I recently attended an SME Conference in Jordan around SME Finance and Employment – extremely important issues in a troubled region. All participants agree that much more needs to be done to address the lack of jobs in the region and to increase financial access at all levels, to individuals, households and small and medium scale enterprises (SMEs).
Only 4% of unbanked adults in the Middle East say that they don’t have an account because they don't need one. In other words, it is clear there is widespread unmet demand for financial services.
A person living in the Middle East is less likely to have a bank account than is a low-income person living in Africa or South Asia, and significantly less likely than a person living in Latin America, Eastern Europe or East Asia from comparable middle income country or region. This poses a dilemma – why?
At the Global Parliamentary Conference 2016, the perspectives of parliamentarians from 70 countries energized the debate before the Bank's and the Fund's Spring Meetings. From left to right, on the Preston Auditorium stage: Jeremy Lefroy, a Member of Parliament in the U.K., who served as the conference chairman; IMF Managing Director Christine Lagarde; and World Bank President Jim Yong Kim.
Did you happen to miss the Davos conference over the winter? I feel your pain: Somehow, for the umpteenth year in a row, my ticket to the World Economic Forum in Davos must have gotten lost by the Postal Service, too.
Not to worry, however: Twice a year, in April and October, Washington’s motto might as well be “Davos Every Day” – as the great and the good of globalization gather for the formal meetings of the World Bank Group and the International Monetary Fund.
The Bretton Woods siblings are just-now recovering from their semiannual tsunami of scholarship and diplomacy, with still-dazed staff members sorting through their accumulated post-Meetings mountains of newly published policy monographs, economic analyses and deepthink datapoints. This spring’s sprint focused, as is customary, on the speeches, statements and seminars with the Bank’s and the Fund’s scholars, along with the insights of the institutions’ core constituents: the Finance Ministers and central-bank governors who oversee their countries’ daily economic policymaking.
But there was an additional governance-focused feature at this spring's gathering: Meetings-goers also gained the valuable perspective of the almost 200 lawmakers and observers from 70 countries who convened in Washington, for just the second time, for the annual Global Parliamentary Conference. The gathering was held under the auspices of the Bank- and Fund-sponsored Parliamentary Network, which is now chaired by Jeremy Lefroy, a member of the U.K.’s House of Commons representing Stafford.
Questions like those – focusing on the private sector as the principal driver of growth, with deft public policy as an indispensable catalyst – inspired a dialogue among some of the developing world’s most experienced policymakers at a major forum, “Powering Up Growth: Ideas for Beating the Slowdown,” during the recent Spring Meetings of the World Bank Group and the International Monetary Fund. All four government Ministers on the panel – from both commodity-exporting and -importing countries – voiced a sense of urgency, describing their efforts to attract private investment to spur job creation, amid a global economy that seems destined for prolonged weakness.
Before the policymakers ascended the Preston Auditorium stage, sobering updates had arrived from the Bank and the Fund: The Bank’s latest forecast for global growth has been lowered from 2.9 percent to 2.5 percent – with the caveat that this latest forecast is subject to further downside risks. That downward revision is in parallel with the Fund’s similar projection, which sees global growth this year in the neighborhood of just 3 percent.
Policymakers worldwide are eager to explore any option to try to lay the foundation for an eventual return to a long-term economic expansion. It was clear that the panelists in the “Powering Up Growth” event – which was convened by Jan Walliser, the Vice President for the Bank Group’s practice group on Equitable Growth, Finance and Institutions (EFI) and organized by the Global Practice for Macroeconomics and Fiscal Management (MFM) – were focused on long-term structural changes that can energize the private sector’s ability to drive growth.
Powering Up Growth: Ideas for Beating the Slowdown
The panelists – from Bolivia, Pakistan, Angola and Ukraine – represented countries from different regions and at various levels of economic development, but they shared a determination to jump-start growth through reforms that will strengthen the private sector’s long-term confidence. The Ministers, at times, seemed to envision opportunities, not just for short-term structural adjustment of their priorities or medium-term structural reform of their policy farmeworks, but for far-reaching structural transformation of their economies and societies.
“The only way to achieve the sustainable development goals is to use more public capital strategically for unlocking private investment, particularly for infrastructure,” says Amadou Hott, CEO of the Senegalese Fund for Strategic Investments.
The Senegalese Strategic Investments Fund (FONSIS, for its acronym in French) is part of a rapidly expanding network of state-sponsored strategic investment funds (SIFs) now emerging in countries at all income levels. The World Bank Group and its partner, the Public Private Infrastructure Advisory Facility, work with FONSIS in an advisory role, and FONSIS provides input to the Bank’s research on SIFs. In the World Bank Group’s recently issued Climate Change Action Plan, SIFs feature as one of the tools to crowd in private capital to climate mitigation and adaptation projects.
Mr. Hott was in Washington last week for the Spring Meetings, and we caught up with him during a break in his schedule. Mr. Hott represents a new generation of African financial sector professionals and leaders, who have returned to opportunities at home after earning degrees at leading global universities and gaining extensive experience on Wall Street, in the City of London, and in other global financial centers. He was also nominated a Young Global Leader by the World Economic Forum.
Q. FONSIS has been doing some very interesting projects. Could you tell us about some of your signature investments?
One project that I think is innovative is our building and commercial operation of the POLIMED (Pôles d’Infrastructures Médicales) diagnostic center within the public hospital of M’Bour, a coastal city 70 kilometers from Dakar. The hospital itself couldn’t afford to buy the required advanced technological equipment, and we were asked to build and run the diagnostic center as a commercial operation, with the public doctors and technicians of the hospital providing the medical services to keep down patient fees. Since operations started at the end of December 2015, more than 4,000 patients have been diagnosed, and the financial results are looking good so far. We intend to replicate this model all over the country to upgrade our medical infrastructure.
Another interesting project is the 30 megawatt, €41 million, solar energy power plant Santhiou Mékhé, and a 9 km transmission line to the grid. We closed that deal this past February. We were approached by the project’s initial developer, and our role was to structure the financial side of the project, help finalize the power purchase agreement with the off-taker, reach out to potential investors, and negotiate the debt and equity contributions. We also put down about €1.0 million of our own capital as a cornerstone investor, to give the project credibility at the initial stage. We expect the plant to be producing electricity in late 2016. I think we’ve achieved a good result: about €40 of external equity and debt co-investment for every euro that we ourselves invested. In general, we aim to achieve a multiplier of around 10 on our own invested capital, but we achieved an exceptionally high multiplier in this case, as we managed to secure a debt/equity ratio of 80/20.
Singapore is an example of one of the most competitive cities in Asia and in the world. Many, many other cities want to be the next Singapore. In fact, Singapore has been so successful that some believe that its success cannot be emulated. They forget that in the 1960s, Singapore faced several challenges – high unemployment, a small domestic market, limited natural resources, not to mention that most of the population lived in overcrowded unsanitary conditions in slums. Challenges that would sound very familiar to a large number of cities in the developing world.
The competitiveness potential for cities is enormous. Almost 19 million extra jobs, annually, could be created globally if cities performed at the level of the top quartile of competitive cities. Of this potential, more than 1/3, i.e. equivalent to an additional 7 million jobs, comes from cities in East Asia. Between 2000 and 2010, nearly 200 million people moved to East Asia's urban centers – these people will need jobs. Where will these jobs come from? How will they be generated?
Two billion people worldwide still lack access to formal and regulated financial services. In 2015, the Bank Group with private and public sector partners committed to promoting financial inclusion and achieving Universal Financial Access by 2020. We've invited our partners to reflect on why they've joined the UFA2020 initiative and how they're contributing toward this goal. This contribution comes from the Pakistan Microfinance Network. #FinAccess2020
Photo Credit: Muhammad Kaleem, Courtesy of the Farmers Friend Organization (FFO)
Kaneez Fatima is a 50 year-old entrepreneur living in Sheikhupura, a city situated 40 km northwest of Lahore, Pakistan. Years before when her husband passed away, she had no idea to find the means for raising a family of six and her future seemed bleak. In her childhood she had acquired the skill of stitching footballs, and she thought about setting up her own workshop. But as a woman in a male dominated market, in an already challenging entrepreneurial environment, she faced what seemed to be an uphill challenge.
Sadly, Kaneez is not alone. World Bank Group Findex data estimates that Pakistan is home to 100 million unbanked people, or 5.2% of the world’ unbanked population, and the ‘Access to Finance Survey 2015’ commissioned by the State Bank of Pakistan states that only 23% of adults use formal financial services offered by formal financial intermediaries with only 16% of Pakistani adults have an account with a formal financial institution.
There’s a lot of good news in the World Bank’s latest economic report on South Asia: the region is the fastest growing in the world and its limited exposure to global economic turbulence means that its near-term prospects look good.
It is time for the annual Spring Meetings. Many of the world’s finance and development ministers, along with business and civil society leaders, are here is Washington and have been meeting with us at the World Bank this week to discuss what we can do to rise up to these challenging times. Most conversations have come to land on two important questions, namely: What is happening around the world in different regions? And: what can we do to stem the slowdown and disunity around the right policy way ahead?
In an effort to harness the benefits of urbanization and improve the living conditions of the urban poor, Latin American countries have experimented with housing subsidies. Now that the region has several decades of experience under its belt, it is time to look back and ask: Have subsidies worked? What kind of impact have they had on the lives of lower-income residents? Moving forward, how can cities pay for ongoing urban renewal?
Finance ministers, auditors-general, and leaders of professional accounting organizations are meeting Tuesday in Nassau to discuss a topic that is often hidden from view, but is critical to quality of life in the Caribbean: Capacity and standards in public financial management.
How governments manage taxes, borrowing and spending is essential to economic growth, to poverty-reduction, and to ensuring that the region’s poorest can improve their lives. It is a core function of accountability in government. Improvements in this area could increase the health of small and medium-sized enterprises, create jobs, and bring in additional government revenues to spend on essential public services. Residents of Caribbean nations: this strategic dialogue will be about how the government manages your money.