Finance: Research, Policy and Anecdotes

Financial inclusion has been at the top of the agenda for financial development researchers and policy makers over the past decade. There has been enormous progress in data collection, financial innovation and policy formulation in this area. Another important area of finance, however, has been long-term finance, the provision of long-term savings and credit services for households, enterprises and governments. It is a challenge in advanced and developing countries alike. In Europe, the objective of creating a capital market union is partly driven by the objective of more long-term financing. In developing countries, there is a remarkable long-term finance gap, with underdeveloped capital markets and contractual savings institutions and banks focusing mostly on short-term transactions. 

But how much long-term finance is there actually? And what are the bottlenecks to increasing the provision of long-term finance?  I have worked on this challenge across two continents - in Latin America for the Inter-American Development Bank, developing a scoreboard and undertaking country diagnostics in Colombia and Paraguay (unfortunately, only the former has been published) and in Africa for a consortium of donors, helping to develop a long-term finance scoreboard.

This long-term finance scoreboard was finally launched today, providing an array of data on long-term finance in Africa. Some of the data were compiled from readily available cross-country databases, other through survey work, undertaken with the invaluable help of the African Development Bank’s Statistics Department.  The result is a website which allows users to compare different countries or focus on one specific country. It presents indicators across different dimensions - the depth of long-term financial markets, access to these markets, different sources of funding and policies and institutions supporting long-term finance. Critically, it also provides the results of a benchmarking exercise, which compares countries’ indicators of long-term finance with a synthetic benchmark that takes into account the socio-economic characteristics of each country.

One critical factor for the financial inclusion revolution was the availability of data, which allowed benchmarking countries and progress over time and the success of policy reforms.  We hope that this long-term finance scoreboard will be the first step in a similar revolution - it starts with measuring, it continues with policy reform and it (hopefully) ends with progress.

Overview