1. Financial Infrastructure Peer Stein, Manager, Advisory Services Access to Finance International Finance Corporation Vienna, September 11, 2008

2. In emerging markets, roughly two-thirds of the population remain unbanked and underserved
This includes retail, micro, small enterprises.

3. Aggregate bank lending to the private sector still low
Source: World Development Indicators (World Bank)
Domestic Credit to the Private Sector 50
100
150
200
250
United
States
East Asia
and
Pacific
Euro Zone
Sub-
Saharan
Africa
Middle
East and
North
South
Asia
Europe
Central
Latin
America
Caribbean
As % of GDP
2000
2005

4. Access points lag behind, though alternative channels may be an opportunity
Internet Users & Growth in Internet Users (by Regions) 50
100
150
200
250
300
350
400
Africa
Asia
Europe
Middle
East
North
America
Latin
Oceania/
Australia
Number of Internet Users (Millions) 0%
100%
200%
300%
400%
500%
% Growth in Internet Users ( )
Banking Penetration in 99 countries
80.0 70
70.0
60.0
50.0
40.0 33 35
30.0
20.0 12 13 9 8 7 11 9
10.0 6 6 5 1 3 5
0.0
High
High
East Asia
Europe
Latin
Middle
South Asia
Sub-
income:
income:
& Pacific
& Central
America &
East &
Saharan
non OECD
OECD
Asia
Caribbean
North Africa
Africa
Avg. no. of branches per 100,000 people
Avg. no. of ATMs per 100,000 people
Global Card Purchase Transactions (Billions)
17%
23%
16%
11%
12% 10 20 30 40 50
North
America
Europe
Asia/
Pacific
Latin
ME/Africa
Billions 0% 5%
10%
15%
20%
25%
CAGR ( )
2005
2006
2007
2008
Growth in Mobile Cellular Users ( )
200
400
600
800
1000
1200
2000
2001
2002
2003
2004
2005
2006
Millions
America
Western Europe
Eastern Europe
Asia Pacific
Latin America
Other
Sources: 1) Reaching Out: Access to and use of banking services across countries, Beck, Thorsten, A.Demirgüç-Kunt and M. Martinez Peria, Journal of Financial Economics, 85, pp ) BuddeComm based on internetworldstats.com, ) Lehman Brothers report on Specialtfy Finance, June 25, ) PaulBudde Communications Pty Ltd, 2007

5. Not only availability is an issue, but also affordability
Access to finance
High income
Cost of finance
East Asia & Pacific
Europe & Central Asia
Latin America & Caribbean
Middle East & North Africa
South Asia
While in malawi, sierra leone and uganda fees exceed 20% of gdp per capita, these acountrs are free in countries such as Sweden
Average 2.49
Median 0.3
Sub-Saharan Africa 10 20 30 40 50 60 70
Share of firms reporting cost of/access to finance (percent)
Source: Demirguc-Kunt, Finance for All? Policies and Pitfalls in Expanding Access, World Bank Research Report, November 2007

6. Annual Fees for a Checking Account (% of GDPPC)
Financial services in developing countries can be prohibitively expensive
Annual Fees for a Checking Account (% of GDPPC)
While in malawi, sierra leone and uganda fees exceed 20% of gdp per capita, these acountrs are free in countries such as Sweden
Average 2.49
Median 0.3
Source: Beck, Thorsten, Asli Demirguc-Kunt, Maria Soledad Martinez Peria, Banking Services for Everyone? Barriers to Bank Access and Use Around the World, World Bank, February 2007.

7. Expanding access to finance requires solid financial infrastructure
Creating and improving financial infrastructure
Credit bureaus, payment systems and collateral registries
Legal and regulatory framework
Working with financial institutions
Retail/SME banks, microfinance, housing, leasing
Comprehensive, long-term institution building programs
Working with securities markets
Corporate and government bond markets
Market
Infrastructure
MFI
Bank A
Bank B

8. Total financing volumes supported by Financial Infrastructure in emerging markets
2006 Emerging Market GDP
= $11,527 BN
$688
$141
$240
$2,804
$1,342
$204
$222
$1,173 $-
$1,000
$2,000
$3,000
$4,000
$155,000
Credit
Bureaus
Collateral
Registries
Remittances
Domestic
Payments
Securities
Markets
Corporate
Governance
US $ Billions
Total Current Financing Volume
Total Potential Financing Volume
$2,030
$345
$154,195
$462
$3,977
$4,169
$9,178
$5,009
$89,350
$64,845
Note: Numbers are estimates based on several studies and assumptions. For more details please refer to the Methodology Sheet for Impact Calculations.
* Current volume of transactions for Payment Systems is based on survey data for 91 emerging market countries. Based on retail payments data only.

9. 2006 Emerging Market Population = 5.4 billion
Total people positively affected by Financial Infrastructure
2006 Emerging Market Population = 5.4 billion
0.34
0.71
1.10
0.24
0.65
0.17
1.87
0.08
0.28
0.06
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Credit
Bureaus
Collateral
Registries
Remittances
Domestic
Payments
Securities
Markets
Corporate
Governance
Billions
Number of people currently affected
Potential # of people affected
0.99
0.25
2.97
0.77
0.53

10. Retail/small business Financial Infrastructure helps reduce
Financial Infrastructure has long-term systemic potential to reduce cost per dollar lent or sent
Notes:
“Total potential reduction in costs” is indicative of the broad range of potential cost reduction. Actual cost savings realized is contingent ultimately on the efficiency of the system.
Credit Bureaus: Lending costs on micro, retail and small business loans. Upper limit is for MFI loans, and is based on average of “Operating costs as a % of loan portfolio” information obtained from 2006 MIX Market data for 798 MFIs in 96 countries.
Collateral Registries: Lending costs on secured credit and leases.
Remittances: Cost of sending remittances to remitter’s home country.
Domestic payments: Cost of sending payments in country. $0 $5
$10
$15
$20
$25
$30
Retail/small business
loans that can make
use of credit bureaus
Loans securitized
with moveable
collateral
Remittances
Domestic
Payments
Cost per $100 lent or sent
Least efficient system
Most efficient system
Total potential reduction in costs
90%
80%
75%
Financial Infrastructure helps reduce
transaction costs
CR – mf, housing, retail, Secured credit (car loans), leases
Remittances – cost of sending remittance homes
Domestic payments – cost of sending payments in country
In chart – FI can help reduce

11. The World Bank Group is developing a Financial Infrastructure Index (FII)
The Financial Infrastructure Index:
Provides a basis for cross-country comparison of FI elements for which consistent cross country data is available
Builds on an FI index being developed by the OECD
Measures strength of FI using indicators for four broad areas:
Contract Enforcement – as a proxy for enforcement of creditor rights in case of non-payment
Access to Credit - measures availability and scope of credit information and the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders
Investor Protection - measures extent of disclosure, director liability and the extent to which shareholders can challenge transactions, including minority shareholder rights. Proxy for corporate governance
Bankruptcy Procedures – reflects time, cost and outcomes of bankruptcy proceedings
As more data become available, the index will be expanded to include other aspects of financial infrastructure such as payment systems, the status of auditing and accounting and securities market infrastructure.

12. Preliminary results showing FII regional averages
Financial Infrastructure Index
Access to Finance
Enforcing Contract
Bankruptcy Procedures
Protecting Investors
EAP
0.53
0.31
0.59
0.52
ECA
0.55
0.41
0.66
0.61
0.50
HCD
0.71
0.70
0.84
LAC
0.44
0.58
0.60
MEN
0.48
0.30
0.57
0.47
SAS
0.49
0.24
SSA
0.45
0.23
0.43
Source: World Bank and IFC. The methodology for the computation of the index follows OECD framework as developed by Alain de Serres, Shuji Kobayakawa, Torsten Slok and Laura Varita (2007) “Regulation of Financial Systems and Economic Growth”, OECD working paper ECO/WKP(2006)34

13. Private credit to GDP and Financial Infrastructure
Financial Infrastructure and Depth
140%
124%
120%
100%
Domestic credit to GDP
80%
56%
60%
45%
37%
40%
17%
20% 0% 1 2 3 4 5
FI quintiles
Note: correlation controlling for income per capita and off shore financial zones. Source: World Bank and IFC

14. Interest rate spread and Financial Infrastructure
Financial Infrastructure and Efficiency
14.0
12.2
12.0
10.0
8.2
8.0
6.8
7.1
Interest rate spread
6.0
3.6
4.0
2.0
0.0 1 2 3 4 5
FI index
Note: correlation controlling for income per capita and real interest rate. Source: World Bank and IFC

15. Non-performing loans and Financial Infrastructure
Financial Infrastructure and Stability
14.0
12.5
12.0
10.0
10.0
7.8
Non-performing loans (%)
8.0
6.0
4.6
4.0
2.4
2.0
0.0 1 2 3 4 5
FI index
Note: correlation controlling for income per capita, inflation and GDP growth.. Source: World Bank and IFC

16. What should policy makers do?
Pursue sound financial sector and macroeconomic policies
Establish an appropriate legal and regulatory framework
Develop institutional capacity for enforcement and oversight
Address competition policy issues, maintaining a balance with cooperation
Identify clear roles for public and private sectors
Extend financial infrastructure to target populations such as low-income, SME or rural consumers
Develop multi-sector strategies or solutions to address the problem of access
Prioritize development objectives of FI
Promote financial education and financial literacy

17. World Bank Group Support to Financial Infrastructure Development
Explore synergies among individual programs in countries/regions (see next slide)
Strenghten/broaden standard setting efforts (e.g. credit reporting)
Working on common terminology/approaches
Push the Research agenda
Conduct “Financial Sector Assessment Program” (FIAP) within the context of FSAPs and beyond
Prepare joint TA and Loan/Grants programs

18. World Bank Group Support to Financial Infrastructure Development: Active projects

19. ANNEX

20. World Bank Group indicators and databases cover most financial infrastructure
Existing:
Doing Business
Credit bureaus
Movable collateral
Property registration (part of immovable collateral)
Investor protection (part of corporate governance)
Contract enforcement
Payments Systems Group “Global Payments Survey”
Remittance price database
In Development:
Getting Finance Indicators
Collateral Registry Survey

21. “Getting Credit” Indicator
Private Bureau Coverage (% of Adult Population)
OECD
59.3
Latin America & Caribbean
32.1
Private Bureau
Coverage (% of Adults)
Eastern Europe & Central Asia
15.4
East Asia & Pacific
10.8
Middle East & North Africa
8.1
Sub-Saharan Africa
4.5
South Asia
1.9 10 20 30 40 50 60 70
Credit Information Index
4.8
3.4
2.6
1.9
1.3 1 2 3 4 5 6
OECD
Eastern
Europe &
Central
Asia
Latin
America &
Caribbean
Middle
East &
North
Africa
East Asia
& Pacific
South
Sub-
Saharan
Credit Information Index measures rules affecting the scope, access, and quality of credit information.
Source: Doing Business 2008

22. Strength of collateral and bankruptcy laws and investor protection rights
Legal Rights Index
6.4
5.6
4.5
4.1
4.0
3.9
3.7
0.0
1.0
2.0
3.0
5.0
6.0
7.0
OECD
Eastern
Europe &
Central Asia
East Asia
& Pacific
Latin
America
& Caribbean
Sub-
Saharan
Africa
South
Asia
Middle
East &
North Africa
The Legal Rights Index measures the degree to which collateral and bankruptcy laws facilitate lending,
Investor Protection Index
6.0
5.2
5.1
5.0
4.7
4.3
0.0
1.0
2.0
3.0
4.0
7.0
OECD
East Asia
& Pacific
Latin
America &
Caribbean
Eastern
Europe &
Central Asia
South
Asia
Middle
East &
North Africa
Sub-
Saharan
Africa
Investor Protection Index measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain.
Source: Doing Business 2008

23. “Enforcing Contracts” indicator50
43.5
43.5 60
39.4
39.3
37.3 40
35.9 50
Measures efficiency of contract enforcement by following the evolution of a sale of goods dispute and tracking the time, cost, and number of procedures involved from the moment the plaintiff files the lawsuit until actual payment.
31.3 30 40
# of Procedures 30 20
Cost (% of Claim) 20 10 10
Middle
East &
North
Africa
South
Asia
Sub-
Saharan
Africa
Latin
East
Asia &
Pacific
Eastern
OECD
America &
Europe &
Caribbean
Central
Asia
Procedures (number)
Cost (% of claim)
Duration (days)
1047
700
699
643
550
443
200
400
600
800
1000
1200
South Asia
Latin America & Caribbean
Middle East & North Africa
Sub-Saharan Africa
East Asia & Pacific
OECD
Eastern Europe & Central Asia
Number of Days to Enforce a Contract
Source: Doing Business 2008

24. “Registering Property” indicator7
6.8
6.6
6.4
6.2 5
4.9 1 2 3 4 6 8
Number of Procedures 10 12
Cost (% of Property Value)
Procedures (number)
Cost (% of property value)
Middle
East &
North
Africa
South
Asia
Sub-
Saharan
Latin
America
& Caribbean
East
Asia &
Pacific
Eastern
Europe &
Central Asia
OECD
Examines the steps, time, and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building in the largest business city—already registered and free of title dispute.
Duration (days) 28 48 73 92 99
105
134 20 40 60 80
100
120
140
160
OECD
Middle East & North Africa
Latin America & Caribbean
Eastern Europe & Central Asia
East Asia & Pacific
Sub-Saharan Africa
South Asia
Number of days
Source: Doing Business 2008