2.5 billion people around the world, many of whom live in extreme poverty, are excluded from the formal financial system. Consequently, this exclusion results in the use of risky and expensive financial alternatives that slow individual and macro-level economic development. In the past, microcredit schemes have been used to solve the problem. Recently, a more holistic understanding of financial inclusion is emerging that focuses on savings, credit, financial literacy, and access to services. However, as these new systems take root, debate can be heard in regards to how the systems should be implemented, who the stakeholders will be, and how to ensure that this new financial ecosystem will function in the long-term.
These issues were addressed in early April at a Guardian conference where Banking on Change outlined the future of the financial ecosystem in developing countries. Banking on Change is a partnership between Plan UK, CARE International UK and Barclays that hopes to help around 400,000 people in 11 countries by developing access to basic financial services. The organization has used savings-led community finance groups in poor communities to help people save, build up assets, access loans from the community “pot”, develop financial literacy and eventually link into formal services. The scheme showed that due to erratic incomes, poor people have a high demand for savings accounts and products in contrast to credit lines and accounts.
Living conditions and finances aside, Ashok Vaswani, Barclays’ CEO for retail and business banking in the UK, Europe and Africa, believes that all people are the same. “People’s hopes and aspirations don’t vary too much,” he said. “We all have them, and people who live in much worse conditions than us have hopes and aspirations that are not very different to ours. They want to send their children to school. They want more for their children, just like we do. People with limited means still have the desire to move up, to put something away.” The difference is that people living in poverty do not have sufficient means to even start a savings account. Vaswani also believes that the money that potential customers save annually, about $58 multiplied by the 2.5 billion people living in financial exclusion, could be much more powerful if linked into the formal financial system rather than stashed under people’s beds.
Aside from defining the customer’s needs, financial literacy is important to the development of the financial ecosystem as well. Governments should do more in educating citizens, especially the youth, about their finances, commented Michaela Kelly, head of Plan’s Programme Delivery Unit.
As the demand for personal banking increases, the needs of potential customers will need to be assessed accordingly. While many view various forms of credit building important, savings accounts and related programs are just as important to the beginning of a financial ecosystem in developing countries. With the implementation of a financial system, both individual and macro-level, economic development will flourish and raise billions of people out of poverty.
– Kira Maixner
Source: The Guardian
Photo: Business Fights Poverty
Greater Investment Required For Universal Energy Access
4 million lives are lost each year to household air pollution. This means that annually, a population roughly the size of Los Angeles dies as a consequence of traditional cooking methods still practiced by poverty stricken families of the global south. In an attempt to raise awareness of the need for the adequate power grids necessary to ameliorate the toxic effects of indoor air pollution, policymakers are calling for increased funding towards universal energy access.
Researchers at the International Institute for Applied Systems Analysis (IIASA) in Austria recently published a study showing that an annual investment of between 65 to 86 billion dollars a year for the next 17 years would allow for universal energy access. Why is universal energy access the solution to indoor air pollution? In order to reduce fatalities by up to 1.8 million by 2030, clean combusting cooking fuels and electric ovens must be made available –via greater energy investment – to poverty stricken areas.
Regarding universal energy access, IIASA researcher Dr. Shonali Pachauri remarked that, “The scale of investment required is small from a global perspective, though it will require additional financing for nations that are least likely to have access to sources of finances.”
Ingenious forecasting models generated from the study show that an investment of 750 to 1000 billion dollars over the next 20 years – or 3 to 4% of current energy investments – would facilitate universal energy access. Furthermore, through these investments, a policy of fuel subsidies, new stoves, and improved access to electricity would all serve to dramatically reduce the casualties of indoor air pollution.
By enacting a policy of universal energy access now, future generations of poverty stricken families can enjoy the safety of cooking without the carcinogenic side effects of indoor air pollution. Dr. Pachauri optimistically notes that achieving this goal will result in signicant health benefits.
–Brian Turner
Source: Science Daily
Photo: Building A Smarter Planet
Cassava Beer Enables Economic Development in Ghana
When people think about Africa, breathtaking savannas teaming with migratory wildlife is generally the first thought that comes to mind. What doesn’t come to mind, however, is a robust micro-brewing industry that utilizes the fermentation properties of the locally sourced cassava plant. In an attempt to challenge previously held notions regarding beer brewing in Africa, production of Impala brand cassava beer is helping to usher in new economic opportunities for Ghanaian farmers.
Thanks to the investment of brewer SABMiller, Impala beer – brewed from the cassava plant – was recently launched in Ghana. How does cassava beer help economic development in Africa? Until recently, cassava farming had been dismissed as an economic failure due to the high costs associated with transferring and processing the root-like product.
Enter innovative DATCO engineers and their ingenious development of a mobile cassava processing unit that enables cassava harvesting to be economically feasible. So for those rural cassava farmers previously hampered by transportation constraints, the new processing units and subsequent production of cassava beer will help to bolster demand for their crops, leading to greater economic gains.
In regards to SABMiller’s investment in cassava beer and the economic benefits to local farmers, Accra Brewery Director Adjoba Kyiamah noted that though more than 70% of Ghanaian farms, most of which grow cassava, are 3 hectares or smaller, there is a current annual surplus of around 40%.
The economic possibilities that stem from both the production and sales of Impala brand cassava beer are nothing less that astonishing, and underpins the business sustainability currently lacking from many developing countries. Remarked SABMiller Director Mark Bowman, “The idea here then is to try and create a win-win proposition, where we have a strong group of farmers contracted to producing grains for us of whatever form.”
–Brian Turner
Source: How we Made it in Africa
Photo: Hanna Clark Steinman
Isabel Dos Santos Africa’s First Female Billionaire
Isabel Dos Santos, the daughter of Angolan president Jose Eduardo Dos Santos, is Africa’s first female billionaire. Dos Santos is an Angolan investor, and according to Forbes, she has become the Africa’s wealthiest female, reaching a net worth of more than a billion USD. She ranks in at 736 richest person in the world overall and thirty-first in Africa.
The president’s daughter works to keep her prowess as a businesswoman separated from the political field. However, she has received sharp criticism as to how she acquired her wealth. President Dos Santos has been accused of enriching his family at the expense of normal Angolans- a country where a majority of the population lives on $2 a day. Problems come into play here because it is nearly impossible to trace the sources of her funds. There is a complete lack of transparency and many of her business transactions are approved and transferred by her father.
Dos Santos has invested in several publicly traded companies in Portugal as well as Angola. She has significant shares in a cable TV firm, as well as assets in at least one Angolan bank. Although, exactly how she got the funds remains unknown.
Dos Santos commands the biggest percentage of shares in Zon Multimedia, which is the largest cable TV operator in Portugal. She also holds 19.5% holding at Banco BPI- one of Portugal’s largest publicly traded banks. In Angola, Dos Santos sits on the board of Banco BIC and is reported to own as much as a 25% stake in the bank.
Angola has emerged from a civil war and developed into one of Africa’s largest economic contributors. This economic growth, however, has not come without problems. Angola has been criticized for its dramatically unequal society, ranking 148th of 187 countries on the U.N Human Development Index. Additionally, they have ranked 157th of 176 countries on Transparency International’s Corruption Perceptions Index.
– Caitlin Zusy
Source Forbes, Guardian
Are U.S. Farmers Hurt by Food Aid Reform?
Are US farmers hurt by food aid reform? The short answer: No.
President Obama’s proposal to allow the food aid supplied by the United States to be purchased more locally has obvious benefits: less travel time and expense to feed those in the greatest danger, bolstering local economies, investing in local agriculture to create a sustainable supply, and the potential of feeding 2-4 million more people.
These are obvious benefits unless you are an American farmer, packer or shipper, the three main interested parties (other than the millions of hungry around the world). These minders are not without questions of their own.
For example, one might wonder how purchasing a larger percentage of the food aid from non-US farmers is reconciled with USAID’s mission of expanding external markets for US goods?
The food crises require immediate response. According to the World Food Program, hunger kills more people than AIDs, Malaria, and TB combined. Preventable deaths per year due to malnutrition are measured in the millions. A shipment from the United States can take many weeks — time the vulnerable simply do not have. Purchasing local produce reduces the time from farm to mouth by 11-14 weeks and feeds an extra 2-4 million people.
Preventing deaths by malnutrition and all the suffering, humiliation, and diseases that go along with it allows for medium and long-term development. Medium to long-term development expands peace and US markets of goods, services, travel and tourism.
How, one may also wonder, do American farmers benefit when their jobs are outsourced and market share displaced?
US farm exports are worth around $145 billion. The US government spends $1 billion on food aid programs—a “drop in the market” compared to the enormous figure of US farm exports. Even an economist from the American Farm Bureau Federation admits, “Our concern is less about decreasing an important revenue stream for U.S. agriculture. It’s more about the loss of a sense of pride.” Despite the minimal impact, the reform proposal includes $25 million to ease the transition of US farmers affected.
Are US farmers hurt by food aid reform? With no significant job losses and no significant market share loss, US farmers’ pride cannot justify denying food to 4 million hungry people deserving of the same dignity and opportunities as them.
– Katherine Zobre
Sources: USAID, The Economist, World Food Program, Reuters
Personal Banking to End Poverty
2.5 billion people around the world, many of whom live in extreme poverty, are excluded from the formal financial system. Consequently, this exclusion results in the use of risky and expensive financial alternatives that slow individual and macro-level economic development. In the past, microcredit schemes have been used to solve the problem. Recently, a more holistic understanding of financial inclusion is emerging that focuses on savings, credit, financial literacy, and access to services. However, as these new systems take root, debate can be heard in regards to how the systems should be implemented, who the stakeholders will be, and how to ensure that this new financial ecosystem will function in the long-term.
These issues were addressed in early April at a Guardian conference where Banking on Change outlined the future of the financial ecosystem in developing countries. Banking on Change is a partnership between Plan UK, CARE International UK and Barclays that hopes to help around 400,000 people in 11 countries by developing access to basic financial services. The organization has used savings-led community finance groups in poor communities to help people save, build up assets, access loans from the community “pot”, develop financial literacy and eventually link into formal services. The scheme showed that due to erratic incomes, poor people have a high demand for savings accounts and products in contrast to credit lines and accounts.
Living conditions and finances aside, Ashok Vaswani, Barclays’ CEO for retail and business banking in the UK, Europe and Africa, believes that all people are the same. “People’s hopes and aspirations don’t vary too much,” he said. “We all have them, and people who live in much worse conditions than us have hopes and aspirations that are not very different to ours. They want to send their children to school. They want more for their children, just like we do. People with limited means still have the desire to move up, to put something away.” The difference is that people living in poverty do not have sufficient means to even start a savings account. Vaswani also believes that the money that potential customers save annually, about $58 multiplied by the 2.5 billion people living in financial exclusion, could be much more powerful if linked into the formal financial system rather than stashed under people’s beds.
Aside from defining the customer’s needs, financial literacy is important to the development of the financial ecosystem as well. Governments should do more in educating citizens, especially the youth, about their finances, commented Michaela Kelly, head of Plan’s Programme Delivery Unit.
As the demand for personal banking increases, the needs of potential customers will need to be assessed accordingly. While many view various forms of credit building important, savings accounts and related programs are just as important to the beginning of a financial ecosystem in developing countries. With the implementation of a financial system, both individual and macro-level, economic development will flourish and raise billions of people out of poverty.
– Kira Maixner
Source: The Guardian
Photo: Business Fights Poverty
Tracking Chinese Aid to Africa
Amidst a flurry of excitement and criticism, AidData released their latest project: a dataset tracking Chinese aid to Africa. This user-friendly free dataset has sparked debate among policy, practitioner, and academic circles.
The data compiles China’s official and unofficial projects between 2000-2011. During this time-period, China committed to 1,673 projects amounting to US$ 75.4 billion. For reference, the US committed US$ 90 billion over the same time-period.
In policy, critics point to the definitions of aid used by AidData in tracking Chinese aid to Africa. Under the OECD classification of aid, China has only invested US$ 1.1 billion over the decade. Academics and practitioners share concerns over the validity of the data and media analysis data collection method. Among the critics are Professor of international development at Johns Hopkins University, Deborah Brautigam, Duncan Green of Oxfam, and Andy Norton of Overseas Development Institute. Brautigam cites her research as having vastly different numbers resulting in reordering of the top recipients.
AidData responded to the critiques by stating that the dataset is a public good and practitioners should make their own conclusions about the policy implications. To the criticism that the data is incorrect and controversial method too risky, AidData responded that “media reports, though imperfect, are often the best means available to track Chinese development finance” citing Brautigam’s own critique as evidence. AidData stresses that the data is a work in progress relying on efforts from many organizations, individuals and experts to find and correct mistakes.
– Katherine Zobre
Sources: China AidData , Japan Times , Devex Impact , AidData Rejoinder to Rubbery Numbers,
Photo: The ChinAfrica Project
Groundbreaking Antimalarial Drug
Jay Keasling a professor of chemical engineering at UC Berkeley will finally see his breakthrough mass-produced. On April 10 the pharmaceutical company Sanofi will produce a partially synthetic version of artemisinin, a chemical critical to making today’s front-line antimalarial drug based on the scientist’s discovery. This new synthetic artemisinin is the first of its kind and could potentially save the lives of the hundreds of millions of people in developing countries who contract malaria each year. Already, 650,000 people, most of them children, die of the disease annually.
Over the centuries, sweet wormwood can be traced back to Ancient Chinese time as a treatment for malaria. The active ingredient in sweet wormwood, artemisinin, was rediscovered in the 1970’s and used commercially to treat malaria. Since then, a combination of chemicals and drugs have been used to treat malaria called ACT (Artemisinin Combination Therapy). In 2005 the World Health Organization declared ACT as the most effective malaria treatment available. Consequentially, demand for artemisinin has increased dramatically.
Today sweet wormwood is grown in Southeast Asia, China and Africa, and the quality, supply and cost of the extract varies greatly. By synthetically creating the chemical, Keasling hopes to reduce the use of such a resource as well as stabilize the quality and quantities of artemisinin in anti-malaria drugs in circulation today. Keasling also hopes that synthetic artemisinin will result in lowering costs to help get the life saving medicine to the people that need it the most.
-Kira Maixner
SourceUC Berkeley News Center
PhotoReuters
Your Old Clothes Could Be Hurting Africa
How is it possible that your old clothes could be hurting Africa and its economy and you may not even know about it? The answer is not so simple.
Often times when Western countries have used, unwanted clothes they cannot get rid of, they end up a landfill. More recently though, charities that collect used clothes in North American and European nations can sell them to wholesalers who package and re-sell them to other countries, particularly those in Africa. Instead of decaying in a landfill, these clothes are desirable and affordable for people in lower-income countries.
“What’s the problem with that?” you may be asking yourself.
In the short-term it could be a win-win situation. People can donate their old clothes to charities, charities can sell them to earn revenue, third-party wholesalers can re-sell them to other countries, people in Africa have access to affordable, well-made clothing, and everyone’s happy. In the long-term, though, the African clothing manufacturers may not be so happy. If African countries continue to rely on Westerners giving away their old clothes, they may not be able to support their own clothing businesses within their borders. In fact, several Africa clothing industries have already gone out of business because of the cheap clothing coming in from other countries, which cuts jobs, decreases revenue, and increases reliance on Western nations.
So what can be done about this problem?
Some African countries are banning imported second-hand clothing to try to rebuild their own clothing businesses. But even with the ban on Western clothing, there is still access to hand-me-downs from other areas of the world – particularly China and the Far East, where clothing is even cheaper. Sylvia Owori, a clothing designer in Uganda, realizes the problem but is forced to accept reality. “As much as I don’t like second-hand clothes to be in the market, I don’t have an alternative,” she says. “I cannot make enough clothes to support a population of 33 million.”
– Katie Brockman
Source CNN
Urbanization to Curb Poverty
According to a study done by the World Bank, urbanization has proven to be a key factor in eradicating poverty. The bank’s Global Monitoring Report 2013 offers statics that positively reflect urbanization in developing countries and in countries that have made the most progress in reaching the 2013 Millennium Development Goals.
The Global Monitoring Report says that countries with large population centers such as Southeast Asia or China have made large strides in reducing poverty in comparison to sub-Saharan Africa, where 70% of the population lives in rural areas. Infant mortality rates are also up to nine percentage points lower in urbanized areas than in rural cities and villages.
Urbanized areas create jobs and are generally better at service delivery such as access to sanitation, health care, education and electricity. Access to sanitation varies as much as thirty percent, 80 percent in urban areas to 50 percent in rural areas. Poverty is also significantly lower in urban areas at 11.5 percent versus the 29.5 percent in rural areas. In Africa, poverty in urban areas stands at 33 percent in urban areas to 47 percent in rural areas.
The next step to urbanizing is to ensure resources are available and to move forward at a steady pace to avoid slum areas. Some people favor state support and the finance of health and education systems while others support a combination of public and private financing. The World Bank encourages countries with oil and mineral resources to use the revenues to finance urbanization and health care systems. However, countries such as Uganda, that do not have an abundance of natural resources, prefer to use those revenues to improve the infrastructure in rural areas. According to Maria Kiwanuka, Uganda’s Minister of Finance, there are trade-offs. When the government uses the oil revenue to strengthen the infrastructure in rural areas, it allows the people living there to make more money to eventually contribute to the health care system.
While there are many different ways to fund health and social services and contribute to urbanization and the ultimate end of poverty, the assurance of resources to create the change is most important, says Joe Verbeek, the lead economist for the Global Monitoring Report. By improving the health and education services for people living in rural areas, it will make the transition easier and improve their job skills if they choose to migrate to a city.
– Kira Maixner
Source Voice of America
Photo World Bank
The Open Borders Theory and Ending Global Poverty
Immigration has always been a hot button issue, especially considering the comprehensive reform laws currently being debated by U.S. congressional leaders. However, what effect would the opening of the nation’s borders have on global poverty? According to several developmental thinkers, quite a bit, as adopting many of the mass migration policies called for in the open borders theory could hypothetically eliminate global poverty forever.
The researchers responsible for the open borders theory, drawn from such disparate fields as Mathematics, Economics, and Philosophy, argue that through the enforcement of a closed border policy, individuals are stripped of their basic human right of self-determination. Furthermore, by allowing migrants to move freely between nations, the net loss of labor productivity could theoretically double the world’s GDP through the mitigation of capital flow inefficiencies.
In regards to the open borders theory, developmental economist Michael Clemens noted that, “Immigration is very, very far from being a zero-sum game of their poverty or ours. Within ranges that even slightly resemble current migration levels, it is rather simply ‘their poverty or their prosperity,’ while we remain prosperous.”
Additionally, supporters of the open borders theory debunked the notion that a huge influx of migrants would depress the wages of developed countries based upon the net employment gains of the managerial sector. And by enabling efficient use of migrant skill sets underutilized by the inadequate facilities of the global south, developed economies would reap huge financial dividends.
Although the open borders theory is still in its infancy and years away from being considered as a realistic solution to global poverty, innovative ideas such as these help to encourage further debate involving current developmental policy. Michael Clemens remarked that, “Development is about people, not places.”
– Brian Turner
Source: The Atlantic
Photo: Women On The Border