A hornet’s nest has been stirred up by the leak of millions of financial files by the International Consortium of Investigative Journalists (ICIJ) in collaboration with journalists around the world. The ICIJ says that its work reveals more than 120,000 offshore companies and trusts, exposing the hidden dealings involving politicians, businessmen and others. While authorities around the world are assessing the validity of these documents, the extent of the information emanating from the British Virgin Islands, the Cook Islands and elsewhere is revealing in many ways. Importantly it is a rebuff to those who claim that there is no problem with the workings and transparency of the international financial system. Whatever the veracity of the allegations contained in the ICIJ report, they reveal the extent of highly complex and secret financial and corporate structures, and their cross-border nature. These revelations have already spurred some to call for more regulation by governments.
An increasing number of countries are developing national strategies for financial education and implementing programs to enhance people’s financial capability. At least 36 countries have already established or are in the process of designing a national strategy for financial education according to the OECD. Boosting people’s ability to take sound financial decisions has emerged as a new policy objective, both in developed and developing countries. The recent financial crisis has reinforced the view that being financially capable is important. However, let’s take a step back. What do we know about how capable people are in different countries across the world in managing their finances? Which knowledge and skills gaps exist that could be filled with financial capability enhancing programs? Which populations are the least financially knowledgeable and capable and would benefit the most from any interventions?
The difficulties faced by Small and Medium-sized Enterprises (SMEs) in getting finance, especially in the developing world, have been well documented. The causes are equally well known. First, traditional bank financing (secured or cash-flow based) is often not available due to the lack of adequate collateral or the opaque modus operandi of many SMEs. Also, financial markets may not be sufficiently well developed to facilitate traditional private equity (PE) financing of SMEs. A typical private equity (PE) firm or fund requires controlling positions in a company it invests. But in Sub-Sahara Africa, most small businesspeople are both owner and operator of lifestyle businesses and have little interest in letting go of control of their company. Another constraint to the traditional PE financing model is the lack of exit channels such as a well-functioning initial public offering (IPO) or merger and acquisition (M&A) market.
Bread, civil society, bank charges, and Competition Authorities: what do these have in common? The surprising answer is that these elements help explain how South Africa’s Competition Authorities have become a standout success in the country’s economic policy making. Nowadays, competition policy forms a central pillar of South Africa's development strategy, and the South African Competition Authorities command substantial respect and widespread support. A crucial ingredient to this success has been the Competition Authorities’ strategic use of convening power to rally stakeholders, focus public discussion, and deliver tangible results.
Do men and women use financial services differently? This is the question we set out to answer when we conducted six country studies on gender finance in sub- Saharan Africa.
The purpose of our study was twofold. First, we wanted to explore the reasons behind differences in usage of financial products. Second, based on these underlying reasons, we wanted to formulate workable intervention strategies that we could recommend as gender-sensitive financial sector policy approaches for policymakers and stakeholders. The countries we studied included Botswana, Malawi, Namibia, Rwanda, Uganda, and Zambia. Based on 50 to 75 interviews per country with individuals from both urban and rural areas, we analysed how and why men and women are using credit, savings and insurance products.
Image courtesy of UPU
In October 2012, when the first version of the Global Panorama was published, several news agencies and papers wrote: “UN urges increase in role of financial services across global postal sector” or “Posts must exploit untapped potential for financial inclusion”. The surprise was not in the titles but in the interest generated by reports on the postal sector. The intersection between two things which the general public does not automatically associate: the Post and financial services, especially for the poor, seemed to spark interest.
A financial crisis is a difficult time to start a business. Credit is tight, demand is low, and the future is uncertain. Even in recovery periods, entrepreneurs may be skittish about making the enormous sacrifices necessary to launch a new enterprise and lenders may be unwilling to lend to new borrowers. New data from the Entrepreneurship Database – a collaborative effort between the Bank's Development Economics Group (DEC) and Doing Business - provide an interesting look at the relationship between new firm creation and the recent financial crisis and ongoing recovery. The main indicator is new firm entry density, defined as the ratio of new registrations of limited liability companies to the working age population. The data show that new firm entry density (“entry density”, for short) dropped sharply in response to the 2008-09 financial crisis but by 2011 had recovered to pre-crisis levels in many economies.
New firm entry density over time: Percent change in entry density as compared to 2004 levels (Source: Entrepreneurship Database, 2012)
It has become mainstream to think that digital technologies will have a significant role to play in addressing the financial inclusion challenge in developing countries. This may be so, but if all we in the financial inclusion community do is merely add the mobile phone (or the smart card) to our stock of dearly-held beliefs, we will accomplish little. Technology will not work additively; if technology-based models work it will be because they will have changed pretty much everything. I’m not saying that everything will change: I’m just saying that that should be the bet.
In geometry, three points define a plane. In journalism, three events establish a trend. In public policy, three strategy forums might not conclusively confirm a consensus – but a recent think-tank trifecta suggests that a dramatic change is taking shape in the policy community’s thinking about economic competitiveness.
Thrice in recent weeks, activist strategies to inspire innovation and growth have been the front-and-center topic in major policy conferences – suggesting that an energetic new Competitiveness Consensus, applicable to developing and developed countries alike, is emerging among economic thought-leaders.
Judging by the three forums, not just academic scholars, but policymakers and lawmakers, now seem eager to apply the lessons from a slew of analyses advocating industry-focused and productivity-driven growth strategies, taking pragmatic steps to invest in stronger competitiveness. In a global economy starved for growth and desperate for job creation, the focus on activist policies – including targeted interventions at the industry level – is relevant to countries large and small, developed and developing.
International Women’s Day is when we celebrate the strides made towards equality, but it also reminds us that gender is a powerful determinant of economic opportunities, particularly in developing countries. Financial inclusion is one of the areas where we observe a gender gap—women in developing economies are still relatively more excluded from the financial sector than men, even after controlling for income and education
For the first time, we can quantify this gap using hard data and evaluate how women around the world save, borrow, make payments and manage risk, both inside and outside the formal financial sector. With the release of the Global Financial Inclusion (Global Findex) data, we now have a comprehensive, individual-level, and publicly-available database that allows for comparisons based on more than 150,000 nationally representative adults in 148 economies in 2011. The dataset includes over 40 indicators, but here we’ll focus on three main categories: account ownership, savings behavior and credit.