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.”
-
Economy2 months ago
Is Gold a Good Investment in 2025? A Deep Dive into the Precious Metal’s Future
-
Alamaliktistaad Magazines2 months ago
Al-Iktisaad, March 2025
-
OER Magazines2 months ago
OER, March 2025
-
Automotive1 month ago
South Korea Plans to Support Auto Sector with US$2B Following US Tariffs
-
News2 months ago
Nothing Phone 3a and 3a Pro launches in the Middle East
-
News1 month ago
Oman Oil Prices Witness Drop Amid Shifting Global Trade Dynamics
-
News1 month ago
Aligning HR Strategies with Oman Vision 2040: A Roadmap for Organisational Growth – OER Business Summit 2025
-
News2 months ago
Omantel Partners with TeKnowledge to Enhance Employee Skills in AI & Data Science