PSD Blog - The World Bank Group

Everyone's doing it - stock market in Kenya

What promises the excitement of gambling without the adverse social consequences? For a growing number of Kenyans it's the Nairobi Stock Exchange (NSE).

The NSE has come a long way since 2002. The paper system which required up to three days just entering trading orders, is finally gone. The number of investors grew to 750,000 from 50,000 and the market capitalization is at $12 billion.

Can Africa attract more investment? So far the NSE has drawn Goldman Sachs.

Improving aid: consensus or competition?

The aid community has undergone sweeping changes since the 1960s when the number of donors per recipient country averaged at 12. Today this figure is 33 and the number of organizations exceeds 230.

The multitude of donor-driven initiatives spurred efforts to streamline aid, such as Poverty Reduction Strategies (PRS), but with little success. Most middle-income countries, home to 80 percent of the developing world's population, opted out of PRS and new emerging donors China and India, with $2 and $1 billion contributions respectively, change the nature of global aid.

It's now easier than ever to borrow from capital markets – 90 percent of the world's developing countries accessed the syndicated loan market and 40 percent issued sovereign bonds. As a result, the World Bank revised its lending policies cutting fees and raising lending limits striving to compete with other development banks.

For the "road ahead" read a very good short study by Joseph O'Keefe, the former head of corporate relations at IFC, and now a scholar at Brookings.

Let's talk about microfinance technology

Banks and microfinance institutions have been applying new technologies to increase lending volume, reduce costs and reach new customers. Seeking ways to further improve efficiency IFC, CGAP and Visa International will bring lenders and borrowers from over 40 countries to Washington, DC from September 17th to 19th.

If the words: emerging markets, microfinance, credit bureau, or technology apply to your work, this conference is for you.

More Wall Street-like World Bank

From moving meetings with top managers to 8:30am, expanding the trading floor – which manages $65 billion portfolio - to providing risk-reducing derivative products, such as swaps, President Zoellick wants the bank to adopt more private sector practices.

Economic malaise? Call the flying executive

Development agencies have long accepted the need to prioritize medical aid to the sick, but Jonathan Legard, Africa correspondent for the Economist, argues it is high time that business expertise should also be available on call to boost local economies.

In August's Strategy + Business, Legard demands the establishment of an Executives Sans Frontieres (ESF) modeled on Medecins Sans Frontieres. Managers with relevant expertise would fly in to assist with market development and to build sustainable local businesses, staying up to 4 years with the program. He cites the Sahel as one region where this resource could make a difference – beginning with advice on how to bring goods to market more cheaply and profitably.

As proposed, ESF would be reliant on altruistic motivations of participating firms and managers. To be effective, targeted expertise would be essential. To boost sustainability any such scheme should not be afraid to offer incentives for companies to become more involved, not least increasing their understanding and penetration of underdeveloped markets. Such an outcome would be one more example in a trend towards more innovative and entrepreneurial forms of business engagement for market development where it is most needed.

MDGs at mid-point

The UN recently updated the Millennium Development Goals data. See the progress chart - 1990 is used as baseline.

The World Bank adopted all 8 goals in 2000.

Microcredit the dangerous

The September issue of Harvard Business Review reminds companies why not to treat microcredit as a foolproof poverty solution:

From a humanitarian perspective, donating to ineffective microcredit programs slows the growth and threatens the sustainability of the best programs. From a corporate public relations perspective, companies that make low-value or even harmful microcredit investments risk being attacked for unsubstantiated claims about the impact of their CSR activities. [And] now they may get bad press for "poverty washing."

The article is free only for one month.

Does malaria cause poverty?

A new paper links low-income levels with incidence of malaria – an illness that claims over one million lives annually, 90 percent of which occur in sub-Saharan Africa.

Though not in itself revolutionary, the paper quantifies why – the moral imperative aside – the outlays on control and prevention of malaria ought to be an obvious economic choice.  Every year the disease accounts for an estimated $12 billion in lost GDP.

Extra: Kenya cuts by nearly half the death rate among children - read the WHO's first global guidance on mosquito nets. Test your knowledge: take a five-question malaria quiz.

Easy vs. effective aid - don't give in to distractions

When Ms. Jolie appears on the screen calling for more aid, she not only distracts our attention toward her obviously good looks, she may also be distracting our attention away from the search for more effective solutions to helping the poorest around the world.

Arvind Subramanian explains that many celebrities "aren't up on the economic literature":

Aid, especially in large amounts, can damage governance and make an economy uncompetitive. […] When foreign resources come pouring in and are spent domestically, wages tend to rise, especially for those in scarce supply such as managers, supervisors and entrepreneurs. Factories that export will find themselves becoming uncompetitive and go out of business.

Corruption in India

Will the continuing integration of India into the world economy diminish or exacerbate graft? Ravi Ramaurti examines the effects of growth on emerging economies:

The Paradox is that even though India's faster growth in recent years is the result of fewer government controls, most India managers would tell you that corruption has increased, not decreased […]. The explanation is that faster growth has created new choke points at which politicians and bureaucrats can extract payments […]. Faster growth has also raised the economic cost to firms of delays in public approvals, giving officials that much more 'held-up' leverage over private investors.