Financial sector development

About: Financial sector development is a research topic. Over the lifetime, 1674 publications have been published within this topic receiving 90787 citations.

Electronic Finance: A New Approach to Financial Sector Development?

Abstract: In recent years, electronic finance, especially online banking, and brokerage services, has reshaped the financial landscape This paper reviews these developments, and analyzes their implications for consumers, governments, and financial service providers First, it reviews the e-finance (r)evolution in emerging, and other markets, and projects its future growth It then analyzes e-finance impact on the structure of, and competition in the financial services industry After that, it assesses how e-finance, and globalization more generally, affects financial sector policies in emerging markets, including the need for changes in the approach to financial sector development The paper then examines governments' changing role in the financial sector, and identifies opportunities that e-finance offers countries to leapfrog Finally, the paper includes for policymakers, and others involved in financial sector reform in emerging markets, detailed information, and Web links on public policy activities related to e-finance

Financial sector development and the macrodynamics of ‘de facto’ dollarisation in developing countries: the case of Ghana

Abstract: Following the massive economic policy restructuring and reforms since the early 1980s, currency substitution, asset substitution and de facto dollarisation have become common phenomena in nearly all transition and developing economies. High and persistent inflation which have been a perennial feature of developing and transition economies is now known to be highly responsible for currency substitution, asset substitution and de facto dollarisation. This paper presents evidence on the macrodynamics of de facto dollarisation, currency substitution and asset substitution during the era of the implementation of the Financial Sector Adjustment Programmes (FINSAPs) in developing and transition economies with special reference to Ghana. The study has found out that de facto dollarisation whether in the form of asset substitution or currency substitution is highly prevalent and poses a serious threat to fiscal and monetary policies effectiveness in developing and transition economies. In Ghana, the principal long-run mainspring of de facto dollarisation is the ad hoc implementation of financial sector development programme that was embarked upon about two decades ago which has resulted in high exchange rate depreciation and price fluctuations. It is, however, likely that as the financial sector develops over a long period a time will come when further development of the financial sector would no longer instigate de facto dollarisation.

Financial geography and access as determinants of exports

Abstract: Although the link between financial development and trade is well documented, the international trade literature has typically defined a country's ‘financial development’ in macroeconomic terms, rather than considering within-country channels. This paper shows that the impact of finance on exports depends not only on the extent to which the sector relies on external finance but also on the financial channels available. With a data set of 27 sectors from over 120 countries, I find that financial access and efficiency variables—particularly the geographic penetration of bank branches and the business loan application processes—significantly impact exports. Results also suggest remittances may not substitute for formal financial sector development.

Finance and income inequality : test of alternative theories

Abstract: Although theoretical models make distinct predictions about the relationship between financial sector development and income inequality, little empirical research has been conducted to compare their relative explanatory power. The authors examine the relation between financial intermediary development and income inequality in a panel data set of 91 countries for the period 1960-95. Their results provide evidence that inequality decreases as economies develop their financial intermediaries, consistent with the theoretical models in Galor and Zeira (1993) and Banerjee and Newman (1993). Moreover, consistent with the insight of Kuznets, the relation between the Gini coefficient and financial intermediary development appears to depend on the sectoral structure of the economy: a larger modern sector is associated with a smaller drop in the Gini coefficient for the same level of financial intermediary development. But there is no evidence of an inverted-U-shaped relation between financial sector development and income inequality, as suggested by Greenwood and Jovanovic (1990). The results are robust to controlling for biases introduced by simultaneity.

Managing Credit Risk and Improving Access to Finance in Green Energy Projects

Abstract: The cost of finance has a relatively high impact on the returns and viability of clean energy projects compared with fossil fuel-based energy projects, because the operating costs for renewable energy projects are very low. Credit risk assessment and ratings, which have usually been an inappropriate measure of credit risk for clean energy finance, have a significant influence on the cost of finance. Factors like inadequate credit information, a lack of historical data at the project level, and the higher risk of technological obsolescence lead to credit market failure in clean energy finance, leading to mispricing of risk and poor capital allocation to clean energy infrastructure in the economy. Access to institutional finance is more constrained in the distributed renewable energy sector, as the transaction costs are high, consumer credit risk is high or unknown, and a variety of other challenges exist. It is important to ease these constraints, through appropriate policy and financing interventions to crowd in domestic banks, by improving the quality of credit information, both technical and commercial, creating suitable financial intermediaries, and providing risk mitigation solutions