Financial products must be adapted to women’s needs, like enabling them to open their own account or improving their financial literacy. Photograph: World Bank Photo Collection
Two billion people worldwide still lack access to regulated financial services. Despite significant progress and the increased technical and financial resources devoted to financial inclusion, much work remains ahead.
There is broad consensus that access to a transaction account can help people better manage their life and plan for emergencies.
But financial access and the underlying financial infrastructure taken for granted in rich countries, such as savings accounts, debit cards or credit as well as the payment systems on which they operate, still aren’t available to many people in developing countries. This past September, I participated in the Global Policy Forum of the Alliance for Financial Inclusion (AFI) held in Mozambique. This annual meeting convened policymakers, the private sector and other stakeholders to assume new commitments, discuss best practices and agree on the way forward.
Proper corporate governance practices in financial institutions should provide added value by enhancing the protection of depositor and investor rights, facilitating access to finance, reducing the cost of capital, improving operational performance, and increasing institutions’ soundness against external shocks. Ensuring strong corporate governance standards is thus essential to the stability and health of all financial institutions, worldwide.
Good governance is an important priority for Islamic finance, an aspect of international finance that has enjoyed a stage of significant growth over the past decade. The volume of financial assets that are managed according to Islamic principles has a value of around $2 trillion, having experienced a cumulative average annual growth rate of about 16 percent since 2009 (Graph 1).
Graph 1: The Size of Islamic Finance Assets (USD Billion)
Banking has traditionally been the leading sector in the realm of Islamic finance, but the share of other products and institutions within the total realm of Islamic financial assets has been steadily increasing, as well (Graph 2). For instance, the Sukuk sector – which focuses on securitized asset-based securities – has seen considerable growth over the past six years and, as of 2014, amounted to more than $300 billion. Similar momentum is driving the growth of the Islamic Funds and Takaful (Islamic insurance) sectors. From 2009 to 2014, the assets under management of Islamic Funds has increased from about $40 billion to about $60 billion, while the amount of total gross contribution to Islamic insurance has surged from $7 billion to more than $14 billion.
Graph 2: The Size of Islamic Finance Assets by Sector 2014 YE (%)
Recently, I participated in an ODI-organized conference on ‘Driving change in challenging contexts’. The ongoing refugee crisis in Europe as well as the adoption of the SDGs is bringing efforts to revive and accelerate development in challenging contexts to the forefront of political attention.
Progress in such contexts is inevitably difficult. But actual practices are also still far from the possibility frontier of what could be done. Four issues stand out:
In most developed nations, when dealing with the aftermath of a natural catastrophe, an accident, a divorce – or even retirement – women know they can buy and rely on insurance to handle the damages, give them access to long-term savings or, at a minimum, cover a portion of their lost assets.
In emerging and developing markets, on the other hand, this is usually not the case. Working at IFC in Washington and staying in touch with my family at home in Senegal, I’ve heard countless stories of men and women living in terrible conditions after a natural disaster.
These are not only people with lower incomes. I’ve met women who have lost everything following their spouse’s death or divorce because customary practices and inheritance laws did not give them access to the family assets. (In fact, in 20 percent of economies around the world, women do not have the same inheritance rights as men.) Worse, there are women whose children have died because the public hospital was too full and too busy to accommodate them at the time they needed medical help, and because they did not have the means to afford private health care.
These are sobering and, sadly, true stories that very seldom make headlines. Yet if we look at families’ needs and at how women tend to be more affected by death, disaster and family illness, the answer seems simple: insurance.
It’s only when something bad happens that, all of a sudden, people – especially women, who tend to be more risk-aware – wish that they had planned better to deal with the situation at hand. What tends to keep women from choosing insurance as the solution to their risk-mitigation needs are misperceptions, affordability, lack of awareness, lack of bank accounts or access, and the stories of people with insurance policies that do not seem to cover any claims.
It’s been 27 years since I have been to Sweden, backpacking my way around the country and marveling at its beautiful natural environment. So it was with real excitement that I set off for the SIWI World Water Week in Stockholm that ran between 23-28 August. I was especially keen to understand better the big issues that the world is facing, particularly since the theme this year was “Water for Development.”
My World Bank colleagues, and particularly those from the Water Global Practice, were well represented and participated in 13 of the events during the week, so the stage was set for serious discussion. As part of that discussion, I presented on the challenges of financing for development in the water sector. I wanted to leave the audience with three key messages. These were that (1) water is physically but not financially transparent; (2) financial innovation has to be conducted in parallel with and reflect the transitional nature of capital markets and (3) other sectors can give us guidance.
This post is part of a series highlighting the key findings of the Global Financial Development Report 2015 | 2016: Long-Term Finance. You can view the entire series at gfdr2015.
The second part of Chapter 2 of the 2015 Global Financial Development Report examines the use of long-term finance by households. The section first discusses the main reasons that households use long-term finance products, while highlighting the risks inherent to their use. Making use of recent data initiatives, it then shows how usage of long-term finance varies substantially both across and within countries, and then outlines a set of policy recommendations that can help develop and promote long-term finance markets.
Why would households use long-term finance? And what are the risks they can incur?
Long-term finance offers households various tools to achieve their changing objectives throughout their life-cycle. Products such as pensions, insurance, or annuities can help households prepare for retirement, smooth their life cycle income, and insure against various life cycle risks. Student loans or mortgages can make lumpy but potentially high-yield investments affordable to households. Long-term savings instruments can allow households to accumulate and reap term premiums.
This post is part of a series highlighting the key findings of the Global Financial Development Report 2015 | 2016: Long-Term Finance. You can view all the posts in the series at gfdr2015.
The first part of Chapter 2 of the 2015 Global Financial Development Report examines the use of long-term finance from the firm’s perspective. It draws on theoretical and empirical studies to ask why firms would want to use long-term finance and how this use affects their performance. It also relies on the most recent data and evidence to show how use of long-term finance varies across countries and discusses what governments can do to promote the use of long-term finance by firms. Here are the main messages regarding firms’ use of long-term finance:
Firms tend to match the maturity of their assets and liabilities, and thus they often use long-term debt to make long-term investments, such as purchases of fixed assets or equipment. Long-term finance also offers protection from credit supply shocks and having to refinance in bad times. But not all firms need long-term finance. For example, firms with good growth opportunities may prefer short-term debt since they may want to refinance their debt frequently to obtain better loan terms after they have experienced a positive shock.
During his visit to Washington last week, China’s President Xi Jinping confirmed that the world’s largest greenhouse gas emitter, which has pledged to reduce its carbon intensity and reach a peak of overall emissions by 2030, will use a cap-and-trade market approach to help realize this.
China already has 7 pilot markets in cities and provinces in place that cover 1 billion tons of greenhouse gas emissions annually. Under the national scheme, now to go live in 2017, this could increase to 4 billion tons according to Chinese researchers - making it the world’s largest national emissions trading system.
It’s an exciting step and demonstration of China’s commitment to achieve its low carbon goals.
This blog is part of the series #OneSouthAsia exploring how South Asia can become a more integrated, thus more economically dynamic region. The blog series is a lead up to the South Asia Economic Conclave, an event dedicated to deepening existing economic links through policy and investments in regional businesses.
Here’s an interesting statistic: 95 percent of trade by South Asian countries is focused on Europe, North America, and, to a lesser extent, East Asia. This has kept the sub-continent, with several landlocked and border regions being some of the poorest in the world, from realizing the wealth in its own neighborhood. By contrast, 25 percent of ASEAN’s trade is within its own region.
More than two decades ago, the world agreed on the need to confront climate change.
The U.N. Framework Convention on Climate Change (UNFCCC) emerged in 1992, spawning a variety of negotiating forums with the goal of preventing catastrophic impacts from planetary warming caused mostly by polluting societies.
It's easy to overlook the progress that has occurred since, because we still have so far to go. Droughts, flooding and cyclones that already seem to be the norm are just the latest warnings of what is coming, and preventing much worse requires immediate and aggressive action to drastically reduce greenhouse-gas emissions.