The following post first appeared on the Huffington Post.
Half the world's adults, approximately 2.5 billion individuals, do not have an account with a formal financial institution. Lack of access to finance is disproportionately skewed towards the poor, women, youth, and rural residents. Defined as the proportion of individuals and firms that use financial services, financial inclusion is increasingly seen as critical for ending extreme poverty and supporting inclusive and sustainable development. It provides people with the tools to invest in themselves by saving for retirement, investing in education, capitalizing on business opportunities, and confronting shocks (Global Financial Development Report, 2014). According to the World Bank Group's newly launched Global Financial Development Report 2014 on Financial Inclusion, most of the unbanked cite barriers such as cost, lack of documentation, distance, lack of trust, or religious reasons.
The following post first appeared on the Huffington Post.
Following the launch of the World Development Report (WDR) 2014, Risk and Opportunity: Managing Risk for Development, various team members have been traveling to different countries to present its findings. I recently joined other team members in a visit to Morocco, Egypt, Ethiopia, and South Africa, with a stop in the middle in London and Oxford.
One thing that struck me was how relevant the topic of risk management is for many countries. The importance of risk management seemed immediately apparent to many participants in our discussions. Indeed, many participants gave examples of risk management measures that have been practiced in their cultures for generations (such as storing grain in African villages), or linked messages in our Report to common sayings – for example, as Professor Awad from the American University in Cairo told us, our message on the importance of saving in good times for the bad times has a direct parallel in the old Arabic adage, “to keep a white coin for a black day”.
How has globalisation affected inequality in incomes around the world? How do the incomes of the richest Chinese compare with those of the poorest Americans, and how has the gap changed over the last 20 years? Where do the poorest and richest people in the world live?
In May 2013, officials of the Federal Reserve System first began to talk of the possibility of the U.S. central bank tapering its securities purchases (of it gradually reducing them from the prevailing $85 billion monthly rate to something lower, presumably as a prelude to phasing them out entirely). A milestone to which many observers point is May 22, 2013 when Chairman Bernanke raised the possibility of tapering in his testimony to the Congress. This “tapering talk” had a sharp negative impact on economic and financial conditions in emerging markets.
Three aspects of that impact are noteworthy. First, not only was the impact sharp but, in the view of many commentators, it was surprisingly large. The most alarmed (some would say alarmist) commentators raised the possibility that some emerging countries might be heading towards a full blown crisis like those in Mexico in 1994 and Asia in 1998. Second, the impact was not felt uniformly; different countries were affected rather differently. And, third, there were complaints from policy makers in the developing world about the Fed’s turn to tapering that were seemingly hard to square with earlier criticisms of quantitative easing by the U.S. central bank as a form of “currency war.”
Inequality is trending as a news topic, in part due to new research by Branko Milanovic and colleagues and because Pope Francis as well as President Obama are treating it as a watershed issue. Read the piece by Howard Schneider in the Washington Post's Wonkblog for more.
Joe Stiglitz won the 2014 Daniel Patrick Moynihan Prize for his work on income inequality in the U.S. and its impact on public policy, adding to his many accolades. Read the Bloomberg coverage here.
Financial markets and the news media have one thing in common: they tend to oscillate rapidly between hype and gloom. Nowhere is this more apparent than in analyses of emerging economies’ prospects. In the last few months, enthusiasm about these countries’ post-2008 economic resilience and growth potential has given way to bleak forecasts, with economists like Ricardo Hausmann declaring that “the emerging-market party” is coming to an end.
Many now believe that the recent broad-based growth slowdown in emerging economies is not cyclical, but a reflection of underlying structural flaws. That interpretation contradicts those (including me) who, not long ago, were anticipating a switchover in the engines of the global economy, with autonomous sources of growth in emerging and developing economies compensating for the drag of struggling advanced economies.
The sudden 2008 global food price crisis—which pushed 105 million people into poverty and sparked riots around the world—showed that designing risk management strategies at the national level may prove to be a sound investment. In fact, this is one of the key messages of the 2014 World Development Report on risks and opportunities. With excessive volatility in food prices expected to persist in coming years, net food-importing countries in the developing world need to develop appropriate solutions to address the food price risks and unexpected fiscal impacts ok they may face.
Are hedging instruments appropriate to address these risks?
Hedging food price risks essentially refers to the purchase of insurance against sharp food price fluctuations, transferring the risk to financial institutions or traders. The government of Malawi is a notable example of an importing country which successfully used hedging instruments to mitigate food security risks, resulting in significant import cost savings. In September 2005, Malawi purchased physical call options* for maize, which offered both price protection and the actual delivery of 60,000 metric tons of maize. These instruments thus allowed Malawi not only to effectively manage price risks, but also to deal with physical availability risks, which are critical in many food-importing countries.
I’ve been struck recently by how little we (or at least I) seem to know about variations in use of health services across the world, and what drives them. Do people in, say, India or Mali use doctors “a lot” or “a little”. Even harder: do they “overuse” or “underuse” doctors? At least we could say whether doctor utilization rates in these countries are low or high compared to the rate for the developing world as a whole. But typically we don’t actually make such comparisons – we don’t have the numbers at our fingertips. Or at least I don’t.
I’m also struck by how strongly people feel about the factors that shape people’s use of services and what the consequences are. There are some who argue that the health problems in the developing world stem from people not getting care, and that people don’t get care because of shortages of doctors and infrastructure. There are others who argue that doctors are in fact quite plentiful – in principle; the problem is that in practice doctors are often absent from their clinic and people don’t get care at the right moment. There are others who argue that doctors are plentiful even in practice and people do get care; the problem is that the quality of the care is shockingly bad. Who’s right?
Last month’s global climate talks in Warsaw may be remembered mainly for progress on programs for Reduction of Emissions from Deforestation and Forest Degradation (REDD+), the UNFCCC mechanism for payments to reduce emissions from deforestation and forest degradation in low-income countries. Seven key decisions were agreed related to REDD+: on finance; reference levels; measuring, reporting and verification (MRV); safeguards; forest monitoring systems; institutional arrangements; and addressing drivers of deforestation. Additional funding of $280 million toward implementation of an extended REDD+ agenda was secured, coming mostly from Norway, but with contributions from the United Kingdom and the United States too.
Global forest losses in rainforest regions close to the Equator today represent close to 20% of net global greenhouse gas emissions, although the share has recently been falling slightly mainly due to less deforestation in Brazil. The target is now to reduce tropical countries’ forest losses to half by 2020, and eliminate such losses completely by 2030. It is encouraging that wider agreement seems to be forming on this issue.
The week ended with the passing at age 95 of Nelson Mandela, father of South African democracy and a global icon for freedom. Read President Jacob Zuma's statement as well as a statement from World Bank Group President Jim Yong Kim --
Universal health coverage was the topic of a December 6 speech by Jim Kim in Tokyo.
On the heels of World AIDS Day on December 1, Tariq Khokhar of the World Bank's Data Group provided a snapshot of the global state of AIDS in four charts.