Economy
Too Much Finance Can Make Inequality Worse: IMF Researchers
(Bloomberg) –The expansion of financial services in an economy can reduce income inequality — but beyond a certain point it tends to have the opposite effect, according to the International Monetary Fund.
Better access to banking and credit can help close income gaps by allowing people to save and invest more, the Washington-based fund said Friday in a staff discussion note by authors including Martin Cihak and Ratna Sahay. But once the financial sector surpasses a certain size threshold relative to the economy, its growth typically exacerbates inequality, the study said.
Bigger income disparities are “associated with greater financial risks,” it said, and they “tend to be accompanied by higher growth in credit.” The Fund cited the example of the U.S., where too much credit — including to lower-income households — contributed to the 2008 crash. And it said that “crises, in turn, lead to higher default rates, making lower-income households worse off.”
Income inequality has emerged as one of the major economic problems of the era. Democratic presidential candidates in the U.S. have put the issue at the center of their campaigns, and it’s contributed to violent protests from Latin America to the Middle East.
The IMF study also found that inequality tends to fall further when women gain greater access to financial services. And it said that good regulation is key to “reining in excessive growth of the financial sector.”
-
Dossier3 weeks agoDossier, 2026
-
Insurance2 months agoLiva Insurance Supports Community Wellness Through “Experience Oman – Muscat Marathon 2026”
-
OER Magazines2 months agoOER, January 26
-
Interviews2 months agoEXCLUSIVE INTERVIEW: TLS Rebranding Marks Strategic Leap Toward Innovation, Sustainability & Growth
-
Alamaliktistaad Magazines2 months agoAl-iktisaad, January 26
-
Banking & Finance3 weeks agoNational Finance Unveils Exclusive Ramadan Offers on Auto Financing
-
Banking & Finance3 weeks agoSohar International and Sohar Islamic Supports Over 100 Families in Al Wusta Governorate Through Its ‘Sohar Al Attaa’ Initiative
-
Banking & Finance2 months agoA New Platform for SME Growth: Oman Arab Bank Unveils Tumouhi
