Financial Sector

Sound financial systems underpin economic growth and are crucial to the World Bank Group’s mission of alleviating poverty.

Further, deep and vibrant capital markets can channel funding into investment needed to support jobs, human capital and infrastructure.

• Financial stability, both globally and within countries, supports productivity. It gives people confidence to invest and save money. Robust banking systems and capital markets efficiently flow funds toward their most productive uses, help governments raise investment capital, maintain financial safety nets and speed payments securely across borders.

• Good access to finance improves a country’s overall welfare because it enables people to thrive and better manage their needs, expand their opportunities and improve their living standards. When people are financially included, it’s easier to manage consumption, payments and savings, access better housing, healthcare and education, start a small business, and use insurance products to protect themselves from shocks. Finance also helps level the playing field – making significant wealth and connections less relevant.

The World Bank Group works to promote financial stability and to develop diversified, efficient and inclusive financial systems, globally and within countries.

Our work supports developing countries and the global community as they develop greater capacity to monitor and support financial sector development. We work with national regulators, supervisors and lawmakers to help ensure financial institutions are stable and to help mitigate spillovers from global financial instability.

We engage globally in agendas driven by the G-20, Financial Stability Board and other standard-setting bodies, and the United Nations by contributing to the formulation of global standards and helping developing countries comply with them.

We work with national authorities to implement sustainable financial development strategies, including for sound financial infrastructure and enabling regulatory framework, for local capital markets, for private sector development and for financial access and inclusion for individuals and small businesses.

Our assistance combines finance, knowledge, advisory and convening services, tailored to each country’s needs.

The World Bank Group is engaged in three global mandates in the financial sector:

1.      Focus on Financial Stability and Integrity

Our global mandate on financial depth and stability emphasizes the sustained development of financial institutions and markets, and the mitigation of financial crises.

Global efforts to strengthen the international financial architecture in the aftermath of the 1999 and 2008 financial crises led to the development of international standards in banking, insurance, capital markets, market integrity, financial infrastructure, and other areas.

As a member of the Financial Stability Board, we contribute to regulatory reforms voicing developing countries’ concerns and balancing the objectives of market development and stability. 

With the IMF, we developed key joint diagnostics – the Financial Sector Assessment Program (FSAP) and Reports on the Observance of Standards and Codes (ROSC) -- to monitor compliance with these standards and assess progress in building deep and stable financial systems.  FSAPs, conducted jointly with the IMF, pursue stress tests and crisis-preparedness simulations, which help regulators to develop appropriate policy responses to vulnerabilities. Meanwhile, ROSCs benchmark countries against select global standards.

We provide technical assistance to countries to maintain efficient capital markets and bond markets guidance on such stabilizing safeguards as insurance and deposit insurance

An important part of our work with countries centers around Anti-Money-Laundering and Combating the Financing of Terrorism (AML/CFT) compliance and advice on corporate governance reforms to enhance financial stability by ensuring greater efficiency and transparency.

We also help countries facilitate more efficient and secure financial transactions by helping reform and develop payments systems, including real-time gross settlement systems (RTGS).

2.      Focus on financial access and inclusion of households and SMEs

Our focus is to expand access to finance for individuals who are locked out of the formal and regulated financial system and for small and medium-sized enterprises (SMEs) who need better access to financing and credit.

About 1.7 billion adults—men and women—still lack access to formal financial services. The WBG aims for adults worldwide to have access to a transaction account or electronic instrument to store money, send and receive payments. Financial access is the first step toward broader financial inclusion, where individuals and firms can safely use a range of appropriate financial services, including savings, payments, credit and insurance.

Small and medium-size enterprises (SMEs) in developing countries lack access to finance and credit, stunting their ability to grow and create jobs. High perceived risk and a lack of collateral discourages banks from extending credit to SMEs.

3.      Focus on development of long-term finance and risk management

Private sector finance and investment is the largest potential source of funding for development priorities, particularly for infrastructure, housing, agriculture, disaster risk,  climate change and humanitarian finance.

Improving a society’s financial resilience—including governments, businesses and households—against various disasters can underpin growth and employment by helping governments shift away from being crisis responders to becoming proactive risk managers. Through developing or strengthening pre-arranged finance and systems, we help countries take early action that can save lives, reduce costs and humanitarian needs, and protect development gains against disasters, climate shocks, and over time, a wider range of crises.

Our work on financial sector in emerging markets also includes several partnerships which help extend our reach:

The Consultative Group to Assist the Poor (CGAP) is a global partnership of 34 leading organizations that seek to advance financial inclusion. CGAP develops innovative solutions through practical research and active engagement with financial service providers, policy makers, and funders to enable approaches at scale. CGAP combines a pragmatic approach to responsible market development with an evidence-based advocacy platform to increase access to the financial services the poor need to improve their lives.

Finance for Development (F4D) Umbrella Program is the World Bank’s key donor financing, partnership and knowledge platform aimed to developing deep, inclusive and resilient financial systems in developing countries.

Global Index Insurance Facility (GIIF) is a multi-donor trust fund supporting the development and growth of local markets for weather and disaster index insurance in developing countries.

The Stolen Asset Recovery Initiative (StAR) is a partnership between the World Bank Group and the United Nations Office on Drugs and Crime (UNODC) that supports international efforts to end safe havens for corrupt funds. StAR works with developing countries and financial centers to prevent the laundering of the proceeds of corruption and to facilitate more systematic and timely return of stolen assets.

We also work closely with the IMF on the two key joint diagnostics – the Financial Sector Assessment Program (FSAP) and Reports on the Observance of Standards and Codes (ROSC) –  to monitor compliance with standards and assess progress in building deep and stable financial systems.