Financial systems
Name two of the four participants in the financial system.
- borrower
- lender
- regulator
- financial intermediary
True or false? Financial development increases long-run growth except at very low levels of financial development.
False
True or false? The countries that lag the most on financial inclusion tend to lag other countries in their banking supervisory capacity.
True
What do we mean by information asymmetry?
Not all parties involved in a transaction have access to all information needed for their decision-making.
True or false? Fintech can provide financial services to individuals who are physically distant from a bank branch.
True
What does being "unbanked" refer to?
Not having an account at a financial institution.
What is the main characteristic of SMEs that makes it difficult for them to access finance?
Information opacity
True or false? The objective of financial inclusion is universal access to credit for firms and accounts for households.
False
What is debt?
An obligation that requires the payment of principal and / or interest at some point(s) in the future
Name two fintech products.
- mobile banking
- marketplace lending
- crowdfunding
- cryptoassets and cryptocurrencies
- electronic trading platforms
- insurtech
- robo advisors
- savings products
Which policies bring a financial system closer to the financial possibility frontier?
- market-developing policies
- market-enabling policies
- market-stabilizing policies
- market-disrupting policies
- market-enabling policies
Which are the four dimensions of financial development?
1) financial depth
2) financial efficiency
3) financial inclusion
4) financial independence
5) financial stability
1) financial depth
2) financial efficiency
3) financial inclusion
5) financial stability
What tends to be the effects of microfinance institutions on the typical borrower?
Limited but positive
What is equity?
The value of the interest of an owner or partial owner in an asset
What is consumer protection?
Consumers understand the financial products they are using and are not taken advantage of by financial companies.
Which financial system is more beneficial to the macroeconomy? A bank-based system or a market-based system?
There is no agreement among policymakers or empirical evidence that either system is more beneficial.
What is the most used measure of financial depth?
Private credit
Why do credit registries and credit bureaus increase financial inclusion?
They allow banks to have better information about potential borrowers.
What is collateral?
An asset that a borrower pledges as security for a loan. It reduces a lender's risk of financial losses.
How can fintech help increase financial inclusion?
- lessen information asymmetry
- lower transaction costs
- efficient matching of borrowers and lenders
- lower barriers to entry
- increased network effects
Name two financial system functions.
- transferring resources
- pooling resources
- price discovery
- clearing and settling payments
- managing risks
What is financial development?
The process of improving the efficiency, depth, accessibility, and stability of an economy’s financial system.
What is financial inclusion?
Individuals and businesses have access to useful and affordable financial products and services that meet their needs—transactions, payments, savings, credit, and insurance—delivered in a responsible and sustainable way.
What is a credit guarantee scheme?
Usually a standalone entity with a mandate to encourage private sector lending to a specific segment of borrowers by providing partial guarantees on loans that promise to refund a private lender partially when a borrower from that specific segment defaults on their obligations.
What is a regulatory sandbox?
A controlled environment for fintech activities to take place. Activities are released and a fintech firm moves or graduates from a sandbox when purpose is achieved.