make investors aware of the myriad opportunities in the continent of africa but also provide tangible reassurance that levels of idiosyncratic risk are no longer prohibitive. to this end, as i speak, the inaugural african investment forum organised by the african development bank has reached its final day nearby in johannesburg. the event has the explicit aim of moving beyond talking about investment in africa to providing a setting for moving specific projects towards bankable deals. it is also from this perspective that i welcome the absa africa financial markets index, as a practical tool that supports market development and, by extension, further improvement in the investment environment. but, before sharing some thoughts on the role of financial market indices, let me, very briefly, enunciate the key characteristics of a wellfunctioning financial sector. distinguished guests, well - functioning financial markets should foster savings mobilisation and investments in a cost - effective manner, channelling surplus funds to their most productive uses, hence contributing to economic growth. they should inspire investor confidence ; have breadth and depth in terms of product offerings, as well as liquidity. but more importantly, good governance and accountability structures, buttressed by a sound regulatory framework, good accounting and auditing standards, as well as efficient and independent judiciary are essential to embed public trust and investor confidence. in this way, developed financial markets facilitate the financial interactions of households, corporations, financial institutions, and governments. such markets provide a pool of savings that can be tapped into for funding investments by businesses and, also, offer a stable source of funding for governments that can be used to undertake infrastructure development. furthermore, empirical evidence suggests that countries with well - developed financial markets gain significantly from increased fdi. of equal importance, studies concur that a developed financial sector can also create opportunities for financial inclusion, especially embracing smmes and the undeserved segments of the population. in turn, this supports economic diversification, enables economic agents to pool and offset risks, and encourages savings and wealth creation, thereby contributing to inclusive growth and improved living standards. various indicators or sets of indicators have been used to measure financial development. the world bank has developed a comprehensive conceptual framework to capture the multifaceted nature of the modern financial system. the framework has four dimensions that reflect the essential characteristics of a good and well - functioning financial system that is : depth, access, efficiency and stability. staff of the international monetary fund ( imf ) have built on the world bank framework by

capital markets and, also, financial inclusion. the development of a wide range of money and capital markets institutions and instruments enables substitution and access to a variety of purpose - fit saving and investment channels as monetary policy and conditions change ; therefore sustained effectiveness of policy transmission in affecting market activity. a diverse and deep market also allows banks to better manage liquidity positions, hence the ability to effectively transmit policy. in addition, with enhanced financial inclusion, changes in monetary policy are more effective as a greater number of businesses, institutions and households, hold and have exposures that are directly affected by the direction and level of interest rates and availability of loanable funds and market liquidity. communication distinguished guests, the fourth area of focus for the bank, as we look ahead, is communication. the bank considers and uses communication as a direct, practical and potent instrument of policy. it is, therefore, important that in order to generate the desired response, communication is recognised and acknowledged by the market and general public as a policy instrument. however, this is to the extent that such communication is backed by durable integrity and reliability of the bank of botswana, premised on predictability and transparency. public trust and reputation of the bank are essential elements for policy effectiveness. central banks such as the bank of england, the european central bank and the us federal reserve demonstrate such effectiveness where, for example, issuance of forward guidance statements ( without immediate actual change in interest rates ), generate market reaction ; thus change in economic behaviour and activity. more generally, communication works best in an environment of economic and policy awareness by the public as well as informed policy and market analysis and commentary. the combination of economic developments and dissemination of policy analysis and economic projections by the bank helps the public and economic agents to anticipate policy action ; the so - called expectations. for example, expectations about future inflation and, therefore, interest rates, are a key determinant in formulating investment and consumption decisions, hence economic activity. communication also facilitates accountability and various platforms and media are used in this regard. overall, increased transparency and communication, regarding the policy framework, objectives and strategy, as well as decisions and progress in meeting the objectives of the bank can contribute to desired market responses and policy effectiveness. distinguished ladies and gentlemen, at the launch of the bank ’ s monetary policy statement, in february this year, i outlined the refinements that the bank continues to make to the monetary policy framework relating to communication. i indicated that, the more recent