Doing Business Blog - The World Bank Group

Easy Access to Credit - Makes for Ugly Buildings?

Lacking credit can be good. Just visit old Sana'a, Yemen - a UNESCO cultural heritage site.

The gingerbread-like houses look like the making of a whimsical architect. In fact, their unique design is due to a lack of credit. Instead of building a four-storey house, Sana'a families build in stages. First floor first, and live there. Once they save enough money, a second floor is built. And so on. It has taken centuries to get to the current look. Had easy access to credit been available, old Sana'a houses could have looked like the IFC Washington DC building.

Still, lack of credit is bad for doing business. The merchants in old Sana'a can attest to that. Their tiny stores can barely fit all the wares. This may change soon. The Central Bank of Yemen is considering a reform of its credit registry. How would this help? The presence of good credit registries is shown to increase access to capital, especially for new and small businesses. This is documented in a recent article in the Journal of Financial Economics, by Simeon Djankov, Caralee McLiesh and Andrei Shleifer (Harvard).

Engaging in Reform, and a Note from Yemen

Relations are said to go through three stages: lust, rust and dust. Engaging in reform is more complicated, requiring double that. At least this is the experience of the Doing Business team.

First comes denial. When the results of Doing Business are published (see the latest installment out as of September 2007), the media picks them up, lauding successful reformers and embarrassing laggards. Angry denials are heard: “The data are wrong. This is not us. The respondents are all opposition members. We will teach those bird-brains at the World Bank a painful lesson.”