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Biometrics, foreign aid, Africa, economics of resource-rich countries, growth and development, transition economies
Alan Gelb is a senior fellow at the Center for Global Development. His recent research includes aid and development outcomes, the transition from planned to market economies, the development applications of biometric ID technology, and the special development challenges of resource-rich countries. He was previously director of development policy at the World Bank and chief economist for the bank’s Africa region and staff director for the 1996 World Development Report “From Plan to Market.”
The informal sector is a major source of economic activity and job opportunities in poor countries as well as emerging economies. In sub-Saharan Africa, the size of the informal sector is estimated to employ over 70 percent of the population. Why do businesses remain informal? What gains in productivity or profitability do they forego by as a result of that choice?
This work analyzes fresh data made available by updated, more comprehensive Enterprise Surveys of formal firms of various sizes and, importantly, of informal firms. It concentrates on five countries (the DRC, Ghana, Kenya, Myanmar, and Rwanda) to provide more fine-grained insights into differences in characteristics and productivity levels between formal and informal firms or different sizes in different developing countries.
In the modern world, many everyday transactions—such as opening a bank account, registering for school, activating a SIM card or mobile phone, obtaining formal employment, or receiving social transfers—require individuals to prove who they are. For an estimated 1.5 billion people in developing countries, this creates a serious obstacle for full participation in formal economic, social, and political life. With this in mind, more than 15 global organizations have jointly developed a set of shared Principles that are fundamental to maximizing the benefits of identification systems for sustainable development while mitigating many of the risks.
Here we offer four specific suggestions to help implement Sustainable Development Goal target 16.9, "legal identify for all," as countries strengthen their identity management systems, often with the support of development partners.
Recognizing the importance of financial inclusion as a policy objective, regulators have endorsed the use of a risk-based approach (RBA) towards know-your-customer (KYC) requirements aimed at strengthening financial integrity. This paper considers applications of the RBA in domestic banking, mobile money and international financial transactions against the features of a rigorous RBA where both the rigor and level of due diligence and the structure and balance of incentives should be proportional to the balance of risks, including that of exclusion. Recommendations include greater attention to national identification systems and to encourage the use of digital technology to shift from cash-cash wire transfers to more transparent account-account transactions between identified holders.
Universal legal identity through birth registration has consistently remained as a potential target for the post-2015 agenda through several rounds of negotiation. However, as it has been put forth, it conflates legal identity and birth registration. This policy note clarifies the differences between legal identity and birth registration and offers measurable, achievable target language for each component to ensure that this important issue remains in the post-2015 development agenda in an impactful way.
This is a joint post with Stephanie Majerowicz. Venezuelan President Hugo Chavez hasn’t appeared in public since his cancer surgery last December and, given his sharply deteriorating health, it seems a safe bet that the country will be having another national election sooner rather than later. When that happens, the opposition will have a rare opportunity outflank the populist Chavistas and offer voters a share in the country’s oil wealth through direct payments of part of the revenue (see the recent WSJ article). Such a program has the twin advantages of being potentially hugely popular and of reducing corruption, strengthening accountability and curbing waste. Here at CGD we call this idea “oil-to-cash.”
This is a joint post with Julia Clark and Christian Meyer.
Industrial policy—as many have already commented—is back. (See here, here and here).
The recent wave of post-financial-crisis interventionism has reignited the classic (and often heated) debate about whether governments can in fact nurture economic growth. Previous analysis of the East Asian miracle, and frustration at the perceived failure of certain liberalization policies, has led many to (again) embrace a more activist role for governments in economic development.
Onerous KYC documentation requirements are widely recognized as a potential constraint to full financial inclusion. However, it is sometimes difficult to judge the extent to which this constraint is a serious or binding one, relative to others. The paper considers this question, distinguishing between different types of documentation and different financial market segments according to their KYC requirements.
Anton Dobronogov, Alan Gelb and Fernando Brant Saldanha
Natural resources are being discovered in more countries, both rich and poor. Many of the new and aspiring resource exporters are low-income countries that are still receiving substantial levels of foreign aid.