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

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  • Abrar, Afsheen
  • Hasan, Iftekhar
  • Kabir, Rezaul

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.

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  • Abrar, Afsheen & Hasan, Iftekhar & Kabir, Rezaul, 2021. "Finance-growth nexus and banking efficiency: The impact of microfinance institutions," Journal of Economics and Business, Elsevier, vol. 114(C).
    • Handle: RePEc:eee:jebusi:v:114:y:2021:i:c:s0148619520304197
    DOI: 10.1016/j.jeconbus.2020.105975
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    4. Francis Lwesya & Adam Beni Swebe Mwakalobo, 2023. "Frontiers in microfinance research for small and medium enterprises (SMEs) and microfinance institutions (MFIs): a bibliometric analysis," Future Business Journal, Springer, vol. 9(1), pages 1-18, December.

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    More about this item

    Keywords

    Microfinance institutions; Commercial banks; Financial development; Economic growth; Income inequality; Poverty; Efficiency;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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