What are the functions of Financial Intermediaries?

The different functions of Financial Intermediaries are:
Tayloring Securities According to the needs of the Borrowers and Lenders:
The characteristics of the claims that the financial intermediaries issue to the savers are different from the characteristics of the claims that they purchase from the borrowers. This ability of the financial markets to convert a contract having particular characteristics into contracts having different set of characteristics is called transmutation effect. They convert the primary securities issued directly by the non-financial economic units into indirect securities issued by financial intermediaries. This function of financial intermediaries plays a very important role in economic development via capital formation because the indirect securities are tailored according to the requirements of both the parties which make these more attractive to both the parties which help in smoother financial intermediation
Imparting Convenience to Financial Intermediation:
The convenience is in two terms:
(i) Convenience in terms of lower denomination requirements.
(ii) Convenience in terms of higher liquidity.
Indirect securities are more convenient for the savers who have small amount of funds because the minimum level of funds that are required to invest in direct securities are way more than that required to invest in indirect securities. This feature of the adjustment of the denomination of securities is called divisibility. It even helps the borrowers because it is easier for them to handle small number of financial intermediaries than large number of investors.
The other convenience of indirect securities is that they are more liquid than primary securities because they have a shorter maturity date than direct/primary securities.
Reducing Risk:
The financial intermediaries expose the investors to lower risk by diversifying their funds by investing them into various units which reduces the risk of capital depreciation and poor dividends. Since diversification requires availability of large amounts of funds and proper market information, this feature is particularly suitable for small investors who do not have enough funds and proper market information to diversify the funds between different units.
Providing Expert Management:
Selection of proper securities and their supervision require proper knowledge, training, time, aptitude and inclination. Large investors can fulfill this requirement by hiring experts but the small investors cannot afford it. The financial intermediaries by hiring experts and professionals in this field provide expert management which helps to increase the profitability of both large and small investors.
Generating Economies of Scale:
The financial intermediaries deal with huge amount of funds on daily basis which help them to incorporate economies of scale in their operations. This lowers the cost of financial intermediation and these intermediaries pass on the lowering of cost to the savers and borrowers. Thus, it even helps the borrowers to borrow at a lower cost.
Thus, financial intermediaries channelize the idle funds from the units of surplus funds to the most productive units of the economy who are deficient of funds. They also impart efficiency to the process of financial intermediation and thus add to the process of economic development via capital formation. Level of economic development is influenced by the level of development of financial intermediaries because it has been seen that the volume of savings is considerably affected by the structure of financial intermediaries