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Title:Why isn't there more financial intermediation in developing countries? PDF Logo
Authors:Conning, Jonathan
Kevane, Michael
Issue Date:2002
Series/Report no.:WIDER Discussion Papers // World Institute for Development Economics (UNU-WIDER) 2002/28
Abstract:This paper proposes to organize thinking about the opportunities for improving and extending financial markets and safety nets for the poor, by focusing on factors that may explain why the linkage of local financial networks and safety nets with the larger economy often fails or is incomplete. Understanding the nature of these impediments is the first step in proposing policies to help promote more effective linkage and intermediation. We propose four explanations for the slowness of adoption of intermediation (high costs of delegated monitoring aggravated by limited intermediary capital; lock-in and crowding out effects from local insurance arrangements, social norms against cooperation with intermediaries; and political resistance to new institutions that shift the balance of power in local polities). Of course, financial repression and weak legal systems remains important as cause of lack of intermediation. We conclude with a review of public policy for more effective intermediation.
Subjects:financial intermediation
mutual insurance
safety nets
microfinance
microcredit
JEL:O16
Q14
G2
N20
ISBN:929190175X
Document Type:Working Paper
Appears in Collections:WIDER Discussion Papers, United Nations University (UNU)

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