Addressing high levels of non-performing loans (NPLs) is key to preserving financial stability and an important element of an integrated development agenda. High levels of NPLs lock in capital that could support fresh lending, and they create a negative macro-financial feedback loop, as debt overhang depresses borrowers’ investment and consumption decisions. High NPLs have particularly adverse implications in emerging market and developing economies (EMDEs), which lack fully developed capital markets and where credit is provided mostly by banks. Hence expanding the role of debt servicing companies and a secondary market for distressed debt is a constructive strategy: it should be a priority in most EMDEs.
The program of events at the just concluded 2017 World Bank-IMF Annual Meetings was rich, and covered a range of topics instrumental to the World Bank Group’s work.
However, the event closest to my heart was on the role national development banks (NDBs) can play to close the staggering financing gap needed to reach the Sustainable Development Goals, nicknamed going “from billions to trillions” of dollars.
Since the SDGs were announced, the international development community has been looking at ways to tap into new funding venues, attract the private sector and build relevant private-public sector partnerships.
It was ten years ago, right before the global crisis when Lehman Brothers had not collapsed, and Fannie Mae and Freddie Mac had not been placed into conservatorship. For debt managers, the markets were less volatile and the future was less uncertain. In Turkey we were dealing with the implementation of the post-crisis reform agenda.
One day, I got an invitation from my son’s eighth-grade teacher to speak at the school’s “careers day” which aims educate children on different types of jobs. I accepted the invitation but I was a little worried because, as a debt manager I have a “different type of job” that was not necessarily an “exciting” one.
For many emerging market and developing economies (EMDEs), the adverse impact is already a reality, with natural disasters becoming more frequent and severe. Unfortunately, many countries still lack the capacity to cushion these blows, and this can spur political fragility, food insecurity, water scarcity, and, in extreme cases, conflict and migration. Even in milder manifestations, these impacts can derail development and set back gains from years of investment.
Many of the world’s populations are vulnerable to climate shocks – to drought, flooding, irregular rainfall and natural disasters. For these countries, cities and communities, index-based insurance is a critical risk-management tool which allows victims of such shocks to continue to have access to finance and to build resilience against future risks.
From basic financial services to board rooms, strengthening women’s role in finance is one of the keys to boosting economic growth.
In every country, women and men alike need access to finance so that they can invest in their families and businesses. But today, 42% of women worldwide – about 1.1 billion – remain outside of the formal financial system, without a bank account or other basic tools to manage their money.
In a guest post for Infrastructure Investor, World Bank Group CFO Joaquim Levy says multilaterals’ provision of hard-currency liquidity facilities could do much to catalyze private investment into emerging market infrastructure.
The World Bank Group is playing a leading role in thinking through better approaches to infrastructure financing in emerging markets and developing economies (EMDEs). Part of this work entails understanding the key barriers that might impede private capital from participating more actively in EMDE projects. This is why we focus so much on developing local capital markets and other means to unlock the power of local institutional investors. It is also why we’ve been working to facilitate cross-border investment, in a time when returns in advanced economies remain low.
Over one billion women in the world do not have access to financial services. Having access to a transaction account is a first step for financial freedom and for women to take charge of their lives.
Women are an underutilized resource in development. Not having access prevents women from having an equal footing in society. Financial inclusion can unleash enormous potential for economic development.
The World Bank’s World Development Report on gender estimated income losses due to women being excluded from the world of work at 10%-37% of GDP across all regions. Research by the World Bank Group, the IMF, the OECD, and private sector studies show that billions can be added to global GDP by advancing women's equality.
Digital technologies are extending access to finance to millions of people, including women. This is incredibly exciting and the world is placing high stakes on digital technologies as a principal way to bring the 2 billion unbanked adults into the formal and regulated financial system.
It’s much easier today to save, make payments, access credit, and obtain insurance, all of which helps people manage day-to-day expenses, make long-term plans and handle unexpected emergencies.
In 2016, the G20 issued a report led by the World Bank Group and the People’s Bank of China – the High Level Principles for Digital Financial Inclusion - which provided eight recommendations for countries to encourage financial inclusion through digital technologies. A few weeks ago, the G20 finance ministers endorsed a follow-up report which profiles what countries have done in line with these recommendations.
Sixty-five million people worldwide are displaced by conflict and war.
Developing countries host 95% of them.
Displaced people need help. But so do their host communities, which face enormous sudden pressures on their infrastructure, public services and markets. These pressures have the potential to undermine political stability.
This is why international development institutions are rethinking how to approach humanitarian crises, and no longer consider humanitarian assistance and development interventions as two separate, sequential responses. We, at the World Bank, have been ramping up our support to both people and communities affected by fragility, conflict and violence as well as disaster risk, which can exacerbate instability.
Being able to provide quality financial services before, during and after periods of humanitarian crises can improve people’s resilience and help sustain livelihoods.
Also available in: Tiếng Việt
It’s nighttime and the streets are bustling in Vietnam’s cities and towns. Buoyed by years of strong growth, the country has a burgeoning middle class with purchasing power to sustain restaurants and cafes, full and open late into the night, busy retailers and a high penetration of mobile phones – more than one per person. The economy, however, continues to run on cash and a majority of adults still don’t have formal financial services such as a basic transaction account. Moving to a “non-cash” system is a priority for the government to increase efficiency, promote business and economic development and reduce poverty including in remote rural areas where traditional financial providers have difficulty reaching.
Since 2016 the State Bank of Vietnam, the country’s central bank, has been partnering with the World Bank Group on a comprehensive approach to financial inclusion which will result in a national financial inclusion strategy. While still in development, several key elements of the strategy are clear: a focus on digital finance including shifts in government payments to digital products and platforms; providing financial services to rural and agricultural communities and ethnic minorities, where growth has lagged and poverty rates are above the national average; and strengthening consumer protection and financial education so that the next generation of consumers are prepared for a modern financial marketplace.