1) The document discusses findings from an IFC study on job creation. It summarizes that private sector activity, particularly from small businesses and improved access to finance, infrastructure like reliable power, and skills training can significantly contribute to job creation.
2) In Nigeria specifically, the agricultural sector provides the most jobs but has low productivity. Infrastructure constraints, especially unreliable power, significantly affect competitiveness. Large skills gaps also exist.
3) Improving the investment climate, access to finance for SMEs, infrastructure like power networks, and training programs linked to the private sector can help address these issues and enable more inclusive job growth.
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IFC Jobs Study: Key findings on addressing Nigeria's unemployment challenge
1. IFC Jobs Study:
Findings , implications and next stepsFindings , implications and next steps
More information: www.ifc.org/jobcreation
1
Thanks to the donors supporting the jobs study:
2. Current dual jobs challenge:
o Quantity: 200M unemployed. 621M neither
working nor studying. Additional 600M jobs
needed by 2020.
o Quality: About 50% of jobs are informal and 30%
of workers are poor worldwide
private sector provides ~90%
Why jobs matter…(1)
2
Only the private sector can bring an answer, as it provides ~90% of
jobs worldwide – but the public sector needs to help.
IFC Jobs Study:
o Assesses the effects of private sector activity on job creation
o Elicits practical lessons for policy makers, IFC and other
finance institutions focused on private sector – and private
companies.
3. Where are jobs located in Nigeria?
• 67 million people are in the labor pool out of a population of 164 million*
• Around a quarter of the labor pool (~16 million people, especially youths) are unemployed*
• Agriculture is by far the largest employer and informal sector employment is prevalent
• Formal employment in either the public and private sector is relatively rare
3
Nigeria Workforce Distribution Source: Nigeria Employment & Growth Study 2009 (World Bank)
*Source: Nigerian Bureau of Statistics – Unemployment Report 2011
4. Yet the Scale of the Jobs Crisis is Significant
• Unemployment has doubled in five years and underemployment is significant
• The populations most affected are: youth (37%), women (24%) and the rural population (27%)
• A third of jobs are in the informal sector – evenly split between self-employed and hired help
• The high level of informal jobs may indicate further “underemployment” in low quality jobs –
over half are self-employed, the rest are apprentices, family (unpaid) and hired workers
30.0%
Nigeria Unemployment Rates
4
DRAFT
12.3%
23.9%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
2006 2007 2008 2009 2010 2011
Source: Nigerian Bureau of Statistics – Unemployment Report 2011
6. Enterprise
Survey
Analysis
IFC Job Study: Components
Infrastructure
case study
Macro-case
studies
Micro-
case
studies
Literature
review
Meta
evaluationIFC
Operational
experience
Collaboration
with WDR
Financial
Markets
case study
IFC’s Smart
Lessons
competition
Blog
WEF-IFC
Youth essay
competition
Website
ifc.org/
jobcreation
MSMEs FI
study
Funds
analysis
Data from
IFC’s DOTS
Advisory
panel
ILO
experience
6
7. Which Sectors Contribute Most to Jobs, Growth?
• The agricultural sector provides 30% of the jobs in Nigeria, but has very low labor productivity
• Food production, retail and furniture manufacturing employ the most in the formal sector
• SMEs contribute more to job growth through manufacturing than through service industries
…but, manufacturing has a disproportionately low contribution to GDP and growth
7
DRAFT
WB Enterprise Survey for Nigeria (2007): Agriculture Excluded WB Enterprise Survey for Nigeria (2007)
9. Selected findings: Removing constraints creates jobs
Investment Climate: Business entry reforms can have large positive
effects, particularly when combined with other reforms.
o Mexican one-stop shops: Firm entry + 5%, jobs +2.8%.
Infrastructure: Most studies focus on immediate direct job creation,
but effects through enabling economic growth are even larger.
o A reliable power supply could increase job growth in low income countries, by at
least 4-5% … and probably much more. Powerlinks: Effects from having power far
outweigh direct + indirect + induced effects of power transmission.
Access to Finance: Improvements create significant number of jobs.Access to Finance: Improvements create significant number of jobs.
o Significant extra job growth from bank loans (>3%) or external financing (>4%).
o “Footprint”: Jobs provided - in 2011 IFC clients “reached” 23M MSMEs …
which employed an estimated 100M+ people huge potential.
o Job created: Sri Lanka case study – SMEs financed grew twice as fast (12%) as jobs in
economy … but attribution is difficult, and more studies needed.
Training: Programs show mixed results, but involving private sector
and combining education with on-the-job training works best.
o Programs that included both had 20% increase in probability of success
9
10. Cumbersome and costly regulations prevent companies from entering,
operating and growing.
Investment Climate
Investment climate adds up to the most pressing issue for firms
Top IC
constraints:
10
Source: Enterprise Surveys
constraints:
(1) Informal
competition
(2) Tax rate
(3) Corruption
11. Informal firms provide a large portion of jobs in developing countries.
Investment Climate
Informalemployment
agricultural
employment)
36 countries
High poverty high
informalityLow poverty
high
informality
Informality is closely linked to poverty
11
Source: ILO, Department of Statistics, and IMF, World Economic Outlook.
Informalemployment
(%oftotalnon-agricultural
employment)
High poverty
low
informalityLow poverty
low
informality
Population living below the national poverty line (% of total population)
12. Investment Climate constraints
The table on the right ranks some of the key constraints drawn
from the range available from the enterprise survey which
includes corruption, credit, crime, electricity, interest, labor,
legal, land, macro-economy, monopoly, regulation, tax
administration, tax rate, ICT, trade, and transport.
Shows that power is the main concern for in-zone firms,
particularly for those in the machinery, garments (and textiles),
and agro-business sectors.
12
Starting a Business
DB
2012 Rank 116
Indicator Nigeria
Sub-
Saharan
Africa
OECD
Procedures
(number) 8 8 5
Time (days) 34 37 12
Cost (% of income
per capita) 70.6 81.2 4.7
Paying Taxes
DB
2012 Rank
138
Indicator Nigeria
Sub-
Saharan
Africa
OECD
Payments (number
per year)
35 37 13
Time (hours per year) 938 318 186
Profit tax (%) 22.3 18.1 15.4
Labor tax and
contributions (%)
9.7 13.5 24
Other taxes (%) 0.7 25.5 3.2
Enforcing Contracts
DB
2012 Rank 97
Indicator Nigeria
Sub-
Saharan
Africa
OECD
Time (days)
457 655 518
Cost (% of claim) 32 50 19.7
Procedures
(number) 40 39 31
13. Business entry reforms: Evidence of job creation, particularly when
combined with other reforms.
Mexico one-stop shop reform increased jobs (including self-employed) by
2.8% in eligible industries in one year
Business entry reform alone may not be not enough to formalize :
Business owners “Out of aspiration” 14.3% more likely to register.
Business owners “ Out of desperation” less likely to register, but 20.4%
Selected Findings: Investment Climate (IC)
13
Business owners “ Out of desperation” less likely to register, but 20.4%
more likely to become wage workers
Some evidence of benefits from IC reforms (e.g. competition reform);
but more data and impact evaluation needed.
Special economic zones (SEZs/EPZs), industry specific reforms:
Potential … and challenges
14. Infrastructure: Increasing private investment
Infrastructure investment by sector using PPP arrangements (US$ billions)
40
50
60
70
80
Energy
Telecommunications
Transport
Water and sewerage
Need to
improve urban
infrastructure,
14
Source: Private Participation in Infrastructure Database.
0
10
20
30
40
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
infrastructure,
as more people
move to cities.
15. Access to Infrastructure: Power
Second-order (“growth”)
effects
Improved/more firm services and inputs
(e.g. reliable power) more output/jobs
Current focus on direct jobs, but larger job effects
through enabling economic growth
Reliable power supply could increase job growth in low income countries
by at least 4-5%
15
Indirect and
induced jobs
Direct
Indirect/induced jobs often larger than direct
jobs Important, but often ignored
New power transmission lines in India, jobs created:
Construction and maintenance ~2K direct, and ~8K direct/induced in 25 yrs
Improved power supply: ~75K jobs from 2006-12
16. Key constraint in Nigeria is Power
Growth remains challenged significantly by the country’s poor infrastructure
framework i.e. bad roads, poor power supply, an inefficient transport system etc.
• Constrained by inadequate infrastructure, Nigerian firms report the second highest rate of
product losses in all SSA.
• Regardless of size, ES firms have overwhelmingly identified electricity as the main obstacle.
SMEs also identified access to finance and the next biggest constraint.
• Power is the main concern for in-zone firms, particularly for those in the machinery, garments
(and textiles), and agro-business sectors.
INFRASTRUCTURE
DEFICIT CONSTRAINS
GROWTH &
COMPETITIVENESS
Large firms and SMEs in low-income countries cite
power as the most important constraint.
In Nigeria, Infrastructure and especially power is
16
Source: Nigeria Enterprise Survey 2007
In Nigeria, Infrastructure and especially power is
the critical factor affecting competitiveness for
manufacturing and agribusiness.
Getting Electricity
DB
2012 Rank 176
Indicator Nigeria
Sub-
Saharan
Africa
OECD
Procedures
(number) 8 5 5
Time (days) 260 137 103
Cost (% of income
per capita) 1056 5429.8 92.8As size increases, % of firms identifying electricity as main obstacle
also increases.
17. Selected findings: Infrastructure – other sectors
Telecoms/IT: Significant employment effects – especially for young
people – and use of technology can help spur job growth.
Strong job effects also from other infrastructure services (e.g.
water– irrigation), and huge needs from urbanization.
In LAC: water/sewer (100K), rural electrification (23K):
Strong direct job effects per $ billion invested – but regional/sectoral
17
Strong direct job effects per $ billion invested – but regional/sectoral
variation.
Direct job creation is the focus of most studies, but “growth
effects” can be much larger – and women often benefit
disproportionately more.
Summary: Infrastructure – a big contributor to jobs, and the biggest
effects often come from improved infrastructure.
18. Finance: Smaller firms have less access to financing
Use of bank financing:
Small firms: 14%
Medium firms: 18%
Large firms: 25%
forworkingcapitalandfixed
investmentneeds(%)
18
Source: IFC (2010). Scaling-up SME Access to Financial Services in the Developing World.
Sourceoffinancingforworkingcapitalandfixed
investmentneeds
19. … and firms in poorer countries too
Ratio of domestic private sector credit to GDP
19
20. SMEs that have access to finance show significant job growth mainly
as a result of expansion of operations and technology investments
o 3.1% - 4.2% higher job growth with loans/overdraft, external financing
• Firms in developing countries: Less access to finance.
Financial markets are less developed.
• 45-55% of formal SMEs unserved, over 20% underserved,
70% don’t use external finance.
Gap: $2.5 trillion
Selected Findings: Access to Finance (A2F)
o 3.1% - 4.2% higher job growth with loans/overdraft, external financing
o “Footprint”: In 2011 IFC’s client FIs “reached” 23M MSMEs … which in turn
employed an estimated 100M+ people huge potential. Growth: Sri Lanka
case study – SMEs financed grew twice as fast (12%) as jobs in economy … but
attribution is difficult.
o Macro case studies: High job creation through FIs: Per $ million invested:
Estimated 228 jobs in Ghana, 107 jobs in Jordan
o From 2000 to 2010, 494 Firms financed by IFC’s private equity funds created,
net of job loss, ~300K jobs Strong growth compared to small portfolio.
20
21. The SME Financing Gap is Significant
No BankChecking &
SME Banking Relationship SME Financing Gap
• 1 M SMEs are estimated to be unserved or underserved by banks, resulting in a 22MM financing gap in Nigeria
• 87% of SMEs already have a bank account, creating the foundation for a banking relationship
• 75% of SMEs would like bank credit but only 14% have access to a loan or overdraft account
• Suppliers and customer credits meet 25% of SMEs’ financing needs
• Bank lending to SMEs constitutes only [3%] of assets in the banking system
• Leasing market grow by 30% in CY2011
21
DRAFT
No Bank
Relationship
13%
Checking
73%
Checking &
Overdraft/
Loan
14%
Does not
Need Credit
25%
Unserved
61%
Underserved
10%
Well-Served
4%
Source: Assessing and Mapping the Gap in MSME Finance McKinsey and IFC (2012)
22. SME Borrowing Constraints are also Significant
• SMEs with varying levels of informality have difficulty providing adequate documentation
• Interest rates are significantly higher for smaller firms, reducing demand
• High collateral requirements and lack of movable collateral registry reduces security options
• Risk aversion of banks results in short loan terms that sometimes are insufficient for SMEs
• There is a lack of capacity among entrepreneurs to develop and present bankable proposals
Less financing at higher cost for SMEs
22
DRAFT
23. Improve financial sector regulation: Liberalize to encourage entry and
lending … but enforce prudential regulations and protect property
rights (which helps lenders … and enterprises).
Improve financial infrastructure to improve information (e.g.
collateral registries). Example: 28%-40% higher likelihood for SMEs to
get a loan in countries with credit bureaus.
How to improve access to finance?
23
get a loan in countries with credit bureaus.
Step up competition – increases the incentive to reach out to SMEs.
Increase funding to FIs: Particularly for under-served groups, such as
MSMEs and women entrepreneurs.
24. Not enough workers for high-skilled jobs
~1/3 of companies can’t find the workers they need.*
Not enough jobs for low-skilled workers
Business owners/managers can lack skills to manage firms
Limits potential for firm growth and job creation.
Training and Skills
Small firms are less
likely to offer
training to their
workers, even
though many
identify skills as a
constraint
29.3
43.8
67.1
27.2
38.7 42.8 43.4
0
20
40
60
80
Small
Medium
Large
Low
Low-
middle
Upper-
middle
High
Firm size Income group% of
firms
offering
training
to their
workers
Source graph: IFC Jobs Study using Enterprise Surveys.
*ManPower Group (2012) sample of 41 countries ; **McKinsey Global Institute (2012)
25. Linking Skills, Technology and Competition
Studies show
<20% of SME
Some observations:
• In terms of skills, some form of education/technology competence is common for SMEs
• Competition in the SME space is relatively high, and is at the local/national/regional level
• Sectors range from retail, manufacturing and services
Characteristics of SMEs differ by business size and a review of several of their attributes is useful to
inform discussion of their demand for and the supply of financial and non-financial services.
25
SMEs represent
90% of the
manufacturing/
industrial sector
<20% of SME
manufacturers
export
26. Training and Skills
Training, technology, and innovation can create jobs
Innovating firms attain more productivity and job growth than non-innovative
firms. This employment growth is inclusive*
But programs show mixed results on jobs; combining training with work
experience works best
Employment effects more significant in longer-term, and focused on
disadvantaged groups (e.g. women, low-income youth).
Combination can increase probability of employment up to 25% in urban areas and
26
Combination can increase probability of employment up to 25% in urban areas and
up to 20% in rural areas.**
Comprehensive approach is needed
Dual vocational training systems - Germany and Switzerland – successful examples
Requires collaboration with private sector and relevant stakeholders
Clusters facilitate investments in training, technology, and innovation
E4E Initiative for Arab Youth: Jointly supported by IsDB and IFC - focuses on preparing
young people for the work place.
Sources: *Dutz et al. (2011). **Fares, Puerto (2009).
27. Where are the jobs?
Particularly in poorer countries: Small businesses dominate
Small firms have the highest share of employment. For higher country
income groups, large firms become much more important.
In addition: High informality … also small firms
Signs of “stunted growth” Impedes income growth
Job growth rate
of smaller
27
of smaller
companies is
twice the average
of all companies.
However, small
companies are
more likely to go
out of business.
Source: IFC Jobs Study using Enterprise Surveys data
29. Where can we get the most “bang for the buck”?
• To prioritize new activities, the team has looked areas where IFC has a comparative advantage:
(1) what is desirable based on the jobs and growth imperative and IFC’s development goals?
WIP: To factor in development results for comparable projects
(2) what is feasible based on ease of implementation and resource availability?
WIP: To factor in resource requirements for comparable projects
Prioritization of programs
High
Agribusiness
SME Banking
Partnerships
Highpriority
Business
Environment
Financial
Infrastructure
-Collateral registries
Credit Bureaus
29
DRAFT
Upside Potential
Growth
Employment
Indirect Devt Impact
Feasibility: Speed of execution and Availability of resources
Health
Education
SME Capacity
Building
Low High
Low
Size of bubble
is potential for
contribution
to IDGs / Reach
Corporate
Value Chains
Banking
on Women
ICT/
Entertainment
Manufacturing/
Construction
Leasing
PartnershipsHighLeverageOnly
OpportunitiesHighpriority
Mobile
Banking
-Collateral registries
-Credit Bureaus
Business
Plan
Competitions
30. Productivity
Larger firms tend to be more productive
Gains in labor productivity tend to be positively associated with
more job growth than destruction.
Why growth - into larger companies – matters
Many firms are born small and grow little in India and Mexico
30
Source: Hsieh and Klenow (2011)
30
31. 67.1
60
80
Firms offering training to workers (%)
by firm size and country income group
Productivity
Larger firms tend to be more productive, pay higher wages, offer more
training and often better working conditions.
Larger firms pay higher wages
Large is beautiful?
31
29.3
43.8
27.2
38.8
42.8 43.4
0
20
40
Small Medium Large Low Low
mid
Upper
mid
High
Country Income GroupFirm size
Source: WDR 2013 team based on Ayyagari, Demirguc-Kunt, and
Maksimovic (2007), and on Montenegro and Patrinos (2012)
Source: IFC Jobs Study using Enterprise Surveys data
32. Macro-case studies:
- Jordan: 9,100 jobs from IFC investment (0.6% of
labor force) plus 3,200 from financing mobilized
- All: Tradeoff between value added per job and
number of jobs
Estimating effects … and tradeoffs
Transformations
• Invest in labor intensive sectors and Financial Institutions (FIs)
• Invest in larger non-FIs & sectors facing international
competition … and develop value chains
Short-term job growth
Long-term job growth
32
33. Other selected findings
Direct job creation – net of losses - tends to be small
However, large job creation in supply/distribution chains (indirect), and in
whole economy (induced jobs)
Indirect jobs tend to be unskilled, providing opportunities for the poor
Multipliers in IFC Projects
Direct
Jobs
Indirect
Jobs
Multiplier Sector, Country
Micro-case studies in Manufacturing, Agribusiness and Services
33
* Safal: multiplier calculated on total jobs provided instead of incremental jobs due to
difficulties with attribution.
Mriya 2,505 7,390 3 Agribusiness, Ukraine
Safal* 4,200 24,000 6 Steel, Africa
PRAN 294 2,198 7 Agribusiness, Bangladesh
Ecogreen 177 3,646 21 Chemicals, Indonesia
OCL 293 7,156 24 Cement, India
Total jobs, not
just multiplier!
Mriya 2009 vs. 2011:
more direct jobs
(increased quality),
multiplier declined.
34. Sector/Industry
Total jobs (direct, indirect, induced) in the economy
for each direct job in a sector
Agriculture 1.2 (Chile) 2 (US and Scotland) 3 (Tanzania)
Mining 2.5 (Scotland) 5 ( US) 7 (Chile) 28 (Ghana)
Financial Services 14.9 (Indonesia) 19 (Ghana)
Large variation for indirect and induced job creation effects
Multipliers … and how to strengthen them
Oil and Gas 7.5 (US) 13.4 (Scotland)*
Hotels 1.24 (Scotland) 2.66 (Tanzania)
Retail 1.27 (Chile) 1.31 (Scotland) 1.89 (US)
Cement 2.47 (Scotland) 4.45 (US)**
34
*This number considers only petroleum refineries. **This number is for California only, not the whole country.
Source: Literature Review for IFC Jobs Study.
IFC-supported
supply-chain
linkage and
community
development
programs
35. IFC’s Performance Standard 2: Labor and Working Conditions:
IFC sets standards for the private sector
Through the Equator principles, other private sector actors
and IFIs are adopting these standards too.
IFC works with clients to improve understanding of
labor standards through training and advisory services
Not just number
of jobs; quality
matters
Quality of Jobs
Business case for higher standards: Less accidents, less turnover, higher
product quality, lower insurance premiums … higher profits
For maximum poverty reduction create good jobs in supply/distribution
networks, e.g. Antea Cement, Albania; Mindanao Bananas, Philippines.
35
IFC’s sustainability policy and performance standards:
Ensure high standards for IFC clients and influence global
standards for project finance through the Equator Principles.
36. When there is greater legal differentiation
based on gender, fewer women work
Gender: Unequal treatment …
Legal differences:
102 of 141
countries
Lack of access to
finance: Less likely
to get a loan … and
paying more for it.
Femalelaborforceparticipation
(residual)
36
Source: Women, Business and the Law database; World Development
Indicators; Enterprise Surveys.
Correlation between the two variables, after controlling for per capita income.
paying more for it.
Cultural norms, less
access to education,
childcare …
Work in less
productive areas,
lower wages
Femalelaborforceparticipation
(residual)
Number of legal differentiations (residual)
37. Where are women most active?
• Women have 2/3 the jobs in retail/trade services and a majority of jobs in manufacturing
• Women only have 1/3 of the jobs in the agriculture sector
• Women are more likely than men to be unpaid, clerical or casual workers in the informal sector
• Women head 38% of formal enterprises and are active business partners more often than men
• Women-owned businesses receive only 15% of the SME financing available in the market
37
DRAFT
Source: NBS – National Manpower Stock and Employment Generation Survey (2010)
38. Some solutions include:
Support women-friendly
industries … and help
women into leadership
positions
Encourage female
participation in non-
traditional fields
Removing obstacles
benefits women, their
families, companies and
society
Women reinvest 90% of
income in families
With women-friendly policies
… and benefits from removing the obstacles
38
traditional fields
Connect women to
markets, support women-
owned SMEs
Further develop business
case for women as
workers and leaders
With women-friendly policies
higher productivity … and
profits
Turkey: Increase female
participation in the labor
force from 23% to 29%
Reduce poverty by 15%
39. Some implications for IFC … and others
IFC’s overall strategic focus on IC, infrastructure, A2F, and training and skills is
consistent with the key constraints to private sector … and job growth.
Use a “job lens” to identify and focus on the key constraints in the country,
region or sector (including gender/youth issues).
Help strengthen client companies’ linkages to domestic suppliers and
distribution networks Opportunities to support people at base of pyramid.
Assess private sector needs on training and skills, and support private
providers’ programs, particularly where education is combined with workproviders’ programs, particularly where education is combined with work
experience. Focus on helping SMEs (upgrade skills of managers & workers).
Working conditions (through E&S standards): Affect IFC’s clients, but also look
beyond: (1) work with “linked” companies; (2) industry standards (e.g. “Better
Work”), (3) global standards (“Equator Principles”).
Reduce obstacles to formality, particularly in low-income countries, support
emerging entrepreneurs … and create opportunities in formal enterprises.
Opportunities for collaboration – within the WBG, with IFIs and others.
39
40. Next Steps: Implementation( along with partners)
Emerging priorities
(based on ongoing consultations within the WBG, with IFIs and others)
1. Operational support: E.g. how best to strengthen jobs focus in
operations (e.g. applying a jobs lens at the country level; strengthening
value chains, making training more relevant for private sector needs,
etc.)
2. Better data: Apply, refine & harmonize methodologies; better under-2. Better data: Apply, refine & harmonize methodologies; better under-
stand formalization; better data on employment effects and standards;
develop “business case” for better standards and monitoring, etc.
3. Improved communication: Improve ability to articulate contributions
of private sector activities to creating more and better jobs
4. For all, enhanced collaboration: With IFIs and with others (e.g. ILO,
academia, private sector, civil society organization)
40
Consolidating a Joint Work Program along with interested
partners on creating more and better jobs
41. What will it take? Collaboration
Private
Sector
World
Bank
Group
Govern-
ment
People
41
Int.
Organi-
zations
Civil
Society
Org’s
Academia
Thinktanks
People
42. What will it take? Collaboration
A joint report
by 31 IFIs
IFC - G20
G20 Challenge
SME Innovation
Finance Fund
28 IFIs - Joint
Communiqué:
Contributing to
Creating More
and Better Jobs
(IFC Jobs Study)
IFC-WEF:
Essay Competition
Youth Unemployment
29 IFIs:
42
G20 Challenge
Inclusive
Business
Innovation
JOBS?
ILO-IFC
IFC & 78 FIs
29 IFIs:
Corporate
Governance
Development
Framework -Trade Finance
-Agricultural
Price Risk
Management,
GAFSP, …