Unprecedented technological advancements and corresponding innovations in business models have helped financial inclusion evolve beyond merely connecting people to a bank account. It is, for instance, helping level the playing field for small farmers by providing access to buyers, more efficient pricing, and speedier payments. It is replacing unwieldy paper voucher systems used amid humanitarian crises with prepaid cards for food and supplies. And it is helping small and micro-merchants expand their businesses by leveraging purchase data to enable credit scoring.
The balance sheet of sovereign entities is far more complex than the balance sheet of private companies. For example, the institutions that manage the assets of a sovereign are different than those which oversee the liabilities, often with different mandates. Other issues include the definition of the “sovereign” and the scope of its balance sheet, the complex valuation of tangible assets and recognition of financial instruments, negative net worth, incomplete recording, and many others. As a result, unlike private companies, most governments manage their balance sheets as separate sub-portfolios without having a holistic approach.
Blog post by a student on the job market.
Weather shocks are a constant and growing threat to much of the world’s rural population whose livelihoods depend on agriculture (Dercon, 2002). The cost of being exposed to these shocks is high: households sell productive assets or reduce spending on essential goods and services that can have substantial negative long-run consequences on household wellbeing. Moreover, households often adopt agricultural production processes that are less risky but also less productive in order to limit their exposure to these types of shocks (Janzen and Carter, 2018). Unfortunately, it has proved challenging to develop financial tools that reduce exposure this risk. Traditional insurance is often absent in developing countries because of moral hazard and adverse selection. Furthermore, weather-index insurance, which was designed to help farmers increase their resilience to extreme weather events, has suffered from low demand (Cole and Xiong, 2017).
Superstar firms have been in the minds of world’s leading bankers and economists lately. Policymakers are concerned that America’s leading firms such as the FAANG stocks — Facebook, Apple, Amazon, Netflix and Google — are having adverse results on the rest of us and making economic policy less predictable. Why is this? Many of the companies have improved the lives of people across the world with highly desirable and useful products. These superstar firms have also done very well for many of their stakeholders and investors. The numbers are staggering. These five tech companies together account for roughly half of the gains achieved by the Standard & Poor’s 500 stock index in 2018. And in recent weeks, Apple became the world's first trillion-dollar corporation, with Amazon not far behind. While the superstar firms have made life easier for many consumers, it's hard for economists not to wonder whether the effects of their stratospheric success are entirely benign.
Since its inception, bank capital regulation has been a topic of heated discussion and debate. At the international level, the Basel Committee on Banking Supervision (BCBS) has emerged as a global standard setter for regulation of banks. Starting with the first Basel accord in 1988, common capital targets were established to strengthen banks’ capital cushions and to ensure a level playing field at the international level. These target capital ratios were designed to be the same across countries, without taking into consideration variations in local market conditions.
The recent economic growth performance of the countries in Latin America and the Caribbean (LAC) has been hampered by poor productivity growth. While many factors explain the poor productivity and growth performance in the region, lack of financial development, particularly long-term credit to fund productivity-enhancing investments, is often cited as a problem.Banking systems are the main providers of long-term financing to the private sector around the world. Regardless of their size or the income level in their country of origin, to fund
fixed assets, firms obtain most of their financing from banks. Households’ main long-term investment, housing, is also overwhelmingly financed by banks.
The tenth anniversary of the collapse of Lehman Brothers is a good opportunity for us all to reflect on the global financial crisis and the lessons we have learned from it. By now, there is widespread agreement that the crisis was caused by excessive risk-taking by financial institutions. There were increases in leverage and risk-taking, which took the form of excessive reliance on wholesale funding, lower lending standards, inaccurate credit ratings, and complex structured instruments. But why did it happen? How could such a crisis originate in the United States, home to arguably the most sophisticated financial system in the world? At the time, my colleagues and I argued incentive conflicts were at the heart of the crisis and identified reforms that would improve incentives by increasing transparency and accountability in the financial industry as well as government. After all, if large, politically powerful institutions regularly expect to be bailed out if they get into trouble, it is understandable that their risk appetite will be much higher than what is socially optimal.
Low and volatile agricultural incomes, poor connectivity, low population density and limited information are just a few reasons that have kept commercial banks away of rural areas in developing countries, where nonbank financial institutions (such as MFIs, cooperatives, or credit unions) have played an important role.
However, these rural institutions tend to be small and often suffer from bad risk management, poor governance, and weak technical and managerial capacity. These constraints are in turn passed on to the borrowers in the form of higher interest rates and credit rationing. The lack of human and organizational capital among lenders is a type of market failure where public interventions may be both effective and market friendly (Besley, 1994).
Some 41 currencies serve the African continent. Many of these are characterised by their illiquid and rarely traded status on the global financial market, as well as their volatility. So for those wishing to do business with Africa, these currencies — as difficult and expensive to source — can pose a real problem.
From the Namibian dollar to the Seychellois rupee, it is vital that organisations are able to source emerging market currencies reliably, on time, and at competitive prices. Yet such necessities often elude those trading with Africa, who view currency concerns as one of the biggest barriers to the development of Africa as an emerging — and therefore high growth — opportunity for international investors.