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Banks mustmake forward-looking provisions for loan losses undernewinternational accounting standards introduced in 2018. In Europe, banks will assign performing exposures to a new "Stage 2" category with a higher provisioning penalty, if they have experienced significant increase in credit risk (SICR).We use a loan-level credit risk model and Irish residential mortgage panel data to assign performing loans into the appropriate stage. Using this technique, we characterise approximately 30 per cent of the performing Irish mortgage portfolio at end-2015 as Stage 2.We then calculate backward-looking, static estimations of Stage 2 mortgages between 2008 and 2015. This exercise suggests that loan stage assignment can be highly pro-cyclical. The share of Stage 2 among performing mortgages rises during the economic downturn to peak in 2013, after which large transitions are assigned from Stage 2 into lowerrisk performing loans, as the economy improves.

A well-functioning and inclusive financial sector is critical for efficient resource allocation leading to increased productivity, greater investment, higher overall levels of economic growth, and lower inequality. This is particularly critical in Iraq, where years of political instability and violence have impeded the development of a robust private sector. Microfinance services in Iraq are still nascent and far from meeting their full potential. This diagnostic report aims to present the microfinance landscape in Iraq, its legal and regulatory framework, and potential policy improvements to enhance the operating environment. It aims to inform public and private sector stakeholders on the regulations and laws affecting the development and strategic direction of the microfinance sector. The policy recommendations presented are designed to address factors preventing greater growth and outreach, with the goal of promoting inclusive financial sector development in Iraq.

By increasing access to finance for out-of-reach households and families, microfinance continues to be an essential tool for improving livelihoods at the base of the pyramid. The last 20 years have seen remarkable growth in the microfinance sector. From its early stages in small-scale microenterprise lending, through its commercial expansion to offer savings and a broad array of financial services to low-income customers, to its entry into new markets and incorporation of technological innovations, microfinance is ensuring that an ever-greater number of households have permanent access to a range of high-quality and affordable financial services. The microfinance industry is estimated at $60 to $100 billion globally, where several thousand microfinance organizations reach an estimated 200 million clients, most of whom were not previously served by the formal financial sector. However, 2.5 billion adults still lack access to formal financial services. Financial services for low-income people are an important factor when it comes to poverty reduction, as it enables them to build assets, increase incomes and reduce their vulnerability to economic stress. Moreover, microfinance continues to be an important tool when it comes to empowering women. IFC is the World Bank Group s main investor in microfinance, working with around 300 microfinance institutions (MFIs) and SME-focused financial institutions, which provide financial services in 91 countries. IFC is also one of the leading global investors in terms of volume. In fiscal year 2014, we committed $519 million in 43 projects with MFIs. Our cumulative investment portfolio in microfinance exceeded $3.5 billion, with outstanding commitments of $2.0 billion. In fiscal year 2014, IFC advisory services comprised $74.2 million, representing advisory assistance for 86 projects. This smart book, titled from small beginnings to great opportunities, presents practical lessons learned from the work that authors have been doing on microfinance projects over the last twenty years. From launching the Microfinance Enhancement Facility to help the industry stay afloat during the time of crisis, to working on a project to support microfinance clients to fulfill their housing dreams, these narratives are both engaging and insightful.

Over the past few years, Microfinance Institutions (MFIs) in Iraq have emerged as credible sources of financing for low-income households and entrepreneurs, both underserved by conventional banks. Microfinance services in Iraq, however, are still nascent and far from meeting their full potential. Similar to many countries in the MENA region, MFIs in Iraq were set up as non-governmental organizations (NGOs) supported by a steady influx of donor funding. While these NGOs were initially able to grow through donor support, they are now struggling to meet increasing client demand as donor resources have dwindled, preventing them from making the necessary investments in capital and infrastructure to meet growing client demand. Many countries address this funding challenge by allowing institutions to provide financial services as companies or banks, helping them raise capital, provide new services, and increase their outreach in a sustainable manner. A similar path could be envisioned in Iraq, but is currently obstructed by regulatory hurdles. This diagnostic report aims to present and assess the current microfinance landscape in Iraq, including the legal and regulatory framework, recommend policy improvements to enhance the sustainability and operating environment for MFIs and their clients. This report argues that the current legal and regulatory environment for microfinance in Iraq hinders the growth and sustainability of the sector and furthermore advocates several short and medium term policy recommendations to enhance the overall operating environment for MFIs, the sustainability of the sector, and impact for clients.

This paper studies how Uruguay's regulatory framework was gradually strengthened to address shortcomings identified during the 2002-03 crisis, to align with international standards and, more recently, to deal with cyclical pressures resulting in an acceleration of bank lending. In particular, regulatory reforms pertaining to loan classification and provisioning as well as liquidity requirements are reviewed and evaluated against best practices. The paper concludes that prudential regulation in Uruguay now generally conforms to high standards while also embracing innovative elements such as dynamic provisioning.

This paper seeks to promote discussion on the treatment of nonperforming loans in macroeconomic statistics. After reviewing current recommendations in international statistical manuals and the guidelines provided by some main banking and accounting institutions, the paper recommends that the information on nonperforming loans provided by macroeconomic statistics should be expanded. The paper concludes with a list of issues that deserve further study.