Shadow Banking in Third World Countries

Shadow Banking in Third World Countries

 Shadow banking is a system that consists of lenders, brokers and other key financial players that fall outside the regulated banking system (Wullweber, 2019, pg 12). As opposed to the standard regulated banking, shadow banking does not have the usual risks and restrictions that face regulated banking. The institution does not accept traditional deposits, unlike the conventional banking system. As a result, it has escaped regulation successfully. According to Gennaioli, N. et al. 2013, The fact that shadow banking does not have control enable the players to take higher risks and therefore, in their operations.  Third world countries consist of underdeveloped and developing countries. Consequently, this system of banking is needed because of its low-cost loans and services because of fewer regulations compared to traditional banking systems (Griffith-Jones, S. and Rodriguez, E. eds., 2016, Pg 1338). This paper aims to establish the development of shadow banking in developing and underdeveloped economies.

References

Gennaioli, N. et al., 2013. A model of shadow banking. The Journal of Finance, 68(4), pp.1331-1363. Retrieved fromhttps://onlinelibrary.wiley.com/doi/abs/10.1111/jofi.12031

Griffith-Jones, S. and Rodriguez, E. eds., 2016. Cross-Conditionality Banking Regulation and Third-World Debt. Springer. Retrieved from https://books.google.co.ke/books?hl=en&lr=&id=B82-DAAAQBAJ&oi=fnd&pg=PR8&dq=Banking+in+third+world+countries&ots=dn2c5K3vcI&sig=mhXhWK8PpKC_y6nHlDWLpF5EN9c&redir_esc=y#v=onepage&q=Banking%20in%20third%20world%20countries&f=false

Wullweber, J., 2019. The Politics of Shadow Money: The Shadow Banking System, Money Creation and Unconventional Central Banking. SSRN Electronic Journal,.