The role of banking and financial policies in promoting micro, small, and medium enterprises
The results of empirical research confirm that a well-functioning and developed financial sector fosters economic growth. Additionally, financial deepening has a significantly larger impact on the poorest parts of societies, thus playing a critical role in reducing income inequality and poverty. In many countries, however, the level of financial development is very low due to severe consequences arising from asymmetric information between lenders and borrowers. This, in turn, restricts the amount of capital available to companies, especially small and medium ones. In this paper we have attempted to give some answers to the question of what the government’s role should be in overcoming barriers to capital and financing. The empirical research, as well as case studies of successful reforms, indicate that the main role to be played by the government in supporting financial sector development is to ensure macroeconomic stability and provide an appropriate legal and infrastructural framework for its functioning. Finally, we also argue that in the 21st century global-knowledge economy there is a need for a deeper discussion about the efficacy of public support for SMEs and its redirection to narrowly defined innovative sectors,which may create the potential for long-term development and an increase of social welfare.
Volume (Year): 24 (2008)
Issue (Month): ()
|Contact details of provider:|| Postal: 77 Water Street, 10th Floor, New York NY 10005|
Phone: +1 212 284 8600
Web page: http://www.capco.com/
When requesting a correction, please mention this item's handle: RePEc:ris:jofitr:0021. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Shahin Shojai)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.