After a prolonged slowdown, investment growth in emerging markets and developing economies (EMDEs) picked up to 4.5 percent in 2017, and is projected to accelerate to 5.2 percent in 2018 and 2019 (investment refers to real gross fixed capital formation, public and private combined). Yet projected investment growth is below its long-term (1990–2017) average, inhibited by political uncertainty, trade risks, and expectations of rising interest rates. This will likely limit potential output growth and delay per-capita income convergence between EMDEs and advanced economies.
The retrenchment and intensified regulation of the traditional banking system after the global financial crisis, combined with greater access to information technology and wider use of mobile devices, have allowed a new generation of firms to flourish and deliver a wide array of financial services. What does this mean for the traditional banking system?
In the Global Financial Development Report 2017/18 and a new Research and Policy Brief, we argue that despite the rapid expansion of fintech companies, so far, the level of disruption seems to have been low. This is partly driven by the complementarity between the services provided by many fintech providers and traditional banks. That is, in many instances, the new fintech companies bring alternative sources of external finance to consumers and SMEs, without displacing banks. For example, online lending is an alternative for the type of borrower usually underserved by traditional banks. This is of special relevance not only for households and firms in the developing world (where the banking system is often underdeveloped), but also for underserved borrowers in high-income countries. Moreover, because a bank account is needed to perform many of the fintech services, it is hard now to imagine fintech companies overtaking banks completely and becoming involved in the current accounts niche. There will always be need for a highly regulated service that allows households and firms to keep their money safe and accessible. Banks seem to be the players best suited for that role.
Photo: Arne Hoel
Description: Fish market and vegetable market, Nouakchott. The daily catch is brought here by the fishermen’s wives and family members to sell the fish.
As the World Bank Group’s flagship publication, Doing Business, celebrates its 15th edition, Mauritania continues to thrive as a major reformer in investment climate policy. The country was highlighted in the Doing Business 2016 report among the top 10 reformers worldwide and the current 2018 report shows that Mauritania outperforms the regional average.
Following a downward trend between 2010 and 2014, Mauritania has been steadily improving its ease of doing business performance. Figure 1 shows how, in just three year, a series of reforms that began in earnest during 2015, were key to help the country jump a remarkable 26 places from 176th in 2015 to 150th this year in 2018.
Asian economies are well positioned for robust growth — with GDPs expected to rise by an average of 6.3% in each of the next two years. Emerging markets in Asia are also the best performers in economic growth in recent years, especially when compared with emerging markets outside of Asia.
But to ensure this growth is equitable and inclusive, Asian business leaders, academics and policymakers need to confront a host of challenges, including significant “unbanked” and “underbanked” populations. More than 1 billion people within the region still have no access to formal financial services — meaning, no formal employment, no bank account, no meaningful ability to engage in commerce online or offline. By some estimates, only 27% percent of adults have a bank account, and only 33% of firms have a loan or line of credit. As was highlighted by the speakers at the recent Mastercard-SMU Forum in Singapore, greater financial inclusion must become an essential component of Asia’s economic development.
Financial inclusion is on the rise globally. The third edition of the Global Findex data released last week shows that worldwide 1.2 billion adults have obtained a financial account since 2011, including 515 million since 2014. The proportion of adults who have an account with a financial institution or through a mobile money service rose globally from 62 to 69 percent.
Why do we care? Having a financial account is a crucial stepping stone to escape poverty. It makes it easier to invest in health and education or to start and grow a business. It can help a family withstand a financial setback. And research shows that account ownership can help reduce poverty and economically empower women in the household.
Albert Einstein once said: “The only source of knowledge is experience.” For years I have wondered about this. Surely you can understand something without actually having done it. After all, mankind’s understanding of the vast universe is greater than what can be directly experienced, and some of it is derived from theoretical reasoning. I was on my way to the 2018 Africa Carbon Forum to share fiscal policy lessons under the CAPE program and the debate was still raging in my head when I arrived at the UN campus in Nairobi Kenya.
Asset owners and financial intermediaries increasingly seek to finance development that meets present needs without harming future generations.
This is around one-quarter of professionally managed assets globally.
The focus of ESG investing has been on equity markets – given its roots in corporate governance and engagement, and with information most readily available on listed companies.
By 2050, two-thirds of all people will live in cities. Each year, 72.8 million more people live in urban areas. That’s the equivalent of a new San Diego appearing every week.
But By 2030, climate change alone could force up to 77 million urban residents into poverty.
Achieving resilience is the goal – and the good news is that cities aren’t alone on the team.
We're delighted to release the 2017 Global Findex, the third round of the world's most detailed dataset of how adults save, borrow, make payments, and manage risk.
Drawing on surveys with more than 150,000 adults in more than 140 economies worldwide, the latest Global Findex features new data on fintech transactions made through mobile phones and the internet. It also provides time series updates for benchmark financial inclusion indicators.
The data shows that financial inclusion is on the rise globally, with 1.2 billion adults opening accounts since 2011, including 515 million in the last three years alone. That means 69 percent of adults globally have an account, up from 62 percent in 2014 and 51 percent in 2011. We see that Fintech, or financial technology, plays a progressively greater role in countries like China, where 50% of account owners use a mobile phone to make a transaction from their account. Compared to 2014, twice as many adults in Brazil and Kenya are paying utility bills digitally.
The existing evidence from both cross-country and country case studies on the determinants of foreign bank entry and on the impact of foreign banks on host economies suggests the brick-and-mortar operations of international banks have important implications for competition and efficiency of the local financial sectors and for financial stability and access to credit in the host country (World Bank, 2018). The Global Financial Development Report 2017/2018: Bankers without Borders contributes to the policy dialogue on international banks by summarizing what has been learned so far about: i) the risks and opportunities posed by foreign banks when entering developing countries and ii) under what circumstances host economies can reap most benefits from the entry of international banks.