In emerging economies in Africa and other regions, large foreign banks

Question

In emerging economies in Africa and other regions, large foreign banks that were set up during the colonial era have long played a major economic role. These institutions have tended to confine their business to the wealthier of banks' potential customers. But development of these countries' economies requires financing of the small businesses that dominate their manufacturing, farming, and services sectors. So economic growth will be likely to occur if local banks take on this portion of the financial services markets, since __________.

Which of the following completions would produce the strongest argument?

Which of the following completions would produce the strongest argument?

A. local banks tend not to strive as much as large foreign banks to diversify their investments
B. small farming and manufacturing businesses contribute to economic growth if they obtain adequate investment capital
C. large foreign banks in emerging economies could, with local employees and appropriate local consultation, profitably expand their business to less wealthy clients
D. some small businesses are among the wealthier customers of foreign banks in emerging economies
E. local banks in emerging economies tend to be less risk-averse than foreign banks

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AdityaHongunti · Accepted Answer

In emerging economies in Africa and other regions, large foreign banks that were set up during the colonial era have long played a major economic role. These institutions have tended to confine their business to the wealthier of banks' potential customers. But development of these countries' economies requires financing of the small businesses that dominate their manufacturing, farming, and services sectors. So economic growth will be likely to occur if local banks take on this portion of the financial services markets, since __________.

Which of the following completions would produce the strongest argument?

Understand : 
1. Large banks = finance wealthy customers
2. ECO growth requires = financing to small business

Conclusion : IF local banks finance small business = THEN Growth in economy !!!

Which of the following completions would produce the strongest argument?
: STrengthen

Think : We are told that large banks finane only wealthy...but eco growth requires finance to small business...so the author suggest local baks to give money to small business...and his goal his : growth in economy...PLEASE NOTE THE AUTHOR IS VERY SURE that "there will be a growth "

now lets assume that "even if local banks finance the small business, the small business cannot give us growth " ....possible right?? see we know that " financing small business" is a necessary condition .. but are we sure that if we satisfy the condition "we will get the result" ???

consider eg : If you dont work hard , you will not succeed 
now we know here for sure that if we dont work hard we will not succeed but are we sure that if we work hard , we will succeed?? NOPE...

similarly "if we dont finance small business we will NOT SEE any growth : ...but "if we finance the samll busines" will we see groth definitely? NO IDEA...

SO we have to assume here that  "financing small business WILL lead to growth  " ...ie the necessary confition is sufficient condition !!!

A. local banks tend not to strive as much as large foreign banks to diversify their investments
- TRAP : see the local bank financing is in "if condition " ... ie we are not concerned if local banks CAN OR CANNOT do something !!! We have already taken it for granted that local banks wikll finance !!! ( never try to strenthen or weaken the "condition (if part) of the arguemnt " .... 
or simply ask a question : oay local banks are very kind ...but will the financing lead to GROWTH???

B. small farming and manufacturing businesses contribute to economic growth if they obtain adequate investment capital
- CORRECT : read above

C. large foreign banks in emerging economies could, with local employees and appropriate local consultation, profitably expand their business to less wealthy clients
- Irrelevant : talks abiyt large forgeing banks !!!

D. some small businesses are among the wealthier customers of foreign banks in emerging economies
-"some " : we already consider some businesses could be in the mixed group... the conclsuion por the argeumnt never says "All small busiess"

E. local banks in emerging economies tend to be less risk-averse than foreign banks
- again "we are not concerned wheteher banks CAN OR CANNOT FINANCE " ...we are saying "if they can " then what???

ChiranjeevSingh · Answer

Understanding the Passage

In emerging economies in Africa and other regions, large foreign banks that were set up during the colonial era have long played a major economic role.-

The gist of the sentence is that in some economies, some banks have played a major economic role.

Which economies? Emerging economies in Africa and other regions

Which banks? Large foreign banks set up during the colonial era

These institutions have tended to confine their business to the wealthier of banks' potential customers.

These larger foreign banks have mostly limited their business to the wealthier of their potential customers.

But development of these countries' economies requires financing of the small businesses that dominate their manufacturing, farming, and services sectors.

The “but” indicates a contrast. The contrast is that while these large foreign banks have mostly limited themselves to wealthier customers, financing of small businesses is required for the development of these countries’ economies.

So economic growth will be likely to occur if local banks take on this portion of the financial services markets, since __________.

The author concludes in this statement - “so” indicates the conclusion.

The author says that economic growth will likely occur if local banks finance these small businesses.

The sentence ends with “since.” So, we need to find a reason.

Reason to support what?

This is where a lot of people go wrong.

Many people think that we need to support that “local banks finance these small businesses.”

That’s wrong.

If we’re thinking so, we haven’t understood the complete statement.

We need to support that if local banks finance these small businesses, economic growth will occur.

Thus, we need to support that X will lead to Y.

X: local banks finance these small businesses
Y: economic growth will occur

Many of us incorrectly understand that we need to support X.

Gap Analysis:

The conclusion is that economic growth will occur if local banks finance these small businesses.

The conclusion is supported by the reasoning that
 1. development of these countries' economies requires financing of the small businesses that dominate their manufacturing, farming, and services sectors
2. Large foreign banks are not focusing on these businesses
 
To identify the gaps, we need to ask ourselves the question: what could be the reasons we cannot be sure of the conclusion even though the premises hold?

I can think of two reasons (gaps in the argument):

1. These small businesses are already well-financed by some means and don’t need financing.
2.Even if these businesses get financing, countries’ economic growth may not occur. For example, if they get financing, they might grow by snatching business from the big companies; overall, there may not be any growth in business in the country.

The Evaluation

A. local banks tend not to strive as much as large foreign banks to diversify their investments

Incorrect.  - This option has ZERO impact on the argument.

The option compares local banks and foreign banks in terms of how much they strive to diversify their investment. How much local banks diversify their investments has no relevance to the argument. Remember, we don’t need to strengthen that local banks will finance these businesses. We need to strengthen that if local banks finance these small businesses, economic growth will occur.

B). small farming and manufacturing businesses contribute to economic growth if they obtain adequate investment capital

Correct.    -The option says that certain types of small businesses (farming and manufacturing) contribute to economic growth if they get adequate funding. This option addresses the second gap we identified.

After knowing option B, we believe more in the conclusion that economic growth will likely occur if these small businesses are financed by local banks.

It’s important to be aware that we’re looking for an option that INCREASES our belief in the conclusion; we’re NOT looking for an option that GUARANTEES the conclusion.

C. large foreign banks in emerging economies could, with local employees and appropriate local consultation, profitably expand their business to less wealthy clients

Incorrect .  - This option has ZERO IMPACT on the argument.

The option indicates that large foreign banks can also profitably serve these small businesses. Does this support that financing of small businesses by local banks will likely lead to economic growth?

No.

Whether there are ways other than local banks to finance these small businesses has NO IMPACT on the argument. Remember, we don’t need to strengthen that local banks will finance these businesses. We need to strengthen that if local banks finance these small businesses, economic growth will occur.

D. some small businesses are among the wealthier customers of foreign banks in emerging economies

Incorrect.   - Let me create an extreme version of this option:

D’: ALL small businesses are among the wealthier customers of foreign banks in emerging economies

I understand that D’ doesn’t make a lot of common sense. How can all small businesses be among the wealthier customers of foreign banks?

However, let’s entertain D’ for our discussion's sake.

D’ will weaken the argument since it is around the first gap we identified (What if these small businesses already have enough financing?). If all of these businesses are already served by large foreign banks, then financing of these businesses by local banks will not lead to any additional help to these businesses, and thus we don’t have logic to expect economic growth.

Now, let’s talk about option D, which talks about “some” small businesses. ‘Some’ means at least one.

How does knowing that at least one small business is already served by large foreign banks impact the argument?

It weakens the argument. However, the impact is so small that it is almost no impact. Why so small impact?

Because we have guaranteed information about only one small business - that is served by foreign banks.

How much can this information impact the argument?

Hardly. The local banks can serve other small businesses, whose growth can lead to economic growth.

E. local banks in emerging economies tend to be less risk-averse than foreign banks

Incorrect.   - This option has NO IMPACT on the argument.

If local banks are less risk-averse than foreign banks, we can understand that local banks will be open to taking more risks than foreign banks. If so, will they be more likely to lend to small businesses than foreign banks are?

Yes, if we consider that small businesses are riskier than big businesses. (Can we consider that? I think so. I think that, in general, small businesses are riskier than big businesses.)

So, this option increases the belief that local banks will lend to small businesses.

However, what we need to strengthen is that if the local banks lend to small businesses, economic growth will occur. In other words, we need to strengthen “If X, then Y”. In other words, we need to strengthen “X will lead to Y”.

This option strengthens the idea that X will occur. However, saying so has NO impact on whether X will lead to Y.

For example, if I say, “If Raj takes classes from CJ, he’ll get a great GMAT score”, my statement cannot be strengthened by saying that Raj will indeed take classes from CJ.

Thus, option E has ZERO IMPACT on the argument.

DavidTutorexamPAL · Answer

The logic of the argument is essentially that 'large banks played a major role in economy but catered mainly to the wealthy. Development requires financing small businesses, since ___'. Then our answer needs to be an option that connects between financing the small businesses and growing the economy. Since we know what to look for, we'll seek it directly, without spending too much time on irrelevant options. This is a Precise approach.

Of the options, (B) is the only choice that directly does what we need and so is our answer.

Skywalker18 · Answer

In emerging economies in Africa and other regions, large foreign banks that were set up during the colonial era have long played a major economic role. These institutions have tended to confine their business to the wealthier of banks' potential customers. But development of these countries' economies requires financing of the small businesses that dominate their manufacturing, farming, and services sectors. So economic growth will be likely to occur if local banks take on this portion of the financial services markets, since __________.

Which of the following completions would produce the strongest argument?

Type- strengthen
Conclusion- if local banks will finance the small businesses in manufacturing, farming, and services sectors, then economic growth in emerging economies in Africa and other regions will likely occur
 the financing of small businesses is a sufficient condition for the economic growth in the emerging countries

A. local banks tend not to strive as much as large foreign banks to diversify their investments- irrelevant
B. small farming and manufacturing businesses contribute to economic growth if they obtain adequate investment capital- Correct, adequate investment capital is a sufficient condition for small farming and manufacturing businesses to contribute to economic growth
C. large foreign banks in emerging economies could, with local employees and appropriate local consultation, profitably expand their business to less wealthy clients- irrelevant, the expansion of large foreign banks is not relevant to our conclusion
D. some small businesses are among the wealthier customers of foreign banks in emerging economies - irrelevant
E. local banks in emerging economies tend to be less risk-averse than foreign banks- irrelevant, so these local banks might be reluctant to offer to finance risky business

Answer B

ShukhratJon · Answer

Hola amigos

Understanding why the answer is B but not E will be easier if the stem is simplified and due attention is paid to key words. Stem: Foreign banks worked with rich clients and played economic role (doesn’t mean in developing the economy). However, that‘s the small business what should be FINANCED for economic growth to happen (not only wealthier ones). Then author concludes that if local banks FINANCE small businesses then economy will grow because................... because what? Why small businesses should be financed? What would you say if you were against author’s offer? You would probably say – FINANCING doesn’t itself guarantee a positive result and those small businesses still may FAIL to contribute to economic growth. That is the criticism that weakens author’s conclusion and that you should predict and block with counterargument. This counterargument is - if financed adequately, the small businesses WILL CONTRIBUTE to economic growth and not fail. B says the same thing. The fact that B talks only about 2 businesses (Farming and Manufacturing) while the stem talks about 3 of them (including Services sector) will probably make you hesitate to choose it. However, even if only these two businesses contribute to economy and the third one not, the economy may still grow very well. Why E doesn’t strengthen the conclusion? E says that local banks are less risk-averse and thus will be more willing to finance the small businesses. However, we have already found out that FINANCING doesn’t itself guarantee that the small businesses WILL definitely contribute to economic growth. Even if FINANCED, the small businesses still may FAIL. This doesn’t block possible counterargument. Hence B

prrg0104 · Answer

This is an EXCELLENT question to differentiate between necessary condition and sufficient condition.

Premise: "But development of these countries' economies requires financing of the small businesses that dominate their manufacturing, farming, and services secotrs."

Conclusion: "So economic growth will be likely to occur if local banks take on this portion of the financial services markets"

The premise is necessary condition, and the conclusion is sufficient condition. Answer choice B directly addresses this gap, and hence is a strengthener. Note that this answer would also be appropriate as an assumption.

akbgmatter · Answer

Conclusion: So economic growth will be likely to occur if local banks take on this portion of the financial services markets,

Type: Strengthen.

Which of the following completions would produce the strongest argument?

A. local banks tend not to strive as much as large foreign banks to diversify their investments
Weakener; Eliminate
B. small farming and manufacturing businesses contribute to economic growth if they obtain adequate investment capital
Strengthens the conclusion; Hold.
C. large foreign banks in emerging economies could, with local employees and appropriate local consultation, profitably expand their business to less wealthy clients
Conclusion is about local banks; eliminate.
D. some small businesses are among the wealthier customers of foreign banks in emerging economies
Irrelevant to the conclusion; Eliminate
E. local banks in emerging economies tend to be less risk-averse than foreign banks
Irrelevant to the conclusion; The passage doesn't mention that financing small businesses is risky

B prevails!

egmat · Answer

Situation:

Large foreign banks have long played an economic role in emerging economies, but they have typically confined their business to wealthier customers. Economic development in these countries requires the financing of small businesses that dominate their manufacturing, farming, and services sectors.

Reasoning:

What would most help support the claim that growth in emerging economies will likely occur if local banks help finance small businesses in the relevant sectors of these emerging markets? If it were the case that these small businesses would actually be likely to contribute to economic growth, given adequate investment capital, then economic growth would indeed be likely to occur if local banks provided the investment capital.

Option A  - It could be the case that whatever sorts of investments local banks make—diversified or not—economic growth will not tend to occur; for instance, it could be that the businesses they invest in do not use the capital wisely. So, this claim does not help support the conclusion.  INCORRECT

Option B  - If small farming and manufacturing businesses will contribute to economic growth if they obtain adequate investment capital, then we have fairly good reason to think that economic growth is likely to occur if local banks take on the financing of such small businesses (we merely need to also assume that they will provide adequate investment capital when they take on this financing).  CORRECT

Option C  - Even if large foreign banks could profitably expand their businesses to less-wealthy clients, we have been given no reason to think they will. Furthermore, the claim in need of support is that economic growth will occur if local, rather than foreign, banks financially support these small businesses.  INCORRECT

Option D  - The claim that economic growth will occur if local banks finance small business in certain sectors is not supported by the claim that there are some small businesses supported by foreign banks. If these businesses are already financially supported and yet there is not the sort of economic growth discussed, then that might even suggest that economic growth is unlikely to occur.  INCORRECT

Option E  - It could be that, if local banks are less risk-averse than foreign banks, they will invest in risky businesses that fail, which would not tend to support the claim that economic growth will likely result if local banks in emerging counties provide financial support for the relevant sectors.  INCORRECT

mSKR · Answer

Hi  AndrewN   BrightOutlookJenn   GMATRockstar

It was a bouncer when my 2 attempts couldn't convince me to reach at the right answer. I find the way right answer could be reach is different how I thought.

When I solve the question, My mind was looking for some connection of local banks with growth. ( economic growth will happen if local banks take up financing of the small businesses). So I was looking for option something that local banks can do as compared to foreign banks. I didn't doubt anything wrong here .

When I reached to the options : I shortlisted A and E.

E says: local banks tend to be less risk-opponent , It means local banks can take risk with these small business ( small business are not wealthier of banks' potential customers) 
Wow , I was so confident in selecting E.

2nd attempt: I chose A
 
>>Ok so there are multiple business- manufacturing, farming, and services sectors. So local banks can support these business well than foreigner banks .
But it doesn't clarify whether it would help in economic growth
With same thinking I can't choose E also

I rejected B:
 
seems good but foregner banks can also do the same. There is no distinction with local banks. 
conclusion is based on If condition , so my mind keeps looking for local banks in options.
and end up in choosing E again. ( as E was wrong so I marked A) but I was no near to B

please suggest.  AndrewN   BrightOutlookJenn   GMATRockstar

why why I don't need to bother local banks in these options. How can I avoid such errors. 
I believe I went methodologically and thoughts on local banks --> economic growth came naturally.

GMATRockstar · Answer

mSKR

Whenever we see the word "since" before the blank, it's best to treat this as an Assumption question.

Evidence: Large foreign banks = major role / wealthy customers; countries' small businesses need financing
Conclusion: Econ "will be likely" if local banks take action

We have this unusual idea here in "will be likely." Why? Why is the author assuming a causal relationship between the actions of these local banks and an entire country's economic growth?

That is a very large logical leap from the local to the national level!

PREDICTION: Something that explains WHY this decision by the local banks ----> the entire country's growth.

I believe your mistake was fixating in your prediction so narrowly on the idea of local banks.

It's very odd that the first 2 sentences focus on large foreign banks, the 3rd sentence discusses the need for financing, and that only the 4th sentence mentions the local banks needing to come in. So this is more of a "big picture" argument.

At its core, we have a cause/effect claim here. If local banks do X, then Y will happen. WHY? (B) explains it.

Sachinpri · Answer

Hi.
I'm a little confused about what "since" is trying to modify?
Is it "Economic growth will be likely to occur if..." or "..if local banks take on this portion of the financial services markets"?
Are we supposed to focus on whether economic growth is likely to occur if local banks take on this portion or if specifically local banks take on this position?
Could experts shed some light please? GMATNinja   bb   Bunuel   KarishmaB

KarishmaB · Answer

'Since' is like 'because.' It gives a reason for the previous statement.

Consider this:
If A happens B will happen because ...

What will 'because' give you? It will give the reason why 'if A happens B will happen.'

If it rains today, tomorrow's match will be cancelled because  it is not possible to cover the entire ground .

The reason tells us why tomorrow's match will be cancelled if it rains today.

Similarly, 
' economic growth will be likely to occur if local banks take on this portion of the financial services markets, since ...'
will give us why economic growth is likely to occur if local banks take on this portion of the financial services.

Nina1987 · Answer

GMATNinja ,  GMATNinjaTwo ,  IanStewart ,  MartyTargetTestPrep ,  RonPurewal ,  KarishmaB ,  MarkSullivan ,  AjiteshArun ,  EMPOWERgmatRichC ,  mikemcgarry ,  DmitryFarber ,  sayantanc2k ,  TommyWallach  
Isnt B just a paraphrased version of the following sentence "But development of these countries' economies requires financing of the small businesses that dominate their manufacturing, farming, and services sectors." from the passage. Why would anyone complete their argument by repeating what they have already said in the passage? Thanks

GMATNinja · Answer

You're right that the statements look similar at face value, but they're actually quite different in meaning. The passage tells us that a particular thing is REQUIRED for economic growth. It doesn't tell us that this thing, on its own, will ACTUALLY LEAD TO economic growth. Consider this example: Making a cake REQUIRES that you go out to buy flour. But going out to buy flour doesn't mean that you'll ACTUALLY make a cake -- there are other pieces of the puzzle that are needed if you want to end up with a tasty dessert.

(B) fills a similar gap. The passage tells us that financing small businesses is required, and (B) tells us that financing these businesses actually WILL contribute to growth. I hope that helps!

ashutosh_73 · Answer

Premise: development of small countries' economies(A) ---> financing of the small businesses(B)

Conclusion: banks take on small business portion of the financial services markets(C) ---> economic growth will be likely to occur(D)

Option B: Small business obtain adequate investment capital(B) ---> small farming and manufacturing businesses contribute to economic growth(B)

The BIG-LEAP is from B to D, which has been bridged by option(B)

reed990 · Answer

Anyone can solve my puzzle regarding A? Large foreign banks tends to "confine" their business to be weather, thus, they will be hesitatant on risk and diversify (as compared to "confine"); small local banks are more scattered and tends to support diversified, small business of manufacturing, farming, and services. Thus, With A, it is ensured that local banks tends to be more diversified, and can lead to the conclusion that when they takes on their portion of market, they will use them for these business, and finally develop the economies. 
Thus, it looks to me A is the best answer.

GMATNinja · Answer

The conclusion, in essence, is that if local banks lend money to the small businesses that dominate manufacturing, farming and services, economic growth will be likely.

So we need something that links the banks' investment in small business to actual economic growth.

Why would it matter whether local banks are as diversified in their investments as foreign banks? That tells us nothing about whether investing in small business will be beneficial to the economy, right?

(B), however, makes an explicit link between investment in small business and economic growth, so that's our answer.

I hope this helps!

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In emerging economies in Africa and other regions, large foreign banks

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