(A) 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) 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) 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) 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) 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.