Financial sector development in the Middle East and North Africa

Financial sector development in the Middle East and North Africa

Published Jan 2004

Authors

S. Creane, R. Goyal, A.M. Mobarak, R. Sab

Publisher

Focus themes

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Financial development varies across the MENA region

Based on data collected on a wide range of financial sector indicators, this paper assesses financial sector development in the Middle East and North Africa (MENA). In order to do so new indices of financial development are constructed, encompassing six themes: development of the monetary sector and monetary policy, banking sector development, non-bank financial development, regulation and supervision, financial openness, and institutional quality.

Key findings of the study include:

  • there is substantial variation in the degree of financial development across the MENA region
  • as a group, MENA countries appear to perform relatively well on the regulation and supervision theme as well as on financial openness
  • MENA region is found to compare favorably with a few other regions, but it ranks far behind the industrialized countries and East Asia
  • more needs to be done across the region to reinforce the institutional environment and promote non bank financial sector development

The study concludes with some recommendations:

  • MENA policy makers need to implement prudent macroeconomic policies, along with structural reforms
  • macrostabilizing measures, in turn, should be complemented by creating the enabling structural environment for financial development, including reduced government intervention in credit allocation and strengthened institutional quality
  • efforts should be concentrated where financial development appears to have been the weakest

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