Summary

Low-income countries cannot mobilize as much savings from households that are often constrained in their consumption. Nor are low-income countries well-enough integrated into global finance to import large amounts of foreign savings. In contrast, financial inclusion in high-income countries approaches 90 to 100 percent, and high-income countries focus mainly on fostering financial stability.

To broaden the availability and use of financial tools for managing risk, public policy should focus on overcoming obstacles related to financial infrastructure, the small scale of the market, and adoption of innovative financial instruments. The state should promote competition among different types of financial institutions and support delivery of financial tools within efficient consumer protection frameworks.

To enhance management of systemic risk in the financial system, public policy should focus on establishing strong macro prudential frameworks, including crisis preparedness and resolution measures that are equipped with adequate macroprudential tools, while fostering the safety and efficiency of financial market infrastructure.

I was happy to read a chapter that was devoted to the financial system. However, my initial excitement soon subsided as the policy recommendations coming out of the chapter on financial systems predominantly speak about the financial crisis and macro-prudential regulation, foregoing a systematic discussion of how financial services can stimulate poor households to take decisions that reduce risk-exposure and create equal opportunities in risk-taking. I personally liked the descriptive explanation about how the usage of variety of financial instruments can help people with risk management.

I am from Kazakhstan and now I clearly understand the difference of people’s financial behavior in developing countries with comparison to developed world. As it was said in the chapter, bank loans are the most common and available tool for households and corporations in developing countries like Kazakhstan. However, the percentage of bad loans is growing nowadays. The devaluation of national currency, almost 20%, (Tenge) in 2014 and expected devaluation in 2015 will make the bad-loan problem worse. Unfortunately, government initiatives had only small impact to help the financial sector out of crisis. This is the one of the most common problems that we are experiencing now in financial sector. The regulations relating to the risk control, government policies that should be used, the best and worse world practices was very valuable knowledge that I receive reading this report.