COMCEC Financial Outlook 2018
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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 that is a good
sign of financial development in the OIC member countries.
1.2 Financial Access
Financial access (inclusion) can briefly be defined as the use of financial services by individuals
and firms. Financial access helps peoples and corporations to get the benefit of new business
opportunities, invest more in education, save for the future, and insure against various risks, etc.
This topic has been of growing interest all over the world and considered as one of the main
areas particularly in emerging market and developing economies for the further development
of financial markets. The benefits of the financial intermediation and markets are believed not
being used by all sectors and population that resulted in adverse effects on inclusive economic
growth, poverty alleviation, income distribution and efficient allocation of resources, etc.
Cihak, Demirgüç-Kunt14 highlights the importance of financial access of the different groups of
economic units as follows: “A well-functioning financial system allocates capital based on the
expected quality of the project and entrepreneur, not on the accumulated wealth and social
connections of the entrepreneur”.
A well-functioning financial system that overcomes market frictions will more effectively
provide financial services to a wide range of firms and households, not just large companies and
rich individuals. Thus, to develop informative proxies of financial development, it is useful to
move beyond the financial depth and also include indicators of financial access—the degree to
which the public can access financial services.’
A typical proxy variable of access to financial institutions is the number of bank accounts per
1,000 adults. Other variables in this category include the number of bank branches per 100,000
adults (commercial banks), the percentage of firms with a line of credit. When using these
proxies, the following points should be kept in mind on their weaknesses:
The number of bank branches is becoming increasingly misleading with the move towards
branchless banking. The number of bank accounts does not suffer from the same issue, but it has
its own limitations (in particular, it focuses on banks only, and does not correct for the fact that
some bank clients have numerous accounts) 15.
Bank account per 1,000 adults is one of the leading indicators of access to financial services
that refers to ‘the number of depositors with commercial banks per 1,000 adults’. As a result of
the underdeveloped nature of economic and financial markets as well as low level of financial
14 Cihak, M., Demirgüç-Kunt, A. “Benchmarking Financial Systems Around The World 2012, World Bank”, p. 12
15 Ibid.