BRIEF

Capital Markets

June 28, 2017



Overview

The development of capital markets is critical to promoting economic growth and financial stability, to creating jobs and to reducing poverty. Up to $4 trillion of annual investment is needed for developing countries to achieve the Sustainable Development Goals by 2030. Capital markets play a key role in the provision of long-term financing for strategic sectors of an economy, and risk-management tools for both financial-sector participants and end users. In this way, capital markets contribute to economic growth, which in turn can have an impact on the reduction of poverty and the creation of shared prosperity. At the same time, well-developed capital markets can serve as a “spare tire” for the financial sector, enhancing an economy’s financial stability.

What We Do

The World Bank Group (WBG) is scaling up its overall commitment to emerging economies, which face staggering funding gaps in such areas as agriculture, infrastructure and housing. Capital markets solutions to finance these sectors are being developed in partnership with other WBG Global Practices (such as Transport, Energy and Water) and with units of the International Finance Corporation (IFC), depending on the nature of the problem. For example, among the main WBG capital markets programs, a new IFC initiative, the World Bank Joint Capital Markets initiative (J-CAP) was recently launched to coordinate joint interventions between the World Bank and IFC in cases where demonstration transactions could open up new models for long-term financing for the economy’s non-financial sector. 

In support of this corporate commitment, we offers a list of products and services tailored to the various needs that are faced by client countries. This includes:   

  • Performing Capital Markets Development Advisory Services (AS), from diagnostics to reform implementation: In the last three years, we have provided AS to countries in all regions and at different levels of development. That includes AS in infrastructure finance and capital markets regulations; in government bond markets; and in regulation and supervision.
  • Downstream advisory services: The scope of AS can vary depending on each country’s “strategic country diagnostic” and on client demand. It could cover one or more sectors of the securities markets. This could include working on specific market infrastructures such as implementing trading platforms or clearing and settlement platforms, as well as working on demonstration transactions in specific sectors (such infrastructure finance or housing finance). In the past several years, we have provided AS to countries in all regions and at different levels of development.
  • Capital Markets Diagnostics: We provide Financial Sector Assessment Programs (FSAPs) that analyze the strength of economies’ capital markets, providing such diagnostics to both low-income countries and middle-income countries.
  • Creating Peer Group Dialogues: The objective of this service is to facilitate cross-country knowledge-sharing among countries in select peer groups, through focused discussions on technical and development topics of interest to participants. Peer Group dialogues were launched in 2009 focusing on government debt market development – a service that has proven to be valuable, with potential to be expanded to many other areas based on client demand.
  • Knowledge Management: State-of-the-art knowledge on current and relevant capital market topics is disseminated via policy notes, thought-leadership analyses and country studies as well as conferences, workshops and internal and external training sessions.  The F&M GP team recently held a Global Capital Markets Conference.  The F&M team also holds external training sessions on various subjects related to capital markets in partnership with other International Financial Institutions (IFIs), involving more than 35 countries and 100 participants.
  • Product Development: The intent is to design solutions (such as Issuer-Driven ETFs (I-D ETFs) and Project Bonds) that can leverage the impact of the WBG on the development of capital markets.  

In the development of these services, we do not want to fall into a “cookie cutter” approach with our clients. We seek, instead, to recognize the need for creative and targeted solutions for each individual country context.

Results

We have successfully completed programs across the globe that have achieved important results.  Examples include:

  • Deep Dive programs that provide a comprehensive country solution under a collaborative approach with country clients and partnering with different World Bank GPs.  We have previously focused deep dives on Latin American countries, such as Colombia and Peru, but we are now expanding that approach to African and to East Asian and Pacific countries such as Kenya, South Africa and Indonesia.
  • The World Bank Group has seen progress in its Capital Markets strategy through the Government Bond Market Development Program, an initiative to develop Local-Currency Bond Markets (LCBMs) through the use of both domestic and foreign investment.

The WBG has a longstanding engagement with IOSCO, the international organization of securities-market regulators, which seeks to ensure that the standards for securities-markets regulation and supervision remain proportionate and can effectively be applied in emerging markets. In addition, the WBG has contributed to the G20, particularly in regard to the development of local currency markets where a diagnostic tool was developed and annual notes on trends in LCBMs are being delivered. More recently, a report was produced jointly with the International Monetary Fund and the OECD on the role of capital markets for infrastructure and SME financing. The WBG also participates in the Financial Stability Board and, in particular, in work streams involving shadow banking, to ensure that capital markets develop under solid footing.

 

Last Updated: Jun 28, 2017