Financial Intermediation, Growth, and Microfinance in Turkey: A Quantitative Study

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Carter, Selina Howe
bank; financial; growth; microfinance; poverty; Turkey; Economics
thesis / dissertation description
This paper uses pooled data from Turkey's largest microfinance organization to test if loans increase borrower income in the sample. Using savings deposits as a proxy for borrower income, the results show a statistically significant, positive correlation between loans and savings behavior, ceteris paribus. This suggests that microfinance is an effective tool for poverty reduction in Turkey. Since there is no prior quantitative study on microfinance in the country, this study is of interest to Turkish policymakers.This paper first outlines existing literature on financial intermediation and growth. It then describes the development of Turkey's banking industry and its nascent microfinance sector. In light of the country's ambition to become a high-income country and to gain EU membership, there is an incentive to allow Turkey's microfinance sector to thrive. The paper concludes with policy recommendations on ways to integrate microfinance into the formal banking sector.