When a country's financial system is young, it usually relies more on______ finance.

Question

Quizplus · Accepted Answer

When a country's financial system is young and developing, it often relies more on indirect finance. This means that financial intermediaries, such as banks and other financial institutions, play a larger role in channeling funds from savers to borrowers. This is because direct finance, such as equity and bond markets, may not yet be well-developed or trusted by investors, and nonintermediary finance is typically only used by large, established firms. Indirect finance through intermediaries provides a safer and more reliable way for individuals and small businesses to access capital.

When a Country's Financial System Is Young, It Usually Relies