What Is A Financial Institution, Not A Bank? Explanation, Type, And Function

Illustration of non-bank financial institutions (Unsplash/@synkevych)

YOGYAKARTA - When talking about financial institutions, many people will immediately remember the bank. Even though there are also non-bank financial institutions or not limited to banks only. One form of the institution is Non-Bank Financial Institutions (LKBB).

Non-bank financial institutions are not known to many people. LKBB is a business field engaged in finance. Its function is the same as that of banks in general, namely collecting or managing and channeling funds to the public. However, the difference is that the funds raised are not in the form of savings, deposits, or deposits.

Financial institutions are not bank megupun funds by issuing company securities, to distributing investment funds to various people. The existence of LKBB is very beneficial for companies that need credit for the purpose of increasing the production of goods, expanding the business sector, and other necessities. However, until now, they still do not know the types of non-bank financial institutions.

Non-bank financial institutions or more often referred to as Non-Bank Financial Institutions (LKBB) are institutions that provide financial services to raise funds and channel investments in companies and issue securities.

The LKBB was first established in 1972 based on the Decree of the Minister of Finance No. 39/MK/IV/1972. The establishment of the LKBB aims to encourage market developments to provide smoother and more efficient offerings of funds, thereby improving the welfare of the community.

Non-Bank Financial Institutions have several functions related to financial services. The following are the functions of LKBB.

There are several types of non-bank financial institutions. Each type has a different financial service system. Here are the types of LKBB in Indonesia.

The type of LKBB that is quite often encountered is pawnshops. Pegadaian runs financial services in the form of capital loans. The loan system is carried out by pawning goods or pawning parties receiving goods as collateral. The borrower can bring the goods as collateral to get a loan fund.

The nominal credit funds provided are adjusted to the type and condition of the goods used as collateral. Pegadaian is present as a financial solution for the class community to take it down. The financial services provided are fast, easy, and safe.

The next type of LKBB is the Savings and Loan Cooperative. This type of LKBB provides financial services in the form of efforts to raise public funds. The funds were then lent to members and people in need. The Savings and Loans Cooperative has a legal basis for the establishment of Law Number 17 of 2012.

The capital market is also included in the type of LKBB. The capital market is run by non-bankers. The services provided by the capital market are places for buying and selling securities as well as various investment instruments, such as stocks or bonds.

Another type of LKBB is an insurance company. insurance companies are financial valleys in the form of coverage of various risks that threaten someone. The coverage services provided include accidents, health, fires, natural disasters, emergency funds, and so on.

Accounting services or insurance provided to customers who are required to pay a certain amount of contributions every month. Customer investment funds or deposits can be used when one day they are at risk, whether in any form.

That is the explanation of non-bank financial institutions or non-bank financial institutions. LBKK has various functions and objectives, and there are various types of institutions. If you need LBKK, you can choose the type of institution that suits your orders.

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