Working group on financial intermediation
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Working Group on Financial Intermediation. Finance Forum FY05: The Future of Financial Sector Operations The World Bank September 23, 2004 P.S. Srinivas Senior Financial Economist & Sector Coordinator Finance & Private Sector Development The World Bank, Jakarta, Indonesia. Overview.

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Working Group on Financial Intermediation

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Working group on financial intermediation

Working Group on Financial Intermediation

Finance Forum FY05: The Future of Financial Sector Operations

The World Bank

September 23, 2004

P.S. Srinivas

Senior Financial Economist & Sector Coordinator

Finance & Private Sector Development

The World Bank, Jakarta, Indonesia


Overview

Overview

  • Main question

    • How can the Bank assist in best mobilizing financial resources for long-term funding needs of clients?

  • Approaches

    • Traditional Bank approach

      • Financial intermediary lending through banks or DFIs

      • Foreign currency resources

    • Emerging long-term funding needs of clients

      • Infrastructure finance, housing, sub-national finance

      • Financial intermediaries that could meet emerging needs – capital markets, pension funds, insurance firms

      • Domestic resources


Work of the group

Work of the Group

  • Financial intermediary lending (FIL)

    • Examine OED’s review of Bank experience with FILs

      • All FILs

      • Municipal FILs

      • Microfinance FILs

    • Draw lessons from OED’s findings

    • How to do FILs better?

  • Improving the environment for financial intermediation

    • Legal and regulatory issues

  • Emerging long-term financing needs of clients

    • Infrastructure finance

    • Housing finance

  • Financial intermediaries that can meet long-term needs

    • Capital markets

    • Pension funds

    • Insurance firms

  • Draft policy note prepared for discussion at Forum

    • Comments welcome


Key messages 1

Key Messages (1)

  • Past experience with FILs has not been very good

  • But it is possible to do FILs “right”

    • Better outcomes in FILs associated with

      • Emphasis on proper design and implementation

      • Macro stability and favorable investment climate

      • Sound legal and regulatory regimes

    • There have been success stories in FILs (eg: Zambia case)

  • Shortcomings in laws and legal institutions a major constraint to sound financial intermediation

    • Focusing work on fixing “environmental” issues can have pay off

  • There are clearly emerging needs of clients for long-term domestic resources

    • Infrastructure finance, housing, sub-national finance are examples

    • Bank needs to focus work going forward on financial intermediaries that can meet these needs

    • Examples of intermediaries - capital markets, pension funds, insurance firms

  • Bank needs to take a broader view of financial intermediation

Presentations will deal with these issues


Key messages 2

Key Messages (2)

  • Group also asked to address the issue of getting financial sector work back on the Bank’s overall agenda

    • Special challenge in many middle income countries

  • Lessons from Indonesia case

    • FSD work needs to be tied in to work with other country and sectoral priorities

    • FSD work should be seen as a relevant partner across sectors and not just on a stand-alone basis

Presentations will not get into this, refer page 41-43 in policy note


Structure of the session

Structure of the Session

  • Lessons learned from Bank’s past financial intermediary operations

    • Brief summary of OED’s review - Laurie Effron

  • Case study of a successful financial intermediation operation

    • The Zambia Multi-purpose Credit Facility - Ahmet Soylemezoglu

  • Legal and regulatory issues for improved financial intermediation

    • Heywood Fleisig, CEAL, Washington

  • Emerging financial intermediation needs

    • Infrastructure finance - Michel Noel

  • Financial intermediaries that can meet emerging needs

    • Insurance and contractual savings - Rodney Lester


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