INTERNATIONAL FINANCIAL INSTITUTIONS AND MARKETS
Learning outcomes of the course unit
Knowledge and understanding of :
- the main characteristics of financial institutions and instruments, with a specific focus on the international financial regulation and the risk management in financial institutions.
- the role of microfinance in overcoming financial exclusion.
- the main problems in managing microfinance institutions, providing a basis for originality in developing ideas on balancing financial and social objectives.
Students will be able to apply knowledge and problem solving abilities: a) to assess risk and return of different financial instruments; b) to measure the exposure to interest-rate risk and credit risk in financial institutions; c) to understand the features of a microfinance intervention useful to overcome financial exclusion; d) to assess the sustainability of a microfinance institution.
Students will have the ability to integrate knowledge and handle complexity, and formulate judgements with incomplete or limited information in order to: a) make a choice among different financial instruments; b) foresee the effects that changes in regulation and market conditions can have on the management of financial institutions; c) decide whether a microfinance intervention can be an effective solution to specific social and financial problems; d) understand social and ethical consequences of financial decisions.
Students will have the ability to communicate their conclusions and the underpinning knowledge and rationale to financial operators as well as to non-specialist audiences.
Since a problem solving approach will be adopted, together with the analysis of case studies, students will learn to study in a largely self-directed and autonomous manner.
Course contents summary
-Role of the financial system.
-The intermediation process of financial institutions.
-Banks: characteristics and functions.
-Non-banking financial intermediaries.
-International regulation of financial markets.
-Role of microfinance in providing access to finance.
-Microfinance institutions: organization, lending policies, financial performance, and sustainability.
-Growth and vulnerabilities in microfinance.
-Role of international capital markets in microfinance.
-Impact of microfinance on social and economic development.
The aim of the course is to introduce the functions of a financial system in channeling funds from surplus to deficit units and analyse the reasons why financial markets can fail to serve low-income households and entrepreneurs.
The first part of the course aims to answer the following questions: what is a financial system, what are its functions, how do financial instruments work? The course then focuses on the international regulators and regulations on the financial system and the activities of financial intermediaries. Financial institutions come in many different forms and offer a variety of services: the course emphasizes the distinctive characteristics of financial intermediaries of different European countries (banks and non-banking financial institutions) and explores the main problems concerning the management of financial institutions.
The second part of the course focuses on the failures of the mainstream financial system in channeling funds to low-income households and entrepreneurs. Starting from the problem of financial exclusion, the role of microfinance in economic and social development is examined. Microfinance institutions provide financial services that allow people to save and invest in small businesses, allowing them to overcome financial exclusion. Organization, lending policies, financial performance, and sustainability of microfinance institutions will be discussed, together with the opportunities and threats coming from their growth and internationalization process.
-Financial Markets and Institutions, Frederic S. Mishkin and Stanley Eakins, 7/E, Prentice Hall, 2012, selected chapters. (ISBN-10: 013213683X, ISBN-13: 9780132136839)
-The Economics of Microfinance, Beatriz Armendáriz de Aghion and Jonathan Morduch, The MIT Press, 2010, selected chapters. (ISBN-10:0-262-51398-6, ISBN-13: 978-0-262-51398-2)
-Additional compulsory readings will be indicated during the classes.
Lectures and case studies.
Assessment methods and criteria
Knowledge and understanding, and the ability to study in a largely autonomous manner will be assessed through 2 open-ended questions and 2 true or false questions (with argumentation), for up to 12 marks.
The application of knowledge and understanding through problem solving abilities in new or unfamiliar environments will be assessed through 2 exercises, for up to 8 marks.
The ability to formulate judgements with incomplete data will be assessed through 1 question on a specific case, with the discussion on the approach to be adopted to the solution, for up to 4 marks.
The ability to communicate conclusions and the underpinning knowledge and rationale to specialist and non specialist-audiences will be assessed verifying the accuracy in the use of technical language, the ability to argue the answers, and and 3 multiple choice questions on technical terms for up to 6 marks.