Financial sector

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  • Financial sector
    • Role of the financial sector
      • Needed to raise finance for investment and development projects
      • Provides the infrastructure necessary for saving
      • Allows for lending to occur
    • The Harrod-Domar economic growth model
      • Increased savings
        • Increase investment
          • Increased Capital Stock
            • Increased output
              • Increased incomes
        • Increased incomes
      • Rate of growth of GDP = Savings ratio / Capital ratio
      • Limitations:
        • Many countries have low marginal propensity to save - a domestic saving gap can then occur
        • Without a sound financial system it may be difficult for consumers to save
    • Microfinance
      • Poverty reduction
        • Sustainable finance
        • Gender empowerment
          • Sustainable finance
      • Debt from sub-prime lending charged at high interest
        • Funding for skills can have a bigger impact in the long run
        • Credit is often used for consumption instead
          • Funding for skills can have a bigger impact in the long run

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