Governance

The game-changer: How generative AI can transform the banking and financial sectors

The most essential question of the moment: how can AI help address and course-correct banks’ productivity and financial performance?

• Almost 8 in 10 institutions (78%) are tactically implementing generative AI for at least one use case. Their tactical approaches vary but trend higher in the risk and compliance space, as well as in client engagement. Additionally, 8% of institutions take a broader, more systematic approach by implementing generative AI across a wider set of business domains scaling throughout the bank.
• AI priorities reflect omnipresent concerns about risk—and client relationships. Almost 60% of generative AI decision makers see higher value in risk control, compliance reporting, and client engagement. Keeping data private and earning client trust is essential to winning engagements.
• AI governance is a must-have. Every banker should be an AI risk manager. More than 60% of banking CEOs indicate new vulnerabilities for cybersecurity (76%), legal uncertainty related to operations (72%), difficulties in controlling outcome accuracy (67%), and prejudice from model bias (65%).

This report was produced by IBM Institute for Business Value (IBV), specialist provider of Research-backed, technology-informed strategic insights that help you make smarter business decisions.

Blue Finance is an emerging area in Climate Finance with increased interest from investors, financial institutions, and issuers globally. It offers tremendous opportunities and helps address pressing challenges by contributing to economic growth, improved livelihood, and the health of marine ecosystems. The ocean economy is expected to double to $3 trillion by 2030, employing 40 million people, as compared to 2010.¹ Innovative financing solutions are key to enhancing ocean and coastal preservation and increasing clean water resources, and Blue Finance has a huge potential to help realize these goals.

Specifically, Blue Bonds and Blue Loans are innovative financing instruments that earmark funds exclusively for ocean-friendly projects and critical clean water resources protection. Broadly speaking, the market has witnessed the exponential growth of sustainable finance and the emergence of diverse instruments based on green or social use-of-proceeds or sustainability targets. In this context, several transparency and integrity principles have been introduced, including the Green Bond Principles (GBP), administered by the International Capital Markets Association (ICMA), and the Green Loan Principles (GLP) published by the Loan Market Association (LMA). These principles provide examples of what constitute green eligible use of proceeds and have contributed to developing a credible green bond and green loan process. 

In March 2018, the Sustainable Blue Economy Finance Principles were launched. These Principles go beyond addressing plastic pollution in oceans and consider the sustainable conservation and use of oceans, seas, and marine resources in compliance with Environmental and Risk Management practices such as the IFC Performance Standards.² Amid this growing interest in scaling Blue Finance, IFC has built on the Green Bond Principles and the Green Loan Principles and related resources, including the ICMA Handbook for Impact Reporting, to provide guidance on IFC’s implementation of Blue Finance in the context of green bonds and green loans.

This Guidance document aims to provide a list of eligible use of proceeds to support private investments aligned with the Green Bond Principles and Green Loan Principles and contributing to Goals 6 and 14 of the United Nations Sustainable Development Goals — “Ensure availability and sustainable management of water and sanitation for all,” and “Conserve and sustainably use the oceans, seas and marine resources for sustainable development.

This document identifies eligible blue project categories to guide IFC’s investments to support the blue economy, in line with the Green Bond Principles and Green Loan Principles. The market has been seeking guidance on project eligibility criteria, translating general Blue Economy Financing Principles, such as the Sustainable Blue Economy Principles and the Sustainable Ocean Principles, towards guidelines for blue bond issuances and blue lending. IFC aims to follow this Guidance document to finance the blue economy and encourage best practices that can enable the growth of Blue Finance globally

Bahrain Development Bank joins the SME Finance Forum to promote the growth of SMEs in the Kingdom of Bahrain and boost the local economy.

Washington D.C., July 5ht, 2021- Bahrain Development Bank joins the SME Finance Forum as the newest member of our global membership network. Our members are SME Financing experts from 80+ countries who share the common goal of expanding access to finance to small businesses worldwide through knowledge exchange and innovation.

“When we started in 2012, we were in an exploratory phase for the first few years. Since 2016, we’ve been implementing our mission to build a global membership to support better SME financing, and since then, we’ve established a network with over 220 active member institutions, which operate in over 190 countries sharing the common purpose of helping under-served enterprises. We are delighted to welcome Bahrain Development Bank to further grow our mission.” said Matthew Gamser, CEO of the SME Finance Forum.

Bahrain Development Bank adopts dynamic and effective strategies for stimulating entrepreneurial activities. Focusing on facilitating SMEs’ development, they have been promoting entrepreneurship and innovation in the Kingdom of Bahrain by encouraging professionals, enterprising women and ambitious youth, who demonstrate strong business acumen and leadership qualities in boosting the growth and prosperity of SMEs.

“Our vision is to support projects that yield substantial economic, social, and environmental benefits. Bahrain Development Bank thinks highly of its opportunity to connect with peer institutions and learn about practices from global policymakers and regulators in the field of SME financing. We also look forward to sharing our experience and learnings from Bahrain on this platform,” said Sanjeev Paul, CEO of Bahrain Development Bank. 

About SME Finance Forum

The SME Finance Forum was established by the G20 Global Partnership for Financial Inclusion (GPFI) in 2012 as a knowledge center for data, research, and best practice in promoting SME finance. As an implementing partner for the GPFI, the International Finance Corporation (IFC) was tasked with managing the initiative. To see all SME Finance Forum members, please visit: https://www.smefinanceforum.org/members/member-list

About Bahrain Development Bank

Bahrain Development Bank has been operating as a specialist Bank since 1992. In addition to encouraging and supporting entrepreneurship activities in the Kingdom of Bahrain, Bahrain Development Bank focuses on financing and developing SMEs that yield substantial economic, social, and environmental benefits. Read more at https://www.bdb-bh.com

Media Contact

smefinanceforum@ifc.org

The "OECD Financing SMEs and Entrepreneurs Scoreboard: 2023 Highlights" document SME and entrepreneurship financing trends, conditions and policy developments.
The report provides official data on SME financing in close to 50 countries, including indicators on debt, equity, asset-based finance and financing conditions.
Data for 2021 are complemented by available information for 2022, along with demand-side information and recent developments in public policy and private initiatives to support SME finance.

Findings reveal that most economies showed the beginnings of a dynamic recovery from the COVID-19 crisis in 2021. However, data available for 2022 point to a deterioration in a number of SME finance indicators, due to high inflation and rising interest rates, exacerbated by the effects of Russia's war against Ukraine.

These factors are impacting the accessibility and cost of debt finance for SMEs, and foreshadow a slowdown in lending. Likewise, equity finance showed a significant decline in 2022. In this context, governments should continue to foster the diversification of SME financing instruments and channels to enable them to build resilience and undertake crucial investments, such as those in digitalisation and greening.

The SME Finance Forum, which we run at IFC for the G20 countries is a global center for knowledge exchange, networking promotion and public-private dialogue.
In just over 6 years we’ve also built a community of over 240 financial institutions, fintechs, development banks, tech firms and more, working in virtually every country in the world, including many of the leading innovators in SME finance and financial inclusion in emerging markets.