The views expressed in this article are those of the authors and do not necessarily reflect those of USAID. The authors are grateful to Thorsten Beck, an anonymous referee and numerous colleagues for important comments.
Banks That Don't Lend? Unlocking Credit to Spur Growth in Developing Countries
Article first published online: 13 APR 2006
Development Policy Review
Volume 24, Issue 3, pages 279–302, May 2006
How to Cite
Freedman, P. L. and Click, R. W. (2006), Banks That Don't Lend? Unlocking Credit to Spur Growth in Developing Countries. Development Policy Review, 24: 279–302. doi: 10.1111/j.1467-7679.2006.00325.x
- Issue published online: 13 APR 2006
- Article first published online: 13 APR 2006
- first submitted March 2005, final revision accepted February 2006
This article explores the level of liquidity within the banking systems of developing countries and the potential impact on rates of economic growth from prudently redirecting a portion of liquid assets into credit to the private sector. It finds that banks in developing countries are extremely liquid and growth rates per capita might increase substantially in response to heightened lending to the private sector. It then summarises the primary obstacles to this and presents several policy reforms that can augment the level of credit to the private sector in developing countries.