IslamicFinance.de

he World Bank and Rabobank Foundation are teaming up to strengthen financial cooperatives in rural areas to improve financial services for smallholder farmers and agricultural SMEs. To get access to savings and credit, rural households and farms often establish cooperative financial institutions (CFIs). The idea for intensified cooperation on CFIs is based on the experience with a program in Albania, where Rabobank and the Irish League of Credit Unions Foundation are supporting the consolidations of two local CFI federations.

There are seven of the World Bank Group’s Climate Innovation Centers — in the Caribbean, Ethiopia, Ghana, Kenya, Morocco, South Africa, and Vietnam. They support more than 270 clean-technology startups with training programs, grants and mentorship. Increasingly, the centers have turned to competitions to help entrepreneurs grow. Bootcamps and pitching competitions have emerged as promising opportunities for jump-starting an entrepreneur’s journey. Participants train intensively with seasoned entrepreneurs to perfect their pitch. They learn to showcase their business idea and strategy in mere minutes before a panel of judges. Winners bring home significant prizes — and, perhaps more important, connections with potential investors and a greater understanding of the business landscape.

Despite transformative innovations in digital technologies, the digital divide is still substantial. As this year’s World Development Report on “Digital Dividends” notes, digital finance is likely to play a key role in answering the question of how digital technologies can contribute to the World Bank Group’s twin goals of eradicating extreme poverty and increasing shared prosperity. Digital connectivity is key, but it is only a starting point for successful digital development. It is as important to strengthen other factors that interact with technology in order to make digital technologies work for the poor. The World Development Report calls these other factors the ‘analog complements’ to digital technologies, which fall into three categories: regulation, skills, and institutions.

Infrastructure needs in developing countries are great and will continue to rise over the next decade. Since funding infrastructure projects usually requires a long-term and large investment, emerging markets are struggling how to meet these needs through public investments or even traditional bank funding. Figuring out how to finance investments needed in infrastructure is one of the key issues on the G20 agenda and has also been identified in the Sustainable Development Goals. While private-public partnerships are usually mentioned as one way to bridge this financing gap, using Islamic finance or other asset-backed financial mechanisms has started to gain traction in recent years.

In developed markets, crowdfunding is swelling the ranks of early-stage entrepreneurs and bolstering the pipeline of enterprises that diversify economies and create the majority of jobs. However, for early-stage entrepreneurs in emerging markets, the path toward crowdfunding remains untrod. Microlending platforms like Kiva are issuing consumer lending finance but cannot provide enough capital to fund the core business operations of a startup. Larger amounts of debt or equity are available via online platforms, but these are best suited for more mature companies or projects. What is missing is a normative usage of presale, rewards, or contributions crowdfunding for early-stage companies.

Between $3.3 to $4.5 trillion in investments each year will be needed to fund the Sustainable Development Goals, according to UN estimates. As one way to meet these staggering needs, the international development community is developing new results-focused financing instruments, some of which seek to mobilize untapped private sector capital and knowledge, while repositioning global economic and social challenges into investible opportunities. Impact bonds aren’t bonds in the traditional sense. Instead, they should be considered more as equity-like instruments that offer repayment to investors on the basis of results achieved.

Proper corporate governance practices in financial institutions should provide added value by enhancing the protection of depositor and investor rights, facilitating access to finance, reducing the cost of capital, improving operational performance, and increasing institutions’ soundness against external shocks. Ensuring strong corporate governance standards is thus essential to the stability and health of all financial institutions, worldwide. Good governance is an important priority for Islamic finance. Thus, the General Council for Islamic Banks and Financial Institutions (CIBAFI) and the World Bank’s Finance and Markets Global Practice recently organized the conference on “Corporate Governance for Islamic Financial Institutions: Lessons from Recent Global Developments” in Jordan.

Egyptian social entrepreneur Mohamed Ashraf Abdel Samad started Shagara (‘tree’ in Arabic) back in 2011! The idea of Shagara is to act by planting trees and plants inside cities to offset problems, increase environmental awareness, and—last but not least—help the economically disadvantaged. To do this, Shagara integrates vegetation into urban areas, blending design concepts with modern agricultural techniques and architecture. The flagship project is “Shagara at School”. It was carried out for the first time at a school in Egypt’s Al-Qalyubia Governorate in February 2013. Today, it is still going, the school extending it in 2015 by using its own resources after receiving an award for quality for the second year running.

Central banks in developed economies have created an environment of ultra-low interest rates to rekindle economic growth and to battle falling inflation. They’re doing this by keeping policy rates close to zero and “printing money” on an unprecedented scale via a veritable alphabet soup of programs, such as QE, CE, LTRO and TLTRO. These low interest rates have put a lot of pressure on investors, such as pension funds, to generate a decent return, setting off a massive search-for-yield frenzy. As a result, foreign investors current allocate more than $4 trillion to emerging and developing economies. Cheap foreign money can be highly addictive. It produces a pleasant growth buzz at first.

The World Development Report “Mind, Society, and Behavior" was recently released. In the Overview alone, the reader is met with an abundance of findings related to consumer protection, financial capability, savings and other key topics involving financial inclusion. The report highlights that psychological impulses such as present bias, loss aversion and cognitive overload can lead to poor financial decision-making. For those in or on the edge of poverty, the ramifications of these poor decisions can be devastating. Yet, as outlined in Chapter 6, there are a range of interventions that have been shown to help address behavioral constraints on financial decisions in a developing-country context.