The development of financial institutions plays a crucial role in the economy. According to (Porter, 1966), the author shows that the level of development of financial institutions is the best benchmark of common economic development. And (Arellano and Bond, 1991) also found that financial institutions, especially banks, act as intermediaries between the supply of savings and the demand for loans, directly influencing local and national economic development. Policymakers should keep in mind the important role of banks. The intensification and sophistication of the financial sector is significant to the process of creating growth, even though they are relatively large and liberalized (McKinnon, 1973) and (Shaw, 1973). (Dehejia and Lleras-Muney, 2003) indicate that a well-functioning banking system is capable of improving economic growth. However, based on the studies of (Cetorelli and Gambera, 2001), there is a negative relationship between the overall effect of banking concentration on macroeconomic performance if industrial sectors require more external financing for their growth rate, in particular the most young people encourage credit for their investments. Commercial activity. However, if more dependent on external finance, banking concentration can favor the growth of industries (Cetorelli and Gambera, 2001). A tighter restriction on non-traditional banking activities or bank ownership of non-financial companies is one of the solutions to reduce the negative effect of banking concentration on economic growth. The development of banks is significant for economic growth, but non-bank financial institutions are not significant. Previous studies (Cheng and Degryse, 2010) show a strongly different effect on growth between these two financial institutions. Compared to banks... half of the paper... the shortcoming of financial institutions comes not only from an expansion of savings and investments, but also from the marginal rate of return on investments. (Goldsmith, 1969) indicates that a more efficient allocation of savings among potential investments can increase the marginal rate of return on the investment. According to (Beck et al, 2005), studies show that financial obstacles on small businesses can have a negative impact on economic growth. Therefore, small businesses must have a healthy and well-functioning banking system. (Beck et al, 2008) demonstrate that if small businesses grow with a well-developed financial system, they will be more able to significantly expand their business compared to other economies. Besides this, they will also benefit from the system in terms of savings mobilization and efficient financial intermediation roles (Gibson & Tsakalotos, 1994).