Sector/Thematic Studies

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http://hdl.handle.net/10986/2110

Economic and Sectoral Work are original analytic reports authored by the World Bank and intended to influence programs and policy in client countries. They convey Bank-endorsed recommendations and represent the formal opinion of a World Bank unit on the topic. This set includes the sectoral and thematic studies which are not Core Diagnostic Studies. Other analytic and advisory activities (AAA), including technical assistance studies, are included in these sectoral/thematic collections.

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Opportunities for All: Brazil Policy Notes 2022

(Washington, DC, 2022-12) World Bank

This package of Public Policy Notes is directed to Brazilian policy makers and society to present the World Bank Group’s overview of key challenges facing the country at this juncture, and possible ways forward to address them. We present an agenda prioritized around four issues of core relevance to Brazil’s recovery and its future resilience. First is the goal of financing development sustainably given the immediate challenge of situating the country’s enormous growth, inclusion and climate action needs within a credible macroeconomic framework and efficient and effective fiscal policies. The second theme addressed in this note is building opportunities through productivity-led growth. With the growing reliance of Brazilians on social assistance policies, it is critical to keep sight of growth and jobs as the most important vehicles for the dignity and upward mobility of the poor. Third is increasing the capabilities and economic inclusion of the poor so that they are better able to capture the opportunities that come with growth. Thefourth theme we address in this note is meeting Brazil’s potential as a as a leader in green and climate friendly development. This document is accompanied by a package of six policy presentations and an underlying set of more detailed policy reports that can be accesses here: https://www.worldbank.org/en/country/brazil.
Key Principles for Effective Regulation and Supervision of Credit Reporting Service Providers

(Washington, DC: World Bank, 2022-10-01) World Bank

The first section of this report briefly introduces the topic and explains the role of credit reporting systems in the financial infrastructure. The second section briefly discusses the role of the different types of CRSPs and recognizes alternative credit reporting service providers as emerging players in the industry. It also sheds light on the use of new technologies in credit reporting and their potential implications. The third section discusses GPCR as published by the ICCR in 2011. GPCR represents the only universal set of standards for credit reporting as included under the Financial Stability Board (FSB) noncore compendium of standards for the financial sector. GPCR’s five principles describe the respective roles of key stakeholders, accompanying guidance, and recommendations for effective oversight. The section elaborates on the relevance of GPCR for developing key principles for the effective regulation and supervision of CRSPs. In doing so, it provides numerous examples of how GPCR applies in the regulatory frameworks of different jurisdictions around the globe. The fourth section discusses the major types of risks related to credit reporting systems. These risks are not necessarily mutually exclusive and interrelate in many ways, but they can be termed strategic risk, operational risk, cyber risk, model risk, reputation risk, and legal and compliance risk, among others. The section focuses on the evolving role of credit reporting with a forward-looking approach to identify risks and vulnerabilities. The fifth section discusses the key considerations for regulatory and supervisory principles. The section outlines the preconditions for developing and implementing an effective regulatory and supervisory framework and explains the scope of application of the key principles and the responsibilities of regulatory and supervisory authorities. The sixth section then introduces twelve principles for safe and efficient credit reporting along with the roles and responsibilities of the supervisory authority. The seventh section of the report discusses the suggested approach authorities should adopt in applying the principles. This discussion emphasizes the importance of maintaining holistic oversight of how the credit reporting system functions to ensure that the players in credit reporting activities can manage the risks related to credit information sharing. Finally, the eighth section presents the methodology for assessing the regulatory and supervisory frameworks at the jurisdictional level. The assessment methodology is primarily intended for international financial institutions (IFIs), but it is also helpful for national authorities and other internal and external assessors. Assessment responsibility for observing adherence to the key principles primarily lies with individual countries’ regulatory and supervisory authorities.
CivicTech: Transparency, Engagement, and Collaboration for Better Governance

(Washington, DC: World Bank, 2022-07-17) World Bank

As economies and societies become increasingly digital, governments around the World are prioritizing the use of digital technologies and data to increase the participation and engagement of civil society in public matters. At the same time, citizen’s rising expectations and demands require public sectors to strengthen civil society engagement. Digital technologies and data have the potential to increase substantially the tools that governments have available to further involve citizens in policy and service design and delivery. This how-to-note provides advice on how to use digitalization to strengthen the engagement between the governments and citizens, with various examples of what CivicTech is and why it is an important element of the GovTech approach.
Enhancing Debt Transparency by Strengthening Public Debt Transaction Disclosure Practices

(Washington, DC: World Bank, 2022-05-02) World Bank

Improving debt transparency is critical for promoting debt sustainability and creditworthiness assessments, increasing the accuracy of public debt information, and protecting the interests of a diverse range of stakeholders. The importance of debt transparency, the costs associated with the lack of it, and its benefits, are extensively discussed in recent World Bank literature. One of the key factors that limits debt transparency as it relates to public disclosure and the sharing of public debt-related information, is transaction-level confidentiality and disclosure practices. Challenges to disclosure have become more evident during recent debt distress among borrowing countries, and the COVID-19 pandemic. The discussion in this paper reveals issues that arise from confidentiality and disclosure practices among lenders and borrowers; and highlights how these issues cause information asymmetries and undermine the interests of stakeholders. The paper concludes by proposing concrete and actionable recommendations for the World Bank, IMF and sovereigns.
Insuring Nature's Survival: The Role of Insurance in Meeting the Financial Need to Preserve Biodiversity

(Washington, DC: World Bank, 2022-04-27) World Bank

Biodiversity loss will be an increasingly important source of risk and opportunity for the insurance sector. The significant degradation of ecosystems has the potential to materially impact global finance, economies, and societies alike. Understanding the physical and transition risks associated with biodiversity loss and working to mitigate the damage to biodiversity will be a key aspect of meeting the targets set by the Paris Agreement. Insurance companies will be impacted by biodiversity risks in several ways: as underwriters, as investors, and as corporate citizens. Insurers will be impacted both by changes in climate and biodiversity and by transition risks affecting the risks they insure or the investments they make. Insurance can promote investment in biodiversity in three ways: (i) asset protection, (ii) liability reduction, and (iii) facilitation of capital inflow from the financial markets. Ideally, efforts to protect biodiversity will include a combination of instruments, not only insurance. Insurers, as investors, can contribute directly to the preservation of biodiversity by channeling capital towards biodiversity-positive investments, but the opportunities to do so are still limited. The G20 Sustainable Finance Roadmap (G20 SFWG, 2021) highlighted the need to integrate nature and biodiversity in future work on sustainable finance. The financial materiality of underestimating or inaccurately pricing biodiversity-related risks could pose a threat to the solvency of the insurance industry and lead to an increase in exclusions of uninsurable risks. Risk management can be enhanced by combining the results of both catastrophe and climate risk models, but more needs to be done to incorporate biodiversity risk. Combining ecological action with financial protection can make good economic and financial sense and help overcome the pricing issues associated with risks such as wildfire.
Financial Consumer Protection and Fintech: An Overview of New Manifestations of Consumer Risks and Emerging Regulatory Approaches

(Washington, DC, 2022-04) World Bank

This note provides: (1) an overview of new manifestations of consumer risks that are significant and cross-cutting across four key fintech products: digital microcredit, P2PL, investment-based crowdfunding, and e-money; and (2) examples of emerging regulatory approaches to target such risks. This note is based on a more detailed recently published WBG Policy Research Paper titled Consumer Risks in Fintech, New Manifestations of Consumer Risks and Emerging Regulatory Approaches. The research paper delves more deeply into each of the four key fintech products and their associated risks. The appendix provides an overview of product-specific risks for which more information can be found in the research paper. The primary focus and objective of this note, and the paper on which it is based, is to inform authorities’ development of regulatory policy. The examples included here are intended to assist regulators considering potential FCP regulatory approaches to fintech. However, it is hoped that the discussion of manifestations of consumer risks in a fintech context can also assist authorities with related key areas, such as market conduct supervision.
An Exploration of Nature-Related Financial Risks in Malaysia

(World Bank, Washington, DC, 2022-03) World Bank ; Bank Negara Malaysia (BNM)

Malaysia is one of the world's megadiverse countries, and many of its economic activities are directly or indirectly dependent on nature and its associated ecosystem services.' The Coronavirus (COVID-19) pandemic, with its far-reaching economic impacts, is a reminder of the link between human health and planetary health, given that most human infectious diseases are transmitted between species. In parallel to climate-related risks, nature-related risks can lead to economic and financial losses. Central banks have recently started to investigate biodiversity and other nature-related impacts and dependencies of financial systems. The NGFS, of which Bank Negara Malaysia (BNM) is a member, has recommended several first actions that could be taken by financial sector regulators and supervisors to help build the foundations for more comprehensive measures. BNM, as part of its mandate to promote monetary and financial stability conducive to the sustainable growth of the Malaysian economy, has an interest in understanding nature-related financial risks to the financial sector. to the financial sector. A better understanding of nature-related financial risks is important for prudential supervision to identify and address any emerging risks in the loan books and investments of banks and other financial institutions. This report assesses the exposure of Malaysian banks to sectors and regions that are highly vulnerable to nature-related risks. This study makes use of both Malaysian and global data.
Malaysia - Assessment of the Start-Up Financing Ecosystem

(Washington, DC: World Bank, 2022-02-28) Kuriakose, Smita ; Fong, Kristina Siew Leng ; Loh, John Jaan Hui ; Zakaria, Mohamad Izwan Bin

In the context of the Coronavirus (COVID-19) pandemic and its impact on Malaysia's economy, the need to foster the emergence of an innovation-led economy has taken on increasing urgency. Public-sector involvement in the early-stage financing phase of the ecosystem is integral to crowding-in private investments, as seen by the impact of the establishment of government-sponsored venture capital (VC) funds in several small OECD countries, including Estonia and Finland. In turn, improved access to finance at the initial stages of a start-up and the crowding in of private capital will play a pivotal role in strengthening the entrepreneurship ecosystem. The government has devised a number of developmental roadmaps that emphasize the greater use of alternative forms of financing, such as VC and digital platform based models, including peer-to-peer financing (P2P) and equity crowdfunding (ECF). These strategies are an integral part of the government's strategies for maintaining growth as Malaysia achieves high-income nation status. This study aims to identify the financing gaps in Malaysia's start-up financing ecosystem and to propose specific policy levers to address the identified constraints on both the availability of and access to early-stage financing.
Malaysia - SME Program Efficiency Review

(Washington, DC: World Bank, 2022-02-28) Kuriakose, Smita ; Tiew, Haris Syahir Bin Mohd Zulkifli

With Small and Medium Enterprises (SMEs) constituting a large proportion of Malaysian enterprises and making significant contributions to employment, GDP, and exports, it is vital for the achievement of Malaysia's development aspirations that these SMEs are enabled to achieve higher levels of productivity and performance. Malaysian firms in general, but most particularly its SMEs, face a number of fundamental issues and challenges related to innovation and the adoption and effective use of new technologies. The effects of the rapid evolution of the modern business environment that have resulted from the introduction of innovative new technologies and business practices have been exacerbated by the current high level of uncertainty related to the pandemic, placing increased emphasis on the need to improve firm capabilities. The Coronavirus (COVID-19) crisis has forced businesses to adapt and adopt digital tools in order to operate in the current environment. Given the considerable fiscal challenges resulting from the pandemic, there is an urgent need to recalibrate Malaysia's provision of public support for SMEs to enable the post-pandemic recovery to be driven by the private sector. In this context, the overall objective of this study is to analyse the composition of Malaysia's SME and entrepreneurship support policies so as to identify opportunities to decrease redundancies and to increase efficiencies by ensuring that public support towards SME development responds effectively to the most pressing needs of SMEs.
Economic Shocks and Human Trafficking Risks: Evidence from IOM’s Victims of Human Trafficking Database

(Washington, DC: World Bank, 2022-02-18) World Bank ; International Organization for Migration

The report focuses on risk factors that are expected to increase the vulnerability to human trafficking from and within origin countries such as economic shocks, measured by large, discrete changes to export commodity prices and to GDP. It also explores the role that institutions play through enforcing the rule of law, providing access to justice, and implementing anti-trafficking policies, as protective factors that could weaken the link between economic shocks and an increase in human trafficking. The analysis verifies that economic shocks are significant risk factors that increase vulnerability to human trafficking. In origin countries, economic vulnerabilities, especially those caused by global commodity price shocks, are strongly positively correlated with observed cases of trafficking. For instance, the economic shock produced by a typical decrease in export commodity prices is associated with an increase in the number of detected victims of trafficking of around 12 percent. The analysis suggests that good governance institutions and particularly a commitment to the rule of law and access to justice as well as stricter anti-trafficking policies and social assistance can have a limiting effect on the number of observed cases of trafficking following economic shocks.