A New Financial System for Poverty Reduction and Growth

Author/Editor:

Biaggio Bossone ; Abdourahmane Sarr

Publication Date:

October 1, 2002

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Our proposal draws on the premise that the availability of stable demand deposits for bank lending, in the process of which inside money is created, does not require any act of intentional saving. The mechanism allowing banks to lend deposits does not function well in low-income countries, owing to a number of structural constraints. We argue that separating inside money creation from lending, and distributing it on a nonlending basis to depositors through specialized payment service institutions, could broaden access to financial resources, fuel non-inflationary, demand-led growth; and foster financial deepening, diversification, and stability. We also argue that the proposed reform is consistent with market incentives and sound economic management.

Series:

Working Paper No. 02/178

Subject:

English

Publication Date:

October 1, 2002

ISBN/ISSN:

9781451858969/1018-5941

Stock No:

WPIEA1782002

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

43

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