Wealth Storage, Transmutation and Payment Function
Financial instruments that are traded on the money market and capital market provide a way to store wealth by holding the value of the assets owned in addition to receiving a certain amount of income. Stocks, bonds and other financial instruments that are traded on the capital market in the money market and the capital market promise an income with certain risks.
Wealth Transmutation Function
Where financial institutions have assets in the form of promises of giving rewards to fund owners. The form of promises is basically financing / credit given to the deficit unit with a certain period in accordance with the needs and agreements. Financial institutions in financing these assets can be obtained by receiving deposits from savers (surplus units) whose time period is regulated by savers' needs.
Financial institutions actually only transfer liabilities into assets with a maturity period in accordance with the wishes of savers. The process of transferring liabilities by financial institutions into assets is called wealth transmutation. In the sharia system the process of transmutation of wealth must be based on a contract / contract that is clear, transparent and legally sharia.
Payment Function
The financial system provides a mechanism for transactions of goods and services. Available payment instruments include checks, current accounts, bilyet, credit cards, including clearing mechanisms in banking. With such payment and product mechanisms not only convenience is created but also the velocity of funds.
Financing or credit function
In addition to providing liquidity and facilitating the flow of savings into investments in order to save wealth, the financial market provides financing or credit to finance consumption and economic investment needs. Consumers need financing or credit to buy things such as houses, cars, and so on.
Whereas entrepreneurs use financing or credit facilities to buy goods for production purposes, build buildings, buy machinery, pay salaries or dividends to shareholders, and so on.
Financial institutions are grouped into two, namely Bank Financial Institutions (LKB) and Non-Bank Financial Institutions (LKBB). The Difference between Bank Financial Institutions and Non-Bank Financial Institutions is:
Financial obligations of LKB and LKBB, namely LKB liquidity in the form of money, while LKBB cannot be clarified as money.
The ability of the two financial institutions to create credit and money, namely LKB has the ability to create credit, circulate money, and increase the money supply (JUB) through the multiplier effect of the money while the LKBB channeled funds to the public mainly through capital participation or investment investment financing.
The role of financial institutions in an economy, namely:
Relating to the role of financial institutions in the payment mechanism between economic actors as a result of their transactions, for example:
A. Financial institutions (in this case the central bank) print rupiah money as a legal payment instrument intended to facilitate transactions between the public and in the macro economy.
B. Financial institutions (in this case banks umu) issue checks intended to facilitate transactions conducted by their customers.
Relating to the provision of facilities regarding the flow of funds from parties with excess funds to those who need funds, for example:
Financial institutions can be brokers, brokers or dealers in a variety of assets whose role is to increase efficiency between the two parties.