Discount Houses and Merchant Banks

Discount Houses

• A discount house is a financial institution that participates in the buying and discounting of bills of exchange and other financial products such as money markets, certain government bonds and banker’s acceptances.
• Examples of Discount Houses in Zimbabwe include Tetrad Bank and National Discount House (NDH) (Due to the financial environment in Zimbabwe Discount Houses have either closed or are under judicial management).

Functions

• They raise money over a short period of time from the public and discount houses.
• They lend money to the government and private companies.
• They accept and discount Bills of Exchange.
• They provide banking services for example they accept deposits.
• They invest in securities e.g. Treasury Bills and Bills of Exchange.

MBCA is an example of a Zimbabwean Merchant Bank. Image credit herald.co.zw

Merchant Banks

• A bank dealing in commercial loans and investment.
• For example Renaissance Merchant Bank, Tetrad Bank and MBCA.

Functions

• They specialise in accepting and discounting bills of exchange.
• They lend money on short term to large scale importers.
• They may raise long term capital by arranging the issue of new shares.
• They act as underwriters when they purchase unsubscribed shares.
• They source and keep foreign currency for businesses.
• They import and export goods.
• They confirm orders.
• They arrange letters of credit.
• They offer bankings services e.g. they accept deposits.

To learn more about other financial institutions go to this page.

To access more topics go to the Commerce Notes page.