Capital Access Index 2005: Best Markets for Entrepreneurial Finance

Securitization in Financing Economic Activities
Oct 01, 2005
James R. Barth, Tong Li, Sangeetha Malaiyandi, Donald McCarthy, Triphon Phumiwasana and Glenn Yago

The Capital Access Index is a comprehensive analysis of the breadth, depth and vitality of capital markets around the world. It is based on the simple premise, but complex measurements, showing that efficient financial markets - making capital accessible to the entrepreneurs who can use it to grow and sustain companies and generate jobs - are the key for long-term growth and reducing poverty and income polarization.

This year, for the first time since the rankings began in 1998, the United Kingdom tops the index. Hong Kong, last year's number one, dropped to second this year, followed by Singapore and the United States.

This year's index expands coverage from 88 to 121 countries representing 92 percent of global GDP, ranking them on more than 50 measurements, from the strength of their banking systems and the diversity and efficiency of financial markets to general economic conditions.

In addition to the Capital Access Index, each year the Institute focuses its report on one aspect of entrepreneurial finance. This year's focus is securitization - the process of issuing securities backed by the cash flows from a pool of underlying assets, such as home mortgages.

Securitization has become a pervasive financing mechanism, with total worldwide issuance of $4.7 trillion in 2004. The U.S. and Western Europe accounted for 90 percent of that.

To illustrate the value of securitization, Institute research found that a country issuing securitized financial instruments has a 2.39-point higher capital access score than a country with no such issuance.

The Top 10 markets (with 2004 ranking):

1. United Kingdom (3)
2. Hong Kong (1)
3. Singapore (2)
4. United States (6)
5. Sweden (4)
6. Denmark (9)
7. Australia (7)
8. Norway (13)
9. Finland (5)
10. (tie) Canada (10)
10. (tie) Ireland (11)

View the rankings (pdf).