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Crowding in funds for the next Steve Jobs from Africa

Sam Raymond's picture

iHub Nairobi hosts mLab East Africa, as well as a series of Mobile Social Networking events.

When it comes to financing for entrepreneurs, this week marked a major event in the financial industry of the United States with immense potential ramifications for the developing world. This week, the US Securities and Exchange Commission’s unanimously approved rules for equity crowdfunding.

For context, equity crowdfunding allows entrepreneurs to sell equity shares of their company to a group of investors through an internet platform, and  is a distinct category of crowdfunding apart from micro-finance (Kiva), perks-based (Indiegogo), and debt (Lending Club). The most notable crowdfunding website is Kickstarter which since 2009 has raised more than $840 million, from more than 5 million people, funding 50,000 creative projects. This platform operates on a pre-sale, perks or donation model where funders contribute funds for a future product, reward, or in-kind. Shares or equity were, until the SEC ruling, not part of the deal.

If we hold true that this SEC measure represents a seismic shift in the way entrepreneurs can raise funds in the United States, the question remains, can emerging markets leap frog the developed world to democratize access to finance for entrepreneurs in their countries?

The answer, we believe, is yes.

A Global Challenge: Can We Achieve Financial Inclusion by 2020?

The issue of financial inclusion seems to be everywhere – from the World Bank Annual Meetings to the new UN post-2015 development goals. It’s got buzz in the private sector, public sector and development organizations big and small. Policymakers are increasingly making financial inclusion a priority through specific financial inclusion targets and commitments, such as the Alliance for Financial Inclusion’s Maya Declaration. In fact, World Bank Group President Jim Yong Kim recently launched an initiative “to provide universal financial access to all working-age adults by 2020.”
 
As we know from the Global Findex, more than 2.5 billion people lack access to even a basic bank account — a huge gap in inclusion and an enormous opportunity. Demographic changes, economic growth and advances in technology are making global financial inclusion more possible than ever before. With a massive new market of people demanding new services as incomes rise among the bottom 40 percent, the stage is set for dramatic leaps in access in the next few years. Emerging technologies are bringing down costs and opening new business models while providing greater access to a range of services.
 
Recognizing that the time is ripe for significant progress on financial inclusion, the Center for Financial Inclusion developed a consultative process aimed to raise everyone's sights about the possibilities of achieving full inclusion within a foreseeable timeframe – using the year 2020 as a focal point. The process sought to build a more cohesive financial inclusion “community” through the development of a common vision. It brought together experts from the World Bank, IFC and CGAP along with many representatives of the private sector and the social sector. Financial Inclusion 2020’s Roadmap to Financial Inclusion is the result.

Ask Malala: 'A Woman Is Even More Powerful Than Men'

Katrin Schulz's picture

On this year’s International Day of the Girl, I was part of the vast audience in the Atrium of the World Bank who had the opportunity to hear Malala Yousafza, the young activist who is inspiring the world with her bravery and courage, speak about her passionate fight for girls’ education.

Just the night before, she had wowed Jon Stewart on his television show with her poignantly articulate and exceedingly wise responses. Among them, she said: “I believe in equality. And I believe there is no difference between a man and a woman. I even believe that a woman is more powerful than men.”

These words, though spoken by a teenager, could scarcely ring more true amid the battle to eliminate poverty. Women are indeed more powerful than men, in the sense that, when you invest in a woman, you also invest in her family, her community and her country at large.

Financial Inclusion Targets and Transformational Change

Douglas Pearce's picture

Financial Inclusion Commitments through the Maya Declaration, the G20 Peer Learning Program, and the Better Than Cash Alliance.
 

Today at 2 o’clock in the Preston Auditorium, Jim Kim, the President of the World Bank Group – along with Queen Máxima of the Netherlands, the U.N. Secretary General’s Special Advocate for Inclusive Finance for Development – will challenge the global community to focus on transformational change in the level and quality of financial inclusion.

Why financial inclusion? Because it is an enabler for poverty reduction and shared prosperity, as has been recognized by the U.N. Secretary General’s High-Level Panel on the Post-2015 Development Agenda.

Progress in tackling financial exclusion can be accelerated through the current global wave of nation-by-nation financial inclusion targets and commitments; through improved data availability; and through transformative business models for providing financial services.

Evidence Wanted: Effectiveness of Sovereign Disaster Risk Financing and Insurance

Daniel Clarke's picture

Photo: When disasters strike – like floods, tsunamis, earthquakes or cyclones – they can cause, not just human suffering, but financial damage. Using well-crafted Disaster Risk Financing and Insurance (DRFI) instruments can help ease the impact of a potential financial catastrophe. Credit: World Bank Photo Collection.

When Tropical Storm Sendong battered the Philippines in late 2011, catastrophic flash floods claimed more than 1,200 lives and damaged over 50,000 houses. In addition to the human suffering, disasters like this often have a devastating effect on the budget of vulnerable countries, leading to the reallocation of scarce resources away from development programs to recovery and reconstruction. Governments also need immediate resources for rapid response to minimize post-disaster impacts.

But the Philippines had taken steps to prepare against such disasters. Just months before Sendong made landfall on the island of Mindanao, the government signed a US$500 million contingent credit line with the World Bank. This provided immediate access to liquidity to help finance emergency response and recovery operations.

Yet questions remain about financial protection strategies and instruments such as this contingent credit in the Philippines. For example: Does a government need to establish prior rules for post-disaster expenditure, or does it otherwise risk a slow and poorly targeted response with low impact on poverty and developmental outcomes? Was contingent credit the most appropriate instrument to finance this risk, or should other instruments, such as insurance, have been considered instead of or in addition to it? And fundamentally: Is disaster risk financing and insurance (DRFI) a cost-effective way of reducing (expected) poverty and improving (expected) developmental outcomes?

Competitiveness: Winning Papers for Next Week’s Conference – MENA, China-India . . . and Hard Drives

Ivan Rossignol's picture


We’re now a week away from the Competitive Industries conference on “Making Growth Happen” on October 16 and 17. With more than 20 high-level speakers – including our keynoters Joseph Stiglitz and Don Graves, and with more than 500 internal and external participants already registered – the conference seems poised to be a landmark event.

Through this conference, we aim to start a discussion on a controversial topic in a non-controversial way.  Prominent academics, from Stiglitz to Dani Rodrik, have explained that the world is turning massively to industrial policy pushes.  The U.S. government, through Graves’ work at the President’s Council on Jobs and Competitiveness, is demonstrating that this movement is also affecting the countries that have the strongest reputation for non-interventionist economic policies.  Nevertheless, these approaches are complex and difficult to implement, and they run the risk of allowing rent-seeking behavior and economic distortions without social returns.

We therefore also wanted to hear from other economists, and we launched a call for papers, asking for new ideas and research on the theme of the conference: the “how to” of growth and jobs. We wanted to focus attention on possible lessons that could have immediate policy implications in our country work.

The Selection Committee for these papers was composed of Vijaya Ramachandran of the Center for Global Development (CGD); Shanta Devarajan, the World Bank Group’s Chief Economist for MENA; Mary C. Hallward-Driemeier, the Lead Economist in DEC; Martin Rama, the Chief Economist for South Asia; and myself. We are pleased to announce that the winning papers are:

 


This is a diverse set of papers, ranging from rigorous studies of individual policies to new frameworks for thinking about policymaking.

Joseph Stiglitz: 'Creating a Learning Society,' and the Implications for Industrial Policy

Ivan Rossignol's picture

The first World Bank Competitive Industries conference on “Making Growth Happen” is just two weeks away. There’s been a thrilling addition to the impressive roster of speakers: A Nobel Prize-winning economist, Professor Joseph Stiglitz of Columbia University, has agreed to deliver one of the keynote addresses on Wednesday, October 16. 

What makes this particularly exciting is that Stiglitz – a former Chief Economist of the World Bank – will talk to us not only about his prior work, but will be giving us a taste of what’s coming next. His forthcoming book, co-authored with Bruce Greenwald, “Creating a Learning Society: A New Approach to Growth, Development, and Social Progress," promises to hold a wide range of policy implications.

In anticipation of the talk, and judging by his analyses on his website, I thought I’d share some of my reflections on this theme in Stiglitz’s work and on its relevance for us – as well as some questions that I hope we will tackle during the conference.

Sparking Innovation in Post-Conflict Nations

Kalyah Ford's picture

Conflict and post-conflict countries traumatized by years of instability are not commonly thought of as a source for entrepreneurial talent. Nonetheless, even under the most difficult circumstances, incredible entrepreneurial and innovative talent can and does surface.

According to the World Bank’s Fragile and Conflict Situations unit, one in four people in the world – more than 1.5 billion – live in fragile and conflict-affected situations. These are countries that are often rife with socio-political instability and large-scale organized crime, resulting in precarious security situations. Although there are consistent efforts from international organizations and NGOs to aid in their transition, as the 2011 World Development Report states, insecurity is one of the biggest developmental challenges of our time. It severely affects a country’s overall economic growth.

Yet even under these circumstances, grassroots entrepreneurship can be a way for people to impact their communities while also promoting economic growth. Still, many in the development community question why entrepreneurship thrives in some places rather than others.

At infoDev, we believe that great ideas can be born anywhere. That philosophy is supported by our recent feasibility study that aimed to gauge the mobile applications sector in Afghanistan and provide recommendations for growth.

Cases like these begin to answer the question posed earlier: why entrepreneurship thrives in some environments versus others. In the future, however, perhaps we should strive to better understand the conditions that foster entrepreneurship and its growth in fragile, less secure environments.

China's Answer to Job Creation

Joshua Wimpey's picture

About seven million college graduates are expected to flood the Chinese labor market this year. Seven . . . million . . . hopeful . . . graduates – all looking for work!
 
The Chinese central government, in response, has been actively pursuing policies that expand employment by supporting the growth of small and medium-size firms, as well as by promoting entrepreneurship among young graduates.

But have these policies been effective? How is China tackling the global challenge of job creation? And are there lessons other countries around the world can learn from China?

The Economic Cost of Gender Inequality

Katrin Schulz's picture


Madame Ngetsi of the Democratic Republic of the Congo
is one of thousands of women in the world who—despite their talent, drive, and potential to contribute to the economic development of their countries—may never be able to fulfill their dreams of starting their own businesses. Their dreams may be dashed because of outdated legislation that reproduces debilitating gender roles. 

If she were a man in the DRC, Madame Ngetsi’s initial steps in starting her business would be to obtain a certificate confirming the headquarters location, notarize the articles of association, and register with the Commercial Registry.  As a woman, however, a significant roadblock stands in her way:  She is legally mandated to first obtain her husband’s permission to register a business.  This legal requirement, found in the family code rather than in any commercial or business code, is fully in effect in the DRC.  Permission letters are readily found on file at women-owned company registries.  Married men face no such requirement.

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