Lesson Notes By Weeks and Term - Senior Secondary 1

Financial institution

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Term: 3rd Term

Week: 4

Class: Senior Secondary School 1

Age: 15 years

Duration: 40 minutes of 2 periods each

Date:       

Subject:      Economics

Topic:-       Financial Institution

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

  1. List and explain the types of financial system
  2. Explain the meaning and features of the Central Bank and the other types of banks in Nigeria

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

PRESENTATION

TEACHER’S ACTIVITY

STUDENT’S ACTIVITY

STEP 1

INTRODUCTION

The teacher reviews the previous lesson on Financial institution

Students pay attention

STEP 2

EXPLANATION

She lists and explains the types of financial system.

Students pay attention and participates

STEP 3

DEMONSTRATION

She further discusses the meaning and features of different types of banks in Nigeria

 

Students pay attention and participate

STEP 4

NOTE TAKING

The teacher writes a summarized note on the board

The students copy the note in their books

 

NOTE

TYPES OF FINANCIAL INSTITUTION

  1. BANKING FINANCIAL INSTITUTION
  2. NON-BANKING FINANCIAL INSTITUTION

Banking Financial Institution

Non-banking financial institution

Banking financial institutions are notable for accepting deposits and giving out loans. They deal with short and medium term loans. Examples include; central bank, commercial bank, merchant bank, development bank, mortgage bank, microfinance bank.

Non-banking financial institutions are institutions that are not allowed to accept or take deposit directly from the Public but mobilize Public savings indirectly from rendering other financial services , such as: investment, insurance, administration of pension funds, buying and selling of currencies, discounting of commercial papers and treasury bills. Examples; bureau de change, insurance companies, discount houses,  finance companies, pension fund administrators.

 

CENTRAL BANK

A central bank is a national financial institution that leads a country’s banking system, controls and supervises the monetary and financial system of a country, makingthem comply with the monetary policy of the government

 

FEATURES OF A CENTRAL BANK

  1. They are non-profit oriented.
  2. There is only one central bank in a country.
  3. It is the highest financial institution/apex bank in a country.
  4. It does not transact with private individuals.
  5. It is established by an act of parliament.

 

FUNCTIONS OF CENTRAL BANK OF NIGERIA.

  1. It is a banker and financial adviser to the government.
  2. It is a banker to all financial institutions.
  3. It overseas the issuance and control of country’s currency.
  4. It maintains a country’s external reserve.
  5. It manages national debt.
  6. It is responsible for the monetary policy of the government.

 

COMMERCIAL BANK

Commercial banks are profit-seeking financial institutions that accept deposits from customers at a lower rate of interest and make business loans at a higher interest rate. In addition, they also sell various investment products and banking services that augment their profits. Examples of commercial banks are First bank plc, Access bank plc, UBA, Union Bank Plc, Zenith Bank Plc, Guarantee Trust Bank(GTb) etc

Or Commercial banks are financial institutions which accept deposits and other valuables from the public for safe keeping, with the sole aim of making profit.

 

FEATURES OF COMMERCIAL BANK

  1. Commercial banks are profit- oriented.
  2. They are joint stock companies.
  3. They accept valuable deposit.
  4. They enable customers to pay by cheque.
  5. They are members of the money market.
  6. They are owned by shareholders.

 

FUNCTIONS OF COMMERCIAL BANK

  1. Acceptance of deposit: commercial banks accept deposits from the public for safe keeping. This is the oldest function of commercial banks, which helps in taking care people’s money.
  2. Lending of money: this is perhaps the most profitable function of commercial banks. Deposits from different customers are pooled together and given out as loans and overdraft with interest to people and firms for profitable investment.
  3. Provision of financial advice: commercial banks encourage and advice businessmen on the type of projects they should invest their money in.
  4. Facilitate international trade: commercial banks provide credits to exporters, and this facilitates payment in foreign trade.
  5. Safe keeping of valuables: one of the functions of commercial banks is to keep customers’ valuables such as jewelry, certificates, will, etc.

 

MORTGAGE BANK

Mortgage banks are financial institutions that specialize in granting loans to individuals and corporate bodies for  building purposes.

 

FEATURES OF MORTGAGE BANK

  1. They are joint stock companies.
  2. They accept deposits from investing public at a rate of interest
  3. They provide medium and long term loans for people, organisations who want to build /acquire properties.
  4. They are profit making institutions.
  5. They are owned by individuals or group of individuals.

 

FUNCTIONS OF MORTGAGE BANK

  1. Acceptance of deposit: Mortgage banks accept deposit from customers in order to encourage savings towards owning a house.
  2. Provision of long-term loans : they provide long-term loans to people or to estate developers to build houses.
  3. Give advice on housing matters: they advise and assist the government on housing matters.
  4. Provision of houses: Mortgage banks are also involved in the construction of houses and offer them for sales to the people.
  5. Development of Mortgage institutions: they supervise and encourage the development of Mortgage institutions.

 

DEVELOPMENT BANK

Development banks are institutions established by government to provide long-term finance for development projects. They also provide loans for projects in the area of  agriculture, commerce and industry.

Examples of development banks in Nigeria are Nigeria Industrial Development Bank (N.I.D.B), Nigerian Bank for commerce and industry (N.B.C.I) and Nigerian Agricultural and co-operative bank (N.A.C.B).

 

FEATURES OF DEVELOPMENT BANK

  1. They are owned by the government.
  2. They offer loan for capital projects.
  3. They provide medium and long-term loans.
  4. They do not accept deposit from members of the public.
  5. They do not issue their own cheque and passbook like commercial banks.

 

Functions of Development Bank

  1. Provision of fund for capital projects: development banks provide long-term loans for capital projects in specific areas.
  2. Implementation of government policies: development banks also help to implement government policies on Industrial, commercial and agricultural development.
  3. Supervision of development projects: they help industrialists and other investors to supervise development projects in order to ensure their success.
  4. Manpower development: they contribute to manpower development by making funds available to manpower training institutes.
  5. Render special advice: development banks also advise the industrialist on the surest or best way to invest.

 

MERCHANT BANK

A merchant bank is historically a bank dealing in commercial loans and investment.

A merchant bank is a financial institution that engages in underwriting and business loans, catering primarily to the needs of large enterprises and high net worth individuals.

N.B: Underwriting is the process through which an individual or institution takes on financial risk for a fee.

 

FEATURES OF MERCHANT BANK

  1. It’s a joint stock company.
  2. They engage in trade funding.
  3. They engage in wholesale banking such that their deposits are usually in large sum of money, like #10,000,000.
  4. They offer specialized services on issues like merger, acquisition, tax matters. Etc.

 

FUNCTIONS OF MERCHANT BANK

  1. Discounting bill of exchange: Merchant banks accept and discount bill of exchange.
  2. B: A bill of exchange is a written order once used primarily in international trade that binds one party to pay a fixed sum of money to another party on demand or at a predetermined date.
  3. Loan to foreign traders: merchant banks arrange loans at the request of foreign traders.
  4. Advisers to companies: they act as company advisers by way of telling them possible areas to invest.
  5. Management of merger bid: they manage take over and merger bids.
  6. Provision of long-term loans: they issue long-term loan to the government and companies abroad for development projects.

 

NON-BANKING FINANCIAL INSTITUTION

INSURANCE COMPANY

Insurance companies are non-banking financial institutions that guarantee the insured against risk of loss or harm. They deal on risk management.

 

Features of insurance company

  1. They are usually joint stock companies.
  2. They accept premium as prerequisite for insuring anything.
  3. They don’t accept deposit from individuals.
  4. They often compensate those covered by their policy in case of loss or damage.

 

FUNCTIONS OF INSURANCE COMPANY

  1. It leads to risk reduction: Insurance helps to reduce or control loss or liabilities of a businessman.
  2. Provision of security: Insurance provides security to commercial activities. Some small enterprises would have collapsed as a result of major losses,but insurance always takes care of such uncertainty.
  3. Provides a means of savings: Insurance companies provide a means of saving regularly, which will help to provide for the future.
  4. Motivation of workers: through insurance policy, the workers are fully aware of a secured future; hence they will work harder, which will bring about higher productivity.
  5. Provision for old age and disability: life assurance can used as a way of providing for old age and to make provision for permanent disability.

 

BUREAU DE CHANGE

A bureau de change is a company that is licensed to provide small scale foreign exchange services in Nigeria. Functions of bureau de change includes: dealing in bank notes and coins, buying and selling of travelerscheque, etc.

 

DISCOUNT HOUSES

A discount house is a money lender that participates in the buying and discounting of bill of exchange and other financial products such as money market securities, treasury bills, commercial bills , certain bonds etc..

 

 FUNCTIONS OF DISCOUNT HOUSES

  1. They provide short term finance for industry and trade by discounting bill of exchange.
  2. They provide short-term finance to the government through the acquisition of treasury bill.
  3. They help central bank act as lender of last resort for the government.

 

FINANCE COMPANY

Finance companies carryout the business of providing financial services for consumers(Industrial, Agricultural and commercial enterprises) despite the fact that they don’t accept deposits. Such services include fund management, equipment leasing, hire purchase, debt and project financing, consultancy and export financing, etc.

 

FUNCTIONS OF FINANCE COMPANY

  1. Disbursement of Personal or individual loans
  2. Equipment leasing
  3. Fund management
  4. Hire purchase services
  5. Debt management
  6. Project financing or consultancy
  7. Export financing.

EVALUATION:    1. Discuss the types of financial system

  1. Define and state three functions of these banks
  2. Central bank
  3. Development bank
  4. Commercial bank
  5. Mortgage bank

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively