"Erica Hagen in her piece in Development Outreach talks of the map Kibera effort being a ' first step toward local ownership and creation of shared information.' And in that comment I feel she has hit the nail on the head.'
As an investor, you throw in the previously quite entrenched Africa perception gap and you have a very interesting situation. I would describe the situation as a potential laboratory for innovation. An incredibly youthful skew to the population (60% of Kenyans are under the age of 24) surely is also an accelerator. And hence my desire and interest of late to get on the ground, pound the pavement and see if this has actually been a catalyst for innovation.
This post kicks off a special blog series on the Microfinance Institution, SKS and it's IPO launch in coordination with CGAP. Over the coming weeks we’ll be featuring a variety of voices on the issues raised by the IPO. We welcome your participation in this discussion through comments.
A rare microfinance occurrence took place in late July this year. The Indian microfinance institution, SKS, became the second pure microfinance institution (MFI) globally to go public by listing its shares on the stock market. SKS is one of the largest microfinance institutions in the world with almost 6 million clients, mostly poor women living in rural areas. It has also been one of the fastest growing MFIs over the past few years, with a compound annual growth rate of 165% since 2004.
From one perspective, the IPO was a great success. It was 13 times oversubscribed, the company valuation reached the top of the offer band price (valuing the company at $1.5 billion), and the share price rose 42% in the first five weeks of trading. In the process SKS raised $155 million in fresh capital that will allow it to grow and serve far more people than it reaches now.
With millions around the globe feeling the impact of the financial crisis and slower economic growth and job losses, it is important to understand regulatory and policy constraints on entrepreneurs wanting to start a formal business. Entrepreneurial activity is the basis of sustainable economic growth, and the first step for entrepreneurs joining or transitioning to the formal sector is the registration of their business at the registrar of companies. For evidence of the economic power of entrepreneurship we need look no further than the United States, where young firms have been shown to be an important source of net job creation, relative to incumbent firms (Haltiwanger, et al.).
To measure entrepreneurial activity, we’ve constructed with support from the Kauffman Foundation the World Bank Group Entrepreneurship Snapshots (WBGES) – a cross-country, time-series dataset on new firm registration in 112 countries. The main variable of interest is “Entry Density”, defined as the number of newly registered limited liability firms as a percentage of the working age population (in thousands). We employ annual figures from 2004 to 2009 collected directly from Registrars of Companies and other government statistical offices worldwide. Like the Doing Business report, the units of measurement are private, formal sector companies with limited liability.
I chaired a very lively seminar on Friday afternoon that focused on the question, “Can Africa Trade with Africa?” The answer was a resounding yes.
Today, there is strong consensus among African leaders that regional integration is indispensable to unlock economies of scale and sharpen competitiveness. And promoting intra-African trade has emerged as a top priority, in recognition that the African market of one billion consumers can be a powerful engine for growth and employment.
Yet despite the introduction of free trade areas, customs unions, and common markets within the Region, the level of intra-African trade remains among the lowest in the world -- only about 10% of African trade is within the continent, compared to about 40% in North America and about 60% in Western Europe.
Anyone who has ever been to the Central African Republic (CAR) knows that the country has huge infrastructure needs after years of internal turmoil and strife. But when you look up how much of the government’s investment budget actually was implemented and financed infrastructure development in 2009 for instance, you find a stunningly low execution rate of 5 percent.
A few months ago, I wrote about why I believed that Russia’s planned “science city” was destined for failure, in my BusinessWeek column. I predicted that it would follow the path of the hundreds of cluster development projects before it. Political leaders would hold press conferences to claim credit for advancing science and technology; management consultants would earn hefty fees; real-estate barons would reap fortunes; and as always happens, taxpayers would be left holding the bag. You don’t read about the failures of tech clusters all over the world, in countries like Japan, Egypt, Malaysia, and in many regions of the United States. That’s because they die slow, silent deaths. And that is the way nearly all government-sponsored innovation efforts go.
Given my scathing criticism, I had expected the Russian Federation to declare me persona non grata. Instead, I got an urgent call from Ellis Rubinstein, president of the New York Academy of Sciences. He said that the Honorable Ilya Ponomarev, head of the high-tech subcommittee of the Russian State Duma (Russia’s parliament) had asked the academy to prepare a detailed report on this subject. And they wanted my input. Ellis also asked whether I would accompany his team to Russia to discuss the issue. I wasn’t sure if this was an elaborate scheme to have me locked up in a Russian gulag, but I hold Ellis in such high regard that I agreed.
This month Homi Kharas and I published a book titled “Delivering Aid Differently – Lessons from the Field”. We launched the book yesterday at the University of Nairobi. Here is a summary of the main messages:
We live in a new reality of aid. Rich countries delivered US$ 3.2 trillion of aid to poor countries between 1960 and 2008, and it is a US$ 200 billion dollar industry today. Despite disputes and convulsions, the core of the aid industry has changed little over the past few decades. Now the new pressures on the aid systems may be too strong to resist fundamental change.
Innovations in development happen where traditional markets fail. The open discussion that followed the presentation I made on Monday to nearly 100 colleagues inside and outside the World Bank Group spurred the first of what I hope are many conversations on the role the World Bank Group and others can pla