There are many reasons why deeper financial development—the increase in deposits and loans but also their accessibility and improved financial sector efficiency—is good for sustainable growth in sub-Saharan Africa. For one, it helps mobilize savings and to direct funds into productive uses, for example by providing the start-up capital for the next innovative enterprise. This in turn facilitates a more efficient allocation of resources and increases overall productivity.
Since the 2008 global financial crisis, the international community has made a great deal of progress in strengthening legal frameworks governing the financial sector, but a great deal more needs to be done to implement international standards and develop appropriate approaches to emerging challenges.
(Version in Français)
Canada’s housing market is sizzling hot and the Bank of Canada has a monetary policy dilemma: increase interest rates to cool the housing market would hurt borrowers and the economy; keep interest rates low adds fuel to the borrowing that led to the rise in housing prices and in household debt. What to do?
In recent years, citizens’ concerns about allegations of corruption in the public sector have become more visible and widespread. From São Paulo to Johannesburg, citizens have taken to the streets against graft. In countries like Chile, Guatemala, India, Iraq, Malaysia and Ukraine, they are sending a clear and loud message to their leaders: Address corruption!
Policymakers are paying attention too. Discussing corruption has long been a sensitive topic at inter-governmental organizations like the International Monetary Fund. But earlier this month at its Annual Meetings in Lima, Peru, the IMF hosted a refreshingly frank discussion on the subject. The panel session provided a stimulating debate on definitions of corruption, its direct and indirect consequences, and strategies for addressing it, including the role that individuals and institutions such as the IMF can play. This blog gives a flavor of the discussion.
A growing number of policymakers see financial inclusion—greater access to financial services throughout a country’s population—as a way to promote and make economic development work for society. More than 60 countries have adopted national financial inclusion targets and strategies. Opening bank accounts for all in India and encouraging mobile payments platforms in Peru are just two examples. Evidence for individuals and firms suggests that greater access to financial services indeed makes a difference in investment, food security, health outcomes, and other aspects of daily life. Our study looks at the benefits to the economy as a whole.
(Versions in عربي)
Since the global financial crisis, policymakers have sought to press the “reset” button to strengthen financial intermediation that is performed by conventional banks and non-bank financial institutions. The aim has been to address the fault lines that helped trigger one of the most devastating financial crises in a century, and to enable a more inclusive, stable financial system that promotes stability as well as economic development and growth.
Islamic finance offers several features that are consistent with these objectives. Islamic finance refers to financial services that conform with Islamic jurisprudence, or Shari’ah, which bans interest, speculation, gambling and short-sales; requires fair treatment; and institutes sanctity of contracts. And these principles hold the promise of supporting financial stability, since a key tenet of Islamic finance is that lenders should share in both the risks and rewards of the projects and loans they finance.
(version in Español)
Economists are paying increasing attention to the link between financial inclusion—greater availability of and access to financial services—and economic development. In a new paper, we take a closer look at exactly how financial inclusion impacts a country’s economy and what policies are most effective in promoting it.
The new framework developed in this paper allows us to identify barriers to financial inclusion and see how lifting these barriers might affect a country’s output and level of inequality. Because the more you know about what stands in the way of financial inclusion, the better you can be at designing policies that help foster it.
Banks are struggling to overhaul the way they do business given new realities and new regulations adopted in the aftermath of the global financial crisis. While banks are generally stronger—they have more capital—they are less profitable, as measured by the return on equity. There are a number of reasons behind this, including: anemic net income at banks, particularly in the euro area; higher levels of equity; and banks taking fewer risks.
If they cannot change their business models, there is a risk that banks will not be able to provide enough credit to help the economy grow and recover.