Fresh Ideas About Business in Emerging Markets
IFC combines six decades of experience with current expertise to share evolving concepts of development finance, from bond markets to blended finance and beyond, in a series of thought pieces and case studies.
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Explore the latest EMCompass publications:
Publish Date: 4/19/18
Crowding-In Capital Attracts Institutional Investors to Emerging Market Infrastructure Through Co-Lending Platform
Financing infrastructure in emerging markets is a critical global challenge for sustainable development. Through a new IFC program, private institutional investors can directly participate in the evolving infrastructure asset class in emerging markets. The program, IFC’s Managed Co-Lending Portfolio Program (MCPP) for Infrastructure, creates a structure that overcomes several hurdles that have inhibited the flow of private capital to emerging market infrastructure projects. Read more.
English | April 2018, Note 53
Publish Date: 4/19/18
Development institutions, governments, and the investment community have been exploring ways to increase private capital flows to support critical development projects in emerging markets. A new financing mechanism applies the risk-bearing capacity and know-how of insurance companies to allow these companies to take what are, in many cases, their first insurance exposure to markets and counterparties. This innovative credit insurance solution, which we call “Credit Mobilization,” is being pioneered to provide long-term funding to developing country banks, and may offer significant potential for scale-up and replication.
English | Note 52 - April 2018
Publish Date: 4/17/18
At the heart of IFC’s approach to blended finance are efforts to create and help sustain private markets with strong development impact. This note explores the role of blended finance in creating markets and looks at lessons from three blended finance projects and structures—and how each contributed to the creation of markets that are scalable, sustainable, and resilient.
English | Note 51 - April 2018
Publish Date: 1/30/18
Key Steps to Improve Agribusiness Competitiveness Part II: Research & Development, Logistics and Marketing
Agriculture is central to emerging market economies. In Africa it accounts for as much as 65 percent of employment and 32 percent of output. Globally, two-thirds of the world’s poor—some 750 million people—work in rural areas. But as economies expand and production shifts to manufacturing and services, agriculture’s share of employment and GDP decreases. At the same time, the broader agribusiness industry—business activities performed “from farm to fork”—is playing a more important role in growth and development. Improved land rights, better regulation of input and output markets, and better access to seeds and fertilizer are all critical to this transition.
English | 5 Pages - January - Note 50 | IFC, 2018
Publish Date: 1/30/18
Agriculture is central to emerging market economies. In Africa it accounts for as much as 65 percent of employment and 32 percent of output. Globally, two-thirds of the world’s poor—some 750 million people—work in rural areas. But as economies expand and production shifts to manufacturing and services, agriculture’s share of employment and GDP decreases. At the same time, the broader agribusiness industry—business activities performed “from farm to fork”—is playing a more important role in growth and development. In Part I, the emphasis is on improved land rights, better regulation of input and output markets, and better access to seeds and fertilizer that are all critical to this transition.
English | 7 Pages - January - Note 49 | IFC, 2018
Publish Date: 1/26/18
Correspondent banking relationships connect banks and people across borders and are critical to finance and trade. They are a vital link between emerging markets and the broader global economy. Yet efforts to combat money laundering and the financing of terrorism have increased compliance requirements for banks. Difficulties adhering to these requirements and increased costs associated with them threaten the ability of banks to serve their customers, while also eroding the number and quality of correspondent banking relationships. A recent IFC survey shows that many banks are feeling the pressure of increased regulation and de-risking, and emerging market banks are bearing the brunt of it.
English | 7 Pages - January - Note 48 | IFC, 2018
Publish Date: 10/26/17
More than a billion tons of food are lost annually across global food supply chains. Spillage, spoilage, insects, and rodents are the causes. Addressing it is a daunting challenge due to the complexity of the many factors involved. But it is a worthwhile challenge because of the potential benefits, including improved food security, nutrition, economic productivity, and response to climate change. Poor or nonexistent public infrastructure is often an underlying cause of food not being transported or processed effectively. And climate change damages existing infrastructure and increases losses. Despite the numerous environmental, economic, and socio-cultural barriers involved, there are many examples of private sector enterprises that have tackled post-harvest loss successfully. They focus on education, collaboration, and markets.
English | 8 Pages - October - Note 47 | IFC, 2017
Publish Date: 10/26/17
Emerging market countries can benefit from advanced farming technologies that mitigate the effects of climate change and protect environmental resources. Water scarcity is an issue that can be overcome by adopting climate-smart technologies such as micro-irrigation. There are several precision agriculture investment opportunities available to the private sector, including agricultural extension via digital advisory services, drip irrigation, solar pumps, and crop and soil monitoring.
English | 5 Pages - October - Note 46 | IFC, 2017
Publish Date: 10/12/17
IFC worked with key influencers and experts in the world of blockchain, distributed ledgers, and digital finance to create a series of six in-depth research papers examining the potential and perils of blockchain. These documents collectively examine the general contours and technology underlying blockchain, its growing impact in the financial services sector, and its implications for emerging markets. They also provide a regional analysis of blockchain developments in emerging markets, with particular attention paid to financial sectors, as well as a look at the implications and potential applications of blockchain beyond finance, especially with regard to global value chains.
English | 60 Pages - October - Report | IFC, 2017
Publish Date: 10/3/17
Global value chains cross multiple borders and connect advanced and emerging economies, and are vehicles that can deliver on many of the promises of globalization. Yet operating them is complex and costly. Global trade since the great recession has slowed, in part because of a lack of transparency and interoperability within these networks. Blockchain, a technology with unique abilities to record, track, monitor, and exchange assets without need of an intermediary, may be the solution to many of the logistical and cost issues that plague the growth and operation of global value chains, especially in the case of food, agribusiness, and pharmaceuticals.
English | 7 Pages - September - Note 45 | IFC, 2017
Publish Date: 8/21/17
Blockchain, or distributed ledger technology, is now disrupting the financial services industry as part of a larger wave of external innovations by digital financial technologies. Emerging markets—due to their higher banking risks, lower bank penetration, and greater presence of digital financing—are an ideal backdrop for the adoption of blockchain-based financial solutions, and benefits could include a technological leap forward and a boost to financial inclusion and growth. This note focuses on selected regions in emerging markets where distributed ledger technology is already affecting the provision of financial services, including Africa, Latin America, and Asia.
English | 5 Pages - August - Note 44 | IFC, 2017
Publish Date: 8/21/17
Financial institutions around the world find themselves continually barraged by external innovations they are often unable to absorb and internalize. The emergence of innovative digital financial technologies has challenged traditional players in the sector by demonstrating new ways to deliver value across the entire financial value chain. Blockchain, or distributed ledger technology, is just such a disruptive—and possibly game-changing—innovation. Emerging markets may provide an ideal backdrop for the adoption of blockchain-based financial solutions, which can provide the basis for a technological leap forward and a boost to financial inclusion and growth.
English | 8 Pages - August - Note 43 | IFC, 2017
Publish Date: 8/10/17
A digital transformation is taking place in the financial services industry, with a host of non-bank innovators offering both customer facing and back office financial technology products and services. This transformation includes emerging market economies, and in many places offers a viable digital alternative to traditional banks, which have left significant populations underbanked. This note explores the challenges and opportunities that financial technology innovations present for banks in these nations.
English | 9 Pages - August - Note 42 | IFC, 2017
Publish Date: 7/26/17
Blockchain has enormous potential for emerging markets. These nations appear poised for a more rapid adoption of blockchain, though a framework is needed to assess how the technology can be deployed and which applications and use cases are likely to be seen first. While the potential of blockchain is great, the technology is still at an early stage of development and will need to overcome potential setbacks—technical, regulatory, and organizational—before it becomes mainstream. In such a context of uncertainty, companies in emerging markets can neither afford to wait until the outcome is evident nor expose their existing business models to overly risky wholescale blockchain initiatives. Instead, they will need to adopt an experimental approach that allows them to develop options and thereby learn in the process, inform their strategies, and improve their value propositions.
English | 7 Pages - July - Note 41 | IFC, 2017
Publish Date: 7/26/17
Blockchain is an exciting new technology that may prove to be a radical innovation with the power to disrupt existing economic and business models. It has the potential to deliver productivity gains to multiple industries, from the financial sector to energy markets, supply chains, intellectual property management, the public sector, and beyond. And blockchain may also prove particularly valuable in emerging market economies. Yet the technology is in early stages of development and serious challenges and risks, both technical and regulatory, will need to be addressed before it achieves widespread adoption. Questions remain about blockchain’s scalability, interoperability, security, transition costs, data privacy, and governance. And business leaders and policy makers will need to think long and hard about when and under what conditions a blockchain initiative may be warranted.
English | 6 Pages - July - Note 40 | IFC, 2017
Publish Date: 6/22/17
Small and medium enterprises in emerging markets often lack access to the credit and liquidity they require for their daily working capital needs. This is partly due to the fact that the credit risk of such businesses is typically difficult to assess and their working capital needs are unpredictable. In most countries these businesses operate primarily in the retail and wholesale trade segments, and banks have generally not done enough to finance their domestic or international trade operations. Supply chain finance structures offer an alternative solution to finance the trade flows of these enterprises, with benefits for all stakeholders, including large enterprises, their SME trade counterparts, and financial institutions.
English | 7 Pages - June - Note 39 | IFC, 2017
Publish Date: 5/24/17
Blockchain, or distributed ledger technology, has the potential to address many problems in emerging markets. In this note we consider whether blockchain can be used to mitigate de-risking by financial institutions, which affects receivers of remittances, businesses that need correspondent banking relationships, and charities working in conflict countries.
English | 5 Pages - May - Note 38 | IFC, 2017
Publish Date: 4/27/17
Creating Agricultural Markets: How the Ethiopia Commodity Exchange Connects Farmers and Buyers through Partnership and Technology
Commodity exchanges can provide emerging market economies with orderly, transparent, and efficient markets by acting as mechanisms that mitigate price risk, discover equilibrium prices, and connect buyers and sellers. Exchanges can also reduce transaction costs and information asymmetries by using technology to disseminate market information while creating better supply chains. The Ethiopia Commodity Exchange is striving to transform Ethiopia’s agriculture sector from a fragmented one marked by high transaction costs and low quality standards to a thriving and reliable part of the country’s economy. Ethiopia’s exchange continues to expand its activity across the farming regions of the country.
English | 4 Pages - April - Note 37 | IFC, 2017
Publish Date: 4/19/17
Queen Alia International Airport – The Role of IFC in Facilitating Private Investment in a Large Airport Project
In 2007 Jordan lacked the financial resources and experience to embark on a renovation and expansion of its international airport, a colossal public-private undertaking. Yet by 2013 it was able to successfully complete the complex endeavor in collaboration with a private sector concessionaire, and without a sovereign guarantee, setting an example for countries and public-private project practitioners confronting similar circumstances. IFC played multiple roles in facilitating private investment over a 10-year period.
English | 5 Pages - April - Note 35 | IFC, 2017
Publish Date: 4/13/17
The infrastructure financing gap remains a critical global challenge for sustainable development. New thinking and innovative financial models are needed in order to mobilize more private capital to infrastructure investments. IFC’s new Managed Co-Lending Portfolio Program for Infrastructure seeks to address numerous infrastructure financing challenges that inhibit the flow of resources to emerging markets. The program provides an innovative model for mobilizing financing for infrastructure projects that combines financing from insurance companies, project origination and credit enhancement from IFC, and support from public sector donors.
English | 4 Pages - April - Note 36 | IFC, 2017
Publish Date: 3/28/17
This note explores the way traditional banks and financial technology companies, or FinTechs, interact in Africa and Asia, and their ability to offer innovative digital financial services that grant unbanked individuals access to financial transactions. The FinTech sector is experiencing explosive growth in both continents, but while Asian banks have managed to efficiently integrate with FinTech solutions, African banks have been slower to adapt to this change. Still, the outlook for mobile banking remains positive, and its prevalence will boost the financial industry in both regions.
English | 6 Pages - March - Note 34 | IFC, 2017
Publish Date: 3/1/17
The World Bank Group’s engagement in Turkey’s power sector, which began in the 1990s and continues today, has helped to expand independent power production and privatize electricity distribution in the country. Significant investments made in both generation and distribution shifted the power sector toward private investment and management while meeting growing energy needs.
English | 3 Pages - March - Note 33 | IFC, 2017
Publish Date: 2/8/17
The private sector plays an important role in emerging market countries with limited education capacity by providing quality schooling at all levels. By strengthening connections between education providers and private enterprises, it helps equip students with skills needed for successful employment, thereby creating additional potential for development. Private firms also play multiple roles in supporting public education by publishing learning materials and developing assessment tools and educational software, building and maintaining schools, and enabling financial support for students in need of it.
English | 6 Pages - February - Note 32 | IFC, 2017
Publish Date: 2/1/17
The role of private enterprise in healthcare is to complement and support improvements to public healthcare, not to supplant it. Private providers are the primary source of care for the world’s poorest people and their record is often as good as or better than that of public providers. As low and middle-income economies grow and resources become more widely available, competition and consumer choice offer substantial potential to improve the reach, quality, and efficiency of both private and public provision.
English | 6 Pages - February - Note 31 | IFC, 2017
Publish Date: 1/25/17
The financing needs of emerging markets are enormous. Sectors such as infrastructure, small business, and housing are vital to a nation’s sustainable development and require substantial financing support. Since these sectors primarily generate revenues in local currency, foreign currency financing may incur a mismatch that can expose emerging market borrowers to exchange rate risk in times of high volatility. Local currency bond issuance is a significant potential option that avoids such risks and can support private sector investment in productive sectors of emerging markets.