Three Main Dimensions of Financial Institutions Essay - 1

Three Main Dimensions of Financial Institutions - Essay Example Even in 2011, we find that the markets continue to struggle with the question of economic reforms, in association with other basic questions, like how to develop sustained and enduring financial growth while also elevating fiscal responsibility. The development of financial systems is affected by various factors, which are, financial institutions risk management policies, ‘indebtedness’ of both individuals and sovereign elements, the banking system, regulatory delinquencies, and exports via the ‘exchange rate policy.’ Some modern researchers claim that the chief cause of the current economic recession is mainly owing to certain socio-economic queries, pertinent to a much broader context, like the enduring presence of income inequality, through the investments made in the line of education and human capital (Rajan, 2010). The World Economic Forum has defined financial development â€Å"as the factors, policies, and institutions that lead to effective financial intermediation and markets, as well as deep and broad access to capital and financial services† (The Financial Development Report 2010, 2010, 4). Financial development is the trajectory through which the states can work towards elevating the efficacies of their economic system (markets and resources), the banking sector, the monitoring of various investment projects, and overall strengthen the position of the financial system. Thus, one can view financial development as a major aspect of affecting a country’s economic growth and welfare (Huang, 2006, 2). Strong factual evidence uphold the notion that finance is at the base of a state’s developmental process.