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Development of the Financial Sector and Growth of Microfinance Institutions: The Moderating Effect of Economic Growth

Isabel Sainz-Fernandez (), Begoña Torre-Olmo (), Carlos López-Gutiérrez () and Sergio Sanfilippo-Azofra ()
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Isabel Sainz-Fernandez: Business Administration Department, Santander Financial Institute (SANFI), University of Cantabria, Avd. Los Castros 56, 39005 Santander, Spain
Begoña Torre-Olmo: Business Administration Department, Santander Financial Institute (SANFI), University of Cantabria, Avd. Los Castros 56, 39005 Santander, Spain
Carlos López-Gutiérrez: Business Administration Department, Santander Financial Institute (SANFI), University of Cantabria, Avd. Los Castros 56, 39005 Santander, Spain
Sergio Sanfilippo-Azofra: Business Administration Department, Santander Financial Institute (SANFI), University of Cantabria, Avd. Los Castros 56, 39005 Santander, Spain

Sustainability, 2018, vol. 10, issue 11, 1-16

Abstract: This article analyzes the moderating effect the degree of economic growth has on the relationship between the development of the financial system and the microfinance industry activity. The hypotheses proposed establish that the influence of the development of the financial system on the activity of the microfinance sector will be different depending on the level of economic growth. The estimates were made using the System-GMM methodology for panel data, which allows controlling the unobservable heterogeneity and the problems of endogeneity. We find that the degree of economic growth affects the relationship between the financial sector development and microfinance activity. Under negative economic growth conditions, the development of the financial sector has a negative impact on the activity of the microfinance sector, but when economic growth is high, the development of the financial sector positively influences the activity of the microfinance sector.

Keywords: microfinance; financial system; economic growth; panel data; developing countries (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:10:y:2018:i:11:p:3930-:d:179054

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