Finance-Growth Nexus and Banking Efficiency: The Impact of Microfinance Institutions

Afsheen Abrar, Iftekhar Hasan*, Rezaul Kabir

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

1 Citation (Scopus)

Abstract

This paper investigates the relative importance of microfinance institutions (MFIs) at both the macro (financial development, economic growth, income inequality, and poverty) and micro levels (efficiency of traditional commercial banks). We observe a significant impact on most of the fronts. MFIs’ participation increases overall savings (total bank deposits) and credit allocation (loans to private sector) in the economy. Their involvement enhances economic welfare by reducing income inequality and poverty. Additionally, their active presence helps to discipline the traditional commercial banks by subjecting them to more competition triggering higher efficiency.
Original languageEnglish
Article number105975
Number of pages20
JournalJournal of economics and business
Volume114
Early online date8 Dec 2020
DOIs
Publication statusPublished - 1 Mar 2021

Keywords

  • Microfinance institutions
  • Commercial banks
  • Financial development
  • Income inequality
  • Poverty
  • Efficiency
  • Economic growth

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