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What is the role of financial systems in promoting economic development? What is microfinance ? Discuss in detail its potentials and limitations for reducing poverty and spurring grassroots development in LDC?

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This explains the concept of microfinance and role of financial systems in promoting economic development

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Economic development
What is the role of financial systems in promoting economic development? What is microfinance? Discuss in detail its potentials and limitations for reducing poverty and spurring grassroots development in LDC?

Financial system play a fundamental role in liquidity redistribution and maturity transformation, the implementation of monetary policy, in operating payment systems and in providing appropriate channels for national and international financial flows, which contribute to the overall development of the economy. This can be depicted as follows:

Financial institutions can provide lending facilities and help businesses in crisis. They can also make major contributions to financial stability:
1. By continuing to make every effort to improve risk management
2. By transferring know-how and funds and strengthening corporate governance in the financial
It acts as an intermediary between the lenders and borrowers. It arranges funds for the borrowers in any form whether it is equity, debt or hybrid instrument. It raises the finance for them for all kinds of duration whether it is short term or long term. Similarly it helps the lenders in allocating their money according to their objectives of risk and return. It helps in linking the lenders and borrowers of any par to the globe. ...

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