Washington, D.C., January 14, 2013—A
new study by IFC, a member of the World Bank Group, finds that much-needed
jobs in developing countries can be created at a faster rate if policymakers
and development institutions make it a priority to remove the key obstacles
to growth that private-sector companies face.
The study, “Assessing Private Sector Contributions to Job Creation,”
concludes that four obstacles pose a particular challenge to job creation
in the private sector: a weak investment climate, inadequate infrastructure,
limited access to finance for micro, small, and medium enterprises; and
insufficient training and skills. Removing these obstacles can significantly
increase job creation.
The study was released today as a companion report to the World Bank’s
World Development Report 2013 on Jobs which was released last October.
In a joint communiqué issued at the launch, 25 leading international
finance institutions immediately pledged to work together to address job
creation, and learn from each other’s experience.
About 200 million people are unemployed globally. The World Bank estimates
that 600 million jobs must be created by 2020, mainly in developing countries,
just to keep up with population growth. The answer lies with the private
sector, which provides nine out of every 10 jobs.
“Joblessness is a global crisis that is especially urgent in the poorest
countries,” said Jin-Yong Cai, IFC’s Executive Vice President and Chief
Executive Officer. “As the world’s largest development institution focused
on the private sector, we believe that job creation offers the surest path
out of poverty. Promoting it in developing countries is a top priority
Other key findings include:
· Micro, small and medium enterprises (MSMEs)
generate the most jobs in developing countries but they are also less
productive, pay less, and do not offer as much training and development
opportunities for employees. Smaller companies are also often most affected
by obstacles to job creation, meaning they are unable to grow to their
· Access to finance is a key constraint for
MSMEs—easing it can result in significant job creation. For instance,
IFC provides financing to a large network of financial intermediaries in
emerging markets, which in 2011 financed 23 million MSMEs, which in turn
employed over 100 million people.
· The largest numbers of jobs are created
within companies’ supply and distribution chains. For example, an
IFC loan to an Indian cement manufacturer helped the company expand and
create more jobs. For every job created within the company, more than 20
were created in the supply and distribution chains.
· Lack of power is the most significant constraint
in lower-income countries. Providing companies with reliable power
could boost annual job growth by at least 4 percent.
· Women and youth face specific employment
challenges. Legal barriers, lack of access to finance, and cultural
norms often force women to work in jobs that pay less and are less secure.
Young people are almost three times more likely to be unemployed. They
also are more likely to work in informal jobs.
The study found that 45 million people enter the work force each year.
Yet more than a third of companies studied across the globe were unable
to find employees with the skills that they needed.
“IFC and the World Bank Group have a number of programs that focus on
closing the skills gap,” said Roland Michelitsch, an IFC Manager and the
study’s lead author. “But the potential to do more exists—not only for
us but also for other development institutions, policymakers, and the private
IFC, a member of the World Bank Group, is the largest global development
institution focused exclusively on the private sector. We help developing
countries achieve sustainable growth by financing investment, mobilizing
capital in international financial markets, and providing advisory services
to businesses and governments. In FY12, our investments reached an all-time
high of more than $20 billion, leveraging the power of the private sector
to create jobs, spark innovation, and tackle the world’s most pressing
development challenges. For more information, visit www.ifc.org.
About the Study:
· The IFC report draws on an extensive literature
review and the experiences of more than 45,000 businesses in over 100 countries,
as well as macro and micro case studies conducted in South Asia, Africa,
and the Middle East.
· The study examines the constraints faced by
private sector in developing countries, focusing on the most binding constraints
to job creation that can be addressed by development finance institutions
oriented toward the private sector.
Additional information (see attachments)
Jobs Study Fact Sheet
Jobs Study Summary Report