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This paper tests the hypothesis that enterprises may forgo formal finance in lieu of informal credit by choice. They do so to avoid the additional regulatory scrutiny and harassment that engaging with the formal financial sector invites. We test this hypothesis using enterprise-level data on 3,564 enterprises in 29 countries. In this sample, enterprises finance approximately 57 percent of their working capital requirements with external finance. This external finance comes from formal sources, such as commercial banks (53 percent) and informal sources (42 percent), such as trade creditors, or family and friends. In our sample, 14 percent of enterprises rely exclusively on informal finance. We find that the likelihood of enterprises preferring to only use informal finance is inversely related to the quality of the regulatory environment, particularly the quality of tax administration and overall governance. For example, we find that when an enterprise has been asked for bribes by tax inspectors, it is 17 percent more likely to prefer informal finance.

Access to Finance --- Banks and Banking Reform --- Bribes --- Capital Requirements --- Commercial Banks --- Creditors --- External Finance --- Finance and Financial Sector Development --- Formal Finance --- Formal Financial Sector --- Informal Credit --- Informal Finance --- Working Capital

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This report provides an assessment of the strengths and weaknesses of the existing financial reporting infrastructure that underpins financial accounting and auditing practices in Mozambique. The assessment focuses on six pillars of financial reporting infrastructure: statutory framework, professional education and training, accountancy profession, accounting standards, auditing standards, and monitoring and enforcement of the applicable standards. The main purpose of this assessment is to assist the development and implementation of a country action plan for strengthening institutional capacity with attendant effect on enhancing corporate financial reporting in Mozambique. All the corporate entities in Mozambique, including investments with foreign participation, are affected by a serious shortage of qualified accountants and trained accounting technicians. Best estimates are that there are less than 50 fully qualified accountants working in Mozambique (mostly in the Maputo area), and that of these only 2 are citizens of Mozambique. Most of the corporate financial statements in the country are therefore prepared by accounting technicians whose level of skill and training is variable. At one extreme, a limited number of accounting technicians have completed training, which has not prepared them nearly at the level of a qualified accountant; and at another extreme, many technicians have no formal training. Most of the financial statement audits in the country are primarily carried out by representatives of the 6 international networks. The lack of senior-level local staff within those networks is of concern particularly as regulators lack any capacity to monitor the quality of financial reporting.

Accounting --- Corporate Data and Reporting --- Finance and Financial Sector Development --- Financial Regulation & Supervision --- Governance --- Private Sector Development

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Until the late 1960s, the World Bank presented itself as an institution devoted to making sound and directly productive project loans. Yet, during its very early years, some discussions developed inside the Bank regarding the possibility of issuing different types of loans, namely (i) loans aimed at tackling social issues ("social loans"), and (ii) loans aimed at providing foreign currency to address disequilibria in the balance of payments ("impact loans"). This paper brings together historical analysis and theories of organization development to study the housing issue as a case in point. The analysis reveals that the Bank was unwilling to lend for housing programs not because these were not sound - in fact, they were - but because they were geared toward achieving social welfare objectives and were not directly linked to productive investment projects, such as dams, power stations, and railroads. This early decision had a significant impact on the subsequent development of the Bank's view of policy-making: it locked the institution into a particular lending pattern, and deprived it of important intellectual resources. It was not until the late 1960s that the Bank began to take social issues into consideration, rather late compared with other multilateral institutions.

Access to Finance --- Bank --- Banks and Banking Reform --- Collections --- Finance and Financial Sector Development --- Governments --- Housing --- Interest --- Lending --- Loans --- Principal --- Projects --- Urban development

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The crisis has surged across the public-private boundary, as the hit to private firms' balance sheets has now imposed heavy new demands on the public sector's finances. It has surged across national borders within the developed world, as the people of Iceland know all too well. And nowthere are reasons to fear that the crisis will swamp emerging markets and other developingcountries, cutting into the considerable economic progress of recent years. The developing world - what it has recently achieved, how these achievements are now at risk, and what it must now do - is the focus of this paper. Understandably, perhaps, until now the focus of policymakers has mostly been on the actions of the governments at the epicenter of the crisis, as well as those of other developed countries like Japan and Korea. This brief discussion of the dynamics of global growth in 2002-07, focusing on the mutually reinforcing booms in the developed and developing world. It also how all this growth began to unravel in 2007-08, starting with the US housing crisis. how we can respond to the crisis to ensure that the costs to the developing world are as small as possible.

Economic Conditions and Volatility --- Economic Growth --- Economic Policy --- Finance and Financial Sector Development --- Financial Crisis Management & Restructuring --- Investment Climate --- Macroeconomics and Economic Growth

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Trade, financial, and exchange rate reforms are shown to have exerted a positive impact on the growth of total factor productivity in Rwanda during the period 1995-2003. Based on a constant returns-to-scale Cobb-Douglas production function, this paper regresses total factor productivity on indices of trade, financial, and exchange rate reforms. The analysis determines that trade reforms and financial reforms each contributed positively to improvements in total factor productivity. The data also suggest that the allocation of official development assistance to human capital made a significant contribution to productivity. In contrast, the appreciation of the real exchange rate of the late 1980's hindered productivity or the growth of TFP. Taken together, the findings for Rwanda presented in this paper show that the strong growth of the past decade has not just been due to a "bounce back" effect following the genocide. The results support the notion that policies favorable to trade development, a deepening of the financial sector, and formation of human capital have been effective for increasing aggregate productivity of the economy and stimulating growth in Rwanda. For sustained growth, the Rwandan authorities should continue to build on these policies, while also taking care to maintain an appropriate exchange rate.

Competitiveness --- Currencies and Exchange Rates --- Debt Markets --- Development assistance --- Economic Theory and Research --- Emerging Markets --- Finance and Financial Sector Development --- Financial sector --- GDP --- Human capital --- Macroeconomics and Economic Growth --- Private Sector Development --- Production function --- Productivity --- Productivity Growth --- Total factor productivity --- Trade reforms