Private Sector Development

Rethinking SME Finance Policy – harnessing technology and innovation

Conventional SME finance policies are designed to address conventional constraints to SMEs accessing the financial services which they need to manage risks, meet supply orders, and invest in new technologies and market opportunities. Yet technology and innovative approaches are transforming the business of SME finance, mitigating conventional challenges and risks and in some cases presenting new risks. Continuing with only conventional policy responses may be duplicative and waste resources, and may also fail to address emerging risks. This has important implications for the World Bank Group’s approach to SME Finance.

Information asymmetry raises the costs and risks of providing financial services, and therefore reduces access and leads to higher pricing of financial services for many SMEs. Yet data availability is rapidly expanding, and data brokers are increasingly able to address information asymmetry.

“Big Data” Analytics - the analysis of alternative data sets such as cell phone histories and transactional data, represent new ways for assessing the creditworthiness of enterprises currently without access to finance. For example, Experian MicroAnalytics (global) and Cignifi (Brazil, Ghana, Mexico, US) deliver credit scoring based on airtime usage. This type of approach could open up access to credit for mobile payments customers in the developing world. ZestFinance (US) combines data from thousands of potential credit variables, gleaned from alternative credit databases and web crawling to offer a ‘big data underwriting model’.
With increasing technology and internet access, the expansion of “digital footprints” allow for alternative ways to assess borrower creditworthiness and spot and prevent identity fraud. For example DemystData (Hong Kong, US) and Lenddo (Colombia, Mexico, Philippines) use online reputation and social media analytics.
The lack of financing sources available to many SMEs, linked to constraints in the use of collateral and the availability of information, is cited as a major concern in the World Bank’s Enterprise Surveys. Typical policy responses include secured transactions frameworks (collateral laws, movable assets registries), credit lines, state banks, partial credit guarantee schemes, and encouraging competition and diversification.

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Private Sector Development

Sharing Experiences and Insights to Enhance Gender Equality in Sub-Saharan Africa

On February 27, a high-level regional workshop kicked off in Lomé, Togo, with the participation of Ministers of gender affairs and officials from 11 economies from West and Central Africa focusing on the World Bank Group’s Women, Business and the Law 2014: Removing Restrictions to Enhance Gender Equality report. A welcome dinner prior to the official opening of the event revealed the dynamic nature of gender affairs Ministers – all women – and the common realities and issues facing their nations. Most were meeting for the first time in a unique experience that enabled sharing stories and views about laws, cultural norms and traditional roles within the family in prelude to the official discussions.

The opening remarks at the workshop reflected well the importance of gender equality for the region. In welcoming the event, Mr. Hervé Assah, the World Bank's Country Manager for Togo, noted that “underinvesting in the human capital of women is a real obstacle to reducing poverty and considerably limits the prospects for economic and social development.” Those concerns were echoed by the Minister of Social Action and Women and Literacy Promotion in Togo, Mrs. Dédé Ahoéfa Ekoué, who highlighted the importance of women’s participation in society and the economy, both in Togo and worldwide. The tone was thus set for this two-day event, which aimed at both highlighting recent reforms enacted by countries in the region and promoting the sharing of experiences, challenges and good practices among the participants in promoting women’s economic inclusion.

There is certainly much to highlight and share over these two days and beyond. Over the past two years, several Sub-Saharan African economies passed reforms promoting gender parity and encouraging women’s economic participation. For example, Togo reformed its Family Code in 2012, now allowing both spouses to choose the family domicile and object to each other’s careers if deemed not to be the family’s interests. Côte d’Ivoire equalized the same rights for women and men, and also eliminated provisions granting tax benefits only to men for being the head of household. Furthermore, Mali enacted a law allowing both spouses to pursue their business and professional activities and a succession law equalizing inheritance between husbands and wives. While the pace of reform has been accelerating in the region, it is not a recent phenomenon. In fact, Sub-Saharan Africa is the region that has reformed the most over the past 50 years: Restrictions on women’s property rights and their ability to make legal decisions were reduced by more than half from 1960 to 2010.

Pick any country in the developing world.

Say, Pakistan.

Where are the women entrepreneurs in Pakistan?

They start and manage digital-content creation firms serving international clients. They are sole proprietors of construction businesses bidding for government projects. They supervise tailors and embroiderers in windowless storage rooms that double as stitching units. They export high-end gems and jewelry around the world.

Women entrepreneurs in Pakistan lead cutting-edge, innovative businesses – but there are far too few of them. The recent Global Entrepreneurship Monitor report finds that only 1 percent of Pakistani women are engaged in entrepreneurship – the lowest proportion in the world.

Pakistan is not alone in its dismal ratio of growth-oriented (or indeed any kind of) women entrepreneurs. Even in the developed Asian economies of Korea and Japan, only about 2 percent of women are entrepreneurs. Sub-Saharan Africa does much better in this regard, with 27 percent of women, on average, engaged in entrepreneurship -- but they are mostly involved in low-productivity sectors of the economy.

Women entrepreneurs, in Pakistan and globally, have narrow networks of friends and family who provide them with some initial capital to start their small businesses, with little expectation of further financial support. Their export customers are located wherever they have extended family. And they rarely feature in local chambers of commerce activities.

Banks are often reluctant to extend lines of credit to, provide working capital to or lend to women-led enterprises. This makes it difficult for these enterprises to pursue growth. Perhaps this is why the average growth projections for women-led enterprises are seven to nine percentage points below those for their male counterparts.

Note: Everyone is welcome to join a Google+ hangout – focusing on women’s empowerment – on Wednesday, February 26, 2014 at 9:30 a.m. Eastern Time. The event is sponsored by UN Women, UNDP and the World Bank Group’s Women, Business and the Law.

It’s easily taken for granted, but our essentially constant access to the Internet never ceases to amaze me. I use the Internet to stay in touch with my friends and family living abroad, to get my news, to shop for almost anything and to research laws from around the globe. But even more astounding are the revolutionary examples of how the Internet is being used as a tool to combat poverty worldwide.

Some of the most incredible illustrations come from India, where “cloud schools (without teachers) are being piloted to offer a new education channel for the poor in the remotest areas.” In countries such as Kenya, the social enterprise SamaSource is using the Internet to connect women and youths living in poverty to employment opportunities. One World Bank Group study even showed that simply increasing access to high-speed broadband Internet can accelerate economic growth by 1.4 percent.

Another exciting way to harness the transformative power of the Internet to eradicate poverty is as a platform to enable dialogue between advocates for change from all over the world. Women’s-rights activists, along with all those dedicated to women’s empowerment, have been taking their advocacy to the Internet in such high numbers that they are arguably coming to define a new wave of feminism. The tools bringing together such advocates to brainstorm strategies for empowering women include Google Hangouts, Twitter-chats and e-discussions.

The World Bank Group’s Women, Business and the Law recently leveraged the Internet as a platform for exchanging ideas by co-organizing an e-discussion with UN Women and UNDP. The e-discussion, Women’s Employment: Enabling Environment and Legal Incentives, took place from January 15 to 29 and was hosted on UN Women’s Knowledge Gateway for Women’s Economic Empowerment. Experts were also invited to join the e-discussion, coming from such organizations as the IMF, the Woodrow Wilson Center’s Global Women’s Leadership Initiative, OECD Development Center’s Wikigender, the International Labor Organization, the International Trade Union Confederation and Hogan Lovells.

يعرف الناس جميعاً يوم المرأة العالمي السنوي، لكن هل تعرف يوم المرأة العربية؟ على الرغم من نشأتي في سوريا لم اسمع بهذا اليوم. عندما نوهت يوم المرأة العربية لأصدقائي و أقاربي في منظقة الشرق الأوسط ، رد معظمهم باستغراب "أتعنين عيد الأم؟!"

يوم المرأة العربية ، الذي يوافق أول يوم من فبراير (شباط) ، هو ليس فقط يوم لاقامة الاحتفالات بإنجازات المرأة العربية و لكن للدفاع عن حقوقهن و تعزيز قدرتهن للمشاركة في تقدم و ازدهار الاقتصاد. بمناسبة هذا اليوم ، تم عقد عدة اجتماعات و جلسات برعاية المنظمة العربية لحقوق المرأة في جميع أنحاء منطقة الشرق الأوسط لمناقشة أحوال المرأة العربية في المنطقة كالسودان و مصر في حين أشادت دول أخرى كالبحرين بما حظت به المرأة العربية من حقوق و تعهدت بالعمل على اكمال مسيرة الإصلاح لدعم المرأة و ضمان حقوقها.

على الرغم من بطء مسيرة الإصلاح و التعديل القانوني لضمان المساواة بين المرأة و الرجل في الشرق الأوسط ، فإن عقد الاجتماعات و المناقشات و التعديل الجزئي في قوانين بعض البلدان العربية تعد خطوة إيجابية و خطوة أولى لتحقيق المساواة بين الجنسين. فمنذ عام 2009 قام فريق المرأة ، أنشطة الأعمال و القانون بتتبع بعض التعديلات الإيجابية في قوانين البلاد العربية لضمان حقوق المرأة. على سبيل المثال و على الرغم من انعدام الاستقرار و الأمن في المنطقة ، تم سن دساتير جديدة في كل من تونس و مصر والتي تشمل على مواد قانونية تكفل مساواة المرأة في حقوقها مع الرجل.

إن تعديل القوانين هي خطة أولى هامة لضمان حقوق المرأة يجب أن تلحق بها الآليات المناسبة لضمان تنفيذها على أرض الواقع. كما يجب أن تكون الآليات مدعومةً بورش عمل لدعم وعي الجميع بأهمية دور المرأة في المجتمع. إن تسليط الضوء على مكانة المرأة العربية في يوم المرأة العربية هو نقطة أساسية لشد نظر جميع وسائل الإعلام و رفع وعي جميع الناس لجعل التشريعات حقيقة واقعة

To read this blog post in English, click here.

Almost everyone has heard of the annual International Women’s Day, but have you heard of the Arab Women’s Day? Although I grew up in Syria, I had not heard of it. When I mentioned this day to my family and friends living throughout the MENA region, most them responded with a confused: “You mean Mother’s Day?”

Arab Women’s Day, which takes place every February 1, is not only designated to celebrate the achievements of Arab women, but also to advocate for their rights and enhance their ability to participate in the economy. This year, several meetings surrounding this day were held throughout the MENA region in countries such as Egypt and Sudan.

Under the supervision of the Arab Women’s Organization, these events promoted discussion on women in the Middle East. Countries like Bahrain vowed to initiate legal reforms that would guarantee women all rights and that would empower them to contribute to the economy.

How good are the experts at evaluating countries’ anti-money-laundering and combating the financing of terrorism (AML/CFT) systems? That was the central question in a new report released last week by the Center on Law and Globalization. The report takes a critical look at the IMF’s evaluations of the AML/CFT systems of 150 countries from 2004 to 2013. Although we may differ on some of the analysis and recommendations, the report provides ample food for thought and raises issues that need to be addressed and, in certain instances, corrected.

It isn’t possible here to provide a full overview of all the points raised in the report, but a few key messages stand out:

The report finds that assessors were too focused on formal compliance (“rules on the books”) and did not, in any systematic fashion, try to ascertain the real impact of a country’s entire AML/CFT regime in practice. In the words of the report, “Reliance (by assessors) was placed on the prima facie plausibility of the claim that adherence to the [international AML] standards would help reduce money laundering and the financing of terrorism.” This criticism goes to a wider point: that evaluations were conducted without a clear articulation of the objectives to be achieved by AML/CFT measures. If you don’t know what a system is meant to accomplish, how can you evaluate it?

These are valid points and they hold true, not just for IMF evaluations, but also for others (including the World Bank) who carried out assessments using the same internationally agreed methodology. However, the report fails to take due account of the considerable work that has been undertaken in recent years to address and correct those shortcomings.

Since 2010, an intensive process of revision has been underway to improve the AML/CFT standards and the assessment methodology. There has been a long and vigorous debate within the Financial Action Task Force (FATF), the global standard-setter on these issues, and between the FATF and other bodies, about the best way to remedy the system’s deficiencies to make assessment reports more useful. Both the Bank and the Fund have played a very active role in this discussion.

As a result of this process, the new standards approved in 2012, along with a new methodology approved in 2013, provide a framework to address those concerns: Countries’ AML/CFT systems are to be judged based upon an assessment of their effectiveness in addressing a country’s ML/FT risks. Are government interventions commensurate to the risks faced? For example, a country with a negligible financial sector and a high use of cash should probably not spend too much money and manpower on policing its securities sector. Conversely, a sophisticated financial center providing easily usable incorporation services should probably keep a close eye on company registration. As a participant in this process, the World Bank has been a strong proponent of this pivot toward risk and effectiveness. In our view, only such an approach can help countries make meaningful decisions regarding their priorities and their strategies.

On January 16, the World Bank welcomed a delegation from the Organisation for Economic Cooperation and Development (OECD), led by Andrew W. Wyckoff, the director of the OECD's Directorate for Science, Technology and Industry (DSTI). Over the past two years, the World Bank Group and the OECD have developed a strong partnership as part of our effort to build the Innovation Policy Platform (IPP). The OECD delegation's visit took place within the framework the launch the IPP, which included a stimulating conference on inclusive innovation with MIT's Scott Stern as the keynote speaker. This post by Andrew W. Wyckoff, on the importance of public research commercialization to innovation, was originally published on the "OECD Insights" blog.

Do you know what FedEx, the well-known overnight shipping company, and Dell Computers, a multinational technology company, have in common? Both firms’ core business ideas were developed by young student entrepreneurs. There are many other stories out there illustrating that universities and other public research institutions (PRIs) are a major source of innovations.

In searching for new routes to growth, policymakers around the globe invest high hopes in public research. A premium is being placed on the contributions of public research to the creation of new knowledge capital. The way universities and PRIs operate is also changing, including notably the mechanisms and terms on which universities and PRIs are engaging with business and society. We also see that innovation is becoming more open and collaborative, and that knowledge circulates more quickly and more freely than ever. This inevitably has impacts on the commercialisation of public research.

Source: http://innovationpolicyplatform.org/content/technology-transfer-and-commercialization-visual-overview '

Increased hurricane activity and rising sea levels are well-known effects of climate change, and they prompt solemn head-shaking when we read about them in reports. But in the Caribbean they are part of a terrifying reality that is happening now: This reality was demonstrated again by recent flooding and landslides in the Eastern Caribbean that left 20 dead and hundreds of millions of dollars in damage.

"Financial inclusion." This phrase has been found in several recent reports. But what does “financial inclusion" truly mean? More important, what does it mean for women who constitute nearly half of the global population?

Financial inclusion is defined in the Global Financial Development Report as the “proportion of individuals and firms that use financial services.” It is one of the main catalysts of economic growth and helps to reduce poverty in the world. Access to financial services is one approach to greater financial inclusion. As all formal transactions are tied to accounts, ownership of accounts is an important aspect to measure the degree of financial inclusion. There are several crucial benefits to having a bank account, such as: facilitating the saving process; facilitating the receiving of government payments; and enabling entrepreneurship through the building of credit.

Acess to financial services has been expanding steadily as many countries have been adopting national strategies to achieve financial inclusion. (Financial inclusion strategy is defined as “road maps of actions, agreed and defined at the national or subnational level, that stakeholders follow to achieve financial inclusion objectives.”) Yet large gaps and hurdles to access financial systems remain worldwide. (See female percentages with bank accounts at formal financial institutions in 2011 based on the World Bank’s Financial Inclusion Data.)

These gaps and obstacles are especially arduous for women, for no reason other than their gender! The Findex survey, for example, shows that women refrain from opening personal accounts because they rely on their relatives’ accounts. The Global Financial Development Report of 2014 links this matter to the income inequality and the quality of the economic institutions.

Rethinking SME Finance Policy – harnessing technology and innovation

Sharing Experiences and Insights to Enhance Gender Equality in Sub-Saharan Africa

Treasure-Hunting for Women Entrepreneurs

Promoting Women’s Economic Empowerment via the Internet’s Knowledge-Sharing Capacity

يوم المرأة العربية: ما يجب فعله في الشرق الأوسط.

Arab Women’s Day: What Needs to be Done in MENA

Assessing the Assessors: From Form to Substance

Commercializing public research: One of the core subjects of the Innovation Policy Platform

Helping Green Business in the Caribbean

Hidden Roadblocks: Structural Barriers that Limit Women's Financial Inclusion

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