The countries of Europe and Central Asia have made undeniable, if uneven, progress in expanding financial inclusion in recent years. The well-developed microfinance industry and relatively widespread use of wage accounts in some countries are signs of success, though low savings rates and high levels of mistrust in the formal financial sector signal that much work remains to be done. The exclusion from the formal financial system of more than 175 million adults—disproportionately located in Central Asia—presents particularly difficult challenge for policy makers in the region. Our recently published Findex note takes an in-depth look at financial inclusion in the ECA region.
After 25,000 interviews in 23 ECA economies, a subset of the larger Global Financial Inclusion (Global Findex) database , we now know that 45 percent of adults in that region have an account at a formal financial institution. This is on par with the rest of the developing world. But of course we know that there is more to financial inclusion than account ownership, it is equally important to have data on how accounts – and other basic financial tools - are used. Account holders in ECA are much more likely to use their account to receive wages or government payments, as compared to account holders in the rest of the developing world (77 percent vs. 41 percent). This is an interesting insight as to what mechanisms are already working to engage adults with formal financial systems, and something to keep in mind when we think about how to move forward.
Governments and private sector actions can drive down remittance prices for migrants (Credit: DFID-UK, Flickr Creative Commons)
An estimated 215 million people – 3 percent of the world’s population – have emigrated far from home in order to earn enough to support their families. They include workers from Bangladesh who go to Saudi Arabia to work in the construction trade, Afghans who go to Iran to work in the oilfields, and workers from Burkina Faso who go to Cote d’Ivoire to work on the cocoa or coffee harvests.
Toiling far from their loved ones is not their only burden. When migrants send their money home, they are often charged exorbitant fees, which can account for a large portion of the small sums being sent - sometimes upwards of 20 percent – and can inflict a punishing burden on poor migrants.
Animation schools in Cambodia are using the power of international trade to reach the poor. In recent years, a number of institutions have emerged to train young Khmers how to draw the characters used in advertisements, cartoons and films. One of the institutes is run by a French school whose graduates have worked on blockbusters such as the Harry Potter, Shrek and Batman movies. These schools are tapping into a multi-billion-dollar global industry and demonstrating Cambodia’s potential to engage in high-tech services trade. They also confirm that small firms and even community-led projects in LDCs can participate in trade in services, while helping children rise out of poverty.
"Some would like to turn the debunking of the fiscal event horizon claim into a cautionary tale about macroeconomic policy advice in general. They would throw up their hands, saying macroeconomic analyses either inherently depend upon too little data to have reliable results, or inevitably will be selectively picked up by ideologues and opportunistic politicians to suit their purposes.
Perhaps both: there will always be some willing economist who can play with the data to provide credible-seeming study to support any given politically influential point of view. This, however, is far too defeatist, if not craven, a conclusion to draw."
Adam Posen – President of the Peterson Institute for International Economics.
Daunting challenges lie before the Arab-speaking workforce today. Forty million jobs must be created in the next decade to employ the region, home to the highest rate of youth unemployment – not to mention that many countries are still undergoing a period of political transition. The fundamental question about job creation now is where these countries should be headed and how they are getting there.
Having just returned from Dartmouth and meetings with the Center for Health Care Delivery Science, I’ve been thinking about the phrase “Delivery Science.” World Bank Group President Jim Yong Kim’s use of the term in recent speeches is related to using evidence-based experimentation to improve poor health, education, water, and basic service outcomes in the developing world.
Reflecting on this, I think, in many ways, “science” and “delivery” are distinct and need to be understood as different but reinforcing principles. So let’s break it down.
Fragile and conflict-affected countries confront some of the most extreme risks and constraints to their management that, if unaddressed, could create a vicious cycle of poverty, fragility, and conflict with far-reaching implications beyond these states. A well-balanced and collective approach to risk and opportunity can build on the progress made toward better development results going forward.
One thing that fragile and conflict-affected states (FCSs) have in abundance is the extreme risks facing their people. In these environments, consequences of risks materializing are often a matter of life and death. People living in such states make up only 15 percent of the world population, but represent nearly one-third of all people in extreme poverty, one-third of the HIV-related deaths in poor countries, one-third of people lacking access to clean water, one-third of children who do not complete primary education, and half of children dying before reaching their fifth birthday. Only eight of the 36 FCSs have so far met the Millennium Development Goal (MDG) of halving extreme poverty, according to a new World Bank analysis, and the upward trend in the number of poor in FCSs (figure) is expected to take their share in the global poor population to 50 percent by 2015, according to an OECD report. The majority of MDGs in fragile states will not be met by 2015.
The incidence of extreme risks in FCSs is matched by the prevalence of severe constraints on the ability of people to manage risk. Characterized typically by high levels of corruption, weak governance and institutional capacity, an unfavourable environment for doing business and low competitiveness (figure), these states offer limited access to functioning market mechanisms, communities, or governments that provide an enabling environment for managing risk. Three quarters of the limited foreign investment in fragile states go to only seven (resource-rich) states.