Government leaders and advocates came together during the Annual Meetings to discuss a major development goal – ensuring everyone has access to affordable financial services such as a bank or mobile money account. While a lot of progress has been made on “financial inclusion,” new rules affecting the flow of funds threatens to slow or even reverse some gains.
Financial Inclusion not Exclusion: Managing De-Risking brought together Queen Máxima of the Netherlands, US Treasury Secretary Jack Lew, Zhou Xiaochuan, Governor of the People’s Bank of China, Sri Mulyani Indrawati, Indonesia’s Minister of Finance. Arun Jaitley, India’s Minister of Finance, World Bank Group President Jim Yong Kim, and Juan Manuel Vega-Serrano, the president of the Financial Action Tax Force (FATF), which sets international standards for combating money laundering, terrorist financing and other related threats.
Some 700 million people were brought into the formal financial system between 2011 and 2014 – a major success – but 2 billion people remain cut off, said Queen Máxima, who is the United Nations Secretary-General’s special advocate for inclusive finance for development.
A new challenge to financial inclusion is a trend toward “de-risking” by banks. Many larger banks are increasingly terminating or restricting business relationships with remittance companies and smaller local banks in certain regions of the world. De-risking has therefore made money transfers more difficult for migrant workers and humanitarian organizations working in war-torn places.
Many people don’t think twice when they’re asked to show their ID while opening a bank account or even while waiting in long lines to get a driver's license. Yet for the 1.5 billion people around the world who don’t have a form of identification, this is the first barrier they face completing these basic – but important – tasks.
Harnessing the potential of technology to overcome the challenges of providing unique identification to people across the developing world was the topic of an Annual Meetings seminar on ‘Identification for Development.’ The panel was moderated by the new World Bank Chief Economist Paul Romer, and featured Sri Mulyani Indrawati, Minister of Finance of Indonesia; Ajay Pandey, CEO of the Unique Identification Authority of India; Justin Forsyth, Deputy Executive Director of UNICEF; Tara Nathan, Executive Vice President of Public-Private Partnerships at MasterCard; and John Giusti, Chief Regulatory Officer at the GSMA, an association of 800 mobile operators.
Yes, there are approximately 65 million refugees, asylum-seekers and internally displaced people worldwide. Yes, conflicts continue unabated, producing inordinate human misery. Yes, we urgently need political solutions.
But there is growing consensus that creating jobs so people can work—wherever they are—is key to escaping fragility and preventing further conflict. And it’s what we need to focus on right now, experts and policymakers agreed at the “Overcoming Fragility: Why Jobs Are Key” event on Friday during the World Bank-IMF Annual Meetings in Washington, DC.
The World Bank Group convened a Human Capital Summit on the opening day of the Annual Meetings to make the economic case for investing in the early years of children to drive future growth and development.
Nine developing countries heeded the call, pledging to improve nutrition, health and education programs for young children. They became the first wave of countries expected to make similar pledges over the next few years to tackle childhood malnutrition, lack of early stimulation and learning, and other problems affecting the health and development of children.
World Bank Group President Jim Yong Kim warned that the future competitiveness of countries in the world economy will depend on whether their young people are able to reach their potential.
Failure to eliminate childhood stunting will have high economic costs – a loss of 7 percent per capita of GDP, on average, and as high as 9 percent in Sub-Saharan Africa and 10 percent in South Asia, according to a recent analysis by the World Bank Group.
Kim illustrated the dangers of undernutrition, under-stimulation, and other threats to the health and welfare of young children in a presentation at the beginning of the event. For example, one in every 45 children in the world today has been uprooted from their home, according to a recent report by UNICEF. One quarter of children under five worldwide are chronically malnourished (are short for their age, or “stunted”) with rates as high as 50 percent or more in some countries.
According to the 2016 Edelman Trust Barometer, half the world population distrusts government. Understanding why and how governments can better serve their citizens was the central theme of the “Governance Gap” high-level public discussion at the World Bank-IMF Annual Meetings on Thursday.
“Governance is complex and complicated. We need to unpack it to understand those complexities better,” said Kyle Peters, interim chief operating officer and managing director of the World Bank at the start of the event, moderated by Clare Short, chair of the CITIES Alliance and former UK Secretary of State for International Development.
Urgent action is needed to mobilize, redirect and unlock trillions of dollars of private resources to ensure global growth and shared prosperity.
Since 1956, the International Finance Corporation (IFC), the World Bank Group’s member focused exclusively on the private sector, leveraged $2.5 billion in paid-in capital from its shareholders to invest over a trillion dollars for private sector development. IFC’s 60 years of experience has demonstrated the private sector’s ability to create innovative, commercially viable solutions that deliver development impact.
“A year ago, we all signed up to the Sustainable Development Goals. The only way to achieve these goals is if private capital funds them and private business implements them,” said Gavin Wilson, CEO of IFC’s Asset Management Company (AMC) during the World Bank Group/IMF Annual Meetings 2016.
“That’s why we came up with the phrase ‘Billions to Trillions’ last year with our multilateral institutions in the run-up to the Addis conference on financing for development,” he added.
But what does “Billions to Trillions” actually mean? Wilson explained that “we must convert billions of official assistance … to the trillions in total financing.” But he raised a very important question:
The World Bank Group’s president and new chief economist had a friendly hour-long conversation before an overflow Annual Meetings crowd about some of the biggest risks and opportunities confronting the world today – and the kind of innovative thinking needed to reach ambitious development goals.
Sitting side by side, Jim Yong Kim and Paul Romer discussed the potential impact of automation on jobs, the need to raise the profile of practical development research, the best way for people to acquire valuable “soft skills,” and other issues. The event, Shaping the Global Development Agenda, was simultaneously translated into French, Spanish and Arabic, and livestreamed in four languages.
The rapport between Kim and Romer quickly became clear.
“When I first interviewed Paul, it was supposed to be a 35 to 45 minute meeting. We ended up going for about two hours and 15 minutes, talking about all kinds of different things. And so we thought that we’d share some of that,” said Kim.
In a speech just ahead of Annual Meetings, World Bank Group President Jim Yong Kim said there must be a new push to bring enough financing, innovation, and creativity to tackle the world’s many challenges – and the World Bank Group has a vital role to play.
Despite rapid reductions in extreme poverty and improvements in the incomes of the bottom 40 percent of the population, progress is “still far too slow” and inequality is still too high, said Kim.
“We have to make growth much more equitable,” said Kim at the Brookings Institution, a think tank in Washington.
He referred to a new World Bank report finding that income inequality has decreased between people and nations, but “still constrains growth and breeds instability.”
The world is facing low growth, technological change, and threats posed by climate change. By 2030, almost half of the world’s poor will live in countries affected by fragility and conflict, and emerging markets and low-income countries face an annual infrastructure financing gap of up to $1.5 trillion, said Kim.
“We have to face up to the fact that we are not reaching the scale required to make the kind of impact on growth that’s needed in developing countries,” Kim said at the packed event.
“These are no ordinary times. So ordinary measures will not work.”
Estimates of the financing gap for emerging market infrastructure range from nearly half a trillion USD to more than US$1 trillion a year over the next decade. The range reflects the difference between the estimated level of infrastructure needed to sustain growth across emerging markets and the actual level of such investment.
The challenges are immense, and resources are scarce. Of the financing that does exist, more than 70% comes from national government budgets; the second largest source (roughly 20%) is the private sector; and remaining resources come from overseas development assistance or aid from developed economies1. Given the overstretched demands of public sector budgets in developed and developing countries alike, any increase is likely to come through more partnership and co-financing from the private sector.
Ministers from 189 countries meet in Washington the week of October 3 for the World Bank-IMF Annual Meetings. We’re streaming 22 events, with more than 10 in multiple languages, on themes including the need for global cooperation to address risks, encourage trade and economic growth. Watch World Bank Live on Monday as World Bank Group President Jim Yong Kim sets out his vision for ending extreme poverty. On Tuesday, Oxfam International’s Winnie Byanyima and World Bank experts discuss a just-released report on poverty and inequality. New World Bank Chief Economist Paul Romer and Kim talk about the challenges facing global development on Wednesday. On Thursday, heads of state and ministers join Kim at the Human Capital Summit and make commitments to reduce chronic malnutrition in children in their countries. Her Majesty Queen Máxima of the Netherlands and other high-level panelists discuss progress on financial inclusion, along with de-risking efforts by banks that could reverse it. Here is a preview of what you can expect.