About the Finance and Private Sector Development Research Program


A well-functioning financial system and a vigorous private sector are important drivers of growth and poverty reduction. Finance is central to private sector development and vice versa, and large parts of both sub-disciplines revolve around the behavior and performance of firms. In the financial sector, the work of the Finance and Private Sector Development Research Program has focused on understanding just how an effective financial system contributes to economic development and identifying which policies work best to improve the efficiency, stability, and reach of the financial system in developing countries. Currently our research program in finance is organized around two issues of significant policy interest: access to financial services and risk management.

In the private sector, our work focuses on using new data sources to understand firm dynamics in developing countries; conducting a series of impact evaluations designed to measure the impacts of specific policies designed to enhance firm growth; and studying the determinants of informality and consequences of business environment reforms.  Much of this work involves closely working with country governments and World Bank operational units to test the impact of specific reforms and policy efforts they are implementing.

Financial Inclusion and Access to Financial Services

Access refers to the need to ensure that financial services essential for growth reach widely through the economy, thereby ensuring the foundations for broad-based, inclusive growth. Serious data and research gaps in this area led us to create the Global Findex database, the world’s most comprehensive data set on how adults save, borrow, make payments, and manage risk. Launched with funding from the Bill & Melinda Gates Foundation, the database has been published every three years since 2011. The data are collected in partnership with Gallup, Inc., through nationally representative surveys of more than 150,000 adults in over 140 economies.

Ongoing research in this area using different data sets and some field experiments is further evaluating the channels through which access to finance can contribute to the growth process such as promoting entrepreneurship, innovation, and the process of technology adoption, and to household welfare. The role of financial literacy and gender differences in this process also receive significant attention. Ultimately we seek to evaluate the impact of firms’ financing constraints and households’ inability to access financial services on economic growth and poverty alleviation, and better identify different ways to improve this access, ranging from microfinance innovations to making improvements in the functioning of mainstream financial institutions and systems.

Risk Management

Deepening finance and expanding access are not enough, given the fragility of finance. Most countries, even including those that have experienced rapid development success underpinned by financial deepening, have suffered from financial crises interrupting the growth process, as witnessed by the Global Financial Crisis. This is why risk management, including crisis prevention, remains a central part of the financial development agenda and hence of our research program. Drawing information from our global World Bank Survey on Bank Regulation and Supervision (BRSS), which has been fielded five times since 2001 (most recently in 2017), our research investigates the impact of supervision strategies as well as the impact of compliance with Basel Core Principles on bank stability, the interaction of bank insolvency resolution and deposit insurance policies, and the impact of financial globalization on bank efficiency and access to financial services.

Firm dynamics in developing countries

Recent research has shown that there is substantial resource misallocation among firms in developing countries, with substantial productivity gains possible if only inputs were allocated more efficiently to the firms that would have the highest returns from using them. The structure of firms in the economy is driven by the dynamics of firm entry, firm growth, and firm exit. But a lack of data on firms in most developing countries has limited the study of these dynamics. Ongoing efforts aim to collect and use a variety of data sources to better document and understand these dynamics.

Measuring the impacts of firm policies

Governments use a wide range of policies to attempt to directly help spur entrepreneurship and firm growth. A large part of our research program involves evaluating the impact of these policies. Many of these efforts involve prospective randomized trials, working closely with World Bank operations and country governments as they implement new firm policies, and collecting data to trace the performance of firms participating in these programs over time. Examples include work on different training and consulting programs designed to help improve management practices, efforts to shorten value chains, programs to help start-ups get to the stage where they can attract outside investment, and programs to encourage innovation.

Informality, the business environment, and its reforms

Informality continues to be pervasive in most developing countries. Ongoing work continues to investigate the extent to which this has real economic effects, and whether specific regulatory reforms or additional policy efforts can increase formalization. More generally, the overall business environment is an important driver of private sector development, and reform efforts continue in many dimensions. Our work seeks to identify binding constraints to firm growth and investigate how these vary with firm size, and to identify priority areas for reform efforts.






Research Manager

Robert Cull

World Development Report 2021 Co-Director, Development Economics, and Research Manager, Finance and Private Sector, Development Research Group