Black Friday 2024

Save 15% on all writing services during November. Terms & Conditions apply.

Disclaimer: This assignment is provided as an example of work produced by students studying towards a degree, it is not illustrative of the work produced by our in-house experts. Click here for sample essays written by our professional writers.

Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UKEssays.com.

Theory to assess impact of bank credit on the growth and development of SMEs

Paper Type: Free Assignment Study Level: University / Undergraduate
Wordcount: 287 words Published: 22nd Jun 2020

Reference this

Question

what is the best theory for the topic an assessment of the impact of bank credit on the growth and development of SMEs?

Answer

The finance led growth theory believes that activities of the financial institutions serve as a useful tool for increasing the productive capacity in the economy. Schumpeter’s (1911:1934) theory of economic development can be used to assess the impact of bank credit on the growth and development of SMEs. Schumpeter identified the banks’ role in facilitating technological innovation through their intermediary role such as supply of credit to the productive sector. He theorised that to achieve this objective, banks should allocate savings through identification and funding of entrepreneurs with the best chances of successfully implementing production processes and innovative products. The transmission mechanism posits that, in order to reduce the quantity of money in their portfolios, the bank organisations purchase securities with characteristics of the type sold by the Central Bank, thus stimulating activities in the real sector such as SMEs. Using Schumpeter’s (1911:1934) theoretical framework, a model can be employed to help assess the impact of bank credit on growth and development of SMEs. For example, an SMEs output proxy by wholesale and retail trade as a component of GDP as a function of independent variables such as commercial banks’ credit to small scale enterprises, interest rate, savings and times deposit with commercial banks and the exchange rate.

References

Schumpeter, J., A (1934) The theory of economic development: An inquiry into profits, capital credit, interest and the business cycle. Harvard Economic Studies 46

 

Cite This Work

To export a reference to this article please select a referencing stye below:

Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.

Related Services

View all

DMCA / Removal Request

If you are the original writer of this assignment and no longer wish to have your work published on UKEssays.com then please:

Related Services

Our academic writing and marking services can help you!

Prices from

£124

Approximate costs for:

  • Undergraduate 2:2
  • 1000 words
  • 7 day delivery

Order an Assignment

Related Lectures

Study for free with our range of university lecture notes!

Academic Knowledge Logo

Freelance Writing Jobs

Looking for a flexible role?
Do you have a 2:1 degree or higher?

Apply Today!