Islamic finance assets represent only around 1% of the global financial market, so how can tapping into these funds help close the $452 billion annual infrastructure finance gap in Emerging Markets and Developing Economies? The percentage may be small now, but the Islamic finance market is growing at an impressive pace—and not just in Muslim-majority countries.
Private Sector Development
Only a small fraction of women in rural India have a bank account, reinforcing existing gender inequity. Without access to financial services, women miss out on government benefits, like cash transfers. Alternative for India Development (AID) delivers financial products to women and other underprivileged populations through a unique business model. In partnership with the government and commercial banks, AID established more than 600 Common Service Centers that serve as one-stop delivery points to financial and government services. In just three years of operation, AID opened 200,000 deposit accounts, one-third of which belong to women. Thanks to these accounts, underprivileged populations was able to receive pensions, government subsidies and access free savings accounts.
AID is just one of a large and growing number of businesses that combine profits with impressive development results. These businesses are known as social enterprises, and the innovations they develop play a critical role in providing life-improving goods, services, and employment to hundreds of millions of poor people. Social enterprises can be distinguished from other public and private organizations by the fact that they pursue social objectives through commercially viable business models and are independent from the government.
In his recent blog, World Bank Group President Jim Kim urged the development community to partner with social enterprises to achieve the Sustainable Development Goals. This will require a different approach to scaling results of successful social enterprises, their inclusive innovations, and business models. In a recent Brookings Working Paper we reviewed the literature and experience with scaling up social enterprise innovations and summarized lessons for how scaling up can be best managed. Here we briefly explore the main implications for external donors.
The first day of the Digital Youth Summit in Peshawar saw corridors and rooms crowded with entrepreneurs and digital gurus from across the world looking to map out Pakistan’s digital future.
These young and enthusiastic innovators are helping to redefine the province of Khyber Pakhtunkhwa (KP) as an emerging technology hub, and providing substantive skills and resources for Pakistan’s youth to take advantage of digital opportunities. At the summit – sponsored by the World Bank with the Khyber Pakhtunkhwa IT Board and many other partners -- these students, entrepreneurs, enthusiastic young women and men are accessing trainings, announcements, and various forms of support to unlock new possibilities to realizing their potential.
The market for digital entrepreneurship is a multi-billion-dollar industry, growing at a rapid rate and is thirsty for young talent. These opportunities represent a shift in how we think of development—bringing the creativity and passion of tech-savvy young innovators to the forefront of social and economic change. The youth of Pakistani are well placed to be in the driver’s seat of this vibrant future.
Dar es Salaam, Tanzania – one of the many cities in Africa that is expected to see sharp population increases – will need rapid job creation to keep pace with its swift population growth. The city’s new bus transit system – completed in 2015, with a $290 million credit from the International Development Association, the World Bank’s fund for the poorest countries – is now reducing transportation costs, easing traffic and promoting private sector development.
Photo: Hendri Lombard / World Bank
Africa’s working-age population is expected to grow by close to 70 percent, or by approximately 450 million people, between 2015 and 2035. Countries that are able to enact policies conducive to job creation are likely to reap significant benefits from this rapid population growth, according to the Africa Competitiveness Report 2017, co-produced by the World Bank Group, the African Development Bank, and the World Economic Forum. The report also warns that countries which fail to implement such policies are likely to suffer demographic vulnerabilities resulting from large numbers of unemployed and underemployed youth.
There is a famous saying that a successful person can lay a firm foundation with the bricks others have thrown at him.
In real life however, the art of building a firm foundation is not always that simple. Waiting for others to simply throw bricks at you is not enough when the grand task is transforming infrastructure into an asset class. There is a need for a skillful bricklayer—and this is the role we see for the multilateral development banks (MDBs).
To meet this challenge, our two institutions – the International Finance Corporation (IFC) and the Asian Infrastructure Investment Bank (AIIB) – co-hosted a session moderated by AIIB’s Vice President Joachim von Amsberg at the recently-held 2017 Global Infrastructure Forum. The objective was precisely to discuss how to construct and promote infrastructure as a tradable asset class.
Finance fuels economic growth and development. Yet, it is also clear that traditional funding sources – public finances, development assistance or banks loans – will not be sufficient to finance the Sustainable Development Goals.
Both and to attract private sector financing, investment and expertise.
so that emerging market countries can meet their financing needs to fund strategic objectives, such as improving infrastructure.
We estimate that the amount of infrastructure financing covered by the private sector could be more than doubled, if countries harness the full potential of local capital markets.
At the World Bank Group, we are committed to marshal our expertise to increase the use of capital markets for investment financing. Helping countries develop government debt markets is vital to our goals of eliminating extreme poverty and boosting shared prosperity.
Never in recent history has anti-minorities rhetoric — anti-immigrants, anti-religious-minorities, anti-LGBTI — been so pronounced in so many countries around the world. Those groups, we are told, are the cause of our current economic crisis because they steal our jobs, fuel criminality and threaten our traditional way of living. And yet, the causes of our economic crisis are probably more nuanced, and initial research seems to suggest that more and not less social inclusion will help us overcome the instability of our times.
The exclusion of minorities from the labor force is becoming politically and economically unsustainable for many states that are struggling to retain their legitimacy and strengthen their competitive potential in an increasingly global marketplace. As a consequence, governments, international development agencies and academic institutions are now looking seriously at ways to develop policies that guarantee a more equal and sustainable form of economic development — development that addresses both short- and long-term economic goals.
The World Bank’s Equality Project attempts to address this problem. The idea driving the project is that institutional measures that hamper the access of ethnic, religious and sexual minorities to the labor market and financial systems (such as legal and policy restrictions, or the absence of appropriate, positive nondiscrimination actions) directly affect their economic performance and, as a consequence, represent a cost for the economy: If a sizeable percentage of the population is not given the opportunity to acquire a high-quality education, a good job, secure housing, access to services, equal representation in decision-making institutions and protection from violence, human capital will be wasted, income inequality will grow and social unrest will ensue. The World Bank’s widely cited Inclusion Matters report puts it succinctly: “Social inclusion matters because exclusion is too costly. These costs are social, economic and political, and are often interrelated.”
The project collected and validated data on the legal framework of six pilot countries: Bulgaria, Mexico, Morocco, the Netherlands, Tanzania and Vietnam. The methodological approach of collecting cross-country comparable data according to key indicators yielded some general but interesting results, published in a research working paper in March 2017.
Many countries, developed and developing, that want to become more competitive in global markets tend to jump to a quick conclusion that they need to invest more in infrastructure, particularly in transport sectors like ports. But while many regions, including South Asia, do face important infrastructure gaps, massive new investment is not the only way to improve regional competitiveness. Countries should realize that they also have significant potential to make more efficient use of the infrastructure they already have.
Building megaports all along the coast might reduce a country’s trade costs, but it also requires hundreds of millions of dollars in investment. Improving the performance of existing ports, enabling them to handle higher levels of cargo with the same facilities and in a shorter time, can be a far more cost-effective approach to reducing transport and trade costs. Closing the infrastructure gap does not just require more infrastructure, but also better infrastructure, and better use of existing infrastructure.
The report Competitiveness of South Asia’s Container Ports, which we launched today, provides the first comprehensive look at the 14 largest container ports in South Asia, which handle 98 percent of the region’s container traffic. It focuses on port performance, drivers, and costs.
A Thai business owner in Chiang Mai might open a small resort serving local people as well as tourists. It would probably take him about two months to set up his business after finding the location, staff and getting the company registered. He would find it reasonably easy to start his business.
At the same time, a foreign investor living in Vietnam and considering whether to invest 3 million baht in Thailand to start a restaurant might have a different experience. She would likely find the process a bit complex and challenging. Most websites with the relevant information are written in Thai, the paperwork involved in registering a company can be pretty daunting for foreigners, and getting work permits and a business license can take longer than expected.