EMCompass Notes

doi:http://dx.doi.org/10.1596/39397

Report Series: EMCompass Notes

As part of the Economics and Private Sector Development Vice Presidency, IFC’s Thought Leadership regularly publishes EM Compass Notes as part of its regular work program that includes the dissemination of knowledge, trends and emerging solutions on topics and issues that are of specific interest to companies, multilateral development institutions and regulators. Its purpose is to generate fresh ideas about business in emerging markets. The Notes range from usually 4-8 pages and are geared toward clients and private investors, in addition to the traditional development community.

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Banking on FinTech in Emerging Markets
(International Finance Corporation, Washington, DC, 2022-01) Rose Innes, Cleo; Andrieu, Jacqueline
Despite near-universal access to financial services in advanced economies, financial exclusion is stubbornly persistent in many emerging markets, leaving huge swaths of low-income populations unbanked or underbanked. FinTech companies, which apply innovative technologies to deliver such services in new ways, have begun to tap into the enormous unmet demand that this represents. These companies are starting to thrive in emerging markets, though regulatory issues, particularly weak consumer protection measures, remain to be resolved in many countries. If these can be overcome, and more progress toward universal access to digital infrastructure can be made, FinTechs will continue to scale and spread.
Financing Deep Tech
(World Bank, Washington, DC, 2021-10) Nedayvoda, Anastasia; Delavelle, Fannie; So, Hoi Ying; Graf, Lana; Taupin, Louise
Deep tech companies - those built on advances in biotechnology, robotics, electronics, artificial intelligence, and other advanced technologies—aim to solve complex social and environmental challenges. Today the majority of deep tech companies are being launched in developed countries, yet the solutions they can provide are applicable globally. Many of these solutions are especially critical to emerging markets, as the intractable challenges of climate, health, and connectivity, among other issues, disproportionately affect these nations. Addressing these challenges is a strategic priority for development finance institutions and governments worldwide, so financing deep tech companies and boosting deep tech ecosystems in order to deliver new solutions globally is a pressing matter. Doing so, however, requires substantial capital and carries a higher degree of risk than ordinary venture investments. This note examines the process of financing a deep tech company, including the benefits and drawbacks of currently available types of financing, and suggests examples of promising but not yet widespread alternatives.
The Role of Artificial Intelligence in Supporting Development in Emerging Markets
(International Finance Corporation, Washington, DC, 2019-07) Strusani, Davide; Houngbonon, Georges Vivien
Artificial intelligence (AI) has enormous potential to augment human intelligence and to radically alter how one access products and services, gather information, make products, and interact. In emerging markets, AI offers an opportunity to lower costs and barriers to entry for businesses and deliver innovative business models that can leapfrog traditional solutions and reach the underserved. With technology-based solutions increasingly important to economic development in many nations, the goals of ending poverty and boosting shared prosperity may become dependent on harnessing the power of AI. While emerging markets are already using basic AI technologies to solve critical development challenges, much more can be done, and private sector solutions will be critical to scaling new business models, developing new ways of delivering services, and increasing local markets’ competitiveness. All of these solutions require innovative approaches to expand opportunities and mitigate risks associated with this new technology.
Artificial Intelligence Innovation in Financial Services
(International Finance Corporation, Washington, DC, 2020-06) Biallas, Margarete; O'Neill, Felicity
Artificial intelligence technologies are permeating financial services sectors around the world. The application of these technologies in emerging markets allows financial service providers to further automate their business processes and to leverage new and big data sources to overcome obstacles, including the high cost of serving rural and low-income customers and establishing customer identity and creditworthiness, that prevent the delivery of financial services to many consumers. Realizing financial inclusion benefits through the adoption of artificial intelligence relies on its responsible adoption by firms, on competitive market settings, and on continued investment in the necessary infrastructure.
Innovation, Investment, and Emerging Opportunities in Today’s Textile and Apparel Value Chain
(International Finance Corporation, Washington, DC, 2020-12) Manchanda, Sumit; Schlorke, Sabine; Schmitt, Maud
Summary of note 96: innovation, investment, and emerging opportunities in today’s textile and apparel value chain textile and apparel manufacturing is a critical creator of formalized jobs, a well-known path to industrialization, and an enabler of value chain relationships that modernize economies and make them more complex. Today, value chains that support the textile and apparel industries are rapidly evolving. They are integrating new technologies, embracing workplace innovations, adopting sustainable efficiencies, and inventing products and processes to meet the changing demands of global consumers and markets. This pattern has largely been repeating itself since the First Industrial Revolution more than 250 years ago. At the most fundamental level of the textile and apparel value chain, countries with an abundance of low wage, minimally skilled workers enter the industry to do the heavy manual labor and, with time and learned experience, build skills that enable them to graduate to the production of complex products that help them integrate into more important value chains and steadily advance their standards of living.
Sustainability-Linked Finance: Mobilizing Capital for Sustainability in Emerging Markets
(International Finance Corporation, Washington, DC, 2022-01) de la Orden, Raquel; de Calonje, Ignacio
Sustainability-linked finance is designed to incentivize the borrower’s achievement of environmental, social, or governance targets through pricing incentives. Launched in 2017, it has now become the fastest-growing sustainable finance instrument, with over $809 billion issued to date in sustainability-linked loans and bonds. Yet these instruments are still nascent in emerging markets, which represent only 5 percent of total issuance to date. This note shares examples of recent sustainability-linked financing, including several involving IFC in various roles, to highlight how investors can utilize these new instruments in emerging markets and mitigate greenwashing risks
Blended Concessional Finance: The Benefits of Transparency and Access
(International Finance Corporation, Washington, DC, 2021-07) Karlin, Arthur; Sierra-Escalante, Kruskaia
Blended concessional finance, the combination of commercial finance from the private sector and development finance institutions (DFIs) with concessional finance from public and other sources, is increasingly being used by DFIs to support developmentally important projects where normal DFI or commercial finance is not available because of the high risks involved. This can be especially significant in lower-income and fragile and conflict-affected situations (FCS), where risks are high and innovative and pioneering projects can be critical to economic growth, market creation, and poverty reduction. Blended concessional finance is also being used during the COVID-19 pandemic to help sustain struggling businesses hurt by demand and supply shocks, and to rebuild economies toward green, resilient, and inclusive growth. As blended concessional finance involves the use of concessional public or philanthropic1 funds to enhance the viability of private sector projects, strong processes, particularly in the areas of transparency, access, and governance, are necessary to ensure that these resources are used effectively and without distorting markets.
Artificial Intelligence and the Future for Smart Homes
(International Finance Corporation, Washington, DC, 2020-02) Saberi, Ommid; Menes, Rebecca
The floor area of the buildings we occupy is expected to double by 2060, with most of this growth occurring in residential construction. And population growth and urbanization in emerging markets will mean expanding cities and rising demand for new housing in urban areas around the world.1 These trends represent an enormous opportunity to design, build, and operate the homes of tomorrow in intelligent ways that minimize energy consumption and carbon emissions, lower building and homeowner costs, and raise home values. Artificial intelligence will play a pivotal role in this effort by using data, including grid data, smart meter data, weather data, and energy use information, to study and improve building performance, optimize resource consumption, and increase comfort and cost efficiency for residents. AI will also analyze data collected from multiple buildings to improve building design and construction and inform future policy making related to construction and urban planning.
What Gets Measured Gets Done: Using a Corporate Scorecard to Drive Greater Investment Impact
(International Finance Corporation, Washington, DC, 2021-12) Narayanaswamy, Meera
In 2018, International Finance Corporation’s (IFC’s) shareholders authorized a capital increase of 5.5 billion dollars, the largest increase in its history. The capital increase was based on a strategy that emphasizes creating markets and mobilizing private capital and came with ambitious operational undertakings designed to ensure IFC’s place at the forefront of development finance, and to reinvigorate development in the world’s most challenging environments. To help implement these hefty undertakings, measure progress, and motivate staff, IFC took a fresh look at how the Corporation uses operational targets to achieve strategic goals and overhauled its corporate scorecard. Institutions seeking to implement a transformational strategy, as well as impact investors and development finance institutions balancing financial and impact objectives, can learn from how the revamped scorecard balances risk-taking with prudence, innovation with traditional business priorities, and speed with governance, to drive greater investment impact.
Artificial Intelligence in Agribusiness is Growing in Emerging Markets
(International Finance Corporation, Washington, DC, 2020-05) Cook, Peter; O'Neill, Felicity
Business models utilizing artificial intelligence can help meet rising global demand for food and support a more inclusive and sustainable food system by: (1) enhancing the resilience of farming methods; (2) reducing the cost of quality inputs and services to underserved farmers; and (3) improving market access to facilitate smallholder farmer integration into regional and global supply chains. Although nascent in emerging economies, applications for artificial intelligence in agribusiness will proliferate as farmers’ access to the Internet and adoption of smart devices increases across low-income countries.