After years of relative calm, in recent months several emerging economies have found the cost of attracting foreign funding is going up. Faced with a halt of external financing, Argentina obtained a three-year financing deal worth $50 billion from the IMF, while funds also appear to be flowing out of Brazil, Turkey, and elsewhere. And, recent bond market turbulence in Italy suggests the possibility that political risks are triggering outflows there.
In this post, we explain balance-of-payments (BoP) crises—the sudden stops or capital flow reversals—that compel countries to restore their external balance between exports and imports or, in the case of capital flight, shift to export surpluses. In addition to describing common features of BoP crises, and characterizing sources of vulnerability that make them more likely, we examine one emerging-market example—the Asian crisis of 1997-98—and one advanced-economy episode—the crisis of the euro-area periphery from 2010 to 2012…. Read More
The two leading financial trends of our time are the integration of digital technology and the advance of financial inclusion. The latter involves both provision of access to those who have no account (the “unbanked”) and increased usage of financial services by those with a tenuous link to the formal system (the “underbanked”). A combination of swift technological change and government promotion is speeding the rise of inclusion.
Six years ago, the World Bank estimated that roughly 2.5 billion adults (15 or older) had no bank deposit, no formal credit, and no means of payment other than cash or barter. Stunningly, in its Global Findex Database 2017 published last month, the Bank now estimates that the number of unbanked adults has plummeted to 1.7 billion. Over the past six years, more than 1.2 billion adults have gained at least basic financial access through a financial institution or their mobile phone.
In addition to a range of technological progress, India’s government-led financial inclusion program has been the second key factor in the recent advance of inclusion. By our estimate, the gains in India account for more than one-half of the 515 million persons who acquired access globally between 2014 and 2017!
In the remainder of this post, we briefly describe the benefits of financial inclusion, and highlight key trends regarding access since 2011 as well as prospects for achieving the World Bank’s goal of universal financial access. We conclude with a short discussion of Africa, where the largest gains still lie ahead. Reflecting long-term demographic prospects, we emphasize that the advance of financial inclusion in Africa will matter for the global economy, not just for Africa. Read More