Differences in the Functions of Non-Bank Financial Institutions and Bank Financial Institutions

Non-Bank Financial Services – In a country, activities in the economy will be assisted and also supported by the existence of financial institutions. This financial institution will have a role in controlling currency circulation so that it will not have a negative impact on society.

In Indonesia, there are two types of non-bank financial services industry and bank financial institutions. Following are some of the differences between the two:

Bank Financial Institution

Its main activity is distributing services in payment and circulation of money as well as providing credit. This bank is basically a place to store, distribute, and as an intermediary in payments, the following are its functions:

Place to Save money

Banks function to save money in various forms, checking or checking accounts, time deposits and savings accounts.

As a Buyer or Channeling Credit

Banks also have a function to buy and distribute credit. Banks will utilize the funds that will be stored by customers by channeling them to other parties and needing credit.

As an Intermediary in Payment

The bank becomes the liaison between the customer when making a transaction, when the transaction is through the bank, the customer will not make payments directly, but involves the bank to be able to complete the transaction. The bank also provides remittance services, selling shares and foreign exchange. Banks also collect money in the customer’s name.

Printing Money

In contrast to non-bank financial services companies where banks can print money that is used for daily economic activities. This money is legal money in rupiah. The responsibility for printing this money is indeed the responsibility of the central bank.

Example of a Bank Financial Institution

In practice, bank financial institutions are of two types, namely:

Central Bank

An integral part of the financial and economic system, the main function of this bank is to print money, set interest rates, ensure financial stability, and establish monetary policy. This is why central banks are usually managed by the government. In Indonesia, the financial institution that includes the central bank is BI or Bank Indonesia.

Commercial Banks

The main function of commercial banks is financial intermediaries that operate conventionally or sharia. In practice, banks collect funds directly from the public and channel them back to individuals or companies in the form of loans.

This kind of bank can be managed by both the government and the private sector. Examples of commercial banks in Indonesia are BCA, Mandiri, BNI, BRI, BTN Syariah, BSI, Muamalat, and so on.

Non-bank financial institutions

Non-bank financial services have the function of collecting and distributing funds used to support the development of money and capital markets. The following are the functions of non-bank financial services institutions:

Doing Fundraising

Non-bank financial services work by collecting funds from customers by issuing securities. This method is very effective because in storing funds using non-monetary forms, it is safer and more efficient. It is functioned as an aid to the community.

Giving Credit

Non-bank financial institutions will provide credit with a short term or long term. Credit is indeed included in the most important activity of a financial institution. Usually this credit is needed for business owners to be able to develop their business.

Becoming an Intermediary for Companies

Non-bank financial institutions are intermediaries for those who have a capital market, either domestically or abroad, with a company that requires capital. The function of this non-bank financial institution is to help companies that are in need of sufficient capital

Examples of Non-Bank Financial Institutions

Meanwhile, financial services included in the category of non-bank institutions are:


The main function of the pawnshop is a financing institution for both productive and consumptive needs. Using the law of lien, this institution receives collateral in the form of valuable goods and can be redeemed within a certain period of time. In Indonesia, there are two types of pawnshops, namely in the form of BUMN and private.

Stock Exchange

Stock exchange is an investment service in the form of stocks or bonds. In practice, the stock exchange provides a place for investors and capital seekers to meet.

Financial Institutions

This financial institution is tasked with providing funds or capital as financing to customers. Some examples of financing institutions are leasing, credit cards, or online loans.

Insurance Company

This non-bank financial institution functions to provide guarantees against various risks owned by customers through premiums collected within a certain period of time. The amount of premium and the period of collection are determined based on the customer’s choice and the risk to be borne. Examples of insurance companies are government-owned BPJS or private-owned Lifepal.

Retirement Fund Institutions

As the name suggests, the task of this institution is to manage pension funds and give them to customers as a form of appreciation for their loyalty. This institution also ensures that customers get old age guarantee. An example of a pension fund is TASPEN.

Savings and Loan Cooperative

Cooperatives are financial institutions that are entitled to receive deposits from members and provide loans to other members at relatively low interest rates. At the end of a certain financial period, each member will get SHU (residual income) based on their contribution to the institution.

Differences between Bank and Non-Bank Financial Institutions

Based on the reviews above, do you know the difference between bank and non-bank financial institutions? If not, some of these points can serve as an illustration:

1. Banks usually raise funds directly in the form of savings, current accounts and deposits, or indirectly. Meanwhile, non-bank financial institutions raise funds indirectly.

2. Banks have the authority to print demand deposits (Bank Indonesia) and can influence the amount of money circulating in the community. Meanwhile, non-bank financial institutions cannot do this.

3. The main purpose of depositing money into a bank is for interest income, security, and convenience. Meanwhile, the main purpose of deposits to non-bank financial institutions is to earn additional income, invest, purchase, and so on.

Although different, the positions of these two institutions are equally important in maintaining economic stability. The circulation of funds that they do is known to be quite contributing to the economic progress of a country, in this case, Indonesia.