FINANCIAL SERVICES
Without financial services and markets, development simply cannot be achieved. We examine new approaches and what works where and why By Angus Downie, Senior Economist, OPEC Fund MONEY MAKES THE WORLD GO ROUND
A mong the many challenges that low- and middle-income countries (LMICs) face, financial development and stability are two of the most pressing. Without financial services and markets, development and progress in reducing poverty simply cannot be achieved. It’s hard to imagine an economy without a banking system in place; banks perform a unique service in transforming and managing risk by taking in short-term deposits and recycling these funds into long- term loans.
Alongside financial services and markets, financial depth is key to mitigating shocks like the adverse impact of abrupt halts to capital flows during the COVID-19 pandemic. Transitioning to deeper financial markets by harnessing financial innovations while maintaining financial
is about overcoming some of the most persistent barriers to development: high transaction costs, limited physical financial infrastructure, information asymmetry, income volatility and weak state capacity. In this article, we look at how innovations in mobile money, digital identification, real-time payments, alternative data credit, insurance technology (insurtech), digital public infrastructure (DPI) and new capital market tools are delivering transformative opportunities for households, firms and governments.
stability is a key policy question which many LMIC policymakers are focusing on.
Financial innovation is reshaping the economic landscape across LMICs. It is not simply about new technology; it
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