The Financial Systems of Financially Less Developed Asian Economies: Key Features and Reform Priorities

28 Pages Posted: 23 Dec 2015

See all articles by Aaron Batten

Aaron Batten

Asian Development Bank - Economic Research

Poullang Doung

Asian Development Bank - Economic Research

Enerelt Enkhbold

Independent

Gemma Bolotaulo Estrada

Asian Development Bank - Economic Research

Jan Hansen

Asian Development Bank

George Luarsabishvili

Asian Development Bank

Md. Golam Mortaza

Independent

Donghyun Park

Asian Development Bank - Economic Research

Date Written: September 2015

Abstract

Developing Asia’s financial depth as a whole compares favorably with other parts of the developing world, but there are wide variations across subregions and economies. This paper examines the key features and reform priorities of the financial systems in Bangladesh, Cambodia, Georgia, Mongolia, and Papua New Guinea. All are low-income and lower-middle-income economies that have relatively underdeveloped systems heavily dominated by banks and with low levels of access, especially for the poor. The urgent priority for bank-dominated economies is creating a more competitive environment that mobilizes domestic savings, lowers the cost of capital, improves access, and channels credit to the most productive sectors. Reforming state-owned or state-linked banks can also yield sizable efficiency gains. A common need in all five is good governance in financial institutions and markets. Financial regulators in these countries face a difficult trade-off between promoting economic growth and safeguarding financial stability.

Keywords: financial development, financial system, low-income economies, lower-middle-income economies

JEL Classification: G20, G28

Suggested Citation

Batten, Aaron and Doung, Poullang and Enkhbold, Enerelt and Estrada, Gemma Bolotaulo and Hansen, Jan and Luarsabishvili, George and Mortaza, Md. Golam and Park, Donghyun, The Financial Systems of Financially Less Developed Asian Economies: Key Features and Reform Priorities (September 2015). Asian Development Bank Economics Working Paper Series No. 450, Available at SSRN: https://ssrn.com/abstract=2707524 or http://dx.doi.org/10.2139/ssrn.2707524

Aaron Batten

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Poullang Doung

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Enerelt Enkhbold

Independent ( email )

Gemma Bolotaulo Estrada

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Jan Hansen

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

George Luarsabishvili

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Md. Golam Mortaza

Independent ( email )

Donghyun Park (Contact Author)

Asian Development Bank - Economic Research ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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