When placing your savings in an account, you should look at the interest rate. When evaluating the options, you will notice that financial companies are the ones that offer you the highest interest in your savings. But before putting your capital in them, you probably want to find out what a financial one is. In this article we help achieve that goal.
What is a financial institution?
A financial entity is an institution that performs financial intermediation operations; that is, that it captures public capital, provided that said capital is used in active operations or to grant loans to third parties.
Banking instructions or banks are perhaps the type of financial entity best known to the common citizen. To these are added other types of financial institutions, such as savings and loan funds and financial corporations, to name just two of the many types of financial institutions that operate in Peru.
What is a financial and what are its characteristics?
A financial company, known simply as a financial company, is an entity very similar to a bank. In fact, the General Law of Financial System Institutions differentiates banks from financial institutions only in these aspects:
- Financial corporations cannot manage checking accounts, unlike banks.
- And because of the above, financial companies cannot grant current account loans, as if banks do.
The financial companies are characterized by having a very local scope, so they do not have many branches in the country. Its quarry of customers is very small, compared to the one owned by banks. For these two reasons, their operating expenses are many lower than those of the banking entities.
In Peru, financial institutions also tend to be characterized by higher interest rates than banks. This occurs both in the rates offered for savings, as in those charged by loan. In the case of savings, this results from a competition strategy for raising capital. Simply the savings achieved in operating expenses, they invest in the payment of greater interest.