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Subsidies as an Instrument in Agriculture Finance : A ReviewThis paper presents a literature review
 of issues related to recent subsidies and investments in the
 financial sector that have been designed to address the
 immediate effects of the crises and to develop the financial
 institutions necessary to modernize agriculture. Section two
 of the paper discusses the impact of recent food, fuel, and
 financial crises on developing countries and the emergency
 actions taken by countries and international agencies to
 reduce the suffering inflicted on poor people. It also
 discusses the challenge of finding a balance between
 pragmatic immediate responses and longer-term objectives.
 The third section discusses the role of finance in
 agricultural development and poverty alleviation. Section
 four deals with the challenge of creating credit markets in
 developing countries. The fifth section covers shifts in the
 paradigm used to intervene in credit markets and summarizes
 the main features of the old directed-credit and the new
 financial systems paradigms. This is followed by a sixth
 section that summarizes highlights in the development of the
 microfinance industry. It covers guidelines created for
 developing microfinance, microfinance penetration into rural
 areas and agriculture, innovations and prospects for future
 agricultural lending, and insights gained about the impact
 of finance on poor households. The seventh section addresses
 topics related to the demand for credit, including rates of
 return earned in agriculture and in microenterprises, and
 research results analyzing sensitivity of loan demand to
 interest rates. Section eight describes major interventions
 by international agencies and points the way forward for
 agricultural credit. It reviews the debates about the use of
 grants and subsidies, especially in the food, fertilizer,
 and credit markets, and the rationale for smart subsidies.
 It then describes experiences in five major areas of
 international agency activities: micro-insurance and
 weather-index-based insurance, credit guarantee funds,
 warehouse receipts, specialized agricultural development
 banks, and agricultural investment funds. Section nine
 summarizes the main conclusions based on literature
 consulted for this review. It identifies major lessons
 learned with suggestions for priorities that Improving
 Capacity Building in Rural Finance (CABFIN) members might
 consider supporting in their projects and programs.
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Trade Finance during the Great Trade CollapseThe bursting of the subprime mortgage market in the United States in 2008 and the ensuing global financial crisis were associated with a rapid decline in global trade. The extent of the trade collapse was unprecedented: trade flows fell at a faster rate than had been observed even in the early years of the great depression. G-20 leaders held their first crisis-related summit in November 2008. The goal was to understand the root causes of the global crisis and to reach consensus on actions to address its immediate effects. In the case of trade, a key question concerned the extent to which a drying up of trade finance caused the observed decline in trade flows. This book brings together a range of projects and studies undertaken by development institutions, export credit agencies, private bankers, and academics to shed light on the role of trade finance in the 2008-09 great trade collapse. It provides policy makers, analysts, and other interested parties with analyses and assessments of the role of governments and institutions in restoring trade finance markets. A deeper understanding of the complexity of trade finance remains critical as the world economy recovers and the supply of trade finance improves. The international community continues to know too little about the fragility of low income economies in response to trade finance developments and shocks, as well as about the ability and conditions of access to trade finance by small and medium enterprises and small banks in developing countries. Similarly, there is uncertainty regarding the impact on trade finance of recent changes in the third Basel regulatory framework.
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Chinese FDI in EthiopiaChinese Foreign Direct Investment (FDI)
 into Africa is on the rise and Ethiopia is at the forefront
 of this trend. On request of the Government, the World Bank
 surveyed 69 Chinese enterprises doing business in Ethiopia
 with a 95-question survey in May/June 2012. The survey
 covered various aspects of the foreign direct investment
 climate in Ethiopia, including infrastructure, sales and
 supplies, land, crime, competition, finance, human
 resources, and questions about general opportunities and
 constraints for doing business in Ethiopia. This report
 summarizes the results of survey and provides policy
 suggestions in light of the analysis; the report also
 provides some broader background of the expected benefits of
 FDI into Ethiopia as well as current policies and approaches
 to promote incoming investment. Addressing identified
 obstacles could help Ethiopia to take better advantage of
 foreign investors in order to accelerate the shift from a
 predominantly low-productivity agriculture-based economy
 towards a higher-productivity manufacturing and export-based
 economy. Experiences in successful countries around the
 world, and especially East Asia show that foreign investment
 is instrumental to facilitate such a structural
 transformation and to maintain sustained and broad-based
 economic development. This study recommends five main areas
 for policy adjustments to facilitate foreign investors
 coming into Ethiopia: adjust customs clearance procedures
 and trade regulations; facilitate currency convertibility
 and increase transparency of the exchange rate policy;
 improve tax administration consistency and efficacy; execute
 impartial labor regulation; and increase the supply and
 quality of skilled workers.