Inter-firm trade finance in times of crisis

The paper discusses the main features that distinguish inter-firm international trade finance from alternative sources of financing. On the one hand, inter-firm trade finance could help overcome informational problems associated with other lending relationships; on the other, it may contribute to propagate shocks due to the interconnection among firms along credit chains. The paper evaluates the potential effects of a financial crisis on the use of trade credit for firms operating in developing countries. It argues that while the advantages of trade credit might remain largely unexploited due to poor legal institutions, the disadvantages might be exacerbated because of these firms’ greater exposure to a default chain. Based on these arguments, a menu of choices is identified for what policymakers can do to boost firms’ access to inter-firm trade finance in times of crisis.Debt Markets,Access to Finance,Bankruptcy and Resolution of Financial Distress,Economic Theory&Research,Emerging Markets

Under which conditions is carrier cooperation possible? A case study in a Seville marketplace

The high volume of traffic originates two well-known problems in many cities: congestion and pollution. In recent years, a social phenomenon is emerging cooperation. This work is aimed at evaluating the circumstances under which transport cooperation is possible between different stakeholders operating in the same geographical area. To this end, a double survey process was conducted in a marketplace situated in the Seville City (Spain) centre. The first survey was designed to know the characteristics of the retailers and their preferences with respect to cooperation and regulations. A relational analysis between retailer features and their willingness to cooperate was carried out. After analysing the motivations for non-cooperation, a mixed proposal was designed and surveyed. Although the research was limited to a marketplace, the relevant data gathered from this double survey process highlights some implications: (a) the importance of personal relations in retailer cooperation; (b) a high volume of freight and the use of vans as on-street warehouses appear as significant motivations for non-cooperation; (c) forcing changes in the statu quo encourages cooperation.Ministerio de Economía y Competitividad (España) TEC2013-47286-C3-3-

ADB–OECD Study on Enhancing Financial Accessibility for SMEs: Lessons from Recent Crises

During the era of global financial uncertainty, stable access to appropriate funding sources has been much harder for small and medium-sized enterprises (SMEs). The global financial crisis impacted SMEs and entrepreneurs disproportionately, exacerbating their traditional financing constraints. The financial conditions of many SMEs were weakened by the drop in demand for goods and services and the credit tightening. The sovereign debt crisis that hit several European countries contributed to further deterioration in bank lending activities, which negatively affected private sector development. The global regulatory response to financial crises, such as the Basel Capital Accord, while designed to reduce systemic risks may also constrain bank lending to SMEs. In particular, Basel III requires banks to have tighter risk management as well as greater capital and liquidity. Resulting asset preference and deleveraging of banks, particularly European banks with significant presence in Asia, could limit the availability of funding for SMEs in Asia and the Pacific. Lessons from the recent financial crises have motivated many countries to consider SME access to finance beyond conventional bank credit and to diversify their national financial system. Improving SME access to finance is a policy priority at the country and global level. Poor access to finance is a critical inhibiting factor to the survival and growth potential of SMEs. Financial inclusion is thus key to the development of the SME sector, which is a driver of job creation and social cohesion and takes a pivotal role in scaling up national economies. The Asian Development Bank (ADB) and the Organisation for Economic Co-operation and Development (OECD) have recognized that it is crucial to develop a comprehensive range of policy options on SME finance, including innovative financing models. With this in mind, sharing Asian and OECD experiences on SME financing would result in insightful discussions on improving SME access to finance at a time of global financial uncertainty. Based on intensive discussions in two workshops organized by ADB in Manila on 6–7 March 2013 and by OECD in Paris on 21 October 2013, the two organizations together compiled this study report on enhancing financial accessibility for SMEs, especially focusing on lessons from the past and recent crises in Asia and OECD countries. The report takes a comparative look at ADB and OECD experiences, and aims to identify promising policy solutions for creating an SME base that is resilient to crisis, from a viewpoint of access to finance, and which can help drive growth and development

Output-based Aid for Sustainable Sanitation

A review of the experience to date in applying output-based and other results-oriented financing aid formats to the delivery of sanitation services and goods in developing countries. The paper looks at the theoretical underpinnings which justify output-based subsidies in sanitation, reviews a selection of output-based aid projects and then proposes some new approaches which could help to make financing in sanitation more effective and accountable

Systemic Failure in the Provision of Safe Food

Many deficiencies in the capacity of a food system to deliver safe products are systemic in nature. We suggest a taxonomy of four general ways in which a systemic failure might occur. One relates to the connectedness, or topology, of the system. Another arises from mistrust on the part of downstream parties concerning signals on product attributes, production processes, and the performance of regulatory mechanisms. A third arises when asymmetric information leads to low incentives for preserving food quality. Finally, inflexibilities in adapting to different states of nature may leave the system vulnerable to failures. Innovations in information technology and institutional design may ameliorate many problems, while appropriate trade, industrial organization, science, and public infrastructure policies also may fortify the system.

Rural credit in developing countries

Subsidized formal credit to the agricultural sector has been advocated as more efficient, equitable, and easier to implement than, say, land reform. But the record on subsidized credit to farmers is dismal. It shows a significant failure either to achieve an increase of agricultural output cost-effectively or to improve rural income distribution and alleviate poverty. Many of the financial institutions have proven to be inept and to lack accountability. Common features of the success stories are tougher stands on default; strict auditing and accounting procedures and financial control; and some form of joint responsibility or liability by small groups of farmers, whereby default by one member cancels future loans to the whole group.Banks&Banking Reform,Environmental Economics&Policies,Economic Theory&Research,Financial Intermediation,Insurance&Risk Mitigation

Scenarios for the development of smart grids in the UK: synthesis report

‘Smart grid’ is a catch-all term for the smart options that could transform the ways society produces, delivers and consumes energy, and potentially the way we conceive of these services. Delivering energy more intelligently will be fundamental to decarbonising the UK electricity system at least possible cost, while maintaining security and reliability of supply. Smarter energy delivery is expected to allow the integration of more low carbon technologies and to be much more cost effective than traditional methods, as well as contributing to economic growth by opening up new business and innovation opportunities. Innovating new options for energy system management could lead to cost savings of up to £10bn, even if low carbon technologies do not emerge. This saving will be much higher if UK renewable energy targets are achieved. Building on extensive expert feedback and input, this report describes four smart grid scenarios which consider how the UK’s electricity system might develop to 2050. The scenarios outline how political decisions, as well as those made in regulation, finance, technology, consumer and social behaviour, market design or response, might affect the decisions of other actors and limit or allow the availability of future options. The project aims to explore the degree of uncertainty around the current direction of the electricity system and the complex interactions of a whole host of factors that may lead to any one of a wide range of outcomes. Our addition to this discussion will help decision makers to understand the implications of possible actions and better plan for the future, whilst recognising that it may take any one of a number of forms

Scenarios for the development of smart grids in the UK: literature review

Smart grids are expected to play a central role in any transition to a low-carbon energy future, and much research is currently underway on practically every area of smart grids. However, it is evident that even basic aspects such as theoretical and operational definitions, are yet to be agreed upon and be clearly defined. Some aspects (efficient management of supply, including intermittent supply, two-way communication between the producer and user of electricity, use of IT technology to respond to and manage demand, and ensuring safe and secure electricity distribution) are more commonly accepted than others (such as smart meters) in defining what comprises a smart grid. It is clear that smart grid developments enjoy political and financial support both at UK and EU levels, and from the majority of related industries. The reasons for this vary and include the hope that smart grids will facilitate the achievement of carbon reduction targets, create new employment opportunities, and reduce costs relevant to energy generation (fewer power stations) and distribution (fewer losses and better stability). However, smart grid development depends on additional factors, beyond the energy industry. These relate to issues of public acceptability of relevant technologies and associated risks (e.g. data safety, privacy, cyber security), pricing, competition, and regulation; implying the involvement of a wide range of players such as the industry, regulators and consumers. The above constitute a complex set of variables and actors, and interactions between them. In order to best explore ways of possible deployment of smart grids, the use of scenarios is most adequate, as they can incorporate several parameters and variables into a coherent storyline. Scenarios have been previously used in the context of smart grids, but have traditionally focused on factors such as economic growth or policy evolution. Important additional socio-technical aspects of smart grids emerge from the literature review in this report and therefore need to be incorporated in our scenarios. These can be grouped into four (interlinked) main categories: supply side aspects, demand side aspects, policy and regulation, and technical aspects.

Promoting competitiveness in South African agriculture and agribusiness: The role of institutions

This paper considers private and public institutions that will help promote the competitiveness of commercial farms and agribusiness firms, and enhance the productivity of communal farmers and the competitiveness of emerging farmers in South Africa. Commercial agriculture and agribusiness are creating institutions (such as food safety standards and strategic partnerships), adopting existing private and public institutions (e.g. TQM, ISO 9000 and HACCP) or restructuring to add value to products and services, reduce costs and gain access to export markets. Government should focus its relatively scarce resources on providing physical and legal infrastructure (such as secure property rights and contract enforcement) to reduce transaction costs, including risk, so that markets work efficiently. A major challenge for local agricultural economists is to provide information about institutions that will promote the productive use of land in communal areas, and the competitiveness of emerging farmers on redistributed commercial farmland.Agribusiness, International Relations/Trade,

Altruism, Markets, and Organ Procurement

For decades, the dominant view among biomedical ethicists, transplantation professionals, and the public at large has been that altruism, not financial considerations, should motivate organ donors. Proposals to compensate sources of transplantable organs or their survivors, although endorsed by a number of economists and legal scholars, have been denounced as unethical and impracticable. Organ transplantation is said to belong to the world of gift, as distinct from the market realm. Paying for organs would inject commerce into a sphere where market values have no place and would transform a system based on generosity and civic spirit into one of antiseptic, bargained-for exchanges. Here, Mahoney discusses a brief history of the restriction on payments to sources of transplantable organs. She then turn to the arguments commonly advanced against compensating organ sources and explain how they are grounded in beliefs that range from the highly contestable to the demonstrably wrong. Furthermore, she examines the most popular compensation proposals, and offering preliminary assessments of their promise and feasibility. She also concludes with some thoughts about the relationship between altruism and self-interest