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.

The microfinance promise in financial inclusion: evidence from Pacific region

Abstract: Finance is one of the most effective tools not only for growth but also poverty reduction. Increased access to adequate and timely finance improves the welfare status of both producers and consumers. In addition to the relationship between financial sector development and growth, an inclusive financial sector has both indirect and direct impact on poverty alleviation, firstly because of the linkages between financial sector development and more equitable growth and secondly, because of the impact of broadening access to finance – especially to the poor, rural communities and women. Due to failure of formal financial institutions to fully align their services and products to low income and disadvantage groups of people, the microcredit or more broadly microfinance approach was innovated and institutionalized in the Pacific region rural credit system. It was aimed at overcoming the failure of the formal credit system and hence poverty reduction through income and employment generation. As a result microfinance institution has made inroads into the rural areas to improve and extend timely, easy and adequate access to financial services. The present paper examines the nature and the type of the new institutions that imaged in the Pacific region financial system hence making it more responsive and inclusive. The study finds that the micro banking model and Microfinance Institution models are the two dominating microfinance approaches in the post-financial reform in pacific region. The study also find that the microfinance sector in the Pacific region is growing with the government assisted National Microfinance Unit and Cooperative on the one hand and on the other hand, the Non-government organizations are transforming themselves into financial institutions and entering the business of microfinance.

Microcredit in Cambodia: Why is There So Much Support for a Failed Poverty Reduction Model? (preprint)

Abstract: Cambodia’s microcredit sector – the world’s largest (in per capita terms) and most profitable – has created a raft of negative economic and social phenomena that are increasingly undermining the functioning of the economy and cohesiveness of society. Three especially damaging trajectories associated with Cambodia’s microcredit sector are: (1) a ‘no-growth’ low productivity economic structure built on an ‘extractivist’ logic; (2) reckless lending strategies that have created dangerous levels of over-indebtedness in the poorest communities; and (3) the widespread use of land titles as collateral which has inevitably led to the growing loss of land by the poor through coerced informal sales. The COVID-19 pandemic may require the government to bail-out struggling microcredit institutions in Cambodia. A logical, pro-poor way forward would be to make such bail-outs conditional upon an agreed conversion of existing privately/foreign owned microcredit institutions into local community-owned and controlled financial ones. Debt-for-equity swaps would be one way to achieve this goal.

Effect of financial development on financial innovation in nigeria

Abstract: Financial sector is crucial for the development of a well-functioning market as it facilitate capital inflows, mobilize savings for productive investment and facilitates the conduct and growth of an economy in the world. Despite the importance of financial sector development in Nigeria, financial institution operating in financial market were confronted with drastic changes where by old ways of doing business were no longer profitable and sustainable and unable to acquire fund with their traditional financial instruments. Against this background, the study investigated the effect of financial sector development on financial innovation in Nigeria. The study employed secondary data obtained from central bank of Nigeria statistical bulletin and World Bank database between 2011 and 2017. The data obtained was subjected to system General Method of Analysis (GMM) estimator. The study concluded that upward trend of process innovation significantly influence the in depth of finance. The study recommends policy makers should design policies which will promote and enhance the relationship between financial innovation and financial development in other to increase the supply and provision of financial service.

Macro-Financial Link and Monetary Policy Management: The Case of Nepal

Abstract: Macro-financial link is closely intertwined with monetary policy management since it contributes to its fine-tuning and optimization. However, it is felt that increasing financial development and globalization have significantly changed the nature of this link. The paper aims to obtain insight on how these changes have impacted on the effectiveness of monetary policy management, by undergoing a case study of Nepal. The empirical results over a thirty-five year period (FY 1975 to FY 2009), suggest that the elasticity of the real interest is economically and statistically insignificant in relation to the output gap. Examining this result further by taking into account the contribution of direct financing, domestic financial development and external integration, finds that while the elasticity of real interest rate remains economically insignificant, its contribution is now statistically significant; however the direction of effect is opposite to that of the theoretically predicted sign. Surprisingly, the interaction contribution of both domestic financial sector development along with external integration, suggests that their contribution significantly enhances the effectiveness of monetary policy. The result implies that the residual of the regression is driving the results and suggests revision of the traditional monetary policy management in Nepal. The paper ends by highlighting that there should be a regular process to review the macro-financial link to ensure optimal fine-tuning of monetary policy.

Russian Federation capital markets : analysis and diagnosis of the financial regulatory and institutional policies required for becoming an international financial center

Abstract: There should be two principal goals in developing Russia as a financial center: a) attracting more of the financial business of large enterprises and of the wealthy, which now largely goes abroad to other international financial centers; and b) serving the needs of small and medium enterprises and small investors in Russia, needs that are now largely unmet. Advancing the second goal would help to advance the first goal by broadening the diversity in securities market funding as well as firm issuance possibilities. Financial centers exhibit benefits of scale. Better serving the need of Small and Medium Enterprise (SMEs) and small investors would increase both the supply of securities and the demand for securities in Moscow. An increased volume and liquidity of transactions will make Moscow a more competitive financial center, thereby attracting more of the business of large enterprises and the wealthy that currently goes elsewhere. Finally, the above actions will constitute the necessary conditions to have the key elements for developing a significant financial center. They may not be all sufficient measures however. Non-financial market factors such as a suitable macroeconomic environment, efficient city transport facilities, reasonable housing availability, education facilities for foreigners, and a streamlined and transparent business regulatory environment all constitute key ancillary aspects supporting the growth and broader operating environment of international financial centers.