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Championing interoperability for financial inclusion: carrot or stick?

Thomas Lammer's picture
Mobile payments at Hawala Market in Daykundi, Afghanistan. Photo: Institute for Money, Technology and Financial Inclusion

Interoperability – a term used in a variety of industries, including telecommunications and financial services – is generally understood to refer to the ability of different systems and sometimes even different products to seamlessly interact. For payment systems, “interoperability” depends not only on the technical ability of two platforms to interact but also the contractual relationships between the entities wanting to interact. Traditionally, interoperability has been established by the same type of institutions, by banks’ participation in a central retail payment infrastructure (e.g. a central switch or an automated clearing house) and adhering to a payment scheme (e.g. a card scheme or a credit transfer scheme).

These days interoperability in retail payments is no longer limited by national borders and the overall ecosystem has become more complex. Non-bank payment service providers have emerged (many of them mobile network operators-MNOs) and there are new types of payment instruments (e.g. mobile money). Innovative payment instruments often start as proprietary solutions, processed in-house rather than via a central platform. In that regard, interoperability can help tear down barriers by enabling transactions between customer accounts of different mobile money solutions. In some countries, interoperability even facilitates transactions across different type of accounts (e.g. deposit transaction accounts held with banks and mobile money accounts held with non-bank service providers).

Breaking down barriers to competition: Unlocking Africa’s potential through a regional platform for cooperation

Klaus Tilmes's picture



The cement industry in Africa is one of the sectors that would benefit from stronger competition policies, which can help strengthen the economy by preventing anti-competitive behavior and collusive price-fixing. 
Photo by Simon Davis / DFID — U.K. Department of International Development

What determines whether a country is able to reap the benefits of deepening regional integration and the related increases in trade, cross-border investment and economic opportunities from participating in global value chains? One of the key points in this timely discussion is ensuring that the gains from integration are not nullified by anticompetitive business practices or distortive government interventions. As economies become more interconnected, it will become ever more important to allow all businesses to compete on a level playing field. Some African economies, for example, have not benefited as expected, in part because of the continued existence of barriers to competition in domestic markets.

These concerns lie at the heart of a new publication developed by the World Bank Group in partnership with the African Competition Forum (ACF). The report explores competition issues that affect the performance of key markets in Africa, and it reviews the status of competition policy and its implementation across the continent. It is the first report to take a broad regional perspective on competition issues – and the first to be built on a partnership between the World Bank Group and a regional network of government agencies and ministries responsible for competition.

Among its findings, the report shows that reforms in input sectors, such as professional services, can boost the export competitiveness of downstream firms that use those inputs intensively. However, in many cases, trade is restricted when governments impose non-tariff barriers, including product standards or testing regimes that are more restrictive than necessary, which prevent the entry of new, lower-cost products. This is the case with fertilizer markets in both East and West Africa. Even when such non-tariff barriers are removed, it is important to prevent anti-competitive behavior, such as collusive price-fixing and market-allocation agreements among competitors – as was seen in the case of cement in South Africa, Namibia and Botswana.

The report also highlights that, in some sectors in Africa, the same firms operate in many countries and some firms may locate themselves in areas that allow them to supply markets across borders. These factors hold potential efficiencies – for example, where it leads to economies of scale – but it also makes it vital to view competition dynamics through a regional lens as well as a national one.

What is the business community recommending to the G20's leaders on SME development?

This blog post was originally published on the website of the World SME Forum, at  http://worldsmeforum.org/blog/what-is-the-business-community-recommendin...

This coming September, the G20 Leaders will meet in Hangzhou, China, at a time of increasing volatility in global markets and political uncertainty. Across G20 economies and beyond, there is a pressing need to unlock growth, investment and jobs. Unlocking the growth of small and medium-sized enterprises (SMEs) provides one of the best opportunities to achieve all of that.


In most countries, SMEs of all sizes contribute more than 50 percent of GDP and three quarters of formal employment. They are important for social stability, innovation, equitable growth and poverty alleviation, and they form the backbone of the working middle class.

However, SME development has historically been constrained by a lack of access to markets, critical resources such as finance and skills, and a complex set of regulations and standards.

In the last few years, G20 governments have made SME development a priority. This has been strongly encouraged by the Business 20 (B20), the premier dialogue platform of the business community with the G20 policymakers representing the most important economies of the world.

The 2016 China B20 SME Development Taskforce (“SME Taskforce”) builds on the work of the 2015 Turkey B20. Established under the Chair of Mr Jack Ma, Executive Chairman of Alibaba Group, with Accenture as Knowledge Partner and the World SME Forum as Network Partner, more than 100 senior executives from SME businesses, entrepreneurs and business associations contributed to the Taskforce.

Housing is at the center of the sustainable development agenda

Aisa Kirabo Kacyira's picture
UN Habitat - Cover image from Housing at the Centre report

Clearly, a lot of what has gone wrong with cities is related in one way or another to housing. The future of urbanization will therefore depend on how countries and cities position housing as a priority in the public debate around sustainable development.

From slums to gated communities, from overcrowding to sprawl, from homelessness to the vacant houses, there is much evidence that housing is shaping cities worldwide, regretfully, in many cases, by producing fragmentation and inequalities. The resulting models are leading to social, environmental and financial costs far beyond what the majority of cities can afford.

UN-HABITAT: Housing at the Centre of the New Urban AgendaWhile the most common problem is the shortage of adequate and affordable housing and the unprecedented proliferation of slums, other important challenges lay in the poor quality and location of the stock usually far from job and livelihood opportunities, lack of accessibility and services. The housing challenge the world is facing today is likely to persist with six out of every ten people expected to reside in urban areas by 2030. Over 90 per cent of this growth will take place in Africa, Asia, Latin America and the Caribbean. It is estimated that the struggle to obtain adequate and affordable housing could affect at least 1.6 billion people globally within a decade.

We cannot overlook this reality. This is why, towards Habitat III, UN-Habitat has increased efforts to re-establish housing as a priority in the debate around sustainable urbanization. We are proposing the 'Housing at the Centre' approach to shift the focus from simply building houses to a holistic framework where housing is orchestrated with national and urban development in a way that benefits all people.

Banking consolidation in the GCC requires attention to competition

Pietro Calice's picture
Also available in: Arabic | French
National Bank of Abu Dhabi - Ijanderson977 (Own work) [Public domain], via Wikimedia Commons
National Bank of Abu Dhabi, UAE. Photo: Wikimedia Commons

Gulf banking markets may have entered an important phase of consolidation, with the potential to dramatically reshape both the role and the intermediation capacity of the industry. A few days ago, two large banks in the UAE, National Bank of Abu Dhabi and First Gulf Bank, agreed on a tie-up to create a national champion and regional powerhouse with $170 billion in total assets. In Oman, Bank Sohar and Bank Dhofar are in advanced merger talks. Bank mergers are expected to take place in Bahrain and Qatar as well.

The protracted downward trend in oil prices is threatening economic growth and fiscal sustainability in the region. This is having an impact on the banking systems. Banks are increasingly facing pressure on liquidity in the face of both private and public deposit outflows. This coupled with a low interest rate environment in the context of pegged currencies is eroding margins. Capital buffers are strong yet asset quality may deteriorate if oil prices remain low for a prolonged period and economic growth decelerates further. Therefore, in a context largely characterized by fragmented markets, consolidation may help achieve efficiency gains and ultimately preserve financial stability.

However, it is important that banking consolidation in the Gulf does not come at the detriment of competition. International experience shows that healthy bank competition generally promotes access to finance and improves the efficiency of financial intermediation, without necessarily eroding the stability of the banking system. Bank competition in the region is traditionally weak largely due to strict entry requirements, restrictions to bank activities, relatively weak credit information systems, and lack of competition from foreign banks and nonbank financial institutions. While increased market concentration does not necessarily imply greater market power, there is a risk that the current and prospective wave of industry consolidation may have long-lasting negative effects on competition if left unchecked.

New dataset explores how citizens engage with governments on new regulations

Melissa Johns's picture

More than a billion people live in countries in which the government does not consult openly on new business regulations (see Figure 1). There, officials don’t engage chambers of commerce, civic groups or the broader public on draft regulations. They don’t test out whether a draft regulation is a good idea, whether it targets the right problem or whether it is feasible to comply with. Moreover, more than half of the world's countries do not conduct formal assessments of the possible effects that a new regulation might have – socially, environmentally, or on compliance costs to businesses.



Source: Global Indicators of Regulatory Governance dataset


We’re not talking here about top-secret national-defense regulations or emergency-response measures. We’re talking about plain-vanilla, basic, run-your-small-business types of regulations that thousands of constituents will need to follow.       
 
A new dataset, Global Indicators of Regulatory Governance, explores how governments interact with the public when shaping regulations that affect their business communities. Concerned stakeholders could be professional associations, civic groups or foreign investors.

The project charts how interested groups learn about new regulations that are being considered, and the extent to which they are able to engage with officials on the content. It also measures whether or not governments assess the possible impact of new regulations in their country (including economic, social and environmental considerations) and whether those calculations form part of the public consultation. Finally, the project assesses two additional components of a predictable regulatory environment: the ability of stakeholders to challenge regulations in the case of an adverse decision, and the ability of people to gain access to the laws and regulations that are currently in force in a single place that is frequently updated. 

Start talking, and let’s get to work: Dialogue and climate action in industries

Anja Robakowski's picture



Bangkok, Thailand — November 25, 2011: A flooded factory in the Nava Nakorn Industrial Estate at Pathumthani.
Photo @ photonewman



“No one can tackle climate change alone.” Those words, by Abdelouahed Fikrat, General Secretary of the Moroccan Ministry of Environment, aptly summarized the challenge that we face today in dealing with climate change. He made that declaration at the recent Dialogue for Climate Action event in Vienna, organized by The World Bank Group and the Government of Austria on May 24 and 25.

The Vienna event marked the launch of six Principles on Dialogue for Climate Action — a set of tenets aimed at guiding businesses and governments as they embark on productive conversations on how to cooperate effectively to fight climate change.
 
The World Bank Group and 12 international partners got together to collaboratively formulate the six principles: Inclusion, Urgency, Awareness, Efficiency, Transparency and Accountability.

In endorsing the principles and signing on to the Community of Practice (CoP) for Dialogue for Climate Action, Fikrat said, “The principles of dialogue launched at this event hold potential to contribute significantly to the COP 22 agenda and offer a tool to policymakers for engaging the private sector. We need to build on the current momentum to speed up the implementation of concrete actions.”
 
The tone for the event was set by Dimitris Tsitsiragos, Vice President of the International Finance Corporation (IFC), who stressed in his keynote address that “stopping the catastrophic impact of climate change requires urgent, comprehensive and ongoing public-private dialogue”.
 
Dialogue for Climate Action in Practice

So what does this mean in practice? How do we avoid pursuing a dialogue that is devoid of action? There is significant pressure on all actors to avoid “post-Paris blues” and stagnation. There is also a need to avoid actions in a vacuum, where everyone is doing something but without cohesion and coordination.

The six principles for climate action are based on the premise that all actors, working together, will create greater results. Bangladesh PaCT (Partnership for Cleaner Textiles), a project managed by the World Bank Group, makes a strong case for that approach. The project, which was launched in 2013, aims to introduce cleaner, more environment-friendly production methods in the textile sector, and dialogue is a key pillar of its project design. 

START-Ups and SCALE-Ups in Western Europe and the World

Simon Bell's picture



At a recent European Commission SME Envoy meeting in Ljubljana, Slovenia, the European group responsible for advising on policy and strategic directions for SME support in the EU discussed options for the way forward. 

Battered by continued anemic growth since the 2008 global financial crisis, hit with a flood of Middle Eastern refugees, and (in early June) facing the possibility of Brexit, the mood was anything but upbeat and the future of “Project Europe” seemed to hang in the balance.

SMEs in most Western European countries represent over 95% of all registered firms, account for 60% of jobs in many countries, and supply as much as 50% to national income. All of this makes SMEs’ contribution to the economy crucial.  Yet, since the financial crisis, banks in many countries haven’t managed to bring their SME lending portfolios back up to pre-crisis levels. Many are deleveraging out of riskier lending such as SME loans. Venture capital in Europe remains well below its levels of 8 years ago. And SME capital markets and SME securitization of loans continue to be severely battered by the continent’s ongoing economic malaise.

Improving SME competitiveness: To target or not to target? What businesses, and how?

Christine Qiang's picture

Globally, small and medium-sized enterprises (SMEs) make up 95 percent of all businesses, employ 70 percent of the workforce, and are frequently argued to be the “missing link” between growth and inclusiveness. In the words of Anabel Gonzalez, Senior Director of the World Bank Group’s Trade & Competitiveness (T&C) Global Practice, SMEs hold the potential to be “an engine of growth and employment,” but “they face hurdles in competing in domestic and international markets.”
 
Marion Jansen, Chief Economist of the International Trade Centre, shared her insights on this question in April, when she presented ITC’s new SME Competitiveness Outlook at the inaugural event of a new learning series organized by the Investment Climate Applied Research team. Drawing on the input of thought leaders, case studies and detailed country profiles, the report’s framework organizes relevant micro-, meso-, and macro-data from well-known sources (including the Bank Group’s Enterprise Surveys) along three pillars — connect, compete and change — illustrating that advancements in SME competitiveness must cut across three layers: the firm’s own capabilities, the immediate business environment, and the broader national environment (from customs tariffs to the efficiency of government procedures).
 
While it is common knowledge that SMEs are far less internationalized than large firms, the report finds that access to information about export opportunities is the Number One bottleneck that SMEs face. By both mapping out new export markets for a country’s existing exportable products and identifying the top products with diversification potential, the report provides an interesting combination of trade-potential analysis and SME policy guidance.

Indonesia, for example, was found to hold unrealized export potential for tin, rubber and palm oil within the Asia Pacific region, while the SME analysis showed that firm-level constraints were the main factors holding back local SMEs eager to capitalize on these opportunities. Moreover, an analysis of Colombia revealed that the country has not been realizing its full export potential to OECD countries. The main issues for Colombian SMEs appear to be less related to firm-level constraints than related to the general investment climate — in particular, in terms of customs efficiency.

We all know by now that there is a distinction between the majority of small firms in developing countries that fail to expand beyond a few employees (‘survivalists’) and a small group of high-performance firms (‘gazelles’) that experience rapid growth (Nichter & Goldmark, 2009). In fact, in developing countries, the productivity gap between large firms and SMEs is double that observed in developed countries. Closing that gap could yield large payoffs that are more likely to reach the bottom of the income pyramid. The argument is that, because SMEs are, on average, less productive than large firms, employees are paid lower wages. To remedy this situation and help elevate those at the bottom of the pyramid, the development community in the past decade has committed billions of dollars worldwide to support SMEs.



Source: Jansen, M., 2016: “SME Competitiveness Outlook 2015.” Presentation at the World Bank.
 

The changing face of entrepreneurship

Ganesh Rasagam's picture


Members of the World Bank Group’s Innovation & Entrepreneurship team – along with two of the entrepreneurs supported by the team (with their affiliations in parentheses) – at the Global Entrepreneurship Summit. From left to right: Temitayo Oluremi Akinyemi, Loren Garcia Nadres, Natasha Kapil, Kenia Mattis (ListenMi Caribbean), Ganesh Rasagam, Charity Wanjiku (Strauss Energy), Komal Mohindra, Ellen Olafsen.


What do you picture when you hear of new technologies and hot startups? Perhaps a trendy office space overlooking the Golden Gate Bridge and tech moguls from San Francisco? Well, think again.

At the recent Global Entrepreneurship Summit (GES) in Silicon Valley — an annual event hosted by President Barack Obama and attended by nearly 700 entrepreneurs — one message came across clearly: Great ideas come from anywhere. And, increasingly, they’re coming from talented entrepreneurs who are overcoming the odds in cities like Nairobi, Kenya or Kingston, Jamaica.

Increasing internet and mobile-phone access is bringing new opportunities to young entrepreneurs from developing countries. More than 40 percent of the world’s population now has access to the internet and, among the poorest 20 percent of households, nearly 7 out of 10 have a mobile phone.

Businesses that can take advantage of the widespread use of digital technologies are growing at double-digit rates — in Silicon Valley, as well as in emerging markets. Ground-breaking technologies and business ideas are flourishing across the world, and a new, more global generation of tech entrepreneurs is on the rise.
 
The potential impact — economic and social — is significant. Entrepreneurs have a powerful ability to create jobs, drive innovation and solve challenges, particularly in developing economies, where technology can address old inefficiencies in key sectors like energy, transport and education.
 
“[I]n our era, everybody here understands that new ideas can evolve anywhere, at any time. And they can have an impact anywhere,” said John Kerry, the U.S. Secretary of State. “In my travels as Secretary, I have been absolutely amazed by the groundbreaking designs I’ve seen, by the ideas being brought to life everywhere — sometimes where you least expect it.  By the men and women striking out to create new firms with an idea of both turning a profit as well as improving their communities.”
 
But for many of the brightest minds in developing countries, entrepreneurship is not an easy path.

As President Obama said during the Summit: “It turns out that starting your own business is not easy. You have to have access to capital. You have to meet the right people. You have to have mentors who can guide you as you get your idea off the ground. And that can be especially difficult for women and young people and minorities, and others who haven’t always had access to the same networks and opportunities.”


President Barack Obama on stage at the Global Entrepreneurship Summit with Mark Zuckerberg and entrepreneurs.
 

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