Finance and Private Sector Development PPT @ BEC BAGALKOT MBA

8/2/2019 Finance and Private Sector Development PPT @ BEC BAGALKOT MBA

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FINANCE AND PRIVATE

SECTOR DEVELOPMENT


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Background

World Bank and National Governments carry outmany finance and private sector projects everyyear, but to date few have been rigorouslyevaluated.

This makes it difficult for us to know what works,why, and what could we do better

Purpose of this workshop is to take a big steptowards rectifying this status quo.

=> But first lets take stock of what has beenpossible, and in the process illustrate differentmethods of evaluation you will be learning in theworkshop, as well as issues to keep in mind thisweek.


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What is an impact evaluation?

Differs from how M&E typically done forBank/Government projects. E.g. project disbursed $7 million in loans, trained

2,000 firms, etc. This tells us nothing abouteffectiveness.

Rigorous impact evaluation compares theoutcomes of a program or policy against an

explicit counterfactual of what would havehappened without the program or policy, andtakes seriously the issue of why some firms,regions etc. participate in the program and

others do not.


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Why has evaluation not takenplace to date?

Perception that many finance and privatesector policies lend themselves less to formalevaluations:

Changes in laws or regulations may occur ateconomy-wide level

Large loan may be given only to one or two banks

Lack of incentives for both Bank operational

staff and Governments to do Lack of knowledge as to what is possible

=> Hopefully this week we can overcome thesebarriers.


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What have we learned?

A Few examples:

How to raise the incomes of the self-employed?

Rethinking the design of microfinance

Providing insurance to the poor

Learning from regulatory reform


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How to raise the incomes of the self-employed?

Policy Question: Self-employment accounts forimportant share of employment. But do theseenterprises have scope to grow, or are they just

stuck in subsistence waiting for wage jobs?Randomized Experiment in Sri Lanka took

random sample of 600 microenterprises andsurveyed them.

Then randomly chose half of them to give grantsof $100 and $200 to.

Then followed these enterprises for the next threeyears, surveying them every 3 months.


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Firms randomly chosen to receive these grantscan be compared to firms which were randomlychosen not to receive them

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(Female results)

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Rethinking central precepts of microfinance? Low returns to female businesses in Sri Lanka provides

reason to question exclusive focus on women Experiment in Philippines found converting group to

individual liability led to faster client growth and no changein default (among existing clients)

Experiment in South Africa found marginal loan recipientstaking high interest consumer loans were better off 6-12months later along with high returns to capital, rejectsargument that poor cant pay high rates.

Large randomized trial of microfinance in India andPhilippines finds fairly modest results after 1 year, with littleimpact on poverty reduction.


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Insuring poor farmers Does offering rainfall insurance increase use of

credit by risk-averse farmers Experiment in Malawi finds evidence it does not.

General experience has been low take-up: e.g.4.6% for one product in India, 17% in Malawi.

Research suggests trust and financial literacyboth play roles Implications for designing products should be

simple, and pay out with reasonable frequency.


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What have we learned?Learning from regulatory reform

Setting up one-stop shops to improve process of starting a business is apopular reform

Often reforms like this are phased in at a municipal or regional level,offering scope for a difference-in-differences evaluation Example: Mexico simplified the process of business registration

Due to staffing constraints, the federal agency could not implement the reform inall priority municipalities at once, but instead staggered the reforms, introducingthem first in some municipalities and then later in others. Among the municipalitiesidentified as priorities for implementation, there was no specification of whichshould go first.

A Difference-in-differences estimation can then be used to estimate the effect ofthe reform by comparing changes in business start-ups in the municipalities whichgot the reforms earlier to the changes in business start-ups in the similar

municipalities which were to receive this reform later. Results show increase in registration and employment, but coming from new entry, not

conversion of existing firms.


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Learning from regulatory reform

Often reform introduced into entire country atonce, but only applies to subset of population.

Regression Discontinuity or Diff-in-Diff may bepossible.

E.g. evaluation of bankruptcy reform in Colombiawhich reduced costs of re-organizing a bankrupt firm.Active, non-bankrupt firms not affected by law, so canuse difference-in-differences comparing active tobankrupt.

Find reform led to improvement in efficiency of bankruptcyprocedure.


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Lessons

1) Why have these topics been the ones whereprogress has been made?

- Close ties to theoretical work, and in many

cases, theoretical effects unclear.- Have been feasible for researchers to do with

existing data sets or implementing with an NGO

=> Big opportunity is to do this with larger projects.


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Lessons

2) Variety of tools means evaluation of manyfinance and private sector programs ispossible.


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Lessons

3) Ex-ante design beats ex-post

- Huge issues with data availability,understanding what program did, how it

selected people, etc. ex post.=> Need to get researchers involved frominitial design of new projects, rather than

coming ex post.


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Where should we go from here?

Scope for much more work in the areas where existing effortshave occurred: microfinance, microenterprises, insurance,regulatory reform. Still only a handful of rigorous studies.

Big gains to be had from looking at impacts of policies andprojects designed to benefit large numbers of consumers and

firms: Financial literacy and consumer protection

SME sector policiestraining, loans, enterprise support

Housing finance

=> Major area is big policies where too expensive for NGOs or

researchers to run themselves should be in comparativeadvantage of the World Bank to work with National Governmentsto do.

Documents

Finance and Private Sector Development PPT @ BEC BAGALKOT MBA