Bringing Financial Literacy and Education to Low and Middle Income Countries: The Need to Review, Adjust, and Extend Current Wisdom

This paper presents a World Bank led and Russia trust fund financed work program to measure financial capability and the effectiveness of financial education in low and middle income countries. The two activities and their staging have been motivated by the lessons of high-income countries with financial literacy programs and the deviating characteristics of low and middle income countries. While progress has been made in high-income countries to measure financial capability, there is little robust empirical evidence that financial education can improve it. While applying the financial capability concept in low and middle-income countries looks promising it will need to be adjusted to their characteristic and supported by innovative interventions and rigorous impact evaluation to improve it.financial literacy, financial capability, financial education, impact evaluation

A World Bank perspective on pension reform

This report highlights the World Bank's thinking and worldwide involvement in pension reform. Both are driven by the Bank's mandate to help countries develop economically and to reduce poverty. The Bank has four key concerns in working with clients on pension policy: 1) short-term financing and long-term financial viability; 2) effects on economic growth; 3) adequacy and other distributive issues; and 4) political risk and sustainability. In response to these concerns and after review of the three main reform options for unfunded systems-mere pay-as-you-go reform, a rapid and complete shift to a mandatory funded system, and a gradual shift to a multi-pillar scheme-the Bank favors the later approach, but in a pragmatic and country-specific manner. When helping to implement a pension reform, the Bank takes full account of country preferences, circumstances and ownership, bases its support on sound reform criteria, links client assistance with knowledge management, provides training and other measures to enhance the reform capacity of a country, and seeks cooperation with other international institutions.Pensions&Retirement Systems,Banks&Banking Reform,Environmental Economics&Policies,National Governance,Health Monitoring&Evaluation

Can investments in emerging markets help to solve the aging problem ?

Prefunding of pension commitments in OECD (Organization of Economic Cooperation and Development) economies is increasingly seen as a central strategy to cope with the aging of their populations. This paper argues that investments in emerging markets can help at the margin but are unable to solve the demographic problem. While these investments bring potential advantages through enhanced risk diversification, higher rates of return, and accelerated financial market development, the total effects are likely to be limited. Furthermore, in order to harvest them, capital-sending and -receiving countries must fulfill various politically and economically challenging requirements. For pension policy, the limited contribution of pre-funding at home and abroad in order to address the demographic problem implies that enhanced emphasis must be given to domestic reforms.Environmental Economics&Policies,International Terrorism&Counterterrorism,Health Economics&Finance,Banks&Banking Reform,Economic Theory&Research

Risk and vulnerability : the forward looking role of social protection in a globalizing world

The paper outlines a forward-looking role of social protection against the background of increasing concerns about risk, and vulnerability, exemplified by the recent East Asian crisis, the concerns of the World Development Report (WDR) 2000, the need for a better understanding of poverty dynamics, and the opportunity and risks created by globalization. These considerations, and the need for a more proactive approach to lasting poverty reduction, have led to the development of a new conceptual framework, which casts social protection as social risk management. The paper highlights the main elements of the new conceptual framework, and its main strategic conclusions for attacking poverty, before addressing crucial issues for its implementation: the need for an operational definition of vulnerability; the use of social risk assessments as an operational entry point for a new policy dialogue; economic crisis management, and the lessons for social protection; and, the undertaking of social expenditure reviews to enhance the effectiveness of government intervention for addressing risk and vulnerability. The pilot experience with some of these elements, yields cautious optimism that a promising road for addressing poverty has been found.Environmental Economics&Policies,Social Risk Management,Health Economics&Finance,Poverty Assessment,Insurance&Risk Mitigation

Can Investments in Emerging Markets Help to Solve the Aging Problem?

Prefunding of pension commitments in OECD economies is increasingly seen as a central strategy to cope with the aging of their populations. This paper argues that investments in emerging markets can help at the margin but are unable to solve the demographic problem. While these investments bring potential advantages through enhanced risk diversification, higher rates of return, and accelerated financial market development, the total effects are likely to be limited. Furthermore, in order to harvest them, capital sending and receiving countries must fulfill various politically and economically challenging requirements. For pension policy, the limited contribution of pre-funding at home and abroad in order to address the demographic problem implies that enhanced emphasis must be given to domestic reforms.Aging, pensions, international investments, emerging markets, risk diversification

Bringing financial literacy and education to low and middle income countries : the need to review, adjust, and extend current wisdom

This paper presents a World Bank led and Russia trust fund financed work program to measure financial capability and the effectiveness of financial education in low and middle income countries. The two activities and their staging have been motivated by the lessons of high income countries with financial literacy programs and the deviating characteristics of low and middle income countries. While progress has been made in high-income countries to measure financial capability, there is little robust empirical evidence thatfinancial education can improve it. While applying the financial capability concept in low and middle-income countries looks promising it will need to be adjusted to their characteristic and supported by innovative interventions and rigorous impact evaluation to improve it.Financial Literacy,Access to Finance,Access&Equity in Basic Education,Education For All,Poverty Impact Evaluation

Individual accounts as social insurance : a World Bank perspective

The trend toward including individual accounts as part of the mandatory pension system continues unabated. Nine Latin American countries have introduced individual accounts (Chile, Peru, Argentina, Colombia, Uruguay, Bolivia, Mexico, El Salvador and Nicaragua) and several more are preparing to do so (Ecuador, Dominican Republic) . A similar trend has emerged in Europe where the former socialist countries are taking the lead: Hungary, Kazakhstan, Latvia and Poland have already passed reform legislation and many others including Croatia, Estonia, Macedonia, Romania and the Ukraine are preparing their own versions. There is also movement in this direction in Western Europe, even in countries with large, state defined benefit plans like Sweden. Several Asian versions of the individual accounts strategy are also emerging, ranging from the gradually liberalization of Singapore's Central Provident Fund to Hong Kong's new, employer based, defined contribution scheme. In fact, reforms that assign an important role to individual accounts are being discussed in dozens of countries in every region of the world. This brief note states the broad arguments for individual accounts. More detailed discussion of specific reforms and issues can be found at www.worldbank.org/pensions. The structure of the paper is as follows: Section II provides some needed clarification on"individual accounts", Section III outlines the main arguments for individual accounts while Section IV concludes.Banks&Banking Reform,Environmental Economics&Policies,Health Economics&Finance,Poverty Assessment,Pensions&Retirement Systems

Portability of Pension, Health, and Other Social Benefits: Facts, Concepts, Issues

Portability of social benefits across professions and countries is an increasing concern for individuals and policy makers. Lacking or incomplete transfers of acquired social rights are feared to negatively impact individual labor market decisions as well as capacity to address social risks with consequences for economic and social outcomes. The paper gives a fresh and provocative look on the international perspective of the topic that has so far been dominated by social policy lawyers working within the framework of bilateral agreements; the input by economists has been very limited. It offers an analytical framework for portability analysis that suggests separating the risk pooling, (implicit or actual) pre-funding and redistributive elements in the benefit design and explores the proposed alternative approach for pensions and health care benefits. This promising approach may serve both as a substitute and complement to bi- and multilateral agreements.portability, acquired rights, migration, bilateral agreements, risk pooling

Social protection as social risk management : conceptual underpinnings for the social protection sector strategy paper

This report serves as a conceptual background piece for the development of the Social Strategy Paper (SSP). To develop the conceptual underpinnings, the objectives and instruments of strategy papers (SP) are viewed under the rubric of Social Risk Management (SRM). SRM consists of public measures intended to assist individuals, households, and communities in managing income risks in order to reduce vulnerability, improve consumption smoothing, and enhance equity while contributing to economic development in a participatory manner. To support the approach and its logic, the structure of this note is as follows: Chapter 2 sets the stage and presents global trends, definitions, and outlooks. Chapter 3 presents key issues of SRM, from the reasons for World Bank concern to a typology of strategies and instruments, and ends with the role of the main actors. Chapter 4 focuses on the boundaries of SP/SRM and on three key policy issues to balance equity, efficiency, and political sustainability. Chapter 5 ends with preliminary list of ways in which the new framework may affect our view of SP and the development of better instruments.Environmental Economics&Policies,Health Economics&Finance,Banks&Banking Reform,Social Risk Management,Rural Poverty Reduction

Challenges and opportunities of international migration for the EU, its member states, neighboring countries, and regions : a Policy Note

The note aims at identifying key challenges and opportunities, including win-win solutions that would allow sending and receiving countries in and around Europe to benefit most from geographic mobility of people. The note (i) highlights demographic, economic and political gaps explaining international migration; (ii) explores the main options for the EU member states and reviews the experiences of traditional countries of immigration; (iii) investigates the implications of a pro-active recruitment approach, including the impacts on both sending and receiving countries; and (iv) sketches the institutional requirements and necessary changes to move toward win-win solutions, identifying areas of potential cooperation between sending and receiving countries. The paper concludes with a short summary and an outlook on open data and research questions.International Migration,Human Migrations&Resettlements,National Governance,Health Monitoring&Evaluation,Voluntary and Involuntary Resettlement