GPN pilot study of banking
The banking sector plays a crucial role
in any economy. The availability of credit allows businesses to invest
in long-term projects, and households to afford to buy their own homes.
Financial sector policies, especially with respect to the banking market,
have been a core ingredient in economic policy reform in recent years.
The main goal has been to provide sufficient credit for investment, to
improve banking services, and thus to promote strong, stable, and sustainable
growth. One important aspect of banking sector reform has been the removal
of entry barriers for foreign banks. A GPN
pilot study
looks at the impact of the entry of these
multinational banks on the supply of credit and the quality of credit.
The study shows that in many instances, the entry of multinational banks
is associated with a decline in the availability of credit. For instance,
multinational banks, which can quickly control a majority of the local
banking sector, are less likely than domestic banks to lend to small and
medium sized enterprises or to low and moderate income households. Moreover,
there is some indication that the entry of multinational banks leads to
more financial instability instead of less. A possible alternative reform
effort may lie in the promotion of postal savings banks as a study
by the United Nations' Department of Economic and Social Affairs suggests.
UN-DESA postal savings study
UN-DESA study summary (PowerPoint)
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