This article consists of 10 pages and 3261 words. What are the effects of financial institutions in the economy of Tanzania, Africa”. In order to have full access to this article, email us at thedocumentco@hotmail.co.uk
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1. Proposed Title
“Effects of Financial Institutions’ performance on the economy of Tanzania”.
2. Background and Rationale of the Project
In the view of Tarashev, Borio and Tsatsaronis (2009), financial institutions have become an important part in any economy as the service sector accounts for approximately 50% of the World’s economy and employment generation.
It has been discussed that the development of financial institutions have different impacts on the economy; this development has impacted the economies around the world both negatively and positively.
Since the financial institutions’ performance impact the economy directly so it is important to study both positive and negative impacts on the economy of Tanzania. Like global economy and macro – economy around the world, the economy of Tanzania has also been impacted greatly due to the development of the financial institutions over the years.
It has been found that the financial sector development is one of the key reasons behind the growth in Tanzanian economy (Odhiambo, 2005). The study by Odhiambo (2005) concluded that the economic growth, higher productivity and overall development in Tanzania is largely caused by the financial sector development as it helps the business develop in a country.
The research project is important because of the increasing importance of financial institutions and their role in the economic development of all the countries.
The research problem identified for this research is that most of the people consider financial institutions as either positive for economic development or negative for economic development; there are only few people who realize there are both positive and negative effects of the financial institutions on economy as a whole.
Therefore, this research aims to analyze both positive and negative effects of the financial institutions performance on the economy of Tanzania. I am particularly interested in this proposed title for research because of my personal interest toward financial institutional knowledge; I always aim to explore knowledge related to financial institutions.
I believe that this study will not only increase my knowledge but it will contribute to the knowledge of future researchers and public as well. The research is highly significant for different members in the society as it will highlight the importance of financial sector for economists, financial analysts etc.
It will also help top management of financial institution to highlight and restrict those activities which hurt the economy. Overall, it can be stated that there is a need for this research in the Tanzanian economy and the findings of research will be highly significant for the economy as a whole.
3. Literature Review
A lot of research has been carried out earlier to analyze the role of financial institutions’ performance in the economic growth of different countries. Most of the researchers have based their researches on the secondary data available on the online and offline sources and have concluded about the effects of financial institutions’ performance on the domestic economy.
Different researchers who have conducted research on the related topics used different methodologies over the years to achieve their research objectives.
Sheppard (2013) conducted research on the role of financial institutions in the economic development of UK. After the research, he wrote a book in which he concluded that financial institutions have played a very important role in the economy of UK.
He found out that large part of development in UK is due to the progress of financial institutions because their contribution to development of businesses is significant as banks transfer excess money to the businesses for their most efficient use.
In support to these findings, Hasan, Wachtel and Zhou (2009) after studying the Chinese economy concluded that the established banking sector of China is one of the reasons behind the economic growth and development in China.
They found that the Chinese economy has growth due to the smaller business which have been initiated by the support of banks and other financial institutions in the China; the researchers believe that this growth in economy was not possible without the efficient banking sector.
Ayyagari, Demirgüç-Kunt and Maksimovic (2012) studied the importance of financial institutions’ performance on the macro – economy of the developing countries. They took data from different developing countries and analyzed both qualitative and quantitative data to reach at the conclusion.
They found that only those developing countries have been able to grow rapidly whose banking sector has been efficient; it is important for financial sector to be efficient because it contributes to the economy in terms of employment and revenue generation as well.
Apart from these, new businesses are opened and old are grown with the help of financial intermediation so it is important to have effectively managed financial institution sector for all developing countries.
Ssendi and Anderson (2009) conducted similar research in Tanzania and found that the role of financial institution and micro financing has been very important for the Tanzanian economy; they believe that micro financing has played very important role in reducing the poverty rate in the Tanzanian economy as it has helped poor women establish their own business.
Apart from poverty, it has also helped in reduction of unemployment and rising economic growth as businesses help the economy grow. Another research focused on the sovereign default and the role of banks and…
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