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Finance-growth nexus and banking efficiency: The impact of microfinance institutions

Afsheen Abrar, Iftekhar Hasan (ihasan@fordham.edu) and Rezaul Kabir

Journal of Economics and Business, 2021, vol. 114, issue C, No S0148619520304197

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.

Keywords: Microfinance institutions; Commercial banks; Financial development; Economic growth; Income inequality; Poverty; Efficiency (search for similar items in EconPapers)
JEL-codes: G21 G23 L31 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:114:y:2021:i:c:s0148619520304197

DOI: 10.1016/j.jeconbus.2020.105975

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