Solutions to problems
are easy to find:
the problem’s a great
So wrote the Danish poet, inventor, and mathematician Piet Hein. Development finance wasn’t on his mind when he wrote those words. Neither was private sector development. Yet the observation is unmistakably true for the field: To formulate solutions, we must first understand the nature of the problems we are trying to solve.
It helps crowd in private investment to create markets in difficult places. In an era of limited government resources and donor funds, this is key to achieving sustainable development.
Those following the discussions during the IMF and World Bank Group Annual Meetings held in Washington last week will have noticed that our approach toward international economic development is changing in a major way—and, I believe, for the better.
Saturday’s panel discussion on Maximizing Finance for Development set the context that many in the development community now know well, but bears repeating: It will take not billions, but many trillions of dollars to meet rising aspirations for better infrastructure, health and education. Specifically, we are talking about $4 trillion every year needed to meet the Sustainable Development Goals to which the international community agreed in September 2015.
An estimated 1.2 billion people — almost one in every five people in the world — are living in areas affected by conflict and fragility today. Some of these people are fleeing from war, while others have escaped natural disasters. Most are trying to earn a living in very challenging environments.
These are not abstract numbers — we are talking about real people, with real problems. Hence, we need to ask ourselves, in the public and private sectors, what strategies can help them.
For the first time in history, the number of people living in extreme poverty has fallen below 10%. The world has never been as ambitious about development as it is today. After adopting the Sustainable Development Goals and signing the Paris climate deal at the end of 2015, the global community is now looking into the best and most effective ways of reaching these milestones. In this five-part series I will discuss what the World Bank Group is doing and what we are planning to do in key areas that are critical for ending poverty by 2030: good governance, gender equality, conflict and fragility, creating jobs, and, finally, preventing and adapting to climate change.
Twenty years ago, the World Bank took up the fight against corruption as an integral part of reducing poverty, hunger, and disease. The decision was groundbreaking then and remains valid today. Corruption diverts resources from the poor to the rich, leads to a culture of bribes, and distorts public expenditures, deterring foreign investors and hampering economic growth.
- domestic resource mobilization
- Development Finance
- international development association
- Public Sector and Governance
- The World Region
- South Asia
- Middle East and North Africa
- Latin America & Caribbean
- Europe and Central Asia
- East Asia and Pacific
- Cote d'Ivoire
These are some of the views and reports relevant to our readers that caught our attention this week.
What If We Just Gave Poor People a Basic Income for Life? That’s What We’re About to Test.
Over the past decade, interest has grown in an ostensibly unorthodox approach for helping people who don’t have much money: just give them more of it, no strings attached. In the old days of policymaking by aphorism—give a man a fish, feed him for a day!—simply handing money to the poor was considered an obviously bad idea. How naïve—you can’t just give people money. They’ll stop trying! They’ll just get drunk! The underlying assumption was that the poor weren’t good at making decisions for themselves: Experts had to make the decisions for them. As it turns out, that assumption was wrong. Across many contexts and continents, experimental tests show that the poor don’t stop trying when they are given money, and they don’t get drunk. Instead, they make productive use of the funds, feeding their families, sending their children to school, and investing in businesses and their own futures.
Media as a Form of Aid in Humanitarian Crises
Center for International Media Assistance
As the humanitarian crises following the Arab spring enter their sixth year, the media coverage of war, displacement, and migration in the Middle East and North Africa tragically have become all too familiar. For mainstream media, the millions of people whose lives have been upended are mostly data points, illustrations of the misery and upheaval that have swept across Syria, Yemen, Gaza, Iraq, and many places between. Yet for those who are caught in the crises, and plagued not only by insecurity and uncertainty but a lack of information, relatively little is available to help them make informed decisions for their own survival. CIMA’s report, Media as a Form of Aid in Humanitarian Crises, examines how humanitarian crises around the world have led to a major change in the priorities and approaches in media development efforts.
What would be a game-changer for achieving some of the world’s most difficult goals — such as ending poverty and hunger and making sure every child gets a quality education?
Billionaire philanthropist Bill Gates came to the World Bank Group Spring Meetings to answer that question in a thought-provoking conversation about how to finance development for greater impact.
The release of the joint statement “From Billions to Trillions: Transforming Development Finance” at the World Bank-IMF Spring Meetings is one of the most satisfying moments during my two-year tenure as Managing Director and World Bank Group CFO.
My one regret is that the title should have been Billions for Trillions.
Thanks to Alex Evans for recommending ‘Who Foots the Bill’, a report from the ODI’s Romilly Greenhill and Annalisa Prizzon on trends in development finance. It was published at the end of last year, but somehow I missed it – probably because it is pegged to funding the post-2015 goals, a timesuck discussion I have tried to avoid (without much success).
But actually its value goes way beyond post2015. Here are some highlights:
Conclusions on Financing for Development:
In addition to the temporary protected status and facilitation of remittances - see my earlier post, when government offices and banks resume functioning, Haiti could usefully tap its large diaspora's wealth for the reconstruction of community infrastructure and social projects. This could be done via the issuance of "diaspora bonds". By diaspora bond, I mean not only bonding between the diaspora and the homeland, but more specifically a financial instrument for attracting investment from the diaspora.
In the past diaspora bonds have been used by Israel and India to raise over $35 billion of development financing (see my article with Suhas Ketkar). Several countries - for example, Ethiopia, Nepal, the Philippines, Rwanda, and Sri Lanka - are considering (or have issued) diaspora bonds recently to bridge financing gaps. Besides patriotism, diaspora members are usually more interested than foreign investors in investing in the home country. Not only Haitians abroad, but also foreign individuals interested in helping Haiti, even charitable institutions, are likely to be interested in these bonds. Offering a reasonable interest rate - a 5% tax-free dollar interest rate, for example - could attract a large number of Haitian investors who are getting close to zero interest rate on their deposits.
If 200,000 Haitians in the US, Canada and France were to invest $1,000 each in diaspora bonds, that would add up to $200 million. If these bonds were opened to friends of Haiti, including private charitable organizations, much larger sums can be raised. If the bond rating were enhanced to investment grade rating via guarantees from the multilateral and bilateral donors, then such bonds would even attract institutional investors.