The Role of Financial Intermediation through Banks to the Economic Activity. Case of Vlora’s City

Abstract

This study examines the relationship between financial intermediation through the banking sector and increased economic activity in the city of Vlora. The literature on economic growth recognizes this regard due to the decisive role played by financial intermediaries, mainly commercial banks, to collect large amounts of savings and use these savings to support the investments.When we chose to analyze the effect of financial intermediaries, specifically of the banking system in the economic activity of the city of Vlora, we had in mind the development of this city as an important part of Albanian economic development today, representing a significant percentage of GDP and of GDP per Capita for this country. The main questions that this study attempts to answer are as follows: 1. If there is an increased access of external financing possibilities, for the private sector, due to the banking sector intermediation? 2. If the availability of banking intermediation in Vlora’s city, provided support for the private sector of this city to grow at higher rates? In order to obtain the correct answer to these questions there are investigated two aspects in particular: • The first relates to the bank loans, if they are perceived available as a form of external financing by the private sector in the city of Vlora in order to finance the production and trade activity in this city? • The second is an attempt to find if bank loans have funded and continue to fund economic growth of firms operating in this city?

DOI: 10.5901/ajis.2013.v2n9p602