How are financial intermediaries able to engage in maturity transformation?

Financial intermediaries, such as banks, engage in maturity transformation by accepting short-term deposits and using those funds to issue longer-term loans. This process allows them to manage the liquidity needs of depositors while providing borrowers with the longer timeframes they require for investment. By balancing the timing of cash flows between deposits and loans, intermediaries can earn a spread between the interest rates on deposits and loans, thus facilitating economic activity while also managing the risks associated with mismatched maturities.