How do Arab economies fare in terms of “Competitiveness”? Are they able to provide prosperity for their citizens? Are they efficient in using available resources?
The variation in investment among developing countries is truly remarkable. Over the course of the 30-year period between 1980--2010---a period of relative calm in the global economy that is often referred to as the "Great Moderation"[*]---the investment rate in developing countries ranged from a whopping 90 percent (Armenia in 1990) to a dismal 1 percent (Liberia in 2003). This variability is more than twice that of variance in economic growth---a topic that has preoccupied many more generations of researchers---and much of this variability stems from the developing world.
Financial Inclusion Commitments through the Maya Declaration, the G20 Peer Learning Program, and the Better Than Cash Alliance.
Today at 2 o’clock in the Preston Auditorium, Jim Kim, the President of the World Bank Group – along with Queen Máxima of the Netherlands, the U.N. Secretary General’s Special Advocate for Inclusive Finance for Development – will challenge the global community to focus on transformational change in the level and quality of financial inclusion.
Why financial inclusion? Because it is an enabler for poverty reduction and shared prosperity, as has been recognized by the U.N. Secretary General’s High-Level Panel on the Post-2015 Development Agenda.
Progress in tackling financial exclusion can be accelerated through the current global wave of nation-by-nation financial inclusion targets and commitments; through improved data availability; and through transformative business models for providing financial services.
Bangladesh was born on December 16 1971, following a devastating war that cost the lives of 3,000,000 people. They were victorious in their fight for independence, yet the prospects of the Bangladeshi people living in the 70’s were disheartening, earning it the now rather infamous connotation of a basket case, as Henry Kissinger called it back in 1971. Emerging from the rubbles left by the war, the resilient Bangladeshis began the rebuilding of their newly established nation. Economic growth was slow to take off, and it rebounded to the pre-war level about twenty years later, in the 90’s. Yet, it was after the 90’s that the country began to attain palpable progress and only over the 2000-2010 decade that the country achieved great poverty reduction. The depth-of-poverty MDG target of 8 percent was attained five years ahead of schedule, and Bangladesh was set in the right path for achieving the first MDG goal of halving the poverty headcount to 28.5 percent by 2015.
South Asia is the least integrated region in the world. Intra-regional trade in South Asia is less than 2% of GDP compared to over 20% in East Asia. Labor mobility and regional travel is minimal, with few exceptions. Even remote communication is low – only 7% of international telephone calls in South Asia are to countries within the region, compared to 71% for East Asia. The case for closer integration has remained strong for a while now, and it is refreshing to see that some movement, albeit watchful, in addressing some of the region's deep rooted political economy issues, particularly between India and Pakistan.
The discussions around closer integration have centered on energy, trade, connectivity and stability. All of these offer strong potential to enhance growth in the region. However, financial sector integration overall, and access to finance in particular, hardly ever make it to the agenda of regional integration forums and deliberations. This is unfortunate, because the region has a long way to go in providing adequate access to financial services and insurance products, especially to the vulnerable segments of the population. Given that South Asia is home to more than half a billion of the world’s poor, this becomes a poverty reduction goal as much as a financial inclusion goal.
The world’s population by 2030 is projected to be 8.1 billion, 2 billion more than in 2000. A full 95 percent of the increase over this 30 year period will take place in the developing world, nearly all of it concentrated in urban areas. There is a relentless process of urbanization under way all over the world which, for instance, has transformed China’s landscape and has contributed to that country’s rapid pace of economic growth. Whereas in 1980 less than 20 percent of China’s total population of close to 1 billion was living in urban areas, by 2000 this share had risen to 33 percent. The urban population during this period expanded from about 190 million to over 420 million, and is projected to reach 1 billion by 2030. Well before 2030 China will have several megacities, with the population of Shanghai likely to exceed 25 million.
‘Imagine you have a lot of mangoes on your farm and your neighbor has lots of tomatoes. You make a bargain and he says he will give you three tomatoes for every mango you give him. If you give him fourteen mangoes, how many tomatoes do you expect him to give back to you?’
This question, amongst others, has been asked in the 2009 and 2011 Kenya FinAccess surveys. If you got the answer to this question right (see end of the blog for the correct answer), congratulations! It may be an indication that you are financially literate. Or would you rather be financially capable? ‘Financial Literacy’ and ‘Financial Capability’ are two terms many have heard about and usually they are used interchangeably. However, in a recent World Bank publication, which tries to ‘Make Sense of Financial Capability Surveys around the World’, the authors (Perotti, Zottel, Iarossi, and Bolaji-Adio) reviewed key approaches to measure financial literacy and capability. In doing so, they identified Financial Literacy to be often associated with financial knowledge.
From 2006 to 2009, growth of bank deposits dropped by over 12 percentage points globally. The most affected by the 2008 global crisis were upper middle income countries that experienced a drop of 15 percentage points on average. Individual countries such as Azerbaijan, Botswana, Iceland, and Montenegro switched from deposit growth of 58 percent, 31 percent, 57 percent, and 94 percent in 2007 to deposit declines (or a complete stop in deposit growth) of -2 percent, 1 percent, -1 percent, -8 percent in 2009, respectively.
In times of financial stress, depositors get anxious, can run on banks, and withdraw their deposits (Diamond and Dybvig, 1983). Large depositors are usually the first ones to run (Huang and Ratnovski, 2011). By the law of large numbers, correlated deposit withdrawals could be mitigated if bank deposits are more diversified. Greater diversification of deposits could be achieved by enabling a broader access to and use of bank deposits, i.e. involving a greater share of adult population in the use of bank deposits (financial inclusion). Based on this assumption, broader financial inclusion in bank deposits could significantly improve resilience of banking sector funding and thus overall financial stability (Cull et al., 2012).