Fragmented markets and the proliferation of small firms: Evidence from mom-and-pop shops in Mexico
Small firms dominate the economies of developing countries. This phenomenon occurs in all sectors, but it is particularly salient in the retail sector. For example, in Mexico, there is one mom-and-pop shop for every 100 inhabitants, while in the United…
The Big Tech Lending Model
Big tech companies across the world have started to offer lending services in recent years, either directly or in partnership with financial institutions. In China, Alibaba, Baidu, and Tencent all offer credit services through their subsidiaries, while in the United…
Banks with fewer branches fared worse during the 2023 banking turmoil
Bank branch density, defined as the number of bank branches per $1 billion in deposits, has declined significantly over the past decade. While total bank deposits almost doubled between 2016 and 2022, the number of bank branches declined by approximately…
Government banks and interventions in credit markets
Credit markets are often affected by market failures, which makes them prone to government interventions. While there are many ways in which governments can intervene in financial markets, a common method is through state-owned banks. These financial intermediaries allow governments…
Expanding the benefits of financial services
Having a financial account is essential for adults to save, borrow, make payments, and manage unexpected expenses. However, financial products come with risks, especially for those with limited financial knowledge or living in countries with poor consumer protection systems. Inexperienced account owners…
Exploring the link between rising inflation and economic growth: The role of the banking sector
The relationship between rising inflation and economic growth is a topic of ongoing debate in macroeconomics. According to the classical “neutrality of money” view, increases in inflation have little effect on real gross domestic product (GDP), as inflation increases both…
Maintaining momentum of financial inclusion through digital adoption in the West African Economic and Monetary Union (WAEMU)
West African Economic and Monetary Union (WAEMU) countries have seen increased financial account ownership since 2014, with mobile money accounts driving adoption and usage. On average, 41% of adults in the WAEMU have an account with a bank or similar…
Sukuk are just another capital markets instrument (and that is a good thing)
Sukuk are tradable securities. They are listed on major stock exchanges around the world and settle through the largest international securities clearing systems. They are, in other words, capital market instruments in the same way as stocks and bonds. Of…
Expiring money (Part I)
In October 2020, Shenzhen’s Luohu district announced the distribution of 10 million digital yuan—200 digital yuan (USD 30) to about 50,000 people. Lucky winners could spend their money at designated shops in Luohu between October 12 and 18, 2020. A similar…
Expiring Money (Part II)
In Part I of this post, we discussed “expiring” digital cash as a possible type of programmable money, which a central bank (in coordination with government) could issue and distribute to people during severe recessions or events like pandemics or calamities, when…