PSD Blog - The World Bank Group

Big bad banks?

U.S. financial history has been dominated by the debate on how to regulate banks. A recent paper shows that branch deregulation in the U.S. lowered income inequality. Perhaps even more interesting and relevant for the policy debate, deregulation lowered income inequality by affecting labor market conditions, not by boosting the business income of the poor, nor by enhancing their educational attainment.

So, it seems that it is not through expanding access to finance by the poor, but rather through indirect effects that financial deepening reduces income inequality, at least in the U.S.

Microfinance debate

The recent investment by IFC, the Netherlands Development Finance Company and Deutsche Bank in Aasishkaar Goodwell, a private equity company supporting microfinance organizations in India, will create of almost 60 greenfield microfinance institutions to serve a potential client base in India of nearly 75 million households.

But is microfinance the right tool for development? Aneel Karnani from the University of Michigan says no:

There is no developed country that has developed on the basis of microenterprises. All developed countries have larger enterprises (which, as I have emphasised, includes small and medium sized enterprises). Scale economies play a critical role in increasing productivity, which is the foundation of economic development.

Not exactly beach reading

Major conferences inevitably generate a plethora of documents. Corporate responsibility events seems particularly prone to this trend, so it should be no surprise that the gathering of around a thousand of the great and the good at the United Nations Global Compact Leaders Summit in Geneva earlier this month witnessed the launch of a daunting set of proclamations, new initiatives and reports.

Highlights include the Goldman Sachs report suggesting firms that are leaders on good environmental, social and governance policies have outperformed the stock market 25% over the past two years.

The State of Responsible Competitiveness 2007 report from the NGO AccountAbility lets you see how your country compares among the 108 analyzed in terms of their progress on boosting competitiveness through responsible practices. Ratings also feature in the Business guide to partnering with NGOs and the United Nations, but the novel twist is that it is the companies rating the NGOs, looking at their ability to partner effectively.

Finally, the Principles of Responsible Management Education attempt to offer a framework to guide education of the next generation of business leaders on CSR.

Green cards from GE a.k.a war on methane

General Electric's financial arm, GE Money, released a credit card designed to offset the effects of greenhouse gases by allowing consumers to allocate either half or one percent of their purchases to gas credits.

GE, in turn, will buy the credits on behalf of the credit card customers from a joint-venture it created with the AES corporation.

Kevin Walsh, managing director of Renewable Energy for GE Energy Financial Services charged with investing $4 billion by 2010 in renewable projects, explains the focus on methane in a video interview.

The program has its skeptics. According to Michael Brune, from Rainforest Action Network, "GE supplies parts for coal-fired plants, so its credit card offsets emissions it helps create."

Can't blame this one on China

Every year more and more jobs get outsourced. But the trend, which so many resent, can cut costs, boost quality and even create new types of jobs at home, see Marginal Revolution. Full story is here.

Got game?

Can video and computer games help people manage their health? The Changemakers at the Ashoka Foundation think so. "Why Games Matter: A Prescription to Improve Health and Health Care" seeks innovation, along with a potential for social impact, and sustainability.

The rules are simple and the deadline is on September 26, 2007, coinciding with the release of the 2008 Doing Business report which will focus on gender.

Bank regulation around the world - for better or worse?

The third round of a comprehensive database on bank regulatory and supervisory practices around the globe has just been released. It allows policymakers to compare their own regulatory and supervisory framework with other countries and gives researchers ample opportunity for work.

A companion paper demonstrates that some recent regulatory reforms may not have necessarily led to improvements, but instead strengthened elements that have been shown to be less important or even counterproductive to the stability and efficiency of the banking system.

Expanding access to finance

From the World Bank and with contributions from IFC and CGAP, comes a compendium of recommendations for increasing access to finance for the poor. Though policymakers are the target audience, the 13 case studies included in the book make it worthwhile for all development professionals.

ABCs of SMEs

The World Business Council for Sustainable Development published a 12-page primer on the contributions of SMEs to the larger work of governments, businesses and local communities.

The brief describes the benefits that large corporations can derive, such as extensive local knowledge of resources, supply patterns, and purchasing trends, through the inclusion of SMEs in their value chains.

The graph below shows the positive relationship between the ease of doing business, the number of SMEs per 1000 people, and an overall level of income.

2007 most innovative development project

The Global Development Network opened the Eighth Annual Global Development Awards and Medals Competition. Considered one of the largest competitions on development research, the contest is open to candidates from developing and transition countries only.

The main criteria include projects' innovativeness and scalability.