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Financial Sector

Pathways to profits for micro and small enterprises

Bilal Zia's picture

Numerous research studies on micro and small firms from around the world have shown that (a) microenterprises are ubiquitous; and (b) only a very small percentage of such firms scale up to become SMEs.

The obvious question is why?

It is not for want of help. Each year billions of dollars in aid is given to developing economies to help entrepreneurs establish and grow their ventures.  Yet evidence suggests that this money is having little impact in some of the key areas it is directed towards improving.

Take microcredit for example. A recent review of six randomized evaluations from four continents suggests that, while microcredit has some benefits, it has not led to the transformative improvements in business performance and poverty reduction widely expected.

What did we learn from real-time tracking of market prices in South Sudan?

Utz Pape's picture

Economic shocks can be painful and destructive, especially in fragile countries that can get trapped into a cycle of conflict and violence. Effective policy responses must be implemented quickly and based on evidence. This requires reliable and timely data, which are usually unavailable in such countries. This was particularly true for South Sudan, a country that has faced multiple shocks since its independence in 2011. Recognizing the need for such data in this fragile country to assess economic shocks, the team developed a real-time dashboard to track daily exchange rates and weekly market prices (click here for instructions how to use it).

From billions to trillions: converting billions of official assistance to trillions in total financing

Bassam Sebti's picture


Urgent action is needed to mobilize, redirect and unlock trillions of dollars of private resources to ensure global growth and shared prosperity.

Since 1956, the International Finance Corporation (IFC), the World Bank Group’s member focused exclusively on the private sector, leveraged $2.5 billion in paid-in capital from its shareholders to invest over a trillion dollars for private sector development. IFC’s 60 years of experience has demonstrated the private sector’s ability to create innovative, commercially viable solutions that deliver development impact.

“A year ago, we all signed up to the Sustainable Development Goals. The only way to achieve these goals is if private capital funds them and private business implements them,” said Gavin Wilson, CEO of IFC’s Asset Management Company (AMC) during the World Bank Group/IMF Annual Meetings 2016.

“That’s why we came up with the phrase ‘Billions to Trillions’ last year with our multilateral institutions in the run-up to the Addis conference on financing for development,” he added.

But what does “Billions to Trillions” actually mean? Wilson explained that “we must convert billions of official assistance … to the trillions in total financing.” But he raised a very important question: how are we going to combine commercial capital with development needs?

5 priorities to boost Afghanistan’s development

Annette Dixon's picture
Photo credit: Rumi Consultancy / World Bank


Today I joined leaders and representatives from 70 countries and 20 international organizations and agencies at the Brussels Conference on Afghanistan. Together with its development partners, the World Bank Group pledged its continued support to the Afghan people and outlined a course of action to help all Afghans realize their dream of living in peace and prosperity.
 
Afghanistan has come a long way since 2001 and has made much progress under extremely challenging circumstances: life expectancy has increased from 44 to 60 years, maternal mortality has decreased by more than three quarters and, from almost none in 2001, the country now counts 18 million mobile phone subscribers.
 
Yet, enormous challenges remain as nearly 40 percent of Afghans live in poverty and almost 70 percent of the population is illiterate. This is made worse by growing insecurity and the return of 5.8 million refugees and 1.2 million internally displaced people. Much also remains to create jobs for the nearly 400,000 people entering the labor market each year.
 
To that end, here are five priorities we need to address to ensure a more prosperous and more secure future for all Afghans:

To reinvigorate Europe, we need more integration… of services

Doerte Doemeland's picture


To reinvigorate growth in Europe, European Central Bank President Mario Draghi called for more common projects in the European Union (EU). And he emphasized that these efforts need to meet a set of minimum bars: they should “…focus on those actions that deliver tangible and immediately recognisable results… [they] should complement the actions of governments; they should be clearly linked to people’s immediate concerns; they should unequivocally concern matters of European or global significance.”

We couldn’t agree more.

Field of Dreams: Mapping the Landscape for Investing in Emerging Market Infrastructure

Joaquim Levy's picture

Estimates of the financing gap for emerging market infrastructure range from nearly half a trillion USD to more than US$1 trillion a year over the next decade. The range reflects the difference between the estimated level of infrastructure needed to sustain growth across emerging markets and the actual level of such investment.
 
The challenges are immense, and resources are scarce. Of the financing that does exist, more than 70% comes from national government budgets; the second largest source (roughly 20%) is the private sector; and remaining resources come from overseas development assistance or aid from developed economies1. Given the overstretched demands of public sector budgets in developed and developing countries alike, any increase is likely to come through more partnership and co-financing from the private sector. 

Making South Asian Apparel Exports More Competitive

Ritika D’Souza's picture

Apparel workers in Bangladesh

There is now a huge window of opportunity for South Asia to create more apparel jobs, as rising wages in China compel buyers to look to other sourcing destinations.  Our new report – Stitches to Riches?: Apparel Employment, Trade, and Economic Development in South Asia  –  estimates that the region could create 1.5 million new apparel jobs, of which half a million would be for women. And these jobs would be good for development, because they employ low-skilled workers in large numbers, bring women into the workforce (which benefits their families and society), and facilitate knowledge spillovers that benefit the economy as a whole.

But for these jobs to be created, our report finds that apparel producers will need to become more competitive – chiefly by (i) strengthening links between the apparel and textile sectors; (ii) moving into design, marketing, and branding; and (iii) shifting from a concentration on cotton products to including those made from man-made fibers (MMFs) – now discouraged by high tariffs and import barriers. These suggestions recently drew strong support from panels of academics and representatives from the private sector and government when the report was launched mid-year in Colombo, Delhi, Dhaka, and Islamabad. South Asia is now moving on some of these fronts but a lot more could be done.

Moving up the apparel value chain
Stitches to Riches? finds that South Asia’s abundant low-cost labor supply makes it extremely cost competitive (except for possibly Sri Lanka). But rapidly rising living costs in apparel manufacturing hubs, coupled with international scrutiny, are increasing pressure on producers to raise wages. Plus, countries like Ethiopia and Kenya, who enjoy a similar cost advantage, are entering the fray, and some East Asian countries already pose a big challenge. The good news is that the policy reforms needed to keep the apparel sector competitive would likely benefit other export industries and transform economies (view end of the blog).

The Nexus of financial inclusion and stability: Implications for holistic financial policy-making

Martin Melecky's picture

Both financial inclusion and financial stability are high on international policy makers’ agenda. For instance, the G-20 has called for global commitments to both advancing financial inclusion (the Maya Declaration and the Global Partnership for Financial Inclusion) and enhancing financial stability (the Financial Stability Board, Basel III Implementation, and other regulatory reforms). One challenge is that there can be important policy trade-offs between the two objectives.

A rapid increase in financial inclusion in credit, for example, can impair financial stability, because not everyone is creditworthy or can handle credit responsibly—as illustrated in the last decade by the subprime mortgage crisis in the United States and the Andhra Pradesh microfinance crisis in India. In addition, trade-offs between inclusion and stability could arise as an unintended consequence of bad or badly implemented polices.

Establishing payments interoperability: coordination is key

Thomas Lammer's picture



Efficient, accessible and safe retail payment systems and services are necessary to extend access to transaction accounts to the 2 billion people worldwide who are still unserved by regulated financial service providers.
 
Having interoperable payment services addresses several important challenges regarding financial access and broader financial inclusion. This is because interoperability enables people to make payments to anyone else in a convenient, affordable, fast, seamless and secure way via a single transaction account.
 
Establishing payments interoperability is a formidable task. Our experience shows it is important to find the right balance between cooperation and competition when reforming retail payment systems.  Despite the advantages that interoperability brings, not all market participants will necessarily embrace interoperability initiatives, e.g. if they fear to lose their dominant position and/or competitive advantage. In an earlier Blog the role authorities to facilitate interoperability has been discussed. Central banks are a key driving force in any payment system reform, but they cannot – and should not – act alone. Other regulators – such as financial and telecom regulators – are also important to achieving interoperability.


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