Learn how the World Bank Group is helping countries with COVID-19 (coronavirus). Find Out

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Speeches & Transcripts September 11, 2020

Remarks by Managing Director and World Bank Group Chief Financial Officer Anshula Kant at The Economic Times CFO Strategy Summit 2020

Good morning to all the distinguished speakers and viewers who have joined today. I’m delighted to be with you at this Economic Times’ CFO Strategy Summit.

Convenings like today’s are crucial as policymakers, businesses, and the international community work to address the multiple issues facing the world. The coronavirus pandemic is threatening to set back years of progress. The future will not look like the past ─ the pandemic is accelerating changes in how we work, consume, and communicate. These trends could reshape entire industries, and yet create opportunities for those who can spot these trends early enough.

Given that this is a summit for CFOs, let me begin by touching briefly upon World Bank’s business model and how it is different from a typical commercial organization.

The World Bank Group has set two goals for the world to achieve by 2030 ─ End extreme poverty and Promote shared prosperity. We are not a bank in the ordinary sense but a unique partnership to reduce poverty and support development. The Bank extends funds at concessional rates, which are significantly lower than the market. Our support to client countries is countercyclical as we scale up lending during times of crisis.

The overall objective of IBRD’s financial policy framework is to support the Bank’s development mandate through efficient utilization of shareholder resources while protecting IBRD’s triple-A credit rating through an array of financial policies and risk management practices.

Based on the strength of its triple-A rating, IBRD can borrow from the bond markets at attractive terms to raise funds for on-lending to support middle-income countries in their developmental activities and pass on the favorable terms to them.

The International Development Association or IDA is one of the largest sources of assistance for the world’s 74 poorest countries. IDA provides highly concessional financing at zero- or very low-interest rates and outright grants to low-income countries. With the help of donor contributions, IDA loans and grants since its inception have totaled $422 billion.

IDA’s business model has evolved over the last few years to enhance efficient utilization of scarce shareholder resources. IDA has now begun to issue bonds in the capital markets to scale up its financing to low-income countries. The triple-A rating of IDA also bears testament to its financial strength and prudent risk management.

Member countries have increased their support for both the institutions over the years, the latest being the 2018 IBRD capital increase which will add $7.5 billion to IBRD’s paid-in capital and the recently agreed-upon IDA19 replenishment, which will provide IDA with additional donor contributions of nearly $24 billion and support $82 billion of additional financing to client countries.

Turning to the current crisis, the COVID-19 pandemic has triggered what is likely to be the deepest global recession since World War II. The global economy could shrink by 5.2 percent in 2020 before picking up in 2021. The pandemic has hit developing countries particularly hard due to capital outflows, declines in remittances, the collapse of informal labor markets with limited social safety nets. COVID 19 threatens to push over 100 million people into extreme poverty and is exacerbating intense inequality throughout the world.

Billions of jobs are under threat worldwide. Nearly 80 percent of the world’s informal economy workers – 1.6 billion people – have faced COVID-19 lockdowns and slowdowns in hard-hit industries including wholesale and retail trade, food and hospitality, tourism, transport and manufacturing. With 740 million women globally in informal employment and a majority employed in services, women are particularly hard hit by the crisis. Remittance flows which are an economic lifeline for many low-income families and a key source of revenues for many developing economies – are expected to fall by 20% in 2020.

Strong connections with client countries, our local presence, and sound financial principles have allowed the World Bank Group to step up quickly to provide counter-cyclical financing during the on-going COVID-19 crisis. We expect to provide an exceptional crisis response to support developing countries of up to US$160 billion over the 15 months period beginning April 2020 to June 2021. The ambition of the World Bank Group crisis response is to help client countries assist at least one billion people impacted by the COVID-19 crisis.

The World Bank Group response operates across the three stages of crisis ─ providing relief, supporting restructuring, and building a resilient recovery. The relief stage involves emergency response to the health threats posed by COVID-19 and its immediate social, economic, and financial impacts. The subsequent restructuring stage focuses on strengthening health systems for pandemic readiness; restoring human capital; and restructuring, debt resolution, and recapitalization of firms and financial institutions. Finally, the resilient recovery stage entails taking advantage of new opportunities to build a more sustainable, inclusive, and resilient future in a world transformed by the pandemic.

The World Bank Group’s emergency health response is already under implementation in 104 countries which includes reducing transmission. It also addresses health service delivery through the expansion and reorganization of health care, introducing new service delivery modes (e.g. telemedicine) and drawing on private sector capacity to ensure safe access to COVID-19 and other essential health services. The Bank is helping countries secure urgently needed medical supplies through Bank Facilitated Procurement. In addition, our efforts are working to enable households to cope with income shocks, comply with mitigation measures, and access protective gear, supplies, and water and sanitation.

We are also helping client countries manage budgets as spending needs grow, economies contract and fiscal pressures mount. Public financial management process needs to be temporarily adjusted during the emergency response to facilitate fund flows, procurement and payroll management.

Another sector that needs focused attention is education ─ School closures are already impacting learning for 1.5 billion students worldwide, half of whom lack access to a computer, and might result in school detachment. In the emergency stage, the Bank is supporting education systems to mitigate learning losses using multiplatform remote programs for learning and early childhood development. To date, 120 countries are implementing some modality of multiplatform remote learning. There is also critical support to replace school feeding programs stopped by school closures through household or community delivery.

Looking to India, the economy has been facing many challenges in the past few months. For specific COVID-19 support for India, the Bank has provided financing for three projects during the April-June quarter. These include emergency support through a US$1 billion health project, a US$750 million social protection project, and a US$750 million economic response emergency operation to support micro-, small-, and medium-sized enterprises (MSME). Offering support for MSMEs has been especially important since we all know the critical role they play in India’s economy. Various estimates suggest that 150 to 180 million people are employed by 75 to 80 million MSMEs in India. Additionally, MSMEs are estimated to contribute to 40 percent of exports from India.

The World Bank Group will support the Government of India through a Technical Assistance program to further the agenda of developing a robust ecosystem for MSME financing. The International Financial Corporation (IFC) will provide direct support to Small Finance Banks via loans/equity together with other multilateral development financial institutions (MDFIs) and other partners. We will also focus on de-risking lending to MSMEs, possibly through a risk-sharing facility.

Not only in India, but around the world, private companies have been hit hard by the pandemic. As the crisis unfolds, it has become apparent that COVID is leading to paradigm shifts in business models and reshaping businesses in lasting ways. Roughly 436 million enterprises worldwide in the hardest-hit sectors are facing serious disruption according to the International Labour Organization, including both employers and the self-employed. To support job creation and preserve growth-oriented enterprises, it will be important to restructure and recapitalize firms to make them more efficient as also promote reallocation of resources to more efficient companies.

Businesses are being forced to rethink and realign their priorities. Those who have already adjusted to the technology demands of the future are better equipped to survive and emerge from this crisis even stronger than before.

The COVID-19 pandemic has amplified the benefits of expanding Digital Financial Services. These services significantly reduce the need for physical contact in retail and financial transactions and help governments respond more quickly to extend liquidity support to firms and people who are most at risk. Platform-based models for discounting supply-chain invoices have enabled MSMEs to leverage their receivables to access working capital. Basic digital insurance products have emerged across Africa and South Asia.

During this crisis, the role of inclusive businesses will only become more critical as, for the first time in over 20 years, the World Bank Group has predicted that the global poverty rate is going to rise substantially.  And the most vulnerable groups at the base of the pyramid face the highest consequences.

Let me share a few examples of how inclusive businesses in emerging markets are leveraging their assets, capabilities, long-standing networks, and local knowledge and relationships to address the needs of those at the base of the pyramid - to support their low-income and vulnerable suppliers, distributors, and customers.

UK based IrisGuard is an iris-recognition solutions company and a leading supplier of iris biometric technology platforms for large-scale humanitarian efforts. To address the needs of forcibly displaced populations in refugee camps, the company has adapted its technology to enable refugees to make retail and banking transactions by using their iris for identification, rather than a fingerprint. IrisGuard has also added off-line functionality that enables its partners to provide mobile banking services at consumers’ doorsteps. And by building ATMs into vans, the company has enabled refugees to conduct financial transactions and receive their cash aid from governments or humanitarian agencies

PickMe is a ride-hailing app in Sri Lanka with over 60 percent of its drivers operating motorized rickshaws. When COVID-19 became a threat, PickMe quickly shifted its services from ride-hailing to delivering essential goods such as groceries and liquid petroleum gas for cooking. Within just a week of starting its new service, PickMe mobilized more than 2,000 drivers who have since made more than 130,128 deliveries. Through PickMe’s collaboration with local police stations, its drivers have been authorized to deliver emergency medical supplies during curfew hours. The company has also established an emergency hotline for hospital staff who need transportation to get to and from work.

An example from India - Dodla Dairy is a company that sources milk from cooperatives of small farmers. With the onset of the crisis, demand for milk products declined and, as a result, Dodla’s purchases from small dairy farmers also declined. To help dairy farmers maintain their livelihoods, Dodla began purchasing some of farmers’ excess milk and converting it into powder. This is creating continuity and stability in the dairy supply chain.

And there are many more examples of how we are seeing many companies respond to the crisis by reorienting and adapting their business models and operations to continue to work with their suppliers and customers at the base of the economic pyramid.

The future will not look like the past. We are evolving into a new normal which has a lot of uncertainty, but it also provides new opportunities to reimagine business models with the support of technology and digital. Skill requirements will change with more automation, digitization and remote work. For a sustainable and resilient recovery, companies will need to incorporate more Environmental Social and Governance principles in the way they operate and produce goods and services.

Let me end by saying that businesses which are able to explore alternative distribution channels, adapt their products and services, leverage technology channels and fintech, and focus on re-skilling workers will emerge as the winners. The CFOs of course will have to play a vital role in this process by ensuring that their businesses are fit for purpose and remain financially sustainable through these challenging times.

Thank you.

 

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