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BUSINESS AND POVERTY LEADERSHIP PROGRAM

CAMBRIDGE 13-16 NOVEMBER

“FINANCE AS BARRIER OR CATALYST FOR INCLUSIVE


GROWTH”

BY HERMAN MULDER

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TOPICAL ISSUES
• SOME KEY FINANCIAL/ECONOMIC FACTS
• ROLE OF MAJOR INTERNATIONAL
• FINANCIAL INSTITUTIONS IN GLOBAL
DEVELOPMENT
• IMPORTANCE OF LOCAL FINANCIAL SECTOR
FOR DEVELOPMENT
• FINANCIAL SECTOR SERVING THE POOR
• OBSERVATIONS

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NET CAPITAL FLOWS TO DEVELOPING COUNTRIES 1998-
2005
(x$bln) 1997 1998 1999 2000 2001 2002 2003 2004 2005

Current -85 -89 -4 47 19 70 122 153 248


Account

Net Equity 199 179 196 183 183 166 187 249 299

Off Debt 13 34 14 -6 27 5 -12 -29 -71

Priv Debt 94 20 3 5 -29 6 85 148 192

Other -170 128 175 -184 -119 -75 -90 -116 -274

Ch 32 16 33 45 82 172 292 405 393


Reserves

Source:WB,Global Development Finance 2006


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NET CAPITAL FLOWS TO DEVELOPING COUNTRIES
1998 -2005 (cont.) Memo items

(x$bln) 1997 1998 1999 2000 2001 2002 2003 2004 2005

Aid & grants 25 27 28 29 28 33 44 50 53

Net off aid 38 61 42 23 55 38 31 22 -19


+debt

Net priv 295 199 198 188 154 172 272 397 490
(d+e)

Remittances 71 73 77 85 96 113 141 161 167


(off)

Source:WB,Global Development Finance 2006


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NET PRIVATE FLOWS TO DEVELOPING COUNTRIES 1998 –
2005
(x$bln) 1998 1999 2000 2001 2002 2003 2004 2005

SEA &Pac 7 29 28 39 59 82 125 138

Europe+C 67 51 51 33 60 101 160 192


A

LA+Carr 99 96 85 60 28 50 59 94

ME+NAfr 8 3 3 5 8 8 8 15

South Asia 5 4 10 6 10 16 23 24

Sub Sah 14 17 10 12 6 16 21 28
Afr

Source:WB,Global Development Finance 2006


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SUMMARY GLOBAL OUTLOOK 2004 – 2008
(%change) 2004 2005 2006 2007 2008

World Trade 10.6 7.1 7.6 7.7 7.8


volume
Consumer prices 2.1 2.6 2.2 1.8 1.8
G-7
Non –oil 17.5 13.4 5.8 -3.2 -5.8
comm.prices
Oil($/bbl) 31 42 64 61 57

Interest(6/$) 1.6 3.6 5.1 5.2 4.9

Interest(6/Eu) 2.1 2.2 2.6 3.1 6.9

GDP growth HI 3.3 2.8 3.0 2.8 2.8

Developing 7.1 6.4 6.3 6.0 5.9

Dev excl Chlndia 6.1 5.0 5.1 4.8 4.5

Source:WB,Global Development Finance 2006


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ROLE OF INTERNATIONAL BANKING SECTOR IN GLOBAL
DEVELOPMENT

1. FINANCIAL SERVICES: PAYMENT CAPMARKETS


ACCESS, RISK MANAGEMENT, INVESTMENT
LENDING/,INSURANCE,TRADE FACILITATION
2. KEY RISK CATEGORIES: POLITICAL, CREDIT, MARKET,
OPERATIONAL, REPUTATIONAL
3. OPERATIONAL MODELS: SUBSIDARY, BRANCH, REP
OFFICE, OFFSHORE
4. STANDARDS & PRINCIPLES: UN GLOBAL COMPACT ,
WBCSD, EQUATOR, CDP,ETC

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IMPORTANCE OF INDIGENOUS
FINANCE
1. REGULATED/BANKING SECTOR: STATE-OWNED,
COMMUNITY-OWNED,
2. PRIVATE SECTOR , MICROFINANCE BANKS, NBFI FOR
PROFIT
3. UNREGULATED/NON-BANKING SECTOR: MONEY
LENDERS, NGOs, NBFI-NOT FOR PROFIT
4. FUNDS, SOCIAL VENTURE CAPITALISTS STEPPING UP
5. REGULATORY ENVIRONMENT: LOCAL CAPITAL
MARKETS; SUPERVISION; POLICY LENDING (SOB),

SECTOR LENDING

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FINANCIAL SECTOR SERVING THE POOR

1. COMMERCIAL BUSINESS, SOCIAL VENTURE


CAPITALISM OR PHILANTROPY? MAKING PROFIT OFF
THE POOR?
2. BUSINESS MODELS: WHOLESALE, RETAIL, FRANCHISE
3. TECHNICAL ASSISTANCE, CAPACITY BUILDING
4. FINANCIAL SERVICES OR COMMUNITY SERVICES
5. FOUNDATION, STAFF VOLUNTEERING

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SOME OBSERVATIONS

1. WE ARE ONLY STARTING………, POOR CLIENTS TOO….


2. MAINSTREAMING/UPSCALING: LINKAGES
:INTERMEDIARIES THROUGHOUT FINANCIAL SYSTEM?
3. VALUE IMPACT ASSESSMENT!
4. POLITICAL INTERFERENCE…..NON-LEVEL PLAYING
FIELD….. PUBLIC SCRUTINY….
5. MULTI-STAKEHOLDER ENGAGEMENT!
6. VALUES, STANDARDS, PRACTICES IN A DIVERSE
WORLD……
7. BASIC INFRASTRUCTURE FACILITIES, BUSINESS
PLANTS,PRODUCTS DISTRIBUTION
8. TRIPLE BOTTOM LINE:BALANCING FAIR ROE, DEFINED
SROI, SUSTAINABLE EROI (INCL CARBON)!

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