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Finance, Distribution And The Economic Objective Of Financial Cooperative Institutions

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  • Amr KHAFAGY

Abstract

This paper proposes a model where the structure rather than the size of the financial sector explains its influence on income distribution. Because of information asymmetries, a financial sector dominated solely by profit‐maximizing financial intermediaries will increase income and wealth inequality as it gives preferential access to credit for high‐income agents, whereas a diversified inclusive financial sector with alternative models of finance, like cooperatives, will reduce the inequality gap. No full convergence in income distribution can be realized through finance only and there is still a need for redistribution policies. Accordingly, an objective function for cooperative financial institutions should define a desired pricing behaviour that can increase the income of members at a rate higher than the average growth rate of the economy.

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  • Amr KHAFAGY, 2019. "Finance, Distribution And The Economic Objective Of Financial Cooperative Institutions," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 90(3), pages 487-511, September.
    • Handle: RePEc:bla:annpce:v:90:y:2019:i:3:p:487-511
    DOI: 10.1111/apce.12216
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    Cited by:

    1. Michael Takudzwa Pasara & Albert Makochekanwa & Steven Henry Dunga, 2021. "The Role of Savings and Credit Cooperatives (SACCOs) on Financial Inclusion in Zimbabwe," Eurasian Journal of Business and Management, Eurasian Publications, vol. 9(1), pages 47-60.

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