Financial Outlook of the OIC Member Countries 2017
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A well established, stable and functioning stock market will ease accumulation and attraction
of long-term capital for a sustainable economic growth and development. The stock market has
a key role in financial markets and smooth functioning stock market is accepted as substantial
condition for financial sector evolution. This is also considered a pre-requisite to the
sustainable economic growth and development that makes the national economy to enhance
more foreign investors. A well-functioning stock market plays an important role in
encouraging liquidity, mobilizing and assembling savings, producing information for
prospective investments and capital allocation. Therefore, it is accepted that the existence of
active and stable stock market can stimulate the rate of economic growth30.
As a result, as also highlighted in the literature, macroeconomic and institutional factors play
an important role in stock market development. The macroeconomic factors such as the real
income, developments in the banking sector, interest rate, private capital flows, inflation and
exchange rates have effects on stock market development. As for the institutional factors, legal
environment, regulations, legal protection of investors, corporate governance, financial
liberalization and trade openness etc. in an economy can affect the development of the stock
market. As the stock markets consist of various financial instruments such as securities, public
and corporate bonds, future and option contracts, a stable and well-functioning stock market
helps attracting foreign investors. The findings and analysis of these two indicators, stock
market capitalization and stock market total value traded, show that stock markets in the OIC
Member States have a potential for further expansion to enhance and enlarge the development
of the markets to meet the financing need of corporations.
In terms of financial depth, the OIC countries have shown significant fluctuations among
various income groups over the selected period. While the high income group and upper-
middle income group countries have performed better than the other groups as well as from
the world averages, the averages of the indicator for other groups have been recorded worse
than world averages. Over the years, for all indicators there has been a trend of improvement
which is a good sign of financial development in the OIC member countries.
30 Azam, M., Haseeb, M., Samsi, A.B., Raji, J., “Stock Market Development and Economic Growth: Evidences from Asia-4
Countries”, International Journal of Economics and Financial Issues, Vol 6, Issue 3, 2016