Financial inclusion is a topic of increasing interest on the international policy agenda. Last week the Universal Postal Union (UPU) hosted the 2013 Global Forum on Financial Inclusion for Development. With over a billion people using the postal sector for savings and deposit accounts and a widespread presence in rural and poor areas, post offices (or “posts”) can play a leading role in advancing financial inclusion. In Brazil more than 10 million bank accounts were opened between 2002 and 2011 after the post established Banco Postal in partnership with an existing financial institution. However, leveraging the large physical network of the post is not without challenges. Posts generally have little or no expertise in running a bank and the business model that a government pursues in providing financial services through the postal network may be critical to its success.
Egyptian writer and commentator Bassem Sabry talks to Hartwig Schafer, World Bank Director for Djibouti, Egypt and Yemen about the economic challenges facing Cairo.
Sabry: What do you think are the questions that are missing from the discussion on Egypt right now?
Schafer: I think the question is, what is the priority right now for Egypt? If we go back two and a half years, the revolution was basically the result of growing exclusion and inequality. And that is still, in my view, the top priority.
The 2014 Global Financial Development Report, released today by the World Bank Group, presents the most comprehensive review to date of research findings on an increasingly prominent issue in international economic policy: financial inclusion. It also highlights several key topics that are linked to the growing interest in this topic – advances in technology, product design innovations and the role of financial education in financial inclusion.
It’s easy to understand the focus on technology in this kind of report. Mobile phones and other telecommunications and digital technologies offer potential opportunities for the cost-effective expansion of financial services into previously overlooked or under-served markets. Technology is only part of the reason, however, for increased attention to financial inclusion. There is also a new appreciation for the role of financial services in the lives of the poor – an appreciation gained through a pioneering research effort using “financial diaries” methodology. This includes an awareness that even the best supply-side responses – often powered by new technologies – need to understand the demand side of the equation to be commercially successful and to offer value to consumers.
King James had it right early on. “All Treasurers, if they do good service to their masters, must be generally hated”, he remarked after he couldn’t protect his own treasurer Lionel Cranfield from being thrown into the Tower of London in chains. Cranfield had made too many powerful enemies by opposing an expensive war the treasury couldn’t afford. His many successors through the ages can probably relate without too much difficulty.
Following the ousting of Hosni Mubarak in 2011, many Egyptian expatriates turned towards their home country with a renewed sense of hope and desire to participate in the change process. As the political and economic transition is underway, many Egyptians abroad are looking for ways to engage in the transition period, and donors and development agencies are trying to effectively channel their efforts to contribute to development outcomes.
To some, Sharia-compliant financial services offer a promising path towards expanding financial inclusion among Muslim adults. To others, these services – which avoid charging interest and seek to conform to Islamic principles of profit- and loss-sharing – do not address the root causes of financial exclusion. But most agree that there is a dearth of empirical research that measures the degree to which Muslims are using Sharia-compliant financial products, their demand for it, and the extent to which they refrain from using conventional financial systems. Without data and related analysis, policymakers and private sector leaders are often speculative in framing the role of Islamic finance within the financial inclusion agenda.
"Project Greenback 2.0 – Remittance Champion Cities" was launched on October 29 in Turin, Italy.
A team from the World Bank's service line on Financial Infrastructure, hosting the launch event, was thrilled to welcome a room full of migrants, market paricipants, public officials, policy researchers and private-sector observers.
Since March 2013, in partnershp with the Turin city government, the World Bank team has been preparing for the launch of Project Greenback 2.0, which aims to foster the development of a sound and efficient market for remittances. The project pursues an important new approach: It focuses on remittance senders, and its priority is meeting their needs.
In the first months of our efforts in Turin, we have been working on a survey among remittance senders, and we have been mapping and monitoring the services that are available to them when they seek to send money home. The survey focused on Romanians, Moroccans and Peruvians – the most numerous immigrant groups in Turin, who together account for more than 60 percent of the city's immigrant population.
Natural disasters – such as tsunamis, earthquakes, cyclones and floods – are costly to society, in terms of both human destruction and financial losses. Governments ultimately bear the full cost of the havoc wreaked by natural disasters, which can create an enormous strain on limited government budgets, especially in developing countries. This is even before we begin to contemplate the development impact and how the poorest of the poor are disproportionately affected.
Just last week, the world saw the widespread damage that the St. Jude storm inflicted across Europe, and we witnessed its effect on hundreds of thousands of people. Most advanced economies, however, have sufficient capacity to be able to absorb the financial losses inlicted by natural disasters. Higher-income countries enjoy (relatively) efficient public revenue systems and developed domestic insurance markets.
By contrast, developing countries do not have the same degree of access to financial and insurance markets. They face limited revenue streams, limited fiscal flexibility, and limited access to quick liquidity in the wake of an event. This is particularly so for Small Island Developing States (SIDS), such as the Pacific island nations.
In the three years since the Arab Awakening of late 2010, the Middle East and North Africa (MENA) has seen an increase in conflict and political instability, on the one hand, and a deteriorating economic situation, on the other. Given the vicious cycle between economic hardship and conflict, it is natural to ask whether a return to political stability will restore prosperity in the region.
Sitting in a safe house, an ocean away, three former pirates reflect on their past lives as ”footsoldiers” aboard skiffs preparing to attack unsuspecting cargo vessels off the Horn of Africa. Our research team is transfixed by their stories.
We listen as they describe to us how they got involved in the piracy business, how much they earned, how they spent their money and, perhaps most interesting, what they know about their ”masters” – the pirate financiers, investors and negotiators.
These footsoldiers were merely small fish in a big sea. They would be sent out to hijack shipping vessels, which would only be returned to the ships’ owners for a hefty ransom.
Following research for our report “Pirate Trails,” studying acts of piracy off the Horn of Africa, we estimate that between US$339 million and US$413 million was handed over in ransom payments between April 2005 and December 2012. The exact amount is very hard to pin down, given the reluctance of the shipping companies and pirates to reveal the cost and rewards of piracy.