Development of the Financial Sector and Poverty Reduction in an Emerging Economy through Creating Entrepreneurship by Small and Medium Enterprise Banking: An ARDL Approach and Case Studies
Year: 2025
Type: article
Abstract: The advancement of the financial sector is crucial for economic growth, particularly in emerging economies. Entrepreneurship development is essential for job creation and income enhancement, fostering innovation and competitiveness. The emergence of SME banking in the early 2000s marked a significant step, as formal banking institutions began adopting the microfinance model to support income-generating efforts for small and medium enterprises (SMEs). This research utilizes quantitative analysis with the Auto Regressive Distributed Lag (ARDL) model to assess the impact of SME banking on poverty reduction and financial development in Bangladesh, with a particular emphasis on entrepreneurship promotion supported by case studies. The findings indicate that commercial banks implementing SME banking initiatives can establish an inclusive and participatory framework aimed at eradicating extreme poverty. By facilitating access to financing and marketing for SMEs, SME banking contributes to job creation, equitable growth, and reduced income inequality while increasing export earnings. These outcomes are vital for supporting Bangladesh's goal of graduating from Least Developed Country (LDC) status by 2026, necessitating at least six years for capacity building. Overall, the study highlights the crucial role of SME banking in driving significant socio-economic transformation in Bangladesh.
Authors: Ali, Nawazeesh Muhammad, wanasilp, wanakiti, Almajali, Amer
Institutions: Rangsit University, LSU New Orleans
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W7106687150