1. Financial institutions have been defined as the channel or intermediaries which facilitate the transfer of funds. In light of this statement, explain the various types of financial intermediaries and give relevant examples in each case. (10 MARKS)

1. MAKING CAPITAL MARKETS WORK IN EMERGING AND FRONTIER ECONOMIES:

Capital markets promote economic development and growth by allowing firms to tap large, international pools of savings to obtain the finance they need. In order to do so in a sustainable fashion they rely on institutions that ensure reliable financial reporting and assurance; those, in turn, depend on the skills and competence of professional accountants.

The relationship runs both ways. Nearly half of ACCA's members in emerging and frontier economies work in regional or global financial centers; their careers are linked either directly or indirectly to the fortunes of capital markets. It is no secret by now that these economies will dominate global economic growth in the future, but whether they will have access to adequate finance to fulfill their potential is by no means guaranteed.

ACCA believes that the important global debates on corporate governance, financial disclosure, and financial regulation cannot remain focused primarily on capital markets that have already achieved critical mass and whose success is beyond dispute; nor can they reflect forever the economic league tables of the past.

Therefore, we aim to bring policymakers, regulators, exchange operators, and corporate decision-makers from the most dynamic emerging economies together on a regional basis in order to determine what lessons can be learned and shared from their successes and failures, why some markets succeed where others fail and what the profession can do to support financial development in the public interest.

We are pleased to present, in this report, a selection of highlights from the development of fledgling capital markets. Along with our discussion paper, The Rise of Capital Markets in Emerging and Frontier Economies, we hope they will provide all stakeholders with food for thought and help kick-start a much-needed global debate.

Helen Brand Chief executive, ACCA

REQUIRED:

a) Explain why the security market is not quite developed in emerging economies. 5 Marks

b) Explain the strategies that emerging and frontier economies may adopt to enhance the financial market growth in such economies. 5 Marks