3. Republic Bank Trust Company Guyana Limited
Informal Credit Institutions

These institutions are frequently tasked with catering to communities with
limited access to traditional banking services.
Benefits of Informal Credit Institutions

1. Financial Inclusion
2. Access to Credit
3. Community Development
Financial Instruments
A financial instrument is a tradable asset or contract that represents a
financial value or right for the holder. It is a tool used in the financial
markets to facilitate the transfer of funds and manage various types of
risks. Financial instruments can be categorized into several broad types:
1. Equity Instruments: These represent ownership in a company and
include stocks or shares. Equity instruments provide ownership rights
and potential dividends or capital gains based on the company's
performance.
2. Debt Instruments: These represent a loan or debt obligation.
Examples include bonds, treasury bills, promissory notes, and
certificates of deposit (CDs). Debt instruments typically pay interest
over a specified period and return the principal amount at maturity.
3. Derivative Instruments: Derivatives derive their value from an
underlying asset or benchmark. Common derivatives include options,
futures contracts, swaps, and forward contracts. They are used to
hedge against price fluctuations, speculate on future price
movements, or manage risk exposures.
4. Money Market Instruments: These are short-term debt instruments
with high liquidity and low-risk characteristics. Examples include
treasury bills, commercial paper, and repurchase agreements (repos).
Money market instruments serve as a means to borrow or lend funds
for short durations.
5. Commodities: Commodities, such as gold, silver, oil, or agricultural
products, can be considered financial instruments when traded on
commodity exchanges or through derivative contracts tied to their
prices.
6. Foreign Exchange Instruments: These include currencies and foreign
exchange contracts, such as spot transactions, forwards, and
options. They facilitate the exchange of one currency for another and
enable businesses and individuals to manage currency risk

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Economics Write Up

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Name: Nathaniel Sidnauth

Functions of Development Banks

Examples of Development Banks

Functions of Insurance Companies

Examples of Insurance Companies

Advantages of Mutual Fund Investing

Examples of Mutual Funds

Financial Aid Provided by Building Societies

Duties of an Investment Company

Examples of Investment Companies

Informal Credit Institutions

Benefits of Informal Credit Institutions

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