​The history and the form of money:

The main forms of money used in most countries in the world are coins, notes, and bank account.

The Functions of Money:

• Medium of Exchange: An accepted

form of payment for products and
services

• Store of value: Money can be saved

It will be pointless to save eggs!

• Store of value: Consumers can save

money to use later; money will keep its
value

UNIT of Account : measure of value, enable buyer and seller to agree on what items are worth, relative to each other.

Standard of payments: This means that money allows people to borrow and lend in a country.

The characteristic of money: - Intrinsic and extrinsic.

Commercial bank.

● Commercial bank is also called retail/ high street bank, it is a major industry in a number of a country, it helps people to borrow/ lend money, it is a business organisation which usually seek to make profits
For example: BCA, BNI, BRI, Muamalat.

The role and importance of commercial bank

• To accept deposits/ keep money in safe place

• To lend money: (Overdraft, bank loans, mortgage) interest is charged, and customer need to provide some form of security/Collateral, if they cannot return the loans, the asset can be sold. Before this happen, the bank will do BI Checking very carefully.

• make payments / bank transfer between first and second party.

• Foreign currency

• Financial advisors : Completion of tax forms, purchase and sale of shares,

Islamic finance /Sharia.

• Commercial bank (make profit) VS Sharia law (Islam do not allowed to charge interest on bank loans/ riba,The moslem called this as usury/ sin.

• The islamic finance give loans to the companies, in return the companies need to share their profits to repay the debts.

• many banks in Europe and USA open new branches in Islamic coutries in middle east and Asia and they employ islamic scholars experts who can issue religious edicts.

Goals of the Central bank

*Please

write
this in
your

notes!*

What is a central bank?

● The Most important and influential bank in the country.
Example: The Federal Reserve is the central bank of United states America

Federal Reserve System Structure

12 Reserve Banks

Role and importance of central bank:

• Act as banker to the government (independent authority)

• Operates as banker and controls the banking system to the commercial bank

• Act as lender of last resorts

• manages the national debt

• holds national reserve of gold and foreign currency

• issues bank notes

• implement monetary policy and represent the government