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.

Remittances and financial development in Africa

Abstract: Despite the magnitude of remittances as an alternative source of investment financing in Africa, the financial sector in Africa has significantly remained underdeveloped and unstable. Finding a solution to Africa's financial deregulation problems has proved tenacious partly because of inadequate literature that explain the nature of Africa capital and financial markets which has shown to be unorganised, spatially fragmented, highly segmented and invariably externally dependent. We examine the structural linkages between remittances and financial sector development in Africa. Panel data on indices of remittances was regressed on indices of financial sector development in fifty-three (53) African countries from 1986 through 2017 using the Pooled Mean Group (PMG) estimation procedure. We accounted for cross-sectional dependence inherent in ordinary panel estimation and found a basis for the strict orthogonal relationship among the variables. Findings revealed a positive long-run relationship between remittances and financial development with a significant (positive) short-run relationship. It is suggested that, while attracting migrants' transfers which can have significant short-run poverty-alleviating advantages, in the long run, it might be more beneficial for African governments to foster financial sector development using alternative financial development strategies.

Policy issues in financial regulation

Abstract: The author summarizes the findings of a forthcoming book on financial regulation that examines the policy issues of financial regulation and reviews the experiences of both developed and developing countries. He stresses the following ten points: 1) the 1980s were not a decade of deregulation, but a period of extensive regulatory reform; 2) there is a widespread consensus on the need for market mechanisms for monetary and credit control for allocating scarce financial resources; 3) the best speed and sequence of financial reform remains an open question. The contrasting experiences of Japan and Chile support a cautious, gradual approach; Indonesia's experience suggests that several reform paths may work; 4) there is strong consensus on the importance of prudential, organizational, and protective controls and on the need for capital adequacy and for strong banking supervision; 5) there is ample recognition of the importance of speedy and decisive intervention to prevent involvent institutions from magnifying losses and infecting the rest of the financial system; 6) the role of deposit insurance is still unclear; 7) the regulatory issues of nonbank financial intermediaries are similar to those of banks. For life insurance companies, price and product controls (which inhibit competition) are being replaced by solvency controls; 8) the most controversial type of control is still structural controls that impose geographic or functional limits on the activities of financial institutions; 9) universal institutions pose a serious challenge to regulators and supervisors. Countries with weak supervisory agencies would be well advised to promote simpler and more transparent structures; and 10) there is considerable controversy about the desirability and benefits of universal banking. Many analysts emphasize the difficulties of regulation by function and of relying on rules of conduct for overcoming excessive risk taking, conflicts of interest, and the abuse of privileged information. These analysts favor structural controls that limit the scope for fraud and mismanagement. But other analysts argue that the threat of regulation, considerations of reputation, and provisions for legal redress against offending institutions would be effective in policing universal institutions.

Nexus between Financial Sector Development and Economic Growth: Empirical Analysis of 112 Countries

Abstract: International statistics show that almost 30 percent of total world population lives on less than $765 GNI per capita per year in 2005. In comparison this indicator for developed countries is more than $9385 per year. This huge difference in per capita income can be accounted for by various factors which affect long‑run economic growth. One of the vital aspects that contribute the economic growth is the financial sector development. According to Levine(2004)the financial instruments the markets and the intermediaries are the factors of financial sector development that can promote economic growth. Well‑functioning financial intermediaries and markets can promote long‑run economic growth(Beck et.al 2001). However the financial sector development varies across countries because of different degree of the financial intermediation the rule of law and a number of other endogenous and exogenous reasons. As outlined in a number of studies financial sector development can affect economic growth through five main functions. Efficiently allocated savings can offer low cost financial resources for industry and firms. Moreover financial intermediaries help decrease transaction costs and thereby encourage deposits. Thus they in turn increase the funds available for investment. Managing and reducing risk can weaken the uncertainty of investment projects and strengthen deposits. The financial intermediaries prepare information on borrowers and provide this information to

India’s insurance sector: challenges and opportunities

Abstract: The insurance industry in India has been growing dynamically, with the total insurance premiums increasing rapidly compared with its global counterparts. In the past 17 years or so, the insurance sector of India has risen at a compound annual growth rate (CAGR) of 16.5 per cent. The insurance penetration and density stood at 3.69 per cent and USD 73 respectively for FY2017-18, which is low in comparison with global levels. These low penetration and density rates reveal the uninsured nature of large sections of population in India and the presence of an insurance gap.

Creating an efficient financial system: challenges in a global economy

Abstract: Financial sector development fosters economic growth and reduces poverty by widening and broadening access to finance and allocating society's savings more efficiently. The author first discusses three pillars on which sound and efficient financial systems are built: macroeconomic stability and effective and reliable contractual and informational frameworks. He then describes three different approaches to government involvement in the financial sector: the laissez-faire view, the market-failure view and the market-enabling view. Finally, the author analyzes the sequencing of financial sector reforms and discusses the benefits and challenges that emerging markets face when opening their financial systems to international capital markets.