This assumption implies that the fire-sale discount plays an important equilibrating role in the model, and that we can have interior equilibria in which the ownership of a given asset i is divided across the traditional banking and shadow banking sectors; as ownership migrates to shadow banks, the fire-sale discount widens, which tends to reduce the relative advantage of shadow banks.
Mainstream institutions shied away from providing financial services to the poor considering them unviable owing to high costs involved in reaching out to the unbanked/under banked areas where there is not enough scale of operations due to low numbers and low value of transactions.