SEU (surplus economic unit) and DEU (deficit economic unit)
What can a financial institution frequently do for a surplus economic unit that it would encompass difficulty doing for itself if the SEU (surplus economic unit) were to deal directly with a DEU (deficit economic unit)?
Expert
SEUs don’t usually have the much knowledge to determine whether deficit economic units will make good on their obligations, so it is quite difficult for them to foresee when a would-be deficit economic unit will not be able to pay what it owes. Such a failure is likely to be disturbing to a SEU that has lent a quite large amount of money.
A financial institution can very well predict who can pay and who can’t. It is also good in having greater financial resources and sometimes absorbs a loss when people fail to pay.
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