Financial Markets for Social Safety Nets

The Financial Markets for Social Safety Nets group supports the development of social safety nets using market-based instruments for pensions, insurance systems, and low-income housing. This work involves increasing household and small business access to key non-bank financial markets.

Housing Finance
This unit's work in this area combines efforts to expand access to primary and secondary residential mortgage markets with developing the market infrastructure, tailored to different stages of economic and financial development. Residential mortgage markets account for 40%-80% GDP in most developed economies but only 0%-10% GDP in most emerging economies. Without access to long-term housing finance, cities are built as they are financed, with slum proliferation - 70% slum dwellers in Africa, 30% in Latin America and the Caribbean.
One billion people are living in the world's unplanned shanty towns. A particular focus of the work is on accessibility for low-income or informal households, implying the use of smarter subsidies, risk sharing mechanisms with insurance and guarantees, housing microfinance, rental residential markets, leasing, and reverse mortgages.

Insurance and Pensions
The insurance market work emphasizes health, life, and livestock for idiosyncratic risk and earthquake, drought, freeze, flood, and windstorm for systemic risk. There is now clear evidence that these risks contribute significantly to families moving into poverty, even in industrial countries, and even when there is economic growth. If other factors are considered, the importance of insurance as a social safety net becomes very evident:

out of 2 billion poor only 10 million have access to insurance

forty of the 50 fastest growing cities are located in earthquake zones

the great majority of health expenditures in poor countries are met out of pocket

Annuity markets have not developed in most countries and with a generation of defined contribution plan members approaching retirement age, mechanisms to produce secure retirement incomes from lump sums need to be developed. The World Bank has been a leader in pension reform over the past decade.