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CGD’s work in this area focuses on strengthening financial systems in development countries through innovation and regulation.
Greater access for the poor to the formal financial system—including payments, savings, credit, and insurance—can greatly improve household stability and development prospects. CGD examines how to strengthen, broaden, and deepen financial systems in developing countries through innovation and regulation. We also study the effects of financial crises, to avoid and mitigate future shocks, and how developing countries can improve their business climates to spur inward investment.
The new government in Buenos Aires has taken quick steps that send a strong message to the world: Argentina wants to open its markets. President Mauricio Macri’s moves to ease market distortions caused by currency controls, trade taxes, and a lack of international financing, have greatly improved local and international expectations about the country's future. However, history shows that the road to a more market-friendly economy can be rocky. Moreover, the challenges can be monumental under small fiscal space, as the recent experience in Brazil demonstrates.
The rise of digital technology has nurtured a growing industry in financial services that benefit the poor, from mobile payments and money transfers to micro-savings and mobile-based crop insurance. But as the financial landscape evolves to include these disruptive innovations, new players and new business models could bring fresh risks to individual users and to financial systems. So how should policymakers respond?
Recognizing the importance of financial inclusion as a policy objective, regulators have endorsed the use of a risk-based approach (RBA) towards know-your-customer (KYC) requirements aimed at strengthening financial integrity. This paper considers applications of the RBA in domestic banking, mobile money and international financial transactions against the features of a rigorous RBA where both the rigor and level of due diligence and the structure and balance of incentives should be proportional to the balance of risks, including that of exclusion. Recommendations include greater attention to national identification systems and to encourage the use of digital technology to shift from cash-cash wire transfers to more transparent account-account transactions between identified holders.
If Africa’s smallholder farmers are going to lift themselves out of poverty, they need access to formal financial services instead of the unstable, inflexible, informal arrangements that they currently rely on and that keep them poor. Ngozi Okonjo-Iweala and Janeen Madan review the ways in which digital technology is changing how financial services are delivered and made affordable. With the right investments and policies, farmers will be able to access credit, savings accounts, insurance, payment platforms, and other financial products that allow them to invest in their livelihoods without being exposed to exploitation or untenable risks.
The first thing we should be asking is why now in particular, since conditions have not really changed much in the past few months. For example, back in September, there were large uncertainties in the global economy. China’s economic slowdown was causing alarm. Volatility in international capital markets was high. The appreciation of the US dollar was hurting US exports, which could (yet) mean slower US economic growth. That was not the time for the US Federal Reserve to up interest rates. But now it is – and here’s why.
Drawing from existing domestic experiences and the first results of the international debate, this paper tries to identify some high-level recommendations on how the payments system should be regulated to best achieve the particular goal of inclusion.
This paper investigates the shifts in Latin American banks’ funding patterns in the post-global financial crisis period. To this end, we introduce a new measure of exposure of local banking systems to international debt markets that we term: International Debt Issuances by Locally Supervised Institutions. In contrast to well-known BIS measures, our new metric includes all entities that fall under the supervisory purview of the local authority.