- They lead to profit repatriation. Foreign commercial banks tend to plough back profits made to their home countries instead of re-investing them where they operate. This leads to low capital accumulation in the economy.
- They worsen the problem of unemployment in the economy. This is because they mainly employ foreigners especially the top officials and they use capita intensive techniques of service delivery hence technological unemployment.
- They accelerate regional income inequalities in the economy. This is because most of their banking activities are mainly concentrated in urban areas neglecting the rural areas. This creates regional imbalance.
- They discourage the development of local financial institutions. This is because foreign commercial banks have huge capital and have the capacity to operate on a large scale and provide better quality services to their customers at competitive rates. This undermines the growth of the local banking sector.
- They limit the successful implementation of monetary policies. This is because the central bank has little control over their activities.
- They interfere in the politics of developing countries. Foreign commercial banks use their economic power to influence national policies and politics of the countries in which they operate in their favour. This results into loss of independence in local decision-making.
- They lead to divergence between private and society interests. This is because foreign commercial banks aim to maximise profits at the society’s expense. Some of their policies are not in line with the national development goals like poverty eradication, rural development.
- They encourage rural – urban migration. This is because most of their business activities are concentrated in urban centres due to poor infrastructure in rural areas. This leads to congestion in urban areas and other negative effects.
- They undermine the provision of banking services to small scale local investors. This discourages the production of cheap goods and services for the local people.
- Etc.
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