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Financial Sector

Dancing with angels, racing with gazelles and dreaming of unicorns

Simon Bell's picture


From IFC photo collection. Reuters/Thomas Mukoya

There has been a lot of discussion around the topic of SMEs and job creation.  While SMEs can foster innovation, help diversify an economy, spread economic activity beyond the main urban hubs, give opportunities to women and youth and much more, their role in creating jobs – in the current economic environment – is key.

Interesting work by the Kauffman Foundation (see graph below) shows than virtually all new net job creation in the U.S. economy has been generated by firms that are less than five years-old and which, almost by definition, are more than likely to be small.  Although there is a huge amount of job churn in this class of enterprise (which are new and therefore probably small), the “net” impact is powerful.  A small subset of these firms are “gazelles” – or very fast growing enterprises – which grow from 5 to 500 employees in a five-year period, generating impressive results.

2014 Global Findex microdata provides a closer look at people’s use of financial services

Leora Klapper's picture
We’ve just rolled out the 2014 Global Findex microdata, which features about 1,000 individual-level surveys on financial inclusion for 143 economies worldwide. Check it out at the Findex homepage or in the World Bank's Data Catalogue.
 

 

Leveraging Islamic finance promotes growth and prosperity of small businesses

Bertrand Badré's picture
Shop owners get ready for another day of work in Cairo, Egypt. © Dominic Chavez/World Bank


From the smallest rural villages in Bangladesh to the large, bustling metropolitan centers of Cairo or Istanbul, small and medium enterprises (SMEs) are the lifeblood of Islamic communities around the world, keeping local economies humming.

I first became interested in the potential of leveraging Islamic finance to grow SMEs when I led a seminar on the topic in 1997. I’ve come full circle, almost 20 years later, when I had the opportunity to speak last month in Istanbul at a conference on “Leveraging Islamic Finance for SMEs” organized by the World Bank Group, the Turkish Treasury, the Islamic Development Bank and TUMSIAD, the largest association of SMEs in the country with 10,000 members.

Quote of the week: Ben Bernanke

Sina Odugbemi's picture

Ben Bernanke“Individually rational behaviour can be collectively irrational. And that’s why the regulators have to do what they can to constrain individual behaviour, so that it doesn’t lead to collectively irrational outcomes.”
 

- Ben Bernanke, an American economist currently working at the Brookings Institution. He served two terms as chairman of the Federal Reserve, the central bank of the United States, from 2006 to 2014. During his time as chairman, Bernanke oversaw the Federal Reserve's response to the late-2000s financial crisis. Bernanke wrote in his 2015 book, The Courage to Act, that the world's economy came close to collapse in 2007 and 2008 and that it was only the innovative efforts of the Federal Reserve, in cooperation with other agencies and agencies of foreign governments, that prevented an economic disaster greater than the Great Depression.  Prior to serving as chairman of the Federal Reserve, Bernanke was a member of the Board of Governors of the Federal Reserve System from 2002-2005 and proposed the Bernanke Doctrine concerning the source of deflation.  

Launching the 2014 Global Findex microdata

Asli Demirgüç-Kunt's picture

I am pleased to announce the release of the 2014 Global Findex microdata, which includes individual-level responses from almost 150,000 adults around the world. You can download it all here.

Drawing on interviews with adults in 143 countries, the 2014 Findex database measures account ownership at banks and other financial institutions and with mobile money providers, and explores how adults save, borrow, make payments, and manage risk. For each of these countries, the microdata unpacks about 1,000 individual-level survey observations.

With this data, which was collected by Gallup, Inc. in calendar year 2014, you can dive deeper into the indicators presented in the main Findex database. For example, the country-level indicators explore the income gap by looking at adults in the poorest 40 percent and richest 60 percent of households, but the microdata splits it into quintiles. The microdata also covers topics that weren’t included on the country-level, such as unbanked adults' reasons for lacking an account.

For a more detailed discussion of Global Findex findings and methodology, visit our website and see our working paper.

I hope you will make good use of the data, and share your findings with us on Twitter @GlobalFindex.

Helping cities finance sustainable urban development

Ede Ijjasz-Vasquez's picture


The United Nations has designated 31 October as World Cities Day to highlight the many challenges and opportunities of global urbanization.  

In his new video blog series, Ede Ijjasz-Vasquez, Senior Director of the World Bank’s Social, Urban, Rural and Resilience Global Practice (GPSURR), speaks with urban development specialists about what it takes to build sustainable cities – communities that are environmentally-friendly, competitive, inclusive, and resilient to disasters of today and disasters of tomorrow.

5 ways to make finance fairer for all

Ceyla Pazarbasioglu's picture
The catastrophic effect of the 2008 financial crisis on growth, trade and jobs across the globe exposed fundamental weaknesses in the financial sector. It also provided the impetus for a major overhaul. Are we making the most of this opportunity to fix the system? Are we building a financial system that is ethical and serves society, and not the other way round?
What’s the good side of finance? 
Financial systems play a key role in facilitating shared prosperity. Just about any important activity requires finance, be it personal health, owning a home, investing in education, starting up and growing a business, or taking care of the elderly. Many financial products – such as installment loans or mortgages – are particularly important for low and middle-income people, and help them smooth and increase their lifetime income.
In a functioning market, money flows freely, information is broadly shared and investors get adequate returns for the risks they take through equity or debt instruments, capital flows to profitable companies, projects and investment opportunities. In an ideal world, the financial system helps society allocate resources and manage risks. Finance works.

Helping cities finance sustainable urban development

Ede Ijjasz-Vasquez's picture
Building low-carbon, climate-resilient cities requires large infrastructure investment that often exceeds the financial capacity of cities in the developing world. In this video, Roland White, World Bank Global Lead for City Management, Finance and Governance, elaborates on some of the practical steps cities can take to put their financial house in order and mobilize the funds they need to finance greener urban development.
 

How can Russia grow out of recession?

Birgit Hansl's picture

Russia’s economic woes continue: the recession deepened in the first half of 2015, severely impacting households, while the economy continued to adjust to the 2014 terms-of-trade shock, which saw oil prices being halved within a few months. In addition, investment demand has contracted for a third consecutive year.

Economic policy uncertainty, arising from an unpredictable geopolitical situation and the ongoing sanctions, caused private investment to decline rapidly as capital costs rose and consumer demand evaporated.

The record drop in consumer demand was driven by a sharp contraction in real wages, which fell by an average of 8.5% in the first six months of 2015 - illustrating the severity of the recession. The erosion of real incomes significantly increased the poverty rate and exacerbated the vulnerability of households in the lower 40% of the income distribution.

So, if oil prices remain low, how can Russia grow out of its recession?

Five steps to closing the $2 trillion credit gap

Peer Stein's picture

Dignity factory workers producing shirts for overseas clients, in Accra, Ghana
Dignity factory workers producing shirts for overseas clients, in Accra, Ghana. Photo © Dominic Chavez/World Bank.

Everyone needs financial services – the poor, the middle class, and the wealthy. But if you are poor, access to quality finance is harder to come by, and much more expensive. Unfortunately, the same is still true for small businesses around the world.

Compared to large companies, small and medium-sized enterprises (SMEs) face severe credit constraints. Two-hundred million businesses globally are unable to get the credit they need, both for working capital and for investments. The estimated global credit gap exceeds $2 trillion. These credit constraints are most acute in low-income countries, where nearly half of small businesses cite lack of access to finance as a major barrier to growth.

This SME finance gap is often described as the “Missing Middle”: microfinance institutions provide capital for microenterprises with fewer than five employees and commercial banks or private equity firms serve large corporations and multinationals. Small and medium-sized companies, usually defined as companies with up to 250 employees, are stuck in the middle. This is an enormous problem, because the vast majority of all firms world-wide are SMEs – up to 95%, according to some definitions.


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