Special investment agencies are created to fill gaps in the capital market. These gaps are of several sorts—arising from the smallness of the borrowing bodies or the particular industry in which they operate and a more general gap consisting of lack of facilities for a particular type of finance. The agencies fill these gaps in two main ways: (1) they use their names to borrow on the capital market and then pass on the funds to the deficit units which are unable to borrow in their own names or (2) they pool the risks of certain types of lending and thus enable existing institutions to participate in a form of finance which they are reluctant to undertake without such assistance.
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