Assessing Financial Development in Target Markets - Essay Example

Planning for Expansion: Assessing Financial Development in target markets Group Members s: KAIJIAN SHEN, XUEWEI ZHANG Planning for Expansion: Assessing Financial Development in target markets Introduction Comparative banking is the system that analyses and studies various banks all over the world and relates them to the targeted banking system that is in the UK. As the team plans to expand the business it requires a set of countries that will be analyzed along with their banking systems in order for them to set up the business. Each of the eight countries will be required to be measured in terms of the development of their banking by using indicators that will measure the measures of depth, access, efficiency and stability. This will also have the financial markets of each of the countries including their GDP per capita. Each country will be analyzed within a period of the last five years including the present year, 2014. All the data and information of each of the eight countries will be compared to that of the UK. With the High Income Country Definition, Australia is the best country from the organization of OECD (Organization of Economic Co-operation and Development) to be considered because its GNP per capita was above 9.266 USD and one of the top countries by the year 2000. The non OECD country to be analyzed is Croatia because it is the best growing economy. Countries from Latin America, South Asia, Sub Sahara Africa, Middle East and North Africa, East Asia and Pacific and Europe and Central Asia to be analyzed are Argentina, Afghanistan, Kenya, Morocco, Indonesia and Turkey respectively. In order to assess the financial development of the eight targeted countries, there should be a comparative baking that will estimate the financial intermediation that will estimate the growth of each of the countries. This will also allow the assessment to determine the functions of the finance sector in promoting the growth of the countries. The banking performances of the eight countries will be well analyzed by use of indicators that will provide the required data on the countries. Banking is also important in analyzing the financial development of the countries because it leads to the growth of the eight countries. Gurley and Shaw tried to explain on the importance of financial intermediation since banks are able to finance entrepreneurs by using the financial institutions. Due to this, the development of the countries leads to growth through financial support from the financial institutions like banks to the entrepreneurs. One of the major evidence is that a large number of industrial countries are the ones with the largest economy. The financial development is determined by the capital realized from the capital collection that leads to the efficiency of using the same capital (SMITH, WALTER & DELONG, 2012). The following are the indicators to be used in evaluating the banking and non banking performances on the countries. Measuring the banking sector development This will include measuring of the size and depths of the banking systems used in the countries. It will also have an in depth analysis on the access of the banking its efficiency and the ability to be able to enhance the analysis. There are conventional measures that will be used in measuring the banking sector. For one to assess the depth size and the development of a country, he must use the ratio of M2 and to the GDP of the same country. Another indicator will be getting the ratio of private credit to the GDP (PETERSON DRAKE & FABOZZI, 2012). The two indicators are not enough in measuring the size of the banking system in the countries. The other indicators are able to analyze how house holds and firms can be able to access the banking services in the countries. With the introduction of the number of days one can take to process a check or wire transfer transaction to go through, efficient results can be found. It is a new measure in determining the bank competitions, and identifies the degree of ownership of the banks. In order to determine the stability of the banks in the respective countries, there is a measure of probability that will analyze the default of the banks on the countries. In the legal infrastructure quality, there are indicators like creditor rights, framework of bankruptcy of the banks, the credit information, and the supervision and regulation of the banks. The accesses of a bank in the countries create a good relationship in the measure of size. In the financial depth and access, there is a relationship between the M2 and the GDP in regard to the number of deposits made per person. All the deposit data is always collected by the body of the regulatory agencies. In determining the bank efficiency dimension, the banking structure information is realized and it measures the bank’s competitiveness. This creates an operating cost that is related to the total assets. Indicators that will be used in analyzing the countries will be, Bank deposits/GDP- this indicator does not include all the credits given by the government, government agencies, and the enterprises that are public including the central bank itself. It is very important because it is related to the income level. It is used in determining the value of the deposits of the country to its economy. It is also used to measure the size of the people’s money in relation to the economy of the country. Bank assets/total financial assets - it is also used to measure the size. It clearly indicates the full size of a company in ratio to the capital made by the central bank. It measures the size of the country’s assets in relation to that of the central bank in the whole world. Private credit by deposit money banks/GDP – this is the measurement of the activities in the country for the bank sector. This is the analyzing the amount of credit given to the private sector in relation to the economy of the same country. The country that always has the highest value in the indicator is at the better position with its economy. Stock market turnover ratio - it is founder under the stock market of a country. It is used to measure the efficiency of the country’s market by analyzing the transactions share of the country. Since the year 1999, the World Bank was able to come up with a database that would analyze the financial development and structure of countries all over the world. The indicator measures the general size of the financial systems; banking system for size, structure and stability; capital markets and insurance; and the globalization finance of the countries. For the measure of the financial market development, Liquid liabilities to GDP, Financial system deposits to GDP and banking system to base money will be used as indicators to measure the financial system size (ARNOLD, 2012). Liquid liabilities to GDP It is used to identify the depth of the finance in a country in order to monitor the finance and growth of the country. It is determined by summing up all the currency and the demand along with the interest liabilities of the banks in the country. All this is divided by the GDP of the country. It is the best indicator to measure the intermediation among other banks in the country. Financial system deposits to GDP This is the ratio of all the savings, checks and the deposits by the banks or any financial institutions in the country. It is used to locate the stock of the resources being deposited by the country. Currency outside Banking System to Base Money The indicator is used in monetization of a country’s economy. It clearly indicates the share that is not mixed in the deposit form of the banks in the country. This is normally high in the low income countries while the upper middle countries have a median mark. United Kingdom Banking Sector and financial Markets developments GDP of United Kingdom The Gross Domestic Product for the country was at 2522.26 billion by the year 2013. It has an economy of that is 4. 07 percent of the world economy meaning thus has a better position. This is the national income of United Kingdom in regard to the economy. This also has the total expenses of the country with all the goods and services that were produced in the last five years. So far the economy of United Kingdom is far better than a number of other countries more those that are not members of the OECD (Organization of Economic Co-operation and Development). The GDP in the UK for the last years has been improving but it was constant in year 2012 to 2013. Generally its highest GDP recorded ever was 2857.08 Billion USD. The highest percentage growth rate recorded was 5 percent. Investing in the country will lead to success since it has the best GDP (WORLD BANK, 2013). Bank Deposits/GDP The information represents the Bank deposits over the GDP of UK for the last 5 years (2013-2009) It measures the amount of deposits made to the financial assets of the country in relation to the country’s economy. The amount of deposits made for the country has been increasing for the last five years. With the constant increase of the deposits proofs that the economy of the UK is well connects to deposits made by the citizens (WORLD BANK, 2013). Australia’s Banking Sector and financial Markets developments Gross Domestic Product of Australia The GDP of Australia was 1560.60 billion US Dollars by the year 2013. The GDP is lower than that of United Kingdom. It has an average of 348.54 USD since 1960 meaning that it has got a genuine economy income. The scale of the GDP for the last five years is improving and it has a linear increment of the GDP. Shocking enough is that the country attained its largest growth the last year (2013). This means that the country is investing a lot on the banking sector. Its national income is improving than the last previous years. The highest growth rate it has ever reached is at 4.5 percent. This is one of the best countries for Directors to invest in since there are signs of growth in the country (WORLD BANK, 2013). Bank Deposits/GDP of Australia The capital deposits to the GDP (economy) of the country are increasing. This is a good investment zone (WORLD BANK, 2013). Croatia’s Banking Sector and financial Markets developments Gross Domestic Product The GDP for the country was 57.54 Billion USD in last year. Its percentage to the world’s economy is around 0.09 percent. The country has an average of 35.91 USD Billion since 1990. Its high GDP has been 69.60 USD Billion in the year 2008. The country has a poor progress in the GDP drastically in the year 2011 and 2013. The country has also attained the highest growth rate of 2.10 percent. It is not a good place for the investment since its GDP is decreasing (WORLD BANK, 2013). Bank Deposits/GDP The deposits are not as constant as related to the economy. It is not advisable to invest in such zone (WORLD BANK, 2013). Argentina’s Banking Sector and financial Markets developments Gross Domestic Product The GDP of Argentina is high with a realistic figure of 611.76 Billion USD in last year. It has an average of 181.49 billion USD since the year 1962. It also attained a highest GDP last year. Just like the UK, it is a better place to invest a business since there are improvements in the country. The country has a shoot out in the year 2010 to 2012. There is fear of the country decreasing its rate of economy. It attained a highest growth rate of 5.1 percent. One can invest in such country but caution should be taken by not trusting the country’s economy because the rate of its GDP increase is depreciating (WORLD BANK, 2013). Bank Deposits/GDP The deposits to the economy of the country are not constant but they have decreased in the recent years. One can not invest in the country (WORLD BANK, 2013). Afghanistan’s Banking Sector and financial Markets developments Gross Domestic Product The GDP for the country was 20.27 Billion USD and it is a 0.03 percent of the entire world economy. The highest GDP attained ever was this last year 2013. It also has a record that is very low (0.54 Billion USD). It is never a good place to invest since it has a low growth rate. The country heavily depends on services, both retail and wholesale. It is not recommended for a large scale entrepreneur to venture into business in the country. Its GDP is also rising at a very high rate of depreciating mode. The rate was worst in the year 2013. For the last years the country attained a highest growth rate of 28.60 percent (WORLD BANK, 2013). Bank Deposits/GDP The deposits are flowing very well encouraging the investment in the country. Both the GDP and the Deposits: GDP connects very well (WORLD BANK, 2013). Kenya’s Banking Sector and financial Markets developments Gross Domestic Product By the end of the year 2013 the GDP of Kenya was 44.10 USD. Its GDP is about 0.07 percent in relation to the world economy. Its average on the GDP is 10.10 USD having quite a low value. The GDP of the country is improving for the last five years. In the year 2010 the improvement was small till the year 2012 that the graph rose drastically. For one to invest in the country, it’s a medium organization that can run very well. The good news is that the country’s economy is improving a lot from year 2012. It attained its highest GDP last year with growth rate percentage of 4 percent. This is not a recommended investment for large scale business. The country required small or middle class organizations to venture into business and progress along with the country since it is a growing middle class country (WORLD BANK, 2013). Bank Deposits/GDP The GDP is not constant but it is increasing while decreasing but with a stable increase in the following year. It is a young country developing with business (WORLD BANK, 2013). Morocco’s Banking Sector and financial Markets developments Gross Domestic Product The GDP for morocco last year was 104.37 Billion USD. It represents the world’s economy by 0.17 percent. It has an average of 29.60 Billion USD. Last year was its highest GDP attained ever with a tendency of decreasing its GDP. In the year 2011 its GDP decreased but it was worst in the year 2013. It is not easy to predict in search markets but caution should be taken. The economic growth of the country is not constant since it increases while decreasing. When starting a business such incidents are only for risk takers. One can start a business but it should not be the only one that is depended on. Losses can occur anytime and the economy of the country can decrease anytime (WORLD BANK, 2013). Bank Deposits/GDP The Deposits made to the financial institutions are improving for the last then years. Apart from the unstable GDP of the country, good business would have been conducted (WORLD BANK, 2013). Indonesia’s Banking Sector and financial Markets developments Gross Domestic Product The GDP for Indonesia was 868.35 Billion USD in last year. It has a percentage of 1.40 percentage of the world’s economy. It is an interesting country since it has a constant increase of the GDP for the last year. It had a decrease in last year with a highest GDP in the year 2012. That was an all time reach of the country’s economy. The highest growth rate recorded in the county is 3.82 percent. It’s a good area for investing business other than slight challenges facing the country that made the GDP to decrease. The country has also recorded a low record of 5.98 billon US Dollars (WORLD BANK, 2013). Bank Deposits/GDP There is a decrease thus not advisable for investors (WORLD BANK, 2013). Turkey’s Banking Sector and financial Markets developments Gross Domestic Product The GDP for Turkey was 820.21 Billion USD last year (2013). It has a 1.32 percent of the world’s economy. It has an average of 197.27 USD Billion since the year 1961. All time highest GDP was last year’s performance. The highest growth rate ever achieved was 6.69 percent. It has a trend of increasing its rate of the GDP since 2010 but also decreased as from 2012 to 2013 then rater regained its speed in the last results. It’s a good country for one to invest in since it has improved. In all the last years it has improve though with small figures (WORLD BANK, 2013). Bank Deposits/GDP At the beginning the deposits were less but they have increased hence business can be conducted but with caution (WORLD BANK, 2013). References ARNOLD, G. (2012). The Financial Times guide to the financial markets. Harlow, Pearson. CHAN-LAU, J. A., LIU, E. X., & SCHMITTMANN, J. M. (2012). Equity returns in the banking sector in the wake of the great recession and the European sovereign debt crisis. Washington, D. C., International Monetary Fund. http://bibpurl.oclc.org/web/24285/2012/wp12174.pdf. HAAN, J. D., OOSTERLOO, S., & SCHOENMAKER, D. (2012). Financial markets and institutions: a European perspective. HULL, J. (2012). Risk management and financial institutions. Hoboken, N.J., John Wiley & Sons. http://public.eblib.com/choice/publicfullrecord.aspx?p=882716. KING, R. G., & LEVINE, R. (1993). 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