Which of the following institutions channels funds between lenders and borrowers?

Financial intermediaries are essential institutions in the economy as they facilitate the flow of funds between lenders and borrowers. They act as a bridge, connecting those who have surplus funds, like savers and depositors, with those who require funds for various purposes, such as individuals seeking loans or businesses needing capital for expansion.

These intermediaries can take various forms, including banks, credit unions, and investment firms, and they perform critical functions such as assessing credit risk, managing financial transactions, and providing liquidity. By pooling resources from multiple lenders, they are able to provide loans to borrowers, thus playing a vital role in promoting economic activity and growth. This function of transforming savings into investments is what makes financial intermediaries pivotal in the functioning of financial markets.

While stock exchanges facilitate the buying and selling of securities and can contribute to the financial system, they do not directly channel funds between lenders and borrowers like intermediaries do. Similarly, insurance companies offer risk management and protection rather than serving primarily as channels of funds. Credit unions are a specific type of financial intermediary, but the broader category includes various institutions tasked with this essential function.