Financial markets

Definition

Strength and capability of local financial markets.

What Does Good Look Like?

Availability to provide a variety of capital market instruments to encourage investors to finance infrastructure.

Best Practice Guidance:

National Infrastructure Banks and Similar Financing Facilities (Global Infrastructure Hub)
Infrastructure Financing Instruments and Incentives (OECD)

Top Performers

Rank Country

Score /100

1 -

United States

91.0

1 -

United States

91.0

91.0/100

2 -

Japan

84.4

2 -

Japan

84.4

84.4/100

3 2

Sweden

78.3

3 2

Sweden

78.3

78.3/100

4 -

United Kingdom

77.5

4 -

United Kingdom

77.5

77.5/100

5 1

Republic of Korea

77.1

5 1

Republic of Korea

77.1

77.1/100

Go To Full Ranking

Guidance

Metric

Best Performer

Source

Best Practice

Financial depth

Overall level and breadth of the financial market, to sustain relatively large market orders

Indicates the availability of financial products in the market to efficiently meet the capital requirements for infrastructure projects. The deeper the financial market, the greater (and possibly cheaper) the supply of capital for infrastructure projects.

28.1%

United States

Global Competitiveness Index 4.0, World Economic Forum (2019)

Capital market instruments to mobilize institutional investors to infrastructure and SME financing in emerging market economies (World Bank)

Domestic credit to private sector

Financial resources provided to the private sector by financial corporations, such as through loans or securities. The measure considers the current level of credit to the private sector.

Indicates the availability of local finance (often short-term finance). Similar to the depth, more credit to the private sector may indicate a more developed financial market able to better supply capital for infrastructure projects; alternatively too much credit to private sector may indicate the sector is at borrowing capacity and cannot invest much more.

26.3%

United States

World Development Indicators, World Bank (2019)

Staff note for the G20 IFAWG recent developments on local currency bond markets in emerging economies (World Bank)

Stocks traded

The value (or total number) of shares traded, both domestic and foreign.

Indicates the level of activity in the stock market, where infrastructure assets are bought and sold. It measures liquidity, which is important for investors to know they can extract investments at appropriate points.

23.5%

Japan

Republic of Korea

United States

World Development Indicators, World Bank (2019)

Stock markets are changing: Investors, companies and regulators must be prepared (OECD)

Financing through local equity market

Degree of participation by local equity participants, such as pension funds, sovereign wealth funds and fund managers.

Indicates the availability of local finance (often long-term finance), including the availability of suitable domestic partners to form consortia. The greater the participation from local equity, the greater the supply of and competition for capital for projects.

17%

United States

Global Competitiveness Index, World Economic Forum (2018)

Local Capital Market Development (IFC)

Financial stability

State of the financial market, such as whether the system is resistant to economic shocks.

Stable markets promote the growth of debt and equity participants in the country. A stable financial market facilitates smooth flow of funds between investors, projects and bankers, improving supply of capital for projects.

5.2%

Finland

Global Competitiveness Index, World Economic Forum 4.0 (2019)

Debt Capital Market Solutions (IFC)

Best performer

Best practice

Financial depth

United States

Global Competitiveness Index 4.0, World Economic Forum (2019)

Description

Overall level and breadth of the financial market, to sustain relatively large market orders

Metric Importance

Weighting
(% Of Driver)

28.1%

Guidance

Capital market instruments to mobilize institutional investors to infrastructure and SME financing in emerging market economies (World Bank)

Domestic credit to private sector

United States

World Development Indicators, World Bank (2019)

Description

Financial resources provided to the private sector by financial corporations, such as through loans or securities. The measure considers the current level of credit to the private sector.