Problem
Lack of capital development
Incidence:
[Developing countries] Local savings in developing countries are often badly invested in terms of the facilitating of further economic growth. The shortage of long-term financing not only undermines capital formation but also shortens the time horizon of investors, and tends to direct funds into short-term speculative investments with quick pay-offs. An excessive preference for purchasing land leads only to its over-valuation. Over-investment in buildings in metropolitan cities is a feature of some developing countries, especially during inflation. Larger enterprises often merely reinvest in the extension of their own concerns where more diffused investment through the economy would bring larger returns to the economy as a whole. Lax monetary policies, high inflation and negative interest rates have helped to perpetuate this situation in some developing countries. Besides, the capacity to save, particularly in the case of debtor countries, has been impaired by the adjustment policies adopted in response to external imbalances.
Broader Problems:
Inadequate savingsDependency on unpredictable sources of income Narrower Problems:
Lack of savings structuresInadequate improvement fundsLimited availability of loansLimitations on capital development in rural areas Aggravates:
Insufficient enterprise capitalInsufficient financial resourcesProhibitive cost of capital equipmentDiminishing capital investment in small communitiesReduced investment in small inner-city enterprises Strategies:
Developing capitalImproving access of rural poor to creditAbstaining from capital development Subject(s):
Commerce → FinanceDevelopment → Development
Societal Problems → Scarcity
Related UN Sustainable Development Goals:
Problem Type:
D: Detailed problems Date of last update
04.10.2020 – 22:48 CEST