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.”
-
IT2 months agoAI Zone, Digital Triangle Project Unveiled at COMEX 2025
-
Automotive2 months agoChangan Launches the All New CHANGAN CS75PLUS 4WD in Oman
-
Dossier2 months agoDossier Construction Awards 2025 Celebrates Pioneers in Construction, Infrastructure and Real Estate
-
Arts and Culture2 months agoROHM To Premiere Arabic-Language Grand Opera – ‘Sindbad: The Omani Sailor,’ on Oct 3 and 5
-
Insurance1 month agoLiva Insurance Sweeps Three Major Wins at Alam Al-Iktisaad Awards 2025
-
News2 weeks agoKitchenomiKs Secures Investment of US$3.2M Led by Jasoor Ventures
-
Magazines3 weeks agoOER – September 2025 Issue
-
Healthcare1 month agoWassan Dental Centre’s Expanded State-Of-The-Art Facility Opens In Muscat
