SlideShare a Scribd company logo
1 of 9
Download to read offline
FINANCIAL
DUALISM
Sr. Sindhu P.J (Sr.Sharin CTC)
 Professor Hala Myint has developed
the theory of financial dualism in his
work” Economic Theory and UDCs
published in 1971.
 Such dualism rises because of division of
money markets as unorganized and
organized in LDCs.
 The rate of interest in unorganized market
is higher than the rate of interest in
organized money market which is
concerned with modern sector.
• The unorganized money market consists
of village money lenders, landlords, traders
etc.,.They charge the high interest because
of the following reasons.
• (i) The lenders have monopoly and
position of the borrowers is very weak.
• (ii) There is a shortage of savings in the
traditional sector because most of the
savings are made in terms of land or gold.
• (iii) Due to natural calamities etc. the risk
attached with such lending are very high.
• The organised money market of the
UDCs consists of commercial banks and
other financial institutions. They give short
term loans to modern manufacturing
industries, foreign owned export industries
and to give the govt.
• In the organized markets of LDCs the
interest rates are low and credit facilities
are abundant. The loans are advanced to
manufactured sector, export industry and
modern commerce sector.
Consequences of the co-existence of
unorganised and organised Money market
• 1.Since there is great demand for loans in the
modern industrial sector, all domestic savings
flow to that sector. This creates shortage of
capital in the traditional sector.
• The govt. expenditure on public services like
transport and communication, supply of
electricity etc., favours the urban sector as
against the rural sector
• The ultimate result is the misallocation of
resources between the modern and
traditional sector.
• According to Myint the cheap and easy
credit to the traditional sector is not provided
because of following:
• (i) The high over head costs and salaries of
officials of commercial banks in the rural
areas.
• (ii) The red-tapism in dealing with small
borrowers according to the rigid rules.
• (iii) The lack of coordination between the
head office and the branches.
• (iv) Lack of subsidized loans supplied by the
agricultural banks etc.
Professor Myint suggest two types of policies
to reduce financial dualism in LDCs:
• (i) The official interest rate in the organized
capital market must be increased. This will
attract the savings both from with in the
country and from abroad. It will also create
an equilibrium between the demand for
funds and supply of funds.
• (ii) There should be free access on equal
terms to capital funds by modern and
traditional sector. This will reduce
misallocation of resources between the two
sectors.
THANK YOU

More Related Content

What's hot

Effects of public expenditure on economy production distribution
Effects of public expenditure on economy production distributionEffects of public expenditure on economy production distribution
Effects of public expenditure on economy production distributionBhaumiki
 
Big Push Thheory By Prof. Rodan
Big Push Thheory By Prof. RodanBig Push Thheory By Prof. Rodan
Big Push Thheory By Prof. RodanHarsha Aswani
 
The big push theory
The big push theoryThe big push theory
The big push theoryAnjali Singh
 
Theory of unbalanced_growth
Theory of unbalanced_growthTheory of unbalanced_growth
Theory of unbalanced_growthmaya0311
 
Public debt in india
Public debt in indiaPublic debt in india
Public debt in indiaheerkhant
 
Automatic adjustment in Balance of Payments
Automatic adjustment in Balance of PaymentsAutomatic adjustment in Balance of Payments
Automatic adjustment in Balance of PaymentsDrJagdish Maheshwari
 
Hypothesis of secular deterioration of terms of trade
Hypothesis of secular deterioration of terms of tradeHypothesis of secular deterioration of terms of trade
Hypothesis of secular deterioration of terms of tradeRitika Katoch
 
Capital formation and economic development
Capital formation and economic developmentCapital formation and economic development
Capital formation and economic developmentridailyas3
 
The Social welfare function
The Social welfare functionThe Social welfare function
The Social welfare functionPrabha Panth
 
6. joan robinson's model
6. joan robinson's model6. joan robinson's model
6. joan robinson's modelPrabha Panth
 
Restatement of quantity theory of money
Restatement of quantity theory of moneyRestatement of quantity theory of money
Restatement of quantity theory of moneyNayan Vaghela
 
marginal efficiency of capital
marginal efficiency of capitalmarginal efficiency of capital
marginal efficiency of capitalManohar Gupta
 

What's hot (20)

Lewis model
Lewis model Lewis model
Lewis model
 
Effects of public expenditure on economy production distribution
Effects of public expenditure on economy production distributionEffects of public expenditure on economy production distribution
Effects of public expenditure on economy production distribution
 
Theory of the second best
Theory of the second bestTheory of the second best
Theory of the second best
 
Big Push Thheory By Prof. Rodan
Big Push Thheory By Prof. RodanBig Push Thheory By Prof. Rodan
Big Push Thheory By Prof. Rodan
 
Inflation and its theories
Inflation and its theoriesInflation and its theories
Inflation and its theories
 
The big push theory
The big push theoryThe big push theory
The big push theory
 
Permanent income hypothesis
Permanent income hypothesisPermanent income hypothesis
Permanent income hypothesis
 
Theory of unbalanced_growth
Theory of unbalanced_growthTheory of unbalanced_growth
Theory of unbalanced_growth
 
Solow groth model 2
Solow groth model 2Solow groth model 2
Solow groth model 2
 
Public debt in india
Public debt in indiaPublic debt in india
Public debt in india
 
Automatic adjustment in Balance of Payments
Automatic adjustment in Balance of PaymentsAutomatic adjustment in Balance of Payments
Automatic adjustment in Balance of Payments
 
Hypothesis of secular deterioration of terms of trade
Hypothesis of secular deterioration of terms of tradeHypothesis of secular deterioration of terms of trade
Hypothesis of secular deterioration of terms of trade
 
Capital formation and economic development
Capital formation and economic developmentCapital formation and economic development
Capital formation and economic development
 
The Social welfare function
The Social welfare functionThe Social welfare function
The Social welfare function
 
6. joan robinson's model
6. joan robinson's model6. joan robinson's model
6. joan robinson's model
 
Restatement of quantity theory of money
Restatement of quantity theory of moneyRestatement of quantity theory of money
Restatement of quantity theory of money
 
Lewis model
Lewis modelLewis model
Lewis model
 
Theories of Business Cycles
Theories of Business CyclesTheories of Business Cycles
Theories of Business Cycles
 
marginal efficiency of capital
marginal efficiency of capitalmarginal efficiency of capital
marginal efficiency of capital
 
Accelerator Theory
Accelerator TheoryAccelerator Theory
Accelerator Theory
 

Similar to Theory of Financial Dualism

Bsc agri 2 pae u-2.3 capitalformation
Bsc agri  2 pae  u-2.3 capitalformationBsc agri  2 pae  u-2.3 capitalformation
Bsc agri 2 pae u-2.3 capitalformationRai University
 
[Project] Banking in 2030 (Commercial Banking Project)
[Project] Banking in 2030 (Commercial Banking Project)[Project] Banking in 2030 (Commercial Banking Project)
[Project] Banking in 2030 (Commercial Banking Project)Biswadeep Ghosh Hazra
 
Financing for development1
Financing for development1Financing for development1
Financing for development1Naveed Naushad
 
Project financing and appraisal atul rai
Project financing and appraisal atul raiProject financing and appraisal atul rai
Project financing and appraisal atul rainehabanasthali
 
Project financing and appraisal atul rai
Project financing and appraisal atul raiProject financing and appraisal atul rai
Project financing and appraisal atul raitiwarineha
 
11.mollifying poverty through microfinance indian perspective
11.mollifying poverty through microfinance indian perspective11.mollifying poverty through microfinance indian perspective
11.mollifying poverty through microfinance indian perspectiveAlexander Decker
 
Housing+finance,+vc,+mb,+cc
Housing+finance,+vc,+mb,+ccHousing+finance,+vc,+mb,+cc
Housing+finance,+vc,+mb,+ccNeeti Gupta
 
commercial investments in microfinance
commercial investments in microfinancecommercial investments in microfinance
commercial investments in microfinanceJorge Berezo
 
Epgp (one year) 2009-10_mos_ assignment_#1_18jan10
Epgp (one year) 2009-10_mos_ assignment_#1_18jan10Epgp (one year) 2009-10_mos_ assignment_#1_18jan10
Epgp (one year) 2009-10_mos_ assignment_#1_18jan10Rajendra Inani
 
Présentation1
Présentation1Présentation1
Présentation1siham1
 
Présentation1
Présentation1Présentation1
Présentation1siham1
 
Global Business Issue_Islamic Finance_Article critique
Global Business Issue_Islamic Finance_Article critiqueGlobal Business Issue_Islamic Finance_Article critique
Global Business Issue_Islamic Finance_Article critiqueWafeeqa Wafiq
 
commercial banks
commercial bankscommercial banks
commercial banksDronak Sahu
 
Private Banking and Crony Capitalism in Egypt
Private Banking and Crony Capitalism in EgyptPrivate Banking and Crony Capitalism in Egypt
Private Banking and Crony Capitalism in EgyptEconomic Research Forum
 

Similar to Theory of Financial Dualism (20)

Bsc agri 2 pae u-2.3 capitalformation
Bsc agri  2 pae  u-2.3 capitalformationBsc agri  2 pae  u-2.3 capitalformation
Bsc agri 2 pae u-2.3 capitalformation
 
10
1010
10
 
[Project] Banking in 2030 (Commercial Banking Project)
[Project] Banking in 2030 (Commercial Banking Project)[Project] Banking in 2030 (Commercial Banking Project)
[Project] Banking in 2030 (Commercial Banking Project)
 
Financing for development1
Financing for development1Financing for development1
Financing for development1
 
Project financing and appraisal atul rai
Project financing and appraisal atul raiProject financing and appraisal atul rai
Project financing and appraisal atul rai
 
Project financing and appraisal atul rai
Project financing and appraisal atul raiProject financing and appraisal atul rai
Project financing and appraisal atul rai
 
11.mollifying poverty through microfinance indian perspective
11.mollifying poverty through microfinance indian perspective11.mollifying poverty through microfinance indian perspective
11.mollifying poverty through microfinance indian perspective
 
Housing+finance,+vc,+mb,+cc
Housing+finance,+vc,+mb,+ccHousing+finance,+vc,+mb,+cc
Housing+finance,+vc,+mb,+cc
 
commercial investments in microfinance
commercial investments in microfinancecommercial investments in microfinance
commercial investments in microfinance
 
Xs65
Xs65Xs65
Xs65
 
Indian economy sectors
Indian economy sectorsIndian economy sectors
Indian economy sectors
 
Banking Theories and Macroeconomics Slideshare
Banking Theories and Macroeconomics SlideshareBanking Theories and Macroeconomics Slideshare
Banking Theories and Macroeconomics Slideshare
 
Epgp (one year) 2009-10_mos_ assignment_#1_18jan10
Epgp (one year) 2009-10_mos_ assignment_#1_18jan10Epgp (one year) 2009-10_mos_ assignment_#1_18jan10
Epgp (one year) 2009-10_mos_ assignment_#1_18jan10
 
Prioritysector by akshay sonone
Prioritysector by akshay sononePrioritysector by akshay sonone
Prioritysector by akshay sonone
 
Présentation1
Présentation1Présentation1
Présentation1
 
Chapter 2 slides
Chapter 2 slidesChapter 2 slides
Chapter 2 slides
 
Présentation1
Présentation1Présentation1
Présentation1
 
Global Business Issue_Islamic Finance_Article critique
Global Business Issue_Islamic Finance_Article critiqueGlobal Business Issue_Islamic Finance_Article critique
Global Business Issue_Islamic Finance_Article critique
 
commercial banks
commercial bankscommercial banks
commercial banks
 
Private Banking and Crony Capitalism in Egypt
Private Banking and Crony Capitalism in EgyptPrivate Banking and Crony Capitalism in Egypt
Private Banking and Crony Capitalism in Egypt
 

More from Sharin1234

Economic laws
Economic laws Economic laws
Economic laws Sharin1234
 
Economic theory
Economic theory Economic theory
Economic theory Sharin1234
 
The classical theory of Economic Development
The classical theory of Economic DevelopmentThe classical theory of Economic Development
The classical theory of Economic DevelopmentSharin1234
 
Material Balance Model
Material Balance Model Material Balance Model
Material Balance Model Sharin1234
 
Economy - environment interaction(Linkages)
Economy - environment interaction(Linkages)Economy - environment interaction(Linkages)
Economy - environment interaction(Linkages)Sharin1234
 

More from Sharin1234 (6)

Supply.pptx
Supply.pptxSupply.pptx
Supply.pptx
 
Economic laws
Economic laws Economic laws
Economic laws
 
Economic theory
Economic theory Economic theory
Economic theory
 
The classical theory of Economic Development
The classical theory of Economic DevelopmentThe classical theory of Economic Development
The classical theory of Economic Development
 
Material Balance Model
Material Balance Model Material Balance Model
Material Balance Model
 
Economy - environment interaction(Linkages)
Economy - environment interaction(Linkages)Economy - environment interaction(Linkages)
Economy - environment interaction(Linkages)
 

Recently uploaded

Q-Factor General Quiz-7th April 2024, Quiz Club NITW
Q-Factor General Quiz-7th April 2024, Quiz Club NITWQ-Factor General Quiz-7th April 2024, Quiz Club NITW
Q-Factor General Quiz-7th April 2024, Quiz Club NITWQuiz Club NITW
 
Tree View Decoration Attribute in the Odoo 17
Tree View Decoration Attribute in the Odoo 17Tree View Decoration Attribute in the Odoo 17
Tree View Decoration Attribute in the Odoo 17Celine George
 
Employablity presentation and Future Career Plan.pptx
Employablity presentation and Future Career Plan.pptxEmployablity presentation and Future Career Plan.pptx
Employablity presentation and Future Career Plan.pptxryandux83rd
 
Healthy Minds, Flourishing Lives: A Philosophical Approach to Mental Health a...
Healthy Minds, Flourishing Lives: A Philosophical Approach to Mental Health a...Healthy Minds, Flourishing Lives: A Philosophical Approach to Mental Health a...
Healthy Minds, Flourishing Lives: A Philosophical Approach to Mental Health a...Osopher
 
MS4 level being good citizen -imperative- (1) (1).pdf
MS4 level   being good citizen -imperative- (1) (1).pdfMS4 level   being good citizen -imperative- (1) (1).pdf
MS4 level being good citizen -imperative- (1) (1).pdfMr Bounab Samir
 
Satirical Depths - A Study of Gabriel Okara's Poem - 'You Laughed and Laughed...
Satirical Depths - A Study of Gabriel Okara's Poem - 'You Laughed and Laughed...Satirical Depths - A Study of Gabriel Okara's Poem - 'You Laughed and Laughed...
Satirical Depths - A Study of Gabriel Okara's Poem - 'You Laughed and Laughed...HetalPathak10
 
BÀI TẬP BỔ TRỢ TIẾNG ANH 8 - I-LEARN SMART WORLD - CẢ NĂM - CÓ FILE NGHE (BẢN...
BÀI TẬP BỔ TRỢ TIẾNG ANH 8 - I-LEARN SMART WORLD - CẢ NĂM - CÓ FILE NGHE (BẢN...BÀI TẬP BỔ TRỢ TIẾNG ANH 8 - I-LEARN SMART WORLD - CẢ NĂM - CÓ FILE NGHE (BẢN...
BÀI TẬP BỔ TRỢ TIẾNG ANH 8 - I-LEARN SMART WORLD - CẢ NĂM - CÓ FILE NGHE (BẢN...Nguyen Thanh Tu Collection
 
Beauty Amidst the Bytes_ Unearthing Unexpected Advantages of the Digital Wast...
Beauty Amidst the Bytes_ Unearthing Unexpected Advantages of the Digital Wast...Beauty Amidst the Bytes_ Unearthing Unexpected Advantages of the Digital Wast...
Beauty Amidst the Bytes_ Unearthing Unexpected Advantages of the Digital Wast...DhatriParmar
 
Congestive Cardiac Failure..presentation
Congestive Cardiac Failure..presentationCongestive Cardiac Failure..presentation
Congestive Cardiac Failure..presentationdeepaannamalai16
 
CLASSIFICATION OF ANTI - CANCER DRUGS.pptx
CLASSIFICATION OF ANTI - CANCER DRUGS.pptxCLASSIFICATION OF ANTI - CANCER DRUGS.pptx
CLASSIFICATION OF ANTI - CANCER DRUGS.pptxAnupam32727
 
How to Uninstall a Module in Odoo 17 Using Command Line
How to Uninstall a Module in Odoo 17 Using Command LineHow to Uninstall a Module in Odoo 17 Using Command Line
How to Uninstall a Module in Odoo 17 Using Command LineCeline George
 
ESP 4-EDITED.pdfmmcncncncmcmmnmnmncnmncmnnjvnnv
ESP 4-EDITED.pdfmmcncncncmcmmnmnmncnmncmnnjvnnvESP 4-EDITED.pdfmmcncncncmcmmnmnmncnmncmnnjvnnv
ESP 4-EDITED.pdfmmcncncncmcmmnmnmncnmncmnnjvnnvRicaMaeCastro1
 
Mythology Quiz-4th April 2024, Quiz Club NITW
Mythology Quiz-4th April 2024, Quiz Club NITWMythology Quiz-4th April 2024, Quiz Club NITW
Mythology Quiz-4th April 2024, Quiz Club NITWQuiz Club NITW
 
Team Lead Succeed – Helping you and your team achieve high-performance teamwo...
Team Lead Succeed – Helping you and your team achieve high-performance teamwo...Team Lead Succeed – Helping you and your team achieve high-performance teamwo...
Team Lead Succeed – Helping you and your team achieve high-performance teamwo...Association for Project Management
 
How to Manage Buy 3 Get 1 Free in Odoo 17
How to Manage Buy 3 Get 1 Free in Odoo 17How to Manage Buy 3 Get 1 Free in Odoo 17
How to Manage Buy 3 Get 1 Free in Odoo 17Celine George
 

Recently uploaded (20)

Q-Factor General Quiz-7th April 2024, Quiz Club NITW
Q-Factor General Quiz-7th April 2024, Quiz Club NITWQ-Factor General Quiz-7th April 2024, Quiz Club NITW
Q-Factor General Quiz-7th April 2024, Quiz Club NITW
 
Tree View Decoration Attribute in the Odoo 17
Tree View Decoration Attribute in the Odoo 17Tree View Decoration Attribute in the Odoo 17
Tree View Decoration Attribute in the Odoo 17
 
Employablity presentation and Future Career Plan.pptx
Employablity presentation and Future Career Plan.pptxEmployablity presentation and Future Career Plan.pptx
Employablity presentation and Future Career Plan.pptx
 
Spearman's correlation,Formula,Advantages,
Spearman's correlation,Formula,Advantages,Spearman's correlation,Formula,Advantages,
Spearman's correlation,Formula,Advantages,
 
Healthy Minds, Flourishing Lives: A Philosophical Approach to Mental Health a...
Healthy Minds, Flourishing Lives: A Philosophical Approach to Mental Health a...Healthy Minds, Flourishing Lives: A Philosophical Approach to Mental Health a...
Healthy Minds, Flourishing Lives: A Philosophical Approach to Mental Health a...
 
MS4 level being good citizen -imperative- (1) (1).pdf
MS4 level   being good citizen -imperative- (1) (1).pdfMS4 level   being good citizen -imperative- (1) (1).pdf
MS4 level being good citizen -imperative- (1) (1).pdf
 
Satirical Depths - A Study of Gabriel Okara's Poem - 'You Laughed and Laughed...
Satirical Depths - A Study of Gabriel Okara's Poem - 'You Laughed and Laughed...Satirical Depths - A Study of Gabriel Okara's Poem - 'You Laughed and Laughed...
Satirical Depths - A Study of Gabriel Okara's Poem - 'You Laughed and Laughed...
 
BÀI TẬP BỔ TRỢ TIẾNG ANH 8 - I-LEARN SMART WORLD - CẢ NĂM - CÓ FILE NGHE (BẢN...
BÀI TẬP BỔ TRỢ TIẾNG ANH 8 - I-LEARN SMART WORLD - CẢ NĂM - CÓ FILE NGHE (BẢN...BÀI TẬP BỔ TRỢ TIẾNG ANH 8 - I-LEARN SMART WORLD - CẢ NĂM - CÓ FILE NGHE (BẢN...
BÀI TẬP BỔ TRỢ TIẾNG ANH 8 - I-LEARN SMART WORLD - CẢ NĂM - CÓ FILE NGHE (BẢN...
 
Introduction to Research ,Need for research, Need for design of Experiments, ...
Introduction to Research ,Need for research, Need for design of Experiments, ...Introduction to Research ,Need for research, Need for design of Experiments, ...
Introduction to Research ,Need for research, Need for design of Experiments, ...
 
Beauty Amidst the Bytes_ Unearthing Unexpected Advantages of the Digital Wast...
Beauty Amidst the Bytes_ Unearthing Unexpected Advantages of the Digital Wast...Beauty Amidst the Bytes_ Unearthing Unexpected Advantages of the Digital Wast...
Beauty Amidst the Bytes_ Unearthing Unexpected Advantages of the Digital Wast...
 
Congestive Cardiac Failure..presentation
Congestive Cardiac Failure..presentationCongestive Cardiac Failure..presentation
Congestive Cardiac Failure..presentation
 
CLASSIFICATION OF ANTI - CANCER DRUGS.pptx
CLASSIFICATION OF ANTI - CANCER DRUGS.pptxCLASSIFICATION OF ANTI - CANCER DRUGS.pptx
CLASSIFICATION OF ANTI - CANCER DRUGS.pptx
 
How to Uninstall a Module in Odoo 17 Using Command Line
How to Uninstall a Module in Odoo 17 Using Command LineHow to Uninstall a Module in Odoo 17 Using Command Line
How to Uninstall a Module in Odoo 17 Using Command Line
 
ESP 4-EDITED.pdfmmcncncncmcmmnmnmncnmncmnnjvnnv
ESP 4-EDITED.pdfmmcncncncmcmmnmnmncnmncmnnjvnnvESP 4-EDITED.pdfmmcncncncmcmmnmnmncnmncmnnjvnnv
ESP 4-EDITED.pdfmmcncncncmcmmnmnmncnmncmnnjvnnv
 
INCLUSIVE EDUCATION PRACTICES FOR TEACHERS AND TRAINERS.pptx
INCLUSIVE EDUCATION PRACTICES FOR TEACHERS AND TRAINERS.pptxINCLUSIVE EDUCATION PRACTICES FOR TEACHERS AND TRAINERS.pptx
INCLUSIVE EDUCATION PRACTICES FOR TEACHERS AND TRAINERS.pptx
 
Mattingly "AI & Prompt Design: Large Language Models"
Mattingly "AI & Prompt Design: Large Language Models"Mattingly "AI & Prompt Design: Large Language Models"
Mattingly "AI & Prompt Design: Large Language Models"
 
Mythology Quiz-4th April 2024, Quiz Club NITW
Mythology Quiz-4th April 2024, Quiz Club NITWMythology Quiz-4th April 2024, Quiz Club NITW
Mythology Quiz-4th April 2024, Quiz Club NITW
 
Team Lead Succeed – Helping you and your team achieve high-performance teamwo...
Team Lead Succeed – Helping you and your team achieve high-performance teamwo...Team Lead Succeed – Helping you and your team achieve high-performance teamwo...
Team Lead Succeed – Helping you and your team achieve high-performance teamwo...
 
How to Manage Buy 3 Get 1 Free in Odoo 17
How to Manage Buy 3 Get 1 Free in Odoo 17How to Manage Buy 3 Get 1 Free in Odoo 17
How to Manage Buy 3 Get 1 Free in Odoo 17
 
Chi-Square Test Non Parametric Test Categorical Variable
Chi-Square Test Non Parametric Test Categorical VariableChi-Square Test Non Parametric Test Categorical Variable
Chi-Square Test Non Parametric Test Categorical Variable
 

Theory of Financial Dualism

  • 2.  Professor Hala Myint has developed the theory of financial dualism in his work” Economic Theory and UDCs published in 1971.  Such dualism rises because of division of money markets as unorganized and organized in LDCs.  The rate of interest in unorganized market is higher than the rate of interest in organized money market which is concerned with modern sector.
  • 3.
  • 4. • The unorganized money market consists of village money lenders, landlords, traders etc.,.They charge the high interest because of the following reasons. • (i) The lenders have monopoly and position of the borrowers is very weak. • (ii) There is a shortage of savings in the traditional sector because most of the savings are made in terms of land or gold. • (iii) Due to natural calamities etc. the risk attached with such lending are very high.
  • 5. • The organised money market of the UDCs consists of commercial banks and other financial institutions. They give short term loans to modern manufacturing industries, foreign owned export industries and to give the govt. • In the organized markets of LDCs the interest rates are low and credit facilities are abundant. The loans are advanced to manufactured sector, export industry and modern commerce sector.
  • 6. Consequences of the co-existence of unorganised and organised Money market • 1.Since there is great demand for loans in the modern industrial sector, all domestic savings flow to that sector. This creates shortage of capital in the traditional sector. • The govt. expenditure on public services like transport and communication, supply of electricity etc., favours the urban sector as against the rural sector • The ultimate result is the misallocation of resources between the modern and traditional sector.
  • 7. • According to Myint the cheap and easy credit to the traditional sector is not provided because of following: • (i) The high over head costs and salaries of officials of commercial banks in the rural areas. • (ii) The red-tapism in dealing with small borrowers according to the rigid rules. • (iii) The lack of coordination between the head office and the branches. • (iv) Lack of subsidized loans supplied by the agricultural banks etc.
  • 8. Professor Myint suggest two types of policies to reduce financial dualism in LDCs: • (i) The official interest rate in the organized capital market must be increased. This will attract the savings both from with in the country and from abroad. It will also create an equilibrium between the demand for funds and supply of funds. • (ii) There should be free access on equal terms to capital funds by modern and traditional sector. This will reduce misallocation of resources between the two sectors.