PSD Blog - The World Bank Group

End-of-summer hiatus

The PSD Blog is going on an end-of-summer hiatus for the next two weeks. While we're away, check out our most popular posts from August if you missed them while at the beach:

• A Universal Definition of Small Enterprise: A Procrustean bed for SMEs?
• Coming Full Circle: Bucket baths at IFC
• Development 2.0: The skills gap
• Harnessing development’s information shadow
• Is the mainstream ready for output-based aid?

Also of interest to PSD Blog readers -- Professor Benjamin Powell takes the saddle over at Bill Easterly's Aid Watch blog to make the case for sweatshops. See an earlier post on the sweatshop debate on the PSD Blog.

Coming Full Circle: Bucket baths at IFC

When I applied for work at the International Finance Corporation way back in 1996, I had no idea that the battle against poverty would involve so many bucket baths, or that I would be taking them throughout my career.

It started with my very first assignment, in Sumy, a town of 300,000 in Ukraine. My water was heated by a frightening device, now rarely seen, called a kolonka, which was a metal box in your bathroom that heated water by gas. A good kolonka worked well; when you turned on the hot water tap, the device would fire up and provide enough hot water to take a shower or wash dishes. But my kolonka only worked if the water moved through it at a trickle, making a shower impossible. So every morning, I would slowly fill my red plastic bucket with hot water and take a bucket bath before heading off to do IFC business.

Friday links

1. Pimp my rice (paddy)

2. The World Bank talks about failure (with a little help from a Google transplant)

3. Which country has the second highest number of gyms in the world (after the US)? (Hint: It belongs to the BRICs.)

4. Singapore: Incredible, or frightening?

5. ICTs and microenterprises in Mumbai (Thanks to Giulio Quaggiotto for the pointer.)

6. Finally, scientific confirmation that name-dropping is annoying

Who are those turkeys on Twitter?

The image below belongs to Filippo Minelli's Contradictions series. The World Bank has at least 11 Twitter feeds (and probably many more that I am not aware of). Also check out his Flags series. Can you guess which country gets to raise the 'Bananas' flag?

Just in case you aren't already, you can follow the PSD Blog's Twitter feed @worldbankpsd.

Prioritizing business environment reforms

Over the last decade or so, the World Bank has made considerable investments in carrying out firm-level surveys that can be compared across countries and over time. What have we learned from all of this? Most obviously, we confirmed our suspicions that reforming the business environment, e.g. by reducing the barriers to entry, can boost productivity.

But perhaps more importantly, we now have a better sense of which aspects of the business environment matter most for different countries. Things like protection of property rights seem to be a basic prerequisite for all countries, but certain aspects of the business environment matter much more to countries at different levels of development. A new World Bank working paper by Lixin Colin Xu usefully summarizes what the research says:

A new way to do financial literacy?

Over on the All About Finance blog, Bilal Zia provides a comprehensive roundup of what we know about the impact of financial literacy programs. As Zia points out, there are a lot of reasons to believe that financial literacy is important, but evaluations of financial literacy programs have so far produced lackluster results. An evaluation of a financial literacy seminar in Indonesia targeted at the unbanked found no impact on the overall population (although some impact among the least well off); a program for farmers in India also had little impact.

Although Zia suggests that in both these cases perhaps what is needed is simply more -- longer trainings, more often -- maybe the problem is rather in the delivery mode. Rather than delivering in the format most familiar to those who are responsible for the training, i.e. some kind of formal training module, perhaps the solution is to use a now widely available form of communication: mobile phones.

Harnessing development’s information shadow

In a previous post, I introduced the concept of development’s information shadow (mediated from Tim O’Reilly), arguing that the development world will gradually produce an increasing amount of digital data with a relationship to real world objects (think, for example, of a digital map of safe drinking water sources in a given location). This will shed new light on different aspects of the reality of development work (particularly in the field) -- a reality for which we currently have no effective narrative, providing an opportunity to rewrite the script for aid.

A recent prototype initiative of AidData, the Development Gateway, and the World Bank to geocode the Bank’s projects at the subnational (rather than the national) level is meant to showcase the potential of enhancing development’s information shadow (hopefully, there are techies out there who will be inspired!).* All of a sudden, thanks to the increased level of granularity of geospatial data, a whole new narrative is emerging that will allow us to account for regional differences in, say, the impact of education projects between capital cities and rural areas (more in a blog post and video on Owen Barder’s blog). What used to be a bird’s eye view of development work at the national level, thanks to the magnifying lens of geodata, will now turn into a more nuanced account taking into account regional variations.

Creating competitive markets

It is a matter of debate whether governments should play an active role in stimulating industrial upgrading. But it strikes me as highly unlikely that an activist role for government has much benefit for products low on the value chain. A new policy note from ODI on four product markets in five developing countries seems to bear this out. The market for sugar is a particular object of abuse:

...the state is heavily involved in the sugar industry in some countries, including Bangladesh, Kenya and Viet Nam. In all three countries, however, the state-led sugar industries exhibit low productivity and poor performance, and the use of obsolete technology and inefficient farming methods mean poor cane yields and sugar outputs. All three are struggling to compete and survive in the face of competition from sugar that is either privately produced or imported. They need substantial levels of costly government subsidisation, which is unlikely to be sustainable in the long run, thus jeopardising many livelihoods.

Overcoming the SME fetish?

Responding to a post last week on possible metrics for defining SMEs, blog reader Nadezhda expressed some concerns in the comments section. Nadezhda argues that trying to come up with a universal definition for SMEs gets the whole thing backwards. Instead:

We need instead to start with "why do we think SMEs are important but need attention" and work from there. As your survey of endless studies suggests, the answer will be different depending on factors like how developed an economy is, how formal or informal the "SME sector" is, are we dealing with agriculture, manufactures, services, tradeables, etc. The answer will also be different depending on the specific policy context -- the things that make SMEs "special" are different depending on whether we're trying to address financial services or labor conditions or environmental standards or consumer safety, etc etc.

So IFC should go back to what (some of it) was trying to do internally about a decade ago before the SME fetish took hold (because it was easier to market to donors and scale up high-profile, big money "SME" programs than to fold a lot of differentiated services and solutions under an "access to financial services" umbrella)...

Read the rest of the comment here.

A Universal Definition of Small Enterprise: A Procrustean bed for SMEs?

Editor's Note: Khrystyna Kushnir is a consultant on micro, small and medium-sized enterprises with the Enterprise Analysis Unit of the World Bank Group.

At the G-20 summit in Pittsburgh last year, the assembled authorities agreed to "scale up successful models of small and medium-sized enterprise (SME) financing." The G-20 assigned the IFC and other international organizations to launch a G-20 Financial Inclusion Experts Group and asked the private sector to come up with ideas through G-20 SME Finance Challenge. This increased attention to micro, small and medium-sized enterprises (MSMEs) begs the question -- what, exactly, should be considered an MSME?

With the issue of MSMEs playing out on an international level, it is tempting to try to find a universal MSME definition. A universal MSME definition would ease the design of loans, investments, grants and statistical research. One such effort is IFC’s SME Definition Deep-dive Analysis and Recommendations, although it's currently on hold because of internal restructuring.