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Public Sector and Governance

'Model Law for Best Practice in Financial Consumer Protection': An important driver for Universal Financial Access

Ros Grady's picture

The Client Protection Principles: Model Law and Commentary for Financial Consumer Protection (the "Model Law"), recently launched by the Microfinance CEO Working Group, has the potential to be a useful resource for the many developing and emerging economies that are seeking to design and implement international best practices in financial consumer protection, having recognized that consumer protection is a critical element in building and maintaining trust in the financial sector and achieving financial inclusion targets.

The Model Law was prepared on a pro-bono basis by the international law firm DLA Piper on the basis of the 7 Client Protection Principles of the Smart Campaign. The project, which took place over a 15-month period and was managed by Accion on behalf of the Council of Microfinance Counsels, included consultations with financial inclusion stakeholders and legal experts, who undertook a review of existing legal frameworks in various countries. Reference was also made to international best practices and principles such as the World Bank’s Good Practices on Financial Consumer Protection and the G20 High Level Principles on Financial Consumer Protection.
 
The Model Law is a high-level, activities-based law that is intended to apply equally to all financial-services providers. This includes “banks, credit unions, microfinance institutions, money lenders and digital financial-service providers.” The apparent aim is to ensure an equal level of protection for all consumers and a level playing field. The consumers concerned may be an individual or a micro-, small or medium-sized business, and so the law will apply equally to consumption and small-business facilities. Many of the provisions are framed in terms of principles, the detail of which would need to be filled out in related legislation.


 
The framework of the Model Law follows the Smart Campaign’s 7 Client Protection Principles, and so it covers the topics of appropriate product design and delivery; prevention of overindebtedness; transparency; responsible pricing; fair and respectful treatment of clients; privacy of client data; and mechanisms for complaint resolution. There is also a section covering the establishment of a dedicated supervisory authority with broad functions relating to the regulation, supervision and registration of financial-services providers, market monitoring and enforcement.

Procurement data for better development outcomes

Joel Turkewitz's picture


Even marginal improvements in procurement efficiency can mean big savings. And that’s just a start.
 
The use of data and technology in procurement make it possible for governments to make informed decisions to maximize development impact. At the World Bank, the Public Integrity and Openness Practice is developing a set of Transformational Engagements, one of which focuses on Data Analytics, to catalyze better outcomes from procurement processes.
 
The engagement will use data analytics to solve pressing developmental problems. The plan is to combine work on addressing common data problems (how to digitize paper records, how to link different data records, how to present data findings in ways that are accessible and influential) with efforts at the country level. Powered by advanced data analysis, countries can undertake empirical-based examinations of when best value is achieved via procurement, or in which cases and sectors government contracting is promoting the development of competitive and dynamic private sectors.
 
Work undertaken within the Bank will be informed by the concurrent efforts of others who are exploring different approaches and different techniques to using data and data analytics to drive improved performance. The World Bank seeks to play a constructive role within a community of initiatives to harness the power of information to change how governments function, the relationship between government and non-governmental actors, and the lives of people. Committed to an inclusive process of learning-by-doing, the World Bank is dedicated to building partnerships with researchers, government officials, the private sector, and civil society.

'Business unusual' can still work

Cecile Fruman's picture

I recently spent three days in Hargeisa, Somaliland. An eye-opening experience, as much as one that strengthens my conviction that World Bank Group is doing the right thing by engaging in this fragile country.

Somaliland is business unusual. Imagine among others, sitting in a mandatory security brief and specifying your blood type straight off the plane, going to meetings in armored cars, wearing the hijab  – a veil worn by Muslim women in the presence of adult males – scheduling meetings around prayers and the time of Iftar, the evening meal when Muslims end their daily fast during Ramadan.

The business environment in Somaliland is characterized by a fragile state, poor public service delivery, a weak legal and regulatory regime, inefficient and costly trade logistics, and a fragmented private sector with limited structured engagement with the government. Although the private sector accounts for more than 90 percent of GDP (an anomaly in Africa), it has poor access to finance and lacks an organized voice.



Meeting with the President of the Republic of Somaliland.
 
During my mission, I met with key Ministers, entrepreneurs and development partners and discussed the challenges and opportunities linked to the ongoing economic development agenda, notably the development of infrastructure and the energy sector. The exchanges highlighted how the World Bank Group's program in Somaliland is laying a foundation to create job opportunities and to accelerate the pace of economic development by fostering business reforms and SME engagement. In this light, the set-up of a high-level taskforce – reporting directly to the President – to implement Doing Business reforms compiled in a Doing Business memo, is a milestone and a strong sign of client buy-in. That is always crucial for the World Bank Group's programs to reach their objectives.  

Last, I participated in the presentation of the pilot Reform Champion Program, which aims to develop the capacity of government officials and some representatives of the private sector to implement key reforms that will address constraints to economic growth and development. The project is expected to help trained reform champions implement at least five reforms to improve government-to-business services by July 2016.

The impact of investment climate reform in Africa: How has 'Doing Business' reform promoted broader competitiveness?

Aref Adamali's picture

Sub-Saharan Africa’s (SSA) impressive growth over the past decade or so has been matched by its equally impressive showing on the World Bank Group's "Doing Business" index. In 2012, one-third of the world’s top reformers on the index were from the continent, and every year its countries feature in the top 10 most active reformers. In 2014, five of the top 10 were from SSA.

Doing Business tracks progress in reforms that support a firm through its life-cycle, from start-up, through to raising capital, to potential closure. Through a mix of wide geographic coverage and rankings that generate a lot of public attention (not all of it wholly positive), the report has been a powerful motivator of investment climate reform, with the data serving as a useful means to measure progress made.
 
Doing Business as a start
While a large appeal of Doing Business as a measure of a country’s business environment is that it focuses on tangible business activities to which the private sector and policymakers can directly relate, its indicators are limited in scope. They are therefore intended to be used mainly as a litmus test of the state of a country’s investment climate. Therefore, while Doing Business's accessibility and global profile can be very useful in generating momentum for private sector reform, it ought to mainly serve as a starting point for a country to then engage in both broader reaching and deeper investment climate change. (This approach to the use of Doing Business has largely underpinned investment climate reform efforts in SSA by the Bank Group’s Trade and Competitiveness Global Practice.)  
 
So, if Doing Business is a starting point and is used as such, is there evidence to support the assumption that it triggers wider and deeper private sector reform? Or is movement on Doing Businesses a starting point and, unintentionally, an ending point too?
 
Linkages to wider competitiveness reform data
One of the most comprehensive measures of the state of different countries’ business environments is the World Economic Forum’s (WEF) Global Competitiveness Index (GCI), a data set of over 110 variables that looks at the current state of, and tracks changes in, competitiveness across the world. The data set is structured under 12 pillars that cover measures from institutional development to technology and innovation.

Using GCI as a good measure of competitiveness, and interpreting changes in it as a reflection of a country’s effectiveness in engaging in wider competitiveness reform, we can look at the relationship between GCI and Doing Business and, significantly, the extent of movement on the two indices.
 
A high-level review of the relationship between changes in GCI and Doing Business for different regions between 2007 and 2013 shows SSA to have performed comparatively well on both indices, performing similarly to countries of Eastern and Central Europe and surpassing the world average.[1] However, looking beyond averages to GCI’s specific pillars, SSA’s performance has been variable, advancing as a region in some areas more than others. Figure 1, below, shows GCI pillars where SSA has improved the most and the least, highlighting the top and bottom three.

Figure 1: Variations within competitiveness
(SSA score on GCI, total and select pillars)  




Of particular interest is Pillar 6, Goods Market Efficiency, because many of the areas that this pillar tracks are also areas where the Bank Group has focused its investment climate reform interventions, from business entry and competition, to taxes, trade and investment. (Two of the 16 indicators in this pillar actually comprise Doing Business data – the number of procedures and days required to start a business.)
 
Pillar 6 is one of the top three GCI pillars that have the greatest upward pull on SSA’s overall performance on GCI, countering the areas where SSA has slipped in its scores.

Increasing value for money in procurement under railway projects in China

Jianjun Guo's picture
 Yang Aijun / World Bank


China has experienced substantial economic growth over three decades, with sustained annual GDP growth rates of 8%-10%. In order to maintain the growth, the government seeks to accelerate the process of industrialization and urbanization started in the 12th Five Year Plan (2011-2015).

China has made investment in transport infrastructure a centerpiece of its strategy, with investment in the rail sector specifically increasing, in recognition of lower cost, higher energy efficiency, and lower carbon emission of rail transport compared with road and air transport.

China has built the world’s largest high-speed rail network, which includes 16,000 kilometers of rail connecting 160 cities on the mainland. China’s Mid- and Long-term Railway Network Plan (2004-2020), adopted in 2004 and updated in 2008, contains an ambitious program of railway network development, with an aim of increasing the public railway network from 75,000 km to 120,000 km, among which 25,000 route-km will be fast passenger railway routes.

Procurement of high-speed railway projects in China is complex and transaction heavy. The technology is constantly changing due to innovation by designers and manufacturers, and the inclusion of multiple agencies and officials can increase the complexity.

Can countries legislate to attract more investment?

Ivan Nimac's picture

The effectiveness of legislating to address investment policy shortcomings is a recurrent debate in development circles. More specifically, do countries need a singular investment law? Should governments expend the political capital required to put in place a law if the likelihood of its implementation is questionable from the outset? Is it not better to work on more implementation-focused activities? And: If countries do undergo the reform process, what should it entail?

Revising or enacting investment laws is one of the first steps that many developing countries take to achieve its objectives for Foreign Direct Investment (FDI). In some cases, the purpose is to signal political will to reform; in other cases, changes are more substantial and seek to profoundly increase legal certainty and improve the value proposition for investors. Reforms may also arise from obligations that countries adopt under international investment agreements.

Investor certainty can bring substantial payoffs to host countries. Foreign investors want to be clear, among other things, about market access; about the requirements for business operation; about their rights and obligations; and about the accessibility and enforcement of dispute resolution.

Lack of certainty can have dire consequences. According to the 2013 Political Risk Survey by the Multilateral Investment Guarantee Agency (MIGA), almost 10 percent of investment plans were cancelled or existing investments were withdrawn due to various adverse regulatory changes in the preceding year. The value of such lost investment, coupled with the cost of international disputes that may arise from it, could climb to tens of millions of dollars for a single case.

But, this does not mean that enacting an FDI law is a guarantee of more investment. Effective reform requires, first, policy based on good practice and, second, implementation (legal, regulatory and administrative) through institutions that are up to the task. An investment framework should be implementable locally while remaining consistent with good practice.

Ideally, an investment law should be a part of a broader set of reforms dedicated to achieving specific objectives, such as more exports, jobs, productivity and other forms of value addition. All stages of investment should be addressed, including attraction, retention and linkage to the local economy.

What’s proactive governance?

Ravi Kumar's picture
See the inforgraphic in high resolution here. Designed by Boris Balabanov, World Bank

Let’s say on a dark, cold day, electricity supply to your house is suddenly interrupted. With no heat and light, you furiously walk to the nearby government energy administration office to file a complaint.
 
As you file your complaint, an official also asks for your mobile number and tells you that within the next 24 hours, you will receive help. A day later, you get a text message or robocall asking you whether you have been helped and how the service was.  
 
This process—when government proactively seeks feedback directly from citizens about the quality of its services and makes it mandatory for service providers to use smartphones and creates dashboards for citizens to view real-time information on service delivery—is called proactive governance.
 
Proactive governance was first introduced in 2011 in Punjab, the most populous province of Pakistan.

Tunisia: Understanding corruption to fight it better

Franck Bessette's picture
Ljupco Smokovski l Shutterstock.com

Corruption in the public sector is a multifaceted and complex phenomenon. It can take on a myriad of forms and come to light in various areas.  It ranges from petty corruption among government officials who use their influence for monetary gain to corruption in lobbying and fundraising in election campaigns.  Its reach extends from public procurement to managing conflicts of interest.  It is used to bribe whistleblowers and is present in all cases of cronyism and misappropriation of public funds. 

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