Conclusion

After critically reviewing the extant literature in a number of key areas of development finance, few inter-connected themes have emerged linking the more macro-oriented literature on the nexus between finance and economic growth to the more micro-oriented literature on the impact of stock markets upon growth. The latter appears to indicate a very mixed evidence, in developing countries, of a positive impact. Furthermore, the literature appears to suggest that project-based financing is more effective than collateralised finance, a point reinforced by the literature on legal titles. The mere presence of legal titles will not increase access to finance, predominantly due to the obstacle of the size of the loans and the lack of desirability of the assets. The issue of the size of firms is also highlighted by the literature on misallocation and financial frictions. The latter do not appear to play an important role in stunting the growth of firms, whereas the smallness of firms has implications for the development of countries. This finding leads to the potential role for the state in nurturing larger firms, although the literature is not unequivocal on the impact of state intervention in the financial development. Finally, the literature on the impact of FDI emphasise the complex behaviour of multinational enterprises and the complex inter-play between domestic firms and foreign subsidiaries to lead to a successful FDI-led development path.