What types of entities are classified as financial institutions?

Financial institutions are entities that provide various financial services, which typically include banking, investment, insurance, and asset management. The classification of financial institutions primarily focuses on their role in the economy related to the management and distribution of monetary resources.

Banks are a prime example of financial institutions, as they accept deposits, provide loans, and facilitate payment systems. They play a crucial role in the monetary system by managing the flow of money within the economy.

Insurance companies are another key type of financial institution. They provide risk management by offering policies that ensure financial protection against various risks, including life, health, property, and liability. By pooling resources from policyholders, insurance companies can pay claims when needed, thus contributing to financial stability for individuals and businesses.

Retail stores, supermarkets, manufacturers, wholesalers, law firms, and consulting agencies, while essential to the economy, do not primarily engage in the financial services sector and therefore are not classified as financial institutions. They are instead categorized under commerce, trade, or professional services, reflecting their distinct roles in the market. This differentiation highlights the specific functions that financial institutions serve in facilitating economic activities through their financial services.