Micro econmics Essay Example | Topics and Well Written Essays - 2000 words

Micro econmics - Essay Example Once the US market tumbled the markets around the world followed suit. Some Asian markets even lost 40% (China)while others lost almost 60% (India) in a matter of months. Most analysts hold the subprime lending crisis as the root cause for the current economic slowdown. In their enthusiasm to outdo other banks and get the maximum number of customers, banks were ready to lend any amount to anyone, without even verifying their credit worthiness properly. As a result, many banks had to close shop, including big names like Citibank and Merryl Lynch. Thousands of people the world over lost jobs, companies had to be bailed out and even turn to government support for their functioning and existence. The latest victim is the automobile giant, General Motors. After being the iconic company that it was, it had to declare bankruptcy and carry out a sale to the U.S government. The subprime lending crisis does not seem to be an isolated one in the financial world. Persistent industrial loan defaults and massive loan losses have become a regular feature in developing countries. According to Hoque (2004) and the World Bank (1993), 150 development banks in 33 developing countries have been haunted by massive debt default and loan loss. The present subprime mortgage crisis that hit the credit markets and banking systems is due to the massive increase in loan defaulters, thus forcing the banks to go bankrupt. Industrial Development Finance Institutions (IDFIs) form the backbone of the economy in both developing and developed countries. These institutions are expected to stimulate industrial investment in both private and public sectors in the country. They play the key role of injecting capital into the system. However, a job bigger than that is to blend capital with entrepreneurial skills to support industrial advancement in an underdeveloped economy. This is precisely what IDFIs are doing in a majority of the