Financial Outlook of the OIC Member Countries 2017
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The world average just hovers around 50 percent over the years from 2012 to 2015. As for the
OIC countries, the ratios for all groups are fluctuating around 40 percent during the same
period. As this ratio increases across the countries and country groups, it should be
interpreted that value of outstanding shares of comparatively smaller companies are
increasing in the market and meaning access to the market is affected positively. Considering
the fact that the data is available only for those countries that their markets have maturity as
well as the undeveloped nature of stock exchanges in the OIC countries, it is understandable to
have smaller shares in OIC states compared to the world averages.
As a result, in terms of financial efficiency the OIC averages for the selected indicators have
been found around the world averages over the selected years. As mentioned earlier, there is a
close correlation between economic development, income level and financial access.
Therefore, the findings of the indicators under this characteristic clearly signs that as the
economies develop financial access increases in parallel. The high and upper middle income
groups of OIC countries have performed much better than the other groups. In this regard, the
policies towards promoting financial access should focus on the low income group countries as
well as on the groups of financially deprived segments of other group countries.
2.3 FINANCIAL EFFICIENCY
The structure and operation of the financial system have undergone remarkable changes in the
past couple of decades due to the significant improvements in technology, product innovation,
and integration in the global financial system, competition in financial services, and policy,
regulatory and trade reforms. These developments have led to a dynamic and sophisticated
global financial markets and fostered economic growth; at the same time, however, specific
problems and issues have plagued the financial system. 32 In this regard, among other
characteristics, the efficiency of the financial intermediaries and markets have emerged as an
important tool to understand financial system.
As for intermediaries, efficiency is primarily constructed to measure the cost of intermediating
credit. Efficiency measures for institutions include indicators such as overhead costs to total
assets, net interest margin, lending-deposits spread, non-interest income to total income, and
cost to income ratio, return on assets and return on equity etc. Regarding financial markets,
efficiency measures focus less on directly measuring the cost of transactions and more on
measuring transactions. A basic measure of efficiency in the stock market is the turnover ratio.
The logic of using this variable is that the higher the turnover (the more liquidity), the more
efficient the market33 .
In this study the following measures for institutions and markets are used to understand and
compare the efficiency of the financial system among the countries and country groups.
Bank lending deposit spread refers to the difference between lending rate and deposit rate.
Lending rate is the rate charged by banks on loans to the private sector and deposit interest
rate is the rate offered by commercial banks on three-month deposits.
32 Policy Framework for Effective and Efficient Financial Regulation, OECD 2010
33 Cihak, M., Demirgüç-Kunt, A. “Benchmarking Financial Systems Around The World 2012, World Bank”