Financial Sector Development
A dynamic, efficient, and diversified financial sector is one of the key factors of sustainable economic development. By fulfilling financial intermediary functions, a financial sector helps direct domestic and foreign savings into investments, which in turn stimulate economic growth.
Conversely, finance and banking crises, especially in the transition countries of Eastern Europe, show the negative consequences that can arise through inadequate regulation and oversight.
Access to Credit
The financial sector is also essential for other areas of the economy. Small- and medium-sized enterprises generally have no or little access to urgently needed credit. Their growth opportunities are thus drastically reduced, which blocks the creation of a healthy economic culture.
The development of an organized capital market, one capable of handling stocks, loans, and derivatives, for example, is still in its early stages in many countries, entailing additional risk – for the stability of the entire economy as well.
Diversification and Regulation
Berlin Economics identifies such weak spots in the financial system development in transitioning countries and works out specific suggestions to solve them. These can include the development of stable institutional framework conditions, the establishment of independent financial markets, and oversight.
Another area of our work is increasing the economic potential of state development banks and their institutional design.
In the area of capital markets, we concern ourselves primarily with the development of local bond markets and futures exchanges, which represent a path towards diversification of a financial sector away from previously dominant banking institutions.
The consulting measures we take in the financial sector are closely tied to the area of macroeconomic stabilization – macroeconomic problems often have direct negative consequences on the financial sector.