Financial Access and Stability : A Road Map for the Middle East and North Africa
This new World Bank report lays out recommendations for reforming the financial sector in the region. It argues that while this sector has been resilient to the global financial crisis and the subsequent political shocks of the Arab spring, it has failed to provide broad, sound and equitable access to finance.
With recent turmoil in the region and deep-seated frustration among the large youth population, this failure might have been a factor in these outcomes. The report notes that lack of access to finance is due to weaknesses in financial infrastructure, insufficient competition in the banking sector. It recognizes that the structure of MENA’s banking systems is evolving in the right direction, but levels of competition are still weak.
It goes on to describe MENA’s financial sectors as dominated by large, well-capitalized banks, but largely undiversified and uncompetitive. With very high loan concentration ratios, banks focus on providing loans to large and well-connected enterprises and industrial groups. Add to that, essential non-banking financial institutions such as insurance companies, mutual and pension funds, leasing, and factoring, are under developed with few exceptions. The report recommends that efforts to develop a new growth agenda for the region must include a significant component of financial sector reforms. It points out the importance of implementing a comprehensive and integrated agenda for both improving access and preserving stability.