A significant amount of credit is available through the traditional banking system that matches borrowers and lenders. There is also a parallel system, often referred to as "shadow banking," that performs a similar function but through specialized financial institutions. This shadow system operates outside many of the rules and regulations placed on traditional banks, hence the "shadow" designation. To better understand shadow banking, it is helpful to first understand borrowing, lending, and credit in general.
To those who don't know, the term "shadow banking" probably has a negative connotation. This primer draws parallels between what has been termed the shadow banking sector and the traditional banking sector—showing that they are similar in many ways.