Capital Markets Outpace Bank Financing Globally, Driving Growth in Developing Economies

Washington, D.C. – August 2025 — New research from the International Finance Corporation (IFC) and the World Bank reveals that capital markets — particularly equity and bond issuance — are expanding faster than traditional bank financing worldwide, with profound implications for economic growth and job creation, especially in developing nations.

A Shift in Global Financing Trends

The analysis, which tracks financing as a percentage of GDP across different income groups, shows that in many regions, capital market instruments are overtaking bank lending as a preferred source of funding.

Low-income countries have seen modest but steady growth in equity and bond markets, complementing stable bank lending levels.

Middle-income nations display a sharper rise, with bond issuance climbing significantly since the early 2000s.

China stands out for its rapid capital market expansion, with bond financing surging from single digits in the early 2000s to over 50% of GDP today.

High-income countries continue to lead in absolute terms, with combined equity and bond markets representing up to 90% of GDP at their peak.

Linking Markets to Job Creation

The IFC and World Bank stress that vibrant capital markets not only mobilize long-term financing for infrastructure, businesses, and innovation, but also directly correlate with employment growth. By providing diversified funding channels, they help businesses expand operations, scale production, and hire more workers.

Implications for Developing Economies

For emerging markets, stronger capital markets can reduce dependence on bank credit, which is often limited or volatile during economic downturns. Expanding access to equity and bond financing also enables governments to fund large-scale development projects without placing excessive strain on public budgets.

Policy Recommendations

Experts recommend targeted reforms to deepen market participation, such as strengthening regulatory frameworks, improving transparency, and encouraging cross-border investment. These steps could unlock greater volumes of private capital, accelerating progress toward the UN Sustainable Development Goals.

As global financing patterns shift, the message is clear: countries that foster robust, accessible capital markets will be better positioned to stimulate growth, create jobs, and build economic resilience.