International Journal of Scientific Research and Engineering Development

This study examines the relationship between financial development, real sector performance, and the evolving dynamics of global finance, with a particular focus on developing and emerging economies. It analyses the channels through which financial systems influence output growth and credit allocation, highlighting evidence of long-run linkages and sector-specific effects. The study further explores the role of microfinance in India, especially the Self-Help Group (SHG)–Bank linkage programme, which has contributed to poverty reduction despite persistent challenges such as limited product diversity, high borrowing costs, and inefficiencies in credit delivery. The analysis also considers India’s financial liberalisation trajectory, noting that political economy factors—rather than its common-law heritage— have predominantly shaped reforms in equity markets and financial services. Rising foreign capital inflows and associated risks underscore the need for stronger regulatory frameworks to mitigate volatility. At the global level, the study critically assesses the International Finance Corporation (IFC), identifying misalignments between its poverty-alleviation objectives and lending patterns that often favour large multinational corporations, even though IFC sustainability standards continue to influence responsiblefinance practices. Additionally, the study evaluates foreign direct investment in the banking sector across advanced economies, identifying trade linkages, capital costs, relative growth, and exchange rates as major determinants. Overall, the findings contribute to a deeper understanding of financial development, regulation, growth, and sustainability within an increasingly interconnected global economy.