PSD Blog - The World Bank Group

Not so simple, Mr. Watson

For the more theoretically minded and for the critics of the logical framework approach - a recent ODI paper attempts to articulate the implications of complexity science for the development sector.

From Robert Chamber's preface:

"Much development and humanitarian thinking and practice is still trapped in a paradigm of predictable, linear causality and maintained by mindsets that seek accountability through top-down command and control. Recent years have seen more emphasis on the mechanistic approaches of this paradigm and the kinds of procedures which are increasingly questioned by successful private sector organizations." Food for thought.

The subprime mess - what's the cost?

Accurate estimates of the fall-out are certainly a moving target , but a recent paper estimates the financial and economic cost of the crisis, predicting total loan losses of $400 billion and a 1.3 percent lower GDP growth this year. This paper also contains a nice explanation of how the subprime crisis infected other financial markets and the channels through which it affects overall lending standards and economic activity.

Aids in Asia: alarming numbers

A new United Nations report, Redefining Aids in Asia: Crafting an Effective Response, was just released and makes an astonishing prediction: 500,000 peaple could die each year people due to AIDS-related illnesses by 2020.

The report released Wednesday also contends that the number of infected people could potentially double to 10 million by 2020 if prevention work is not undertaken. The cost of such an increase in infected people would be great in all levels, including economic cost, since Aids is one of the major causes of death among working-age adults in Asia. According to the chairman of the Commission on AIDS in Asia, Dr Chakravarthi Rangarajan, the cost could be up to $2 billion annually until 2020.

The subprime mess - how did we get here?

A recent IMF paper tries to understand what caused the recent deterioration of lending standards in the U.S. and shows that many parties have to take some blame. Lending standards in the subprime market deteriorated in markets with more competition, faster rising house prices and better opportunities to securitize loans once they're originated.

The relaxation of lending standards was stronger during times of lax monetary policy. While loan decisions in the prime market still seemed to follow fundamentals such as borrower characteristics, this certainly did not hold for the subprime market.

Development 2.0: on which camp are you?

Literature on Web 2.0 technologies applied to developmental problems is rapidly growing, and with it, two camps are beginning to emerge. On the one hand, there are those who see Web 2.0 tools as an enhancement of traditional collaboration and outreach capabilities. On the other hand – and to my mind more intriguing – there are those who believe that Web 2.0 is heralding a new business paradigm.

To the former, the failure to jump on the Web 2.0 bandwagon is a missed opportunity to tap into new audiences and fundraising possibilities. To the latter, it represents the risk to development organizations of becoming obsolete, bypassed by new players who are more adept to exploiting the innovative potential of "radical collaboration". A recent online dialogue titled "NGO 2.0 – the end of the organization?" sheds some light on this issue.

Does tax registration increase profits?

A large number of firms in developing countries operate in the informal sector. It is often argued that informality lowers profits and growth, but is this true? A recent paper on Bolivia finds that formality leads indeed to higher profit - on average. However, distinguishing between firms of different sizes shows that it is only mid-sized firms that stand to benefit from formality, whereas both smaller and larger firms suffer.

Partial Credit Guarantee Schemes – around the world and here in Washington

Partial Credit Guarantee Schemes – around the world and here in Washington As reported earlier, March 13 and 14 saw an interesting conference on Partial Credit Guarantee Schemes, co-sponsored by the Rensselaer Institute and the Journal of Financial Stability.

A variety of papers considered conceptual and theoretical aspects of these schemes, while others evaluated specific schemes, including in Chile, Italy, Japan, Mexico, Nigeria, UK, and the U.S. Two panel discussions complemented the paper presentations and discussions, one composed of practitioners with experiences from different regions of the world, the other of policy makers and advisers to policy makers. So, what were the main findings of the conference?

Negroponte's competitor: One laptop per rich child

Classmate PC – Intel's low-cost educational laptop – which was initially designed for developing countries is now going to be distributed in Europe and in the United States.

Here's a cost comparison of the low-cost and educational laptops out there:

• Eee PC from Taiwan's Asustek Computer: $399
• XO from One Laptop Per Child Foundation: $188
• Classmate PC from Intel: $350
• Making a profit from a do-good idea: priceless (or is it?).

To export or not to export?

A recent paper looks at possible reasons why farmers in parts of the developing world insist in growing crops for local markets when crops for export markets are considered to be more profitable. The authors suggest that this could be explained by:

"[M]issing information about the profitability of these crops, lack of access to the necessary capital to make the switch possible, lack of infrastructure necessary to bring the crops to export outlets, high risk of the export markets, lack of human capital necessary to adopt successfully a new agricultural technology, and misperception by researchers and policymakers about the true profit opportunities and risk of crops grown for export markets."

The paper also takes a look at the work of DrumNet, a social enterprise in Africa, to analyze whether a package of services could help farmers switch to export crops and market them. The researchers found a slightly positive impact from DrumNet’s package of services, but nothing overwhelming.

More on the microfinance dialogue

James Surowiecki's wrote a piece in March 17 issue of the The New Yorker on how the hype around microfinance is fogging the way to development. "What poor countries need most[...]is not more microbusinesses. They need more small-to-medium-sized enterprises," writes Surowiecki. He explained further that focusing on SMEs, rather than on microbusinesses, could generate higher rates of employment. Jacqueline Novogratz from the Acumen Fund, wrote a piece in response where she gives some practitioner's insights:

"In my own experience corroborated James' findings that only a small percentage of borrowers went onto create larger businesses that employed significant numbers of people. But we've learned how to deliver at least one product to the poor, and we have an unprecedented opportunity not only to build larger businesses that employ people but also to deliver other critical products — health care, clean water, housing and alternative energy — to the poor in ways they can access and afford."