International Monetary Fund. Monetary and Capital Markets Department
Banking supervision and regulation by the Hong Kong Monetary Authority (HKMA) remain strong. This assessment confirms the 2014 Basel Core Principles assessment that the HKMA achieves a high level of compliance with the BCPs. The Basel III framework (and related guidance) and domestic and cross-border cooperation arrangements are firmly in place. The HKMA actively contributes to the development and implementation of relevant international standards. Updating their risk based supervisory approach helped the HKMA optimize supervisory resources. The HKMA’s highly experienced supervisory staff is a key driver to achieving one of the most sophisticated levels of supervision and regulation observed in Asia and beyond.
Recent advances in digital technology and big data have allowed FinTech (financial technology)
lending to emerge as a potentially promising solution to reduce the cost of credit and increase
financial inclusion. However, machine learning (ML) methods that lie at the heart of FinTech credit
have remained largely a black box for the nontechnical audience. This paper contributes to the
literature by discussing potential strengths and weaknesses of ML-based credit assessment through
(1) presenting core ideas and the most common techniques in ML for the nontechnical audience; and
(2) discussing the fundamental challenges in credit risk analysis. FinTech credit has the potential to
enhance financial inclusion and outperform traditional credit scoring by (1) leveraging nontraditional
data sources to improve the assessment of the borrower’s track record; (2) appraising collateral value;
(3) forecasting income prospects; and (4) predicting changes in general conditions. However, because
of the central role of data in ML-based analysis, data relevance should be ensured, especially in
situations when a deep structural change occurs, when borrowers could counterfeit certain indicators,
and when agency problems arising from information asymmetry could not be resolved. To avoid
digital financial exclusion and redlining, variables that trigger discrimination should not be used to
assess credit rating.
This Selected Issues paper analyzes Kenya’s success in boosting financial inclusion. Kenya has become a regional and global leader in mobilizing new technologies to advance financial inclusion, poverty reduction, and growth. The rapid progress of financial inclusion in Kenya has been a result of a friendly environment for the absorption of information technology, dynamic local banks, and open and stable regulations. Advances in financial inclusion over the past 10 years have allowed Kenyans to reap many of the benefits of financial access at a much faster pace than the typical cycle of financial deepening in low- and middle-income countries. Mobile financial services have lowered the transaction cost of remittances, allowing Kenyan households to smooth consumption in the face of shocks and significantly reducing poverty.
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper analyzes the performance and vulnerabilities of Qatar’s nonfinancial corporate (NFC) sector. Qatar’s NFC sector is sizable in terms of the overall share of economic activity. The total turnover of these companies was US$ 28 billion in 2016. Assets of listed and non-listed NFCs in Qatar were estimated at about 115 percent of non-hydrocarbon GDP in 2016. Although profitability of Qatari corporates, as measured by Return on Equity and Return on Assets, has declined, it is still high. Qatari companies remain resilient in the face of moderate to severe interest and earnings shocks, as median Interest Coverage Ratio of Qatari firms remains well above 1. The impact of these shocks on debt-at-risk and firms-at-risk is also limited.