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.

How to leverage oil resources to enhance SME financing in South Sudan

Abstract: The attention to financial sector development in development policy is currently shifting away from microfinance alone toward the development of inclusive financial markets more broadly under the rubric of 'finance for all'. This policy orientation underscores that financial inclusion is a requisite for economic development and poverty reduction. This paper draws on evidence from field research in South Sudan and Kenya on the role of financial sector development for small and medium-sized enterprise (SME) financing in these two countries. The analysis of the data indicates that distance from the capital city; firm size and gender of the firm owner significantly affect the likelihood of applying for a loan and receiving a loan. Institutional, regulatory and credit market imperfections stand in the way of expanding the access frontier in South Sudan. Drawing lessons from the Kenyan experience with regard to financial inclusion, the paper argues for enhancing linkages between rate of oil extraction and the financial sector development strategies. The aim is to harness South Sudan's oil wealth in promoting financial sector development in general and SME financing in particular.

Capital Movements and Economic Growth Fluctuations: The Threshold Effect of Financial Development

Abstract: We examine the relationship between capital account openness and growth volatility according to the level of financial development condition. We demonstrate that economies with high level of financial sector development benefit more from capital flows than those with a lower one. In what follows, we extend previous studies by employing updated data, and also exploring more questions related to the links between capital movements and growth volatility. More specifically, we will investigate the issues relevant to threshold effect of financial development on which capital flows changes of sign. We investigate the role of financial development in the relationship between capital flows and growth volatility for different groups of countries. Estimations are conducted with a panel data of 70 countries over the period 1970-2009 using GMM-System estimator for dynamic panel data. Empirical results support that capital movements aggravate macroeconomic volatility according to the level of domestic financial development. This implies that countries which are at an intermediate phase of financial development are the most vulnerable to instability. This threshold is estimated at a rate of credits to the private sector to GDP around 50 %.

Monetary policy effectiveness in Africa: the role of financial development and institutional quality

Abstract: Purpose This study aims to provide empirical evidence of the pass-through effect of monetary policy on bank lending rates vis-à-vis the potential moderating effects of financial sector development and institutional quality in Africa. Design/methodology/approach The study uses robust fixed effects panel data estimation techniques and data from 1990 to 2017 across 37 countries in Africa. Findings The results show that financial development aids in the effectiveness of monetary policy transmission. A decomposition of financial development into financial institution development and financial market development shows that financial institutional development is more influential with regard to effectiveness of the interest rate pass-through compared to financial market development. This study again shows that improvements in the quality of institutions reduced lending rates in African economies. Practical implications The findings present relevant policy implications regarding effective transmission of monetary policy, by linking the pursuit of institutional quality, characterized by the control of corruption, political stability, regulatory quality, rule of law and the voice of accountability and development of financial institutions with lending rates and ultimately the demand for growth capital. Originality/value This study contributes to the literature on the factors influencing the effectiveness of monetary policy. This study considers financial sector development and institutional quality as conduits to monetary policy effectiveness in developing African countries.

Financing Asia's Growth

Abstract: Developing Asia has exhibited rapid growth while saddled with relatively backward financial systems. One might conclude that the coexistence of sustained rapid growth and financial underdevelopment in developing Asia implies that an efficient financial sector is not indispensable for economic development. A more considered view would be that developing Asia grew rapidly despite, not because of, financial underdevelopment. With a stronger and better financial system, it might have grown even faster or achieved the same level of growth with lower savings and investment (and hence a lower cost in terms of forgone consumption). Strengthening the region's financial sectors was made more difficult by the global financial crisis, which gave financial development a bad name. However, in developing Asia financial sector development refers less to the introduction of esoteric products than to the more basic task of building efficient banks and capital markets. There is clearly a positive relationship between financial development and growth up to a certain level of financial development. Although it is possible that the relationship turns insignificant or even negative beyond some threshold, developing Asia is well short of that possible turning point.