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Employing a unique dataset that covers households from six West African capitals, this paper provides new evidence on the demand for informal sector products and services. We first investigate whether demand linkages exist between formal and informal products and distribution channels, and whether there is an overlapping customer base, which would imply that both formal sector wage earners and informal workers buy both formal and informal products using both formal and informal distribution channels. In a second step, we estimate demand elasticities based on Engel curves. We find a strongly overlapping customer base and strong demand-side linkages between the formal and informal sector, with the exception that informal goods are hardly bought through formal distribution channels. The estimated demand elasticities tend to show that rising incomes are associated with a lower propensity to consume informal sector goods and to use informal distribution channels. We therefore conclude that the informal sector in West Africa is likely to be constrained from the demand side. more...

Myanmar’s financial system is undergoing a rapid transformation. A history of economic isolation has left Myanmar with small and underdeveloped financial institutions and very low access to financial services. Since 2011, however, demands on the financial system have grown exponentially with increased trade and investment, growing household income, and expanding government operations. While recent reforms have stimulated financial sector growth, much more needs to be done to establish a competitive and vibrant financial sector that can meet the needs of Myanmar’s expanding economy, boost incomes, and reduce poverty particularly among those living in rural areas. Increasing access to financial services is critical to achieving shared prosperity in Myanmar. more...

This report is a synthesis of fieldwork findings and recommendations developed since October 2012 under this Technical Assistance (TA) carried out by the World Bank’s Water and Sanitation Program (WSP). The recommendations have been developed through on-going consultations and meetings with the Directorate of Environmental Sanitation and Directorate General of Human Settlements, Ministry of Health, and Government of Indonesia. This report describes and assesses the performance of technical assistance TA-P143167, ‘rural sanitation market expansion of domestic private sector in Indonesia,’ provided by the World Bank through the Water and Sanitation Program (WSP) carried out from October 2, 2012 to March 31, 2015 to support the development of a rural sanitation market in Indonesia. This technical assistance (TA) was implemented as parts of a larger effort to assist the Government of Indonesia achieve at-scale results in rural sanitation through its National Strategy for Community-Based Total Sanitation (Sanitasi Total Berbasis Masyarakat - STBM). more...

This paper is organized as follows: this introduction is followed by a primer on the industry and on the evolution of the microfinance sector. The authors then examine the structure of the microfinance industry, (a) NGOs, cooperatives and credit unions, and commercialized vehicles; how they differ and why corporate governance differs according to the nature of the MFI; and (b) large networks, investment and bank-holding groups, and social services/faith-based groups. The authors then consider how corporate governance evolves and develops in MFIs as their structure and ownership changes. This is followed by an examination of the recurring issues and growing risks in the microfinance industry. The authors conclude with a look at the responses of governments, investors, and the industry itself to these issues and risks and propose some next steps. more...

This report explores the potential financing mechanism options that can be employed to catalyze more private sector investment in clean energy (renewable energy and energy efficiency) in the small island developing states (SIDS). Various financial instruments that have been used successfully to date are described and placed in the context of the issues and constraints of the SIDS, with suggested options for discussion and follow up. Green infrastructure finance, as defined in the report, makes the important point that is the combination of financial and nonfinancial interventions and instruments that can make green investments in infrastructure more affordable and less risky to private sponsors, financial markets, and governments. The objective of this report is to identify and assess options that can help increase investment in renewable energy and energy efficiency in SIDS through the adoption and funding of financing mechanisms by SIDS and development partners with special attention given to the role that the private sector can play. Many renewable energy technologies are characterized by high initial capital costs with relatively low operating costs compared to thermal alternatives. By providing an analysis of options for a financing facility to catalyze renewable energy and energy efficiency, this work is intended to inform the discussions among SIDS and development partners interested in actions to stimulate investment in renewable energy and energy efficiency. This report summarizes the results of the two stages. The assessment and selection of options identifies a number of measures that will be needed to stimulate increased private sector participation - project sponsors and developers, equity funds, lending institutions - for energy efficiency and renewable energy. The background material reviewed for this report has been summarized in the annexes. more...

European Commission This chapter highlights the growing global and European financial inclusion agenda and provides a brief assessment of vulnerability and labor market outcomes for Roma in Eastern Europe. Financial inclusion is considered by many to be among the main instruments to improve welfare, especially among the poor, which need financial services as much as, if not more, than non-poor, to reduce vulnerability and improve self-employment. Following a brief description of the main data sources used in the analysis, the chapter highlights the very high levels of vulnerability and exclusion among Roma in Eastern Europe and the poor labor market outcomes by any measure, including extremely low employment rates and high informality. Against this background, the following chapters assess financial exclusion among Roma, and self-employment levels and (credit) barriers to starting businesses. The final chapter highlights international experiences promoting comprehensive, incremental approaches to financial inclusion. more...

This paper focused on the delivery mechanisms for bilateral, multi-lateral, host government subsidy, and consumer cross-subsidy funding to enhance private sector investment. However, the specific source of funds is not deemed to be especially relevant for the purposes of this working paper. Focus on some of the useful characteristics of Output-Based Aid (OBA) experience to date that may be relevant. Propose an option for how OBA experience could be used to deliver national and programmatic supports to projects in middle- and low-income countries in coordination with other multi-lateral development bank instruments such as concessional loans and credits. This working paper does not: specifically address strengths and weaknesses of the clean development mechanism and only briefly touches on issues with using carbon finance in the current market. Carry out an assessment of experience with feed-in tariffs or advanced market commitments, or indeed other results orientated schemes. more...

Micro and Small Enterprises (MSEs) in developing countries are typically considered to be severely credit constrained. Additionally, high business risks may partly explain why capital stocks of MSEs remain low. This article analyzes the determinants of capital stocks of MSEs in poor economies focusing on credit constraints and risk. The analysis is based on a unique, albeit cross sectional but backward looking, micro data set on MSEs covering the economic capitals of seven West-African countries. The main result is that capital market imperfections indeed seem to explain an important part of the variation in capital stocks in the early lifetime of MSEs. Furthermore, the analyses show that risk plays a key role for capital accumulation. Risk-averse individuals seem to adjust their initially low capital stocks upwards when enterprises grow older. MSEs in risky activities owned by wealthy individuals even seem to over-invest when they start their business and adjust capital stocks downwards subsequently. As other firms simultaneously suffer from capital shortages, such behavior may imply large inefficiencies. more...

This Report on the Observance of Standards and Codes (ROSC) provides an assessment of the strengths and weaknesses of the existing financial reporting infrastructure that underpins financial accounting and auditing practices in Cape Verde. The assessment focuses on six pillars of financial reporting infrastructure: statutory framework, professional education and training, accountancy profession, accounting standards, auditing standards, and monitoring and enforcement of the applicable standards. The main purpose of this assessment is to assist the development and implementation of a country action plan for strengthening institutional capacity with attendant effects on enhancing corporate financial reporting in Cape Verde. The findings reveal that Cape Verde has recognized the importance of a strong corporate financial reporting architecture. In terms of accounting and auditing standards, Cape Verde adapted International Financial Reporting Standards (IFRS) for the private companies and fully adopted IFRS for banking and insurance institutions sector. However, there is no tradition of financial analysis in the country (except within the financial institutions when issuing credit) and no credit-rating agencies. The banks do not rely on corporate financial statements; generally, the lenders manage credit risks using collaterals. The Bank of Cape Verde mandated IFRS for banks and insurance companies in 2008. In addition, the capacity of regulators would be built to cope with the demands of IFRS-compliant financial reporting. The central bank would include in its scope the regulation of micro-finance institutions, which are currently unregulated. In order to improve the legal framework of corporate financial reporting, there is need to enact a Financial Reporting Act with focus on all regulatory aspects of accounting and auditing. more...

(english) This paper investigates the dynamics of the informal sector in Madagascar during a period of fragile growth. Overall, the behavior of informal firms in terms of earnings, employment and capital accumulation points to a degree of heterogeneity which goes beyond a simple dualistic model and even a more refined model that would distinguish between an upper entrepreneurial and a lower subsistence tier within the informal sector. However, in line with the dualistic model, the informal sector indeed fulfils a labor absorbing function in times of crisis. During the growth period we see capital accumulation in most of the sectors and lots of evidence that households expand their activities. However, this happens mainly through the creation of new firms instead of the expansion of existing ones, which is consistent with much higher returns at very low levels of capital. More rapid expansion can be observed in sectors that operate with lower capital intensity, which is also consistent with risk or credit constraints as major deterrents to expansion. While there is some indication that total factor productivity increased over time, returns to capital and labor where not higher at the end of the observation period than at the beginning. Returns are also rather low at high levels of capital. These findings point to a limited growth potential of the informal sector as a whole. The heterogeneity in capital returns hints at large inefficiencies in allocating capital across informal firms. _________________________________ (français) Cet article examine la dynamique du secteur informel à Madagascar pendant une période de croissance fragile. Le comportement des firmes informelles en termes de revenus, d’emploi et d’accumulation du capital suggère un degré d’hétérogénéité allant au-delà du modèle dualiste classique, et même d’un modèle plus fin distinguant, au sein du secteur informel, un segment entrepreneurial et un segment de subsistance. Cependant, conformément au modèle dualiste, le secteur informel a absorbé le surplus de travail en temps de crise. Pendant la période de croissance, on constate une accumulation de capital dans la plupart des secteurs d’activité et une expansion des activités des ménages. Ceci se traduit pourtant principalement par la création de nouvelles firmes plutôt que par la croissance de firmes existantes, en lien avec des rendements beaucoup plus élevés à des faibles niveaux de capital. Une expansion plus rapide peut être observée dans les secteurs à faible intensité capitalistique, ce qui tend également à confirmer que le risque et les contraintes de crédit sont des obstacles à l’expansion. Alors que les résultats montrent que la productivité totale des facteurs a augmenté, les rendements du capital et du travail ne sont pas plus élevés à la fin de la période étudiée qu’au début. Les rendements sont également plutôt faibles à des niveaux élevés de capital. Ces résultats indiquent un potentiel de croissance globalement limité des firmes informelles. Enfin, l’hétérogénéité des rendements du capital plaide en faveur d’une allocation sous-optimale du capital dans le secteur informel. more...

Adaptation to human-induced climate change is currently receiving a lot of attention in international development circles. But throughout human existence, natural resource-dependent people have exploited and coped with the effects of climate variability on the ecosystems from which they derive a living. Learning from this experience can help inform the design of appropriate policies for responding to human-induced climate change. This paper presents the results of a World Bank study which sought to better understand the role of local institutions in supporting adaptation to climate variability and change in Ethiopia, Mali and Yemen. The study raised three questions. First, what strategies have been adopted by rural households in the past to adapt to climate variability? Second, to what extent do institutions of various sorts assist households in adopting adaptation strategies? And third, what are the factors that prevent households from adopting appropriate adaptation strategies? For the purposes of this paper, institutions are defined as structured, formal or informal organizations. The study followed a three-step approach. First, drawing on original data from field surveys, focus group discussions and institutional stakeholder interviews, household vulnerability to climate variability was characterized in terms of its three constituent elements: exposure to climate-related shocks and stresses, and sensitivity and adaptive capacity in the face of such stressors. Sensitivity refers to the degree to which people are affected by climate variability and change. High levels of exposure and sensitivity and low levels of adaptive capacity generally result in high levels of vulnerability. But a high level of exposure need not necessarily result in a high level of vulnerability if the household's adaptive capacity is also high. more...

Social reproduction is the highest for self-employed as shown by an extensive literature from developed and developing countries. Very few studies however document the reason for this high intergenerational correlation of the self-employed status. The rare studies that have been done concern the US and show that children of self-employed benefit from an advantage when they are themselves self-employed. The purpose of this paper is to test if the second-generation of self-employed has an advantage related to the first-generation in the African context. It aims at highlighting the debate on firms heterogeneity in the informal sector, and seeks to contribute to understand the intergenerational transmission of inequalities. Using 1-2-3 surveys collected in the commercial capitals of seven West African countries in 2001-2002, this paper shows that the second-generation of informal selfemployed does not have better outcomes than the first one, except when they choose a familial tradition in the same sector of activity. Thus, in the African context, having a self-employed father does not provide any advantage in terms of profit or sales and is not sufficient for the transmission of valuable skills. On the other hand, informal entrepreneurs who have chosen a specific enterprise based on familial tradition have a competitive advantage. Their competitive advantage is partly explained by the transmission of enterprise-specific human capital, acquired through experiences in the same type of activity and by the transmission of social capital. _________________________________ Très peu d’études documentent les raisons de la très forte reproduction sociale observée parmi les entrepreneurs, aussi bien dans les pays développés que dans les pays en développement. Les rares études, portant sur les E.U, montrent que les enfants d’entrepreneurs ont de meilleures performances quand ils sont eux-mêmes entrepreneurs que les enfants de salariés. Cet article teste si ce résultat se vérifie dans le contexte du secteur informel ouest-africain et cherche à en comprendre les raisons. Il vise par conséquent à éclairer le débat portant sur l’hétérogénéité des entreprises informelles, en identifiant des facteurs de succès, mais il cherche aussi à mieux comprendre les mécanismes à l’origine de la transmission intergénérationnelles des inégalités en Afrique. En se basant sur les enquêtes 1-2-3 collectées dans sept capitale ouest-africaines, cet article montre que la seconde génération d’entrepreneurs informels ne bénéficient pas d’un avantage comparatif, sauf s’ils bénéficient d’une tradition familiale dans leur secteur d’activité. Ainsi, dans le contexte ouest-africain, avoir un père entrepreneur ne suffit pas à la transmission de compétences managériales. En revanche, les entrepreneurs qui ont choisi leur secteur d’activité par tradition familiale ont un avantage qui s’explique principalement par la transmission de compétences spécifiques au secteur d’activité et par la transmission d’un capital social. more...

This paper analyses the impact of a microfinance institution (MFI) serving small informal enterprises in Antananarivo (Madagascar). The methodology consists of comparing over time the situation of a representative sample of clients' enterprises with a control group, constructed in an almost experimental way through a standard propensity-score matching technique. Overall, the results indicate a positive impact of the project. Taken as a snapshot, the evaluations successively conducted in 2001 and 2004 indicate that the clients' enterprises recorded better average performance than enterprises without funding. With a dynamic perspective however, the results are more nuanced. If the positive effect of the project is clear during growth phases, its effect during economic recessions appears less certain. more...

This report was initiated at the request of the Iraqi government to get a better understanding of the overall financial sector in Iraq. The main objective of the report was to develop a comprehensive assessment of the financial sector. This report takes a first look at the overall financial system of Iraq with a forward looking approach. Key findings of the report are: 1) Iraq's financial sector is dominated by the banking system, with most assets held by state-owned banks; 2) many private banks are in the process of developing modern banking practices, but still need further strengthening and consolidation; 3) other financial markets are concentrated at the Iraqi stock exchange but capitalization is low, and few instruments are traded; 3) the insurance sector is small, dominated by state- owned enterprises, and is not supervised; 4) weak financial infrastructure is a clear impediment to access to finance; and 5) Small Medium Enterprises (SME) and microfinance is not well developed. more...

Output-Based Aid (OBA) and other results-based financing mechanisms are gaining popularity in the development context for many reasons, in particular, the desire to link scarce public funding with actual results on the ground. But withholding disbursements until the delivery of 'results' or 'outputs' requires that the service providers delivering the results must have access to finance (A2F) to pay for the 'inputs' in the first place. Such finance is not always available or affordable. The purpose of this working paper is to outline some of the key issues related to OBA and A2F. The analysis focuses on the energy, water, and health sectors. Micro, small and medium enterprise (MSME) financing is the main topic; however, OBA is ultimately about poor households affording access to basic services, and many OBA schemes attempt to address A2F for households, so some of these innovations are also described. The working paper is expected to support a consultative process between experts dealing with A2F challenges and experts on OBA. This process should help raise awareness of the OBA approach among potential financiers, and help consider solutions (instruments, partnerships, capacity building) so that OBA and other similar results-based financing mechanisms can be brought to scale and integrated into broader sector policy, where appropriate. more...