Within the international development stream of the MPA program at the LSE, we are only allowed to have one option unit during the first year. After a quick browsing through the approved option list, I immediately decided upon a course named “Regulations of Financial Markets”. While fellow students were struggling to decide on a course, I was at ease with my choice.
Two years in the Peace Corps piqued my interest on the question of how to improve access to financial instruments in the developing world and strengthening its financial systems. It all seem a bit vague, and I didn’t know how one tackles a massive problem as such. But I do know that finding a perfect middle ground between my finance and development background is goal.
Tonight, I did the introductory reading for Regulations of Financial Markets. The particular text I was reading is The Development and Regulation of Non-Banking Financial Institutions by Jeffrey Carmichael and Michael Pomerleano. At the end of the first chapter where it had given a brief overview of the financial system and various financial institutions, it discussed why Non-Bank Financial Institutions (NBFIs) are important; the chapter concluded:
A well-developed and properly regulated NBFI sector is thus and important component of a broad, balanced, efficient financial system that spreads risks and provides a sound base for economic growth and prosperity. However, in developing countries that lack a coherent policy framework and effective regulations, nonbank financial institutions, such as insurance, leasing and finance companies, and collective investment vehicles, can exacerbate the fragility of the financial system. The fragility is often the result of a conscious effort to arbitrage and circumvent banking regulations.
I feel like I just had a super nerdy moment and that I indeed will be able to find the answer to my big cloudy question at the end of this degree. I hope.