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Leveraging Islamic finance promotes growth and prosperity of small businesses

Bertrand Badré's picture
Shop owners get ready for another day of work in Cairo, Egypt. © Dominic Chavez/World Bank


From the smallest rural villages in Bangladesh to the large, bustling metropolitan centers of Cairo or Istanbul, small and medium enterprises (SMEs) are the lifeblood of Islamic communities around the world, keeping local economies humming.

I first became interested in the potential of leveraging Islamic finance to grow SMEs when I led a seminar on the topic in 1997. I’ve come full circle, almost 20 years later, when I had the opportunity to speak last month in Istanbul at a conference on “Leveraging Islamic Finance for SMEs” organized by the World Bank Group, the Turkish Treasury, the Islamic Development Bank and TUMSIAD, the largest association of SMEs in the country with 10,000 members.

The reforms behind the Doing Business rankings

Cecile Fruman's picture



In Mozambique in 2003, it took an entrepreneur 168 days to start a business. Today, it takes only 19 days. That kind of transformation has major implications for ambitious men and women who are seeking to make a mark in business, or, as is often the case in Africa, seeking to move beyond a life in agriculture. In economies with sensible, streamlined regulations, all it takes is a good idea, and a couple of weeks, and an entrepreneur is in business.

This week, the World Bank Group launched its annual Doing Business 2016 report, which benchmarks countries based on their progress undertaking business reforms that make it easier for local businesses to start up and operate.

For the second straight year, Singapore topped the list, with New Zealand, Denmark, the Republic of Korea, and Hong Kong SAR, China, coming in closely behind.

In the developing world, standouts included Kenya and Costa Rica, both of which rose 21 positions; Mauritius, Sub-Saharan Africa’s top-ranked economy; Kazakhstan, which moved up 12 places to rank 41st among all countries; and Bhutan, which topped South Asia’s list of reformers. In the Middle East and North Africa, 11 of the region’s 20 economies achieved 21 reforms despite the challenges caused by a number of civil and interstate conflicts.
 
The reforms tracked by Doing Business are implemented by governments, but the results show up most in the private sector, which is critical to driving a country’s competitiveness and to creating jobs. Ensuring an enabling environment in which the private sector can operate effectively is an important marker of how well an economy is positioned to compete globally. 
 
For those of us working with governments to help improve their investment climates – and to create a policy environment in which business regulatory costs are reasonable, access to finance is open, technology is shared, and trade flows within and across borders – the real work begins long before the Doing Business rankings are published.

In the World Bank Group’s Trade and Competitiveness Global Practice (T&C), our mandate is to work with developing countries to unleash the power of their private sector for growth. Much of this work involves reforms in the very areas measured in the Doing Business report: starting a business, dealing with construction formalities, or trading across borders, among other factors.

Our experience working with clients confirms one of this year’s key findings: Regulatory efficiency and quality go hand-in-hand. A good investment climate requires well-designed regulations that protect property rights and facilitate business operations while safeguarding other people’s rights as well as their health, their safety and the environment.

Part of the #Youthbiz movement? Share your story!

Valerie Lorena's picture

Also available in: Français | العربية
 



A boat trip from Port Elizabeth to Kingstown, in the Caribbean country of Saint Vincent and the Grenadines, is a one-hour trip that locals take several times a day. It was during one of these journeys that the boat of Kamara Jerome, a young Vincentian fisherman, ran out of gas six miles from Bequia City in what is termed locally as the "Bequia Channel." While waiting for help with strong wind gusts and the sun on his head, the idea of developing a boat that would run with wind and solar energy was born. Soon after, the idea became a prototype; a boat using green technology was on the water making 20-year-old Jerome a winner of international innovation competitions and a role model to other Caribbean youth. 
 
In Mexico, young engineer Daniel Gomez runs a multimillion bio-diesel company originally conceived as a research project for his high school chemistry class. Gomez and his partners - Guillermo Colunga, Antonio Lopez, and Mauricio Pareja - founded SOLBEN (Solutions in bio-energy in Spanish) in their early twenties. 
 
Although Daniel and Kamara have different educational backgrounds, they do share one important skill, the ability to identify a problem, develop an innovative solution, and take it to the market. In other words, being an entrepreneur, an alternative to be economically active, that seems to work and not only for a few.

There is No Middle Income Trap

Ha Minh Nguyen's picture

Concerns about the so-called “middle-income trap” have recently emerged among many middle-income countries, particularly after the term was coined in 2007 by two World Bank economists.  Worried that they may become “trapped” at the middle-income level, these countries are seeking a set of policies that can help them achieve strong and sustained growth and eventually help them join the league of high-income countries.

 In our recent paper, we try to shed some light on both issues. First, we do not find that countries are trapped at middle income. “Escapees” – countries that escaped the middle-income trap and obtained a per capita income higher than 50% of the U.S. level – tend to grow fast and consistently to high income, and do not stagnate at any point as a middle-income trap theory would suggest. In contrast, “non-escapees” tend to have low growth at all levels of income. In other words, while the existence of a middle income trap implies that growth rates systematically slow down as countries reach middle-income status, no such systematic slowdown is apparent in the data. Second, we provide some descriptive and econometric evidence for a different set of “fundamentals” that enable middle-income countries to grow faster than their peers. We find that faster transformation to industry, low inflation, stronger exports, and reduced inequality are associated with stronger growth.

The WTO Environmental Goods Agreement: Why Even A Small Step Forward Is a Good Step

Miles McKenna's picture

Will the WTO be the first global organization to take action on climate change? Source - VerticalarrayInternational trade has a critical role to play in environmental protection and the effort to mitigate climate change. While it certainly isn’t always framed this way, it is important to realize that increased trade and economic growth are not necessarily incompatible with a cleaner environment and a healthier climate.

If we are going to move away from dirty fossil fuels and inefficient energy processes at a rate necessary to limit the likely devastating results of a warmer planet, then we need enabling policies in place—especially when it comes to trade policy.

That’s why, this week, a group of 14 World Trade Organization (WTO) Members are meeting to begin the second round of negotiations on the Environmental Goods Agreement (EGA)—an effort aimed at liberalizing trade in products that help make our world cleaner and greener.
 

Education & Technology in an Age of Pandemics (revisited)

Michael Trucano's picture
consider this picture
MOOCs -- massively open online courses of the sort that can simultaneously enroll thousands, even tens of thousands, of learners simultaneously -- have been a hot topic of discussion for a few years now in both the worlds of education and 'international development' (and, for what it's worth, the subject of numerous related posts here on the World Bank's EduTech blog). Recent news that edX, one of the prominent MOOC platforms, is to start offering courses aimed at high school students suggests that the potential usefulness and impact of things like MOOCs may soon extend beyond the realm of higher education, out of which MOOCs originally emerged and where most related activity has occurred to date.
 
There is much (potentially) to be excited about here. Few would argue against having greater access to more learning opportunities, especially when those opportunities are offered for 'free', where there is latent unmet demand, and where the opportunities themselves are well constructed and offer real value for learners. As with MOOCs at the level of higher education, however, we perhaps shouldn't be too surprised if these new opportunities at the high school level are first seized upon *not* by some of the groups with the greatest learning needs -- for example, students in overcrowded, poorly resourced secondary schools in developing countries, or even students who would like a secondary education, but for a variety of reasons aren't able to receive one -- but rather by those best placed to take advantage of them. This has been largely been the case for initial adopters of MOOCs. (One of the first studies of this aspect of the 'MOOC Phenomenon', which looked at MOOCs from the University of Pennsylvania, found that students tended to be "young, well educated, and employed, with a majority from developed countries.")
 
As a practical matter, some of the first types of beneficiaries may, for example (and I am just speculating here), be homeschooling families in North America (while not necessarily comparatively 'rich' by local standards, such families need to be affluent enough to be able to afford to have one parent stay at home with the kids, and generally have pretty good Internet connectivity); international schools around the world (which can offer a broader range of courses to students interested in an 'American' education); and the families of 'foreign' students looking to apply to college in the United States (the edX course “COL101x: The Road to Selective College Admissions” looks, at least to my eyes, tailor made for certain segments of the population of learners in places like China, Korea, Hong Kong, etc.). In other words, at least in the near term, a Matthew Effect in Educational Technology may be apparent, where those who are best placed to benefit from the introduction of a new technology tool or innovation are the ones who indeed benefit from it the most.
 
Longer term, though, it is possible to view this news about movement of a major MOOC platform into the area of secondary education as one further indication that we are getting further along from the 'front end of the e-learning wave' (of which MOOCs are but one part) to something that will eventually have a greater mass impact beyond what is happening now in the 'rich' countries of North America and the OECD.
 
Learning with new technologies has of course been around for many decades but, broadly speaking, has not (yet) had the 'transformational' impact that has long been promised. "Gradually, then suddenly" is how one of Ernest Hemingway's characters famously describes how he went bankrupt. Might this be how the large scale adoption of educational technologies will eventually happen as well in much of the world?
 
I
black swan
black swan
f so, one credible potential tipping point may be a 'black swan' event that could push all of this stuff into the mainstream, especially in places where it to date has been largely peripheral: some sort of major health-related scare. (For those unfamiliar with the term, which was popularized by Nicholas Taleb, a 'black swan' is a rare event that people don't anticipate but which has profound consequences). One of the first ever posts on the EduTech blog, Education & Technology in an Age of Pandemics, looked at some of what had been learned about how teachers and learners use new technologies to adapt when schools were closed in response to outbreaks involving the H1N1 influenza virus: the 'swine flu' that afflicted many in Mexico about six years ago; and an earlier outbreak of 'bird flu' in China. I have recently been fielding many calls as a result of the current outbreak of the Ebola virus in West Africa asking essentially, 'Can we do anything with technology to help our students while our schools are closed?', and so I thought it might be useful to revisit, and update, that earlier post, in case doing so might be a useful contribution to a number of related discussions are occurring.
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Transit-oriented development — What does it take to get it right?

Chyi-Yun Huang's picture
Follow the authors on Twitter: @chyiyunhuang and @shomik_raj
 
A recent trip to Addis Ababa really brought the imperatives of transit-oriented development as a complement to mass transit investments home to us. As a strategic response to rapid urbanization and growing motorization rates, Addis is one of several African cities currently developing public mass transit systems such as light rail and bus-rapid transit. Similar initiatives are budding in Dar es Salaam, Nairobi, and other cities in South Africa.

It is well known that transit-oriented development, or ToD, is a high-value complement to mass transit development. Compact, mixed-use, high density development around key mass transit stations can have the dual benefits of creating a ridership base that enhances the economic and financial viability of the mass transit investment and compounding the accessibility benefits a mass transit system can bring to a city’s residents. This is not to mention the intrinsic value in creating vibrant social gathering places for communities at strategic locations.