Economy in developing countries grow slowly, is it they don't have well developed financial markets?
Answer:
there is no way to answer that question. each country is different and it may be financial, it may be lack of technology, it may be civil conflict, it may be low productivity, it may be corruption, it may ... there are a million reason it could be and it really is a combination of many of the reasons. You must look at a particular country
Its not the exact reason. Lots and lots of reasons for the slow grow like economy distribution, politics, policies, etc.
Since there is slow in grow they are so called as developing countries.
Poorly functioning financial markets are certainly a big part of it. Banks are probably the worst. A typical bank in a poor country is owned by the government. The bank collects the savings from many small depositors . It then uses this money to buy government bonds and thus help to finance a huge government deficit, to make loans to loss making state-owned enterprises so that they can pay their workers, or to friends, relatives, and cronies of the politicians running the country. In other words, a large share of the savings of individuals is not invested in anything productive that would help the country to grow. This country would probably be better of it did not have any banks at all.
I glad that you realized the importance of financial markets. I think we should examine why financial markets are less-developed in developing countries. if you have a look at the countries whose financial markets are developed you can easily see that all of those countires have already used the developing countries' resources in the past. I mean never ever a developing country can have a financial market as well-developed as England has for example. this is the rule. whatever you say, all of them rule the world and decide who will develop. this is the case today I think.
to break this habit a country needs radical changes in the whole structure of itself.
well some grow slowly and some grow fast, it all depends. If the government encourages investment and the building of infastructure and schools, then a developing nation can grow many times as fast as the US. If a country has a corrupt government (like Cameroon) and schools are terrible, and the police steal from everyone, then it will grow slowly or not at all.
It all depends really, financial markets don't usually have much to do with it. Banks are important but they are different than financial markets.
That's part of the reason - access to debt for small businesses is very important.
Additionally, in most developed countries there are strong property rights laws.you can use owned property as an underlying asset to secure debt. This is not possible in nations with weak property laws.
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