Paper Example on Access to Financial Services

Access to financial services is a matter of great importance in any economy, and this is because of the importance of the financial services to the growth of the economy and the improvement of living conditions of the population. Ease of access to financial services enable citizens to engage in economic projects leading to the expansion of the economy and increase in financial activities in a society. In the examination of access to financial services in both Qatar and Saudi Arabia, there are various issues to put into consideration to make citizens have easy access to funds so that they engage in the various economic activities. The economies of both countries have various similarities and one of them is that both depend on oil and gas, in this manner, any changes in the prices of oil and gas greatly affects both economies and livelihood of the population.

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Despite efforts that both countries have put in place to ensure that there is an improvement of access to financial services, there are various challenges that need to be tackled to help in the increase in SMEs as they are some of the economic avenues that create vast employment opportunities. With increase in the employment opportunities, it is prudent that living conditions of the population would be improved and the same would be instrumental in ensuring stability of the economy and promotion of industrialization of the economy. The importance of small and medium enterprises (SMEs) is established in that it serves as the main source of private sector in the Middle East. Regardless of the importance of SMEs, they face various obstacles with negatively affect their success in the economy.

Research Question

The importance of accessing financial services to growth and investment: a comparison study between Saudi Arabia and Qatar. An efficient financial system is positively linked to the economic growth of the country. An efficient finance system should include bot the direct and indirect markets and bank-based finance. A well-enhanced financial system should be able to reallocate capital hence enabling an uninterrupted restructuring of the economy which supports growth. Both Qatar and Saudi Arabia largely invest in the oil and petroleum industry which is responsible for their large GDPs

Overview of the Subject Matter

Both Qatar and Saudi Arabia are countries that are mainly known because of the oil and petroleum industries. Qatar, for example, has continuously produced high GDP growth by protecting the local banking sector by making direct investments into domestic banks even when undergoing financial crisis. The large GDP value can be attributed to the fluctuations in the oil prices and the investments made in the energy sector. In Saudi Arabia, the government is in control of the major oil-based economic activities in the country. The government owns about 16% of the petroleum reserves and the country is ranked the largest petroleum exporter in OPEC. The petroleum sector produces 45% of the GDP and accounts for almost 80% of the budget revenues. These countries are doing well economically by continuously coming up with new investments ideas.

Initial Academic Literature

Further financial sector reforms should be made to promote a faster and long-lasting economic growth in Qatar and Saudi Arabia which both belong to the Middle East and North Africa (MENA). Both the theoretical and the practical evidence support the fact that enhancing financial access in a country leads to a higher economic growth. The research on MENA shows that a better financial system leads to efficiency when handling the finances thus leading to growth of the economy.

Methodology

The MENA officials are planning to come up with a modern financial system which encourages investment by analytically identifying and supporting good business opportunities. The countries are also encouraged to adopt reliable macroeconomic policies to encourage competition within the region and reducing the financial repression policies from the government such as high loan interest rates which in turn leads to growth and encourages investments. The countries should also develop new measures of tracking economic growth such as the annual measure of GDP.

It is apparent that access to financial services is higher in Saudi Arabia as compared to Qatar. The difference is translated to the growth of the economies proving the need to set out policies that can improve uniform access to financial access for citizens and enterprises in the two countries (Buckley and Hanieh, 2014, p155). An efficient financial system is that which includes both the direct and indirect markets and bank-based finance in every economy, however, taking a keen analysis into both Saudi Arabia and Qatar reveals that there is an improper reallocation of capital causing various effects on the restructuring of the economy. The differences in the markets in both Saudi Arabia and Qatar needs to be streamlined to the economic prospects of both countries because they both rely on oil and petroleum industries. This study would seek to find out ways of restructuring the economies of both countries to support growth (Guru, B.K., Shanmugam, Alam and Perera, 2015, p84). Although both countries are very successful due to the oil and petroleum industries, it is evident that Qatar is more successful as it has had a higher growth in GDP by protecting the local banking sector.

Qatar has had a very successful economy because of the higher focus it gives to protection of its banking sector, and making it easier for the citizens and enterprises to access financial services easily. Such is because higher protection of the of the banking sector enables the country to streamline banking services with its policies thereby protecting the needs of citizens at the same time (Al Mallakh and el Mallakh, 2015, p212). One issue that affects economic performance in both Saudi Arabia and Qatar is fluctuations in the oil and petroleum industry. In Saudi Arabia, the government has the ease of streamlining the banking sector because it owns 16 percent of all the petroleum reserves in the country; this enables the country to streamline access to financial services. However, the governments control of 16 percent of all oil and petroleum industries in the country is still relatively low, and this exposes the population to lack of adequate access to financial services they need (Henderson, 2017, p117). There is, therefore, a need for both countries to increase their control of financial services in the two countries; this is because oil and petroleum industry produces 45 percent of the GDP, and accounts for almost 80 percent of the budget revenues (Rezvanian, Ariss and Mehdian, 2015, p160).

Research AimsThe aims of this study is to examine the challenges that citizens in both Saudi Arabia and Qatar get in the process of accessing financial services and suggesting ways of tackling such challenges. Secondly, the study seeks to analyze differences between the economies of both Saudi Arabia and Qatar and compare challenges to access of financial services in both countries with the view of creating a uniform financial framework for the countries. Third, the study aims at identifying the necessary policies, by comparing economic policies of the two countries, that needs to be enacted to promote access to financial services, and finally, the paper seeks to sensitize the population about the financial services available and how they can utilize such to help in improving their living conditions and engage in the building of their economies.

Research ObjectivesThe objective of this research is to improve access to financial services in both Saudi Arabia and Qatar to ensure that citizens have higher opportunities of developing themselves and enjoying economic growth. The other objective of the study is to bridge the gap between the rich and the poor through reducing uneven distribution of income. In addition, the study aims at enlightening the population about importance of improved access to financial services. Finally, the study seeks to improve efficiency of financial systems in both Saudi Arabia and Qatar to include every citizen in the population to access the funds from banks and other financial institutions.

Research Questions

The following research questions would be used to examine the access to financial services in both Saudi Arabia and Qatar and analyze the importance of financial services in both countries:

Detail your experience with your financial institutions.

What attracted you to the Piedmont Triad region?

Is your bank capable of providing efficient access to financial services?

Give and overview of the installed infrastructure and financial policies to improve access to financial services.

What are the strengths and weaknesses of your bank with regards to financial services?

How is your financial institutions able to conform to the standards of financial access in the country?

Is your bank able to achieve any significant impacts in the society in the long run?

Literature ReviewThe issue of access to financial services to both Saudi Arabia and Qatar has been of great importance, and this is because of the importance of access financial services to the living standards of the society and in the growth of the economy. In this manner, various authors have engaged in the examination of the same with the view of comparing situations in both countries to share ideas from the two countries to create solutions to the challenges that citizens have when trying to gain access to the financial services. Henry (2016), proves that access to financial services is easy in both Saudi Arabia and Qatar. Such is apparent in the decision of QNB Financial Services, the brokerage arm of Qatar National Bank which is the largest lender in the region, to expand business to countries such as Saudi Arabia. The decision of the bank to expand business to Saudi Arabia is because of the increased interest of Saudi Arabians to the access to financial services.

By Qatari National Bank being the largest lender in the region, it proves that financial access is higher in Qatar as compared to Saudi Arabia, such an expansion is also because of the increased interest in the Saudi Arabian markets by the Qatari investors. In this relation, it is apparent that the higher access to financial resources as compared to Saudi Arabia is because of the oil and petroleum exploits in the countries. Le Ha and Barnawi (2015), conform to the same thought that investors are paying more attention to Qatar because of its stable oil wells; this is because the oil wells in Saudi Arabia are getting depleted and focus is shifting to other avenues such as tourism, real estate, and infrastructural development. Additionally, Hanieh (2016), also confirm that the stable oil and petroleum industry in Qatar relates to the was that affected the region in the early 21st century which led to reduced interest in the exploitation of oil wells in the country. In this manner, the peace that the region enjoys improve on the economic prospects in the country which increase access to financial services.

Furthermore, the two countries enjoy high access to financial services because of the high confidence that local investors show in equities. Henry (2016), states that Qatar local investors show higher confidence in equities, and this is the main reason for the higher access to financial services because a higher amount money is required to circulate in the economy to help in the growth of various sectors. Although access to financial service is higher in Qatar than in Saudi Arabia, the increase in the access to such services is higher in Dubai than in Qatar. Such is apparent in the way Saudi Arabias equity rose by...