Wednesday, February 08, 2017 2:41 PM / PwC
A ‘fit for purpose’ financial system is essential in promoting inclusive and sustainable growth within emerging markets. How do leading markets rate against fit for purpose targets? How can policymakers, regulators and financial services organisations actively shape a fit for purpose financial system?
Financial Systems Matter
Growth in emerging markets continues to outstrip developed counterparts and hundreds of millions of people have been lifted out of poverty (see Figure 1). Yet, emerging market economies remain fragile in areas ranging from their susceptibility to commodity price movements to their limited resilience against natural catastrophes.
Restricted access to finance is holding back investment in both business expansion and infrastructure; and income inequality is significantly higher than developed counterparts (see Figure 2).
Financial system development is critical in tackling poverty and sustaining economic growth over the long-term. Drawing on the research, analysis and experience of our experts from around the world, this paper seeks to define the end goal of a fit for purpose financial system and set targets against which current state and future progress can be gauged in seven leading emerging markets (see Figure 3). A fit for purpose financial system fosters inclusion, investment, access to credit and support for people when they retire, while promoting efficiency and protecting against systemic risks.
Rather than being scientific, the targets within this framework are a reasonable assessment based on practical experience of what supports inclusive and sustainable growth in different markets.
Our fit for purpose framework aims to help finance ministries and regulators actively shape financial system development by identifying gaps, defining priorities and learning from the experience of counterparts in other markets. It can also help to identify commercial opportunities for both domestic and international groups, along with FinTech innovators looking to bridge gaps and accelerate development.
About PwC Project Blue
PwC Project Blue explores the major trends that are transforming the global economy and competitive landscape for financial services (FS) organisations worldwide. It also sets out the implications of these trends for public policy and regulation, and how governments and regulators can forge an efficient, resilient and inclusive financial system.