Financial Crime World

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Yemen’s Struggle with Bank Secrecy and Transparency May Soon Be Over

Washington D.C., July 25, 2013

Yemen’s economy has been hampered by an outdated financial infrastructure that excludes most of its population and fails to match available funds with credit needs. The World Bank Group has announced a new project aimed at creating an economic environment where financial institutions can reach out to and compete for new customers, with better means for evaluating risks and more effective ways of delivering funds.

Financial Infrastructure Development Project

The Financial Infrastructure Development Project was approved by the World Bank Board of Executive Directors on July 25, 2013. The project will be funded with a US$20 million grant from the International Development Association (IDA). The project aims to support the implementation of core systems to enable the Central Bank of Yemen to exercise effective oversight of the financial system.

Key Components

  • A new electronic payment system that will facilitate a move away from cash transactions and increase both stability and transparency
  • Migration of government programs to the new system, promoting inclusion by making social security payments quicker and more efficient
  • Establishment of a credit registry along with data centers, providing the Central Bank of Yemen with the information necessary to supervise financial institutions and take corrective actions when needed

Benefits

  • Better methods for assessing risk will lower interest rates, removing a major barrier preventing many consumers from accessing credit
  • Improved access to finance for women, who often face collateral requirements that can reach up to 400 percent of the loan
  • Increased transparency and better regulation will build confidence in the financial system, attracting new consumers and allowing banks to cater to a more diverse range of customers

Quotes

“The ability of the private sector to generate jobs is critical for Yemen’s future. Building confidence on both sides to achieve this will only occur in a transparent and well-regulated system.” - Wael Zakout, World Bank Country Manager for Yemen

Project Impact

  • The project is expected to bring immense benefits, including shared economic growth and financial inclusion
  • Increased transparency that will allow Yemen to adhere to international standards for the prevention of corruption and money-laundering

Donor Support

Today’s announcement represents the rapid fulfillment of a US$400 million pledge in support of Yemen’s transition made at a donor conference in September 2012. In less than a year, the World Bank Group has invested almost US$300 million of the total amount pledged.