here are several factors driving the increasing role of financial institutions (Rose & Fraser, 1988: 13), namely:
1) The increase in the income of the middle class families and individuals with incomes sufficient, especially among the middle and has a number of income for savings each year. Financial institutions provide the means favorable to their savings.
2) The rapid development of industry and technology: Financial institutions have demonstrated and have the ability to meet all the needs of capital and the industrial sector funds are usually sourced in bulk and savers.
3) The amount denominated financial instruments make it difficult to gain access to small savers. There are some interesting types of securities and loans in the money market can not be entered or acquired small savers due to such a large denomination. However, by collecting funds and many depositors, financial institutions can provide opportunities for small savers to acquire financial instruments interest.
4) Economies of scale and scope in the production and distribution of financial services By combining resources in producing various kinds of financial services in large numbers, the service cost per unit can be reduced as low as possible, which gives financial institutions a competitive edge against other parties that offer financial services
5) Financial institutions sell services unique liquidity, reducing the cost of liquidity for its customers. Uncertainty of cash flows the company’s business units and individuals, will jeopardize their condition when not in a liquid state when the cash is needed, so it can be subject to fines (penalty cost). To meet the needs of financial institutions selling liquidity services, such as deposits.
6) Long-term Benefits Financial institutions can obtain funding or borrow money and depositors with interest rates relatively lower then utilized loan with a higher interest rate for a longer period of time to the debtor, gains or spread between the cost of funds on the one hand and loan interest rates tend to move together, up or down..
7) the risks of a smaller: Supervision and regulation of the government and the insurance programs cause risks on deposits at financial institutions become smaller and other investments.