Emerging Markets Still Deprived of Fit-for-purpose Financial Systems - PwC

The lack of an efficient and resilient financial system is still holding back inclusive and sustainable growth in emerging markets.

Policymakers, regulators and financial services organisations should more actively shape a financial system that is fit for purpose.

These were the findings of a new PwC report titled: “Geared up for growth: Shaping a fit for purpose financial system.”

For Nigeria, specifically, the report said: “This can’t be said about the other African country in PwC’s assessment. Not only has Nigeria by far the highest percentage of its population living in poverty, its financial system is also showing the least progress of all seven emerging markets. In five of the eight key areas, Nigeria’s financial system scores significantly below PwC’s fit-for-purpose targets, holding back inclusive and sustainable growth. However, the success of Nigeria’s auto-enrolment pension model is a bright spot.”

According to PRNigeria, in the paper, PwC set out what an efficient, resilient and inclusive financial system across eight key dimensions; and how leading emerging markets – Brazil, China, India, Indonesia, Mexico, Nigeria and South Africa – rate against its ‘fit for purpose’ targets. The assessment highlighted considerable room for further improvement in key areas, ranging from financial inclusion to pensions and protection.

While growth in emerging markets continued to outstrip developed counterparts and hundreds of millions of people have been lifted out of poverty, developing a well-functioning financial system remains critical to tackling poverty and sustaining economic growth over the long term, the report added.

Emerging markets need a robust and broad-based financial infrastructure to channel funds efficiently, draw people into the market economy and enable them to share in the benefits.

In the PwC research, all seven emerging markets performed well on private sector lending, which was known to drive growth. With the exception of Brazil, the banking spread (difference between bank lending and deposit rates) in the emerging markets is low, improving borrowers’ ability to service debt, the report stated.