Finance for development - Essay Example

Laws and economic policies differ in different countries; hence the financial sector development and economic growth also differ in different countries. Reforms of financial sector in BRIC or emerging countries started after the 2008/2009 global financial crisis. Ranking of financial development can be measured using Financial Development Index. This index is determined by various factors affecting the financial sector such as policies, financial intermediation, and financial access. The figure below shows how such factors interrelate to determine financial development index of a given economy or country.

Due to the economic potential of BRIC economies, financial institutions have increased significantly in such countries. The figure below shows the number of banks that entered advanced economies and emerging economies between 1995 and 2009. The figure above shows that there were more banks entering emerging markets between 1995 and 2009 than banks entering advanced economies. Increased financial market participants and factors affecting financial sector development in emerging countries have caused general increase in financial index performance of BRIC economies as shown below.

From the graph, it is clear that china’s financial sector development is greater than other BRIC economies, followed by Brazil, India and Russia consecutively. However, China’s financial development index dropped in 2012. This may be attributed to the decrease in banking financial services scores. The country also performed poorly in terms of financial sector liberalization, bond market development and insurance development in 2012. On the other hand, Russia’s financial development index improved in 2012 due to improvements in financial markets pillar and equity development sub-pillar.

In terms of economic growth, China remains the best performing due to its increase in economic growth rate from 2009 to 2012 followed by India,