Development of the Financial Sector and Growth of Microfinance Institutions: The Moderating Effect of Economic Growth

This article analyzes the moderating effect the degree of economic growth has on the relationship between the development of the financial system and the microfinance industry activity. The hypotheses proposed establish that the influence of the development of the financial system on the activity of...

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Bibliographic Details
Published in:Sustainability 2018-10, Vol.10 (11), p.3930
Main Authors: Sainz-Fernandez, Isabel, Torre-Olmo, Begoña, López-Gutiérrez, Carlos, Sanfilippo-Azofra, Sergio
Format: Article
Language:English
Subjects:
Banking
Commercial banks
Community development
Developing countries
Economic development
Economic growth
Efficiency
Financial institutions
Financial services
Growth conditions
Heterogeneity
Hypotheses
Impact analysis
Influence
LDCs
Loans
Longitudinal studies
Microfinance
Population
Researchers
Studies
Sustainability
Systems development
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Summary:This article analyzes the moderating effect the degree of economic growth has on the relationship between the development of the financial system and the microfinance industry activity. The hypotheses proposed establish that the influence of the development of the financial system on the activity of the microfinance sector will be different depending on the level of economic growth. The estimates were made using the System-GMM methodology for panel data, which allows controlling the unobservable heterogeneity and the problems of endogeneity. We find that the degree of economic growth affects the relationship between the financial sector development and microfinance activity. Under negative economic growth conditions, the development of the financial sector has a negative impact on the activity of the microfinance sector, but when economic growth is high, the development of the financial sector positively influences the activity of the microfinance sector.
ISSN:2071-1050
2071-1050
DOI:10.3390/su10113930