The principle financial intermediaries fall into three categories (a) banks – commercial banks, saving and loan associations, mutual savings banks, and credit unions; (b) contractual saving institutions – life insurance companies, and pension funds; and (c) investment intermediaries – finance companies, mutual funds, and money market mutual funds.

1. Explain how financial innovation affected the performance of each category of the above-mentioned financial intermediaries.
2. Name two institutions of each of the above-mentioned financial intermediaries operating in the Kingdom of Bahrain and explain what services they provide for people in Bahrain.
3. Because corporations do raise funds in financial intermediaries, they are very important for the development of the economy. Explain.
4. Can you think of any financial innovation in the past 10 years that has affected you personally? Has it made your life better off or worse off? Why? (5 marks)