Public Development BanksIn November 2020, the world’s 450 Public Development Banks (PDBs) gathered at the first-ever global summit, the Finance in Common Summit. The summit emphasized that PDBs have an essential role in meeting the U.N. Sustainable Development Goals (SDGs) that encompasses both short-term responses and sustainable recovery measures. The commitment of PDBs to a joint effort in support of vulnerable communities around the world is an unprecedented step toward inclusive global development.

Public Development Banks

Public Development Banks are essential to the global economy and play a key role in fighting extreme poverty and hunger by bridging finance and public policy. PDBs are supported or controlled by governments but are legally and financially independent. Investments by PDBs made up 10% of yearly public and private investments in 2018, though all PDB investments are public, allowing the banks to openly and actively direct finances toward the evolution of international economic order and inclusion of declining countries with fewer limitations. This makes PDBs especially effective at supporting change for institutions, economies and infrastructure that reflects their public mandate to work in favor of entrepreneurs and vulnerable groups, such as women and children. None of the financing done by PDBs is related to consumers, individual accounts or credit.

A Cause for Cooperation

Conditions in areas suffering from extreme poverty are declining due to climate change and COVID-19. Developing countries have limited capacity to adapt their unstable agricultural methods and systems to changing climates. The capacity that does exist, including aid received, has been strained by the COVID-19 pandemic and the economic and social issues that accompany it. Common hardships have shed light on the need for united relief efforts that reach all regions and societies, and Public Development Banks have taken action by joining in unprecedented discussion and collective decisionmaking. The desired outcome was a diverse and collaborative movement to achieve the SDGs and respond to the challenges arising from COVID-19 and climate change.

The Future of PDB Financing

The developments made at the Finance in Common summit are clearly communicated in a joint declaration made by all 450 PDBs. The Public Development Banks came to a consensus for aligned strategies and investments that will support sustainable growth in societies and the global economy, all while prioritizing eco-friendliness. Future activity of PDBs will be targeted at attaining the SDGs and responding to a changing climate. Another outcome of the summit was a group of PDBs that will focus investments on rural sectors and agriculture around the world to help eradicate poverty and hunger.

Steps that PDBs have committed to taking together include transitioning investments to support low-carbon and climate-resilient solutions, renewable and clean energy and ecosystem restoration. Also on the global PDB agenda is improving the accessibility of education, housing, hygiene and sanitation as well as advancing social and financial inclusion. These measures were developed with the world’s most vulnerable in mind: young people and the elderly, members of rural communities, refugees and small-scale producers, among others. The alliance of PDBs is dedicated to achieving these goals while upholding best practices in finance and global inclusion.

PDBs Fighting Global Poverty

Public Development Banks have displayed a capacity to serve as leaders in the fight against extreme poverty and hunger. Their landmark summit can be a model for future progress toward equality in all parts of the world. In the middle of widespread crisis and instability, such international cooperation is needed more than ever.

– Payton Unger
Photo: Flickr

Nourish Impoverished Communities
It is no secret that the United States is home to some of the biggest brands in the world. From cosmetics to food products, American brands influence many things global consumers see on their shelves in one way or another. Here is how four American brands help nourish impoverished communities.

Avon

Avon Cosmetics has been benefitting women since the mid-1950s through the creation of the Avon Foundation. For the past 65 years, more than $1 billion has gone toward sustaining women and their families all over the globe. The Avon Foundation’s humanitarian practices have opened up in more than 50 markets across nations, allowing women to feel empowered and begin their own businesses. Any woman can apply to become a representative using Avon’s online website.

Avon Connect is a program that sets the foundation for women to begin their dream businesses. The program provides education on the basics of sales and marketing to nearly 500,000 women worldwide. Through participation, women create jobs for themselves by becoming one of Avon’s Beauty Advisers.

Nestle

Nestle does not only offer water and coffee, the company also implements programs to help nourish impoverished communities around the globe. The company was originally a Swiss brand but has since expanded its locations worldwide. Now, the United States is one of its larger consumers, and it works with farmers and suppliers all over the world. By providing work for those in rural areas, Nestle creates a sustainable supply of food in those communities.

Nestle’s program Global Alliance for YOUth has helped alleviate the problem of unemployment within younger demographics. It provides work opportunities for young people, despite the lack of experience they may have. The program also encourages young people to become entrepreneurs and take control of their own business. By 2030, YOUth plans to benefit 10 million youths by providing employment and skills to help further their lives. Nestle’s Global Alliance for YOUth program brings together 21 international companies to help employ around 15 million youths by 2022.

Walmart

Walmart has provided neighborhoods with fair prices and good products since its beginning. The company aims for its global suppliers to be sustainable and responsible in the workplace. In fact, it has over 100,000 responsible suppliers around the globe. Walmart strengthens not only consumers but also those who help nourish impoverished communities.

In 2010, Walmart decided to actively help alleviate global hunger. More than $2 billion in food donations and grants went toward starving communities. In 2015, it donated around four billion meals to help the hungry. Walmart hopes to benefit an additional four million in 2020 by providing more meals and increasing education.

Walmart contributes to its local communities no matter the country. In 2019, Walmart provided over two million jobs in 27 countries. Employment is beneficial for those working toward upward mobility out of poverty. Walmart, with its 11,300 locations, helps provide just that.

Visa

Almost two billion people worldwide have not implemented banking into their lives. Visa is here to help fix that. In one year alone, Visa provided financial systems for nearly 500 million people. Its help went to women and those living in rural areas —those least likely to have any sort of financial aid.

Through Visa, many have been able to better support and sustain their small businesses. As a result, many have been able to acquire the skills they need to efficiently work in their business and develop the most appropriate services for growing their economy. Visa’s Practical Business Skills, founded in 2019, has helped small businesses from the beginning stages, allowing more efficient and proper company growth.

For instance, in Southeast Asia, Visa partnered with a large payment service to encourage all to improve their banking literacy. In Mexico, over 11 million people have started their own banking account with a Visa-partnered Mexican financial institution. Through the global implementation of Visa, people have been able to improve their finances, which helps nourish impoverished communities worldwide.

Global poverty is a huge and pressing issue. These American big brands can help people manage their lives with a bit more ease by providing support.

Karina Wong
Photo: Flickr

Mobile BankingMobile banking is a clear step toward financial literacy and freedom. It allows users to access and manage accounts without needing physical access to a bank. It is a huge asset and accepted norm in countries like the United States, where it is used by over three-quarters of the population. By 2021, there will be an estimated 7 billion mobile banking users. But in countries where much of the population doesn’t have access to financial institutions, mobile banks presents an option that allows users to gain the financial freedom they wouldn’t otherwise have. Traditionally, without access to banks, there is no access to bank accounts. This makes it not only difficult to save and protect money but also nearly impossible to access loans. Below are three countries where going mobile improves financial inclusion.

Kenya

In 2011, around 80% of the Kenyan population didn’t have a bank account. This was revolutionized by the introduction of mobile banking, resulting in an incredible increase in financial accounts up to 75% in 2014. The percentage of Kenyan’s with a mobile account has since jumped to around 80% in 2019, with that number still growing. Though mobile banking is taking hold in many African countries, Kenya leads the charge of mobile adaption. This success is evident through the country’s recent economic growth, averaging 5.7% in 2019, one of the fastest-growing economies in Sub-Saharan Africa. Mobile banking has been succeeded so rapidly and fruitfully in Kenya due to its incredibly low cost and user ease. After the infrastructure is created, all that’s needed is an old flip phone and a banking SIM card. These products are relatively easy and inexpensive to get, even in countries with fewer resources. Mobile banking has allowed Kenyan’s to save money, send and receive it with ease, apply for loans, and has led to financial inclusion. Kenya acts as a clear leader in developmental growth through mobile banking.

India

In 2017, India had the second largest unbanked population, second only to China, with 190 million of its citizens left without access. In the same year, around 48% of India’s banks were inactive, only adding to the inaccessibility. Despite such a large number of citizens left without a bank account, over 50% of these individuals do have a mobile phone. With the proper infrastructure, mobile banking could revolutionize the way Indians send, receive and save their money. For low-income populations in India, most financial transactions occur in cash, a method that is not conducive to economic growth for poor families. With more universal access to banking, low-income populations could receive their income through direct deposit and pay their bills directly from their account, using their phone. This system promotes saving and also allows tracking of financial habits, producing an easier system for low-income individuals to amass credit and become eligible for loans. As the internet becomes increasingly accessible in India, mobile banking is expected to rise, and with it, financial inclusion.

Indonesia

In opposition to the other nations discussed, Indonesia has a much lower prevalence of mobile banking, but just as it has in Kenya and India, going mobile could revolutionize financial inclusion in Indonesia. Only about 20% of Indonesian’s currently have a bank account, but almost 40% of the population have mobile subscriptions, suggesting mobile banking has huge potential in the country. In 2020, an unexpected source has begun to jumpstart the exponential growth of mobile banking in Indonesia. In the wake of COVID-19, many physical banks are closed, and even those who previously had access are unable to interact with their finances. One bank, namely Bank Rayat Indonesia has even seen a 10% month to month increase in mobile banking, an unprecedented growth. Indonesia presents as a nearly perfect candidate for a “mobile revolution” given its high mobile penetration, low banking rate, and the recent inability of traditional banks to function. Despite the many challenges and tragedies COVID-19 has caused, it could be the driving force for a mobile revolution in Indonesia

— Jazmin Johnson

Photo: Flickr

Kazakhstan Bank Debts
Kazakhstan, located in Central Asia, has implemented a program to help nearly 500,000 citizens get out of bank debts. The program started in June 2019 and will cost over $274 million to execute. President Kassym-Jomart Tokayev hopes that by forgiving bad loans given out by the country’s banks, Kazakhstan’s bank debts will decrease, releasing some of the strain on the economy. This policy will also help increase business in the banking sector of the economy, opening up more jobs for individuals below the poverty line.

4 Facts About Kazakhstan Bank Debts

  1. Kazakhstan’s economy has fallen in recent years. The country’s economic system rated 59 overall in 2019. The country has fallen by 3.7 points in the past few years and this is because of a steep decrease in its fiscal health. The unemployment rate is at 4.9 percent and the annual GDP is $477.6 billion. However, the economy’s fiscal health has faced a sharp decline. Over the past year, the country’s financial stability has steadily decreased due to poor working environments and high prices on goods. The country’s goal is to reduce Kazakhstan’s bank debts and increase financial security.

  2. Private banks caused the bank debts. One-sixth of Kazakhstan’s population holds bad loans written by private banks. Bank bailouts have been occurring in the country for a decade. The government provides at least $18 billion in private banks to keep their businesses running. Since Tokayev’s election in June 2019, he has introduced a policy to stop bank bailouts that the government provided.

  3. This is not necessarily a bad thing for poverty. Although the citizens holding bank debts may be living under the poverty line, the government’s forgiveness is a positive change. By ending Kazakhstan’s bank debts, the country’s monetary freedom should increase. Although this freedom grew in 2019, there is still plenty of room for growth. In 2018, 4.3 percent of the population lived below the poverty line. The debt release policy will help alleviate the debts of about 18 million people. About 500,000 people cannot manage their debts because of bank loans. The loan forgiveness policy will help individuals get rid of their debts so they can spend more money on essentials. By forgiving the loans, the country hopes to balance its economy. This will help individuals escape the poverty line, both through their lack of debts and through pay increases.

  4. The debt forgiveness policy is based on the amount owed. According to Kazakhstan’s president, Kassym-Jomart Tokayev, individuals with up to $800 of debt will have it forgiven completely. Individuals with over $800 will have $800 erased from their debt. This will help individuals like Anara Ryskulova, who has four small children and only makes $400 a month. Because of her low income, Ryskulova is dependent on credit and loans to provide for her family and pay her rent.

Since his election in June 2019, President Kassym-Jomart Tokayev has implemented a policy to stop bank bailouts. For a decade, the Kazakhstan government has been bailing out privately owned banks. The policy will not only increase the banking sector of the government but will also help the individuals who live below the poverty line. By decreasing the bank debts, affected individuals will have more money for essentials. By implementing this policy, Kazakhstan’s president will not only increase the country’s GDP but ultimately, help the citizens live above the poverty line.

Destinee Smethers
Photo: Flickr

Credit Access in Micronesia
A lack of credit access in Micronesia is limiting Micronesia’s ability to develop effective solutions to widespread poverty. Limited credit regulation and poor banking infrastructure (Micronesia has only 14 bank branches per 100,000 adults) have hindered attempts at poverty reduction. An estimated 16 percent of the population lives below the international poverty line (individuals or families whose income per person is less than $1.90 per day) while an estimated 42 percent of the population lives below the national poverty line.

Infrastructure

A lack of effective financial regulation plays an important role in this problem, as Micronesia lacks both the public (credit registry) and private (credit bureau) infrastructure necessary to ensure that financial institutions can confidently provide loans to businesses and individuals. This has produced an extremely small lending practice in Micronesia, as banks and other institutions face a substantial risk when offering loans. Beyond simply the difficulty in verifying that debtors can pay back their loans, there is little legal protection for creditors. When a debtor defaults on a loan, secured creditors do not receive payment first, and if a debtor files for bankruptcy, there are no legal guidelines establishing relief for the creditor. This creates little incentive for lending institutions to grant credit, as there are often serious questions about the prospect of getting their money back.

While poor financial regulation may not appear to have an immediate effect on the spread of poverty, it plays a substantial role in limiting prospects for poverty reduction. The two largest sectors of Micronesia’s economy are the service industry and agriculture, which together make up around 81 percent of Micronesia’s GDP. The lack of credit access in Micronesia has amplified the structural difficulties of poverty, as many lack the money necessary to purchase land or start a business. They also cannot reliably acquire such capital from banks, which harms the overall growth of these vital sectors.

Credit access also plays a substantial role in agricultural production. The agriculture industry in Micronesia is declining as it holds an incredibly small portion of Micronesia’s total exports compared to agriculture’s importance in the country’s GDP. Around seven percent of Micronesia’s exports are in agriculture, and the sector is seeing its impact decline overall, as few can afford to remain farmers. Credit access enables farmers to acquire better agricultural inputs, which functions to provide a long-term solution to poverty in Micronesia by raising income levels across the impoverished population, growing individual incomes and strongly affecting Micronesia’s economy.

Business confidence

Beyond simply limiting access for those seeking the startup funds to create a business, the lack of effective credit infrastructure has hampered overall business confidence and undermined faith in the prospects for sustained growth. Constraints on capital have limited the ability for pre-existing businesses to ensure continued access to the money necessary to provide financial stability. This lack of confidence, while largely sentiment-based, has produced an environment which harms overall prospects for economic activity.

The Good News

Fortunately, the Asian Development Bank (ADB) has begun investing in local banking infrastructure to develop credit access in Micronesia as a part of its Private Sector Development program. In a series of loans beginning in 2006, the ADB has provided over $9 million to Micronesia, with the goal of improving bank credit and narrowing the gap between public and private employment to develop more jobs in the private sector. The program has thus far been a success, as the employment gap has decreased by 20 percent signaling the growth of private industry.  The ADB can offer loans for land ownership via a partnership with the Federated States of Micronesia Development Bank (FSMDB). It can also improve building infrastructure with one loan recipient saying that he was able to make his used clothing store earthquake-resistant to protect his business against a sudden loss in revenue.

Moreover, Micronesia is implementing reforms to protect financial institutions and improve the government’s capacity to register security rights in moveable properties. As a part of the World Bank’s Doing Business program, established in 2008, Micronesia had the goal of improving legal protections for creditors. Since then, the Micronesian government has developed more reforms which allow for the use of moveable assets as collateral when seeking credit and expanding security agreements to codify the use of such assets.

One cannot underestimate the importance of credit access in Micronesia as it plays an integral role in maintaining vital sectors of the Micronesian economy. Not only does credit impact the country’s economic growth, but it also helps lift individuals out of poverty by providing sustained sources of income. While Micronesia requires more work to develop stronger infrastructure, the Micronesian Government, with the help of the ADB, has begun taking steps in the right direction.

– Alexander Sherman
Photo: Flickr

E-Commerce Markets in Africa
Africa holds less than 2 percent of the global e-commerce market, but an increase in participation could benefit the continent on a massive economic scale.

In fact, it has been shown that e-commerce allows consumers to connect to businesses as well as to other consumers in order to exchange goods via the Internet. E-commerce benefits global markets by improving efficiency in distribution channels and creating a more prominent market presence for individuals or businesses trying to sell products. For developing countries in Africa, one of the main obstacles in gaining access to e-commerce markets is limited access to banks.

Mobile Money

Globally, roughly 1.7 billion adults remain without access to a financial institution.

In order to alleviate this problem, mobile banking services focus on the high percentage of adults who have mobile phones in Africa. In South Africa, about 90 percent of the adult population owns a mobile device; whereas, Tanzania has the lowest with only about 75 percent of the adult population owning a mobile device.

The integration of mobile banking companies has increased dramatically over the past decade with 135 live mobile monetary services available in 2017. In fact, the number of subscribers in sub-Saharan Africa hit 44 percent in 2017. Mobile banking is attractive to people who do not physically have access to a bank or who do not have a permanent home address. It allows them to set up an account and protect their money electronically while giving them the freedom to interact financially on a global scale through e-commerce.

The Problem of Rural Communities

A smaller density of people lives in rural areas so there is a lower prospective income for operators who wish to set up mobile services in these regions. Roughly 20 percent of the population of sub-Saharan Africa is spread over 70 percent of the land. Consequently, operators in rural communities only secure a revenue of about one-tenth compared to those who work in urban areas.

Since many individuals rely on mobile banking to engage in the global market, reducing this barrier is essential to the continued development of e-commerce markets in Africa. As a result, in 2018, Uganda’s Communications Commission decided to pair with satellite firms Intelsat and Gilat in order to help increase access for those living in two rural communities.

The Prospective Value of E-Commerce Markets in Africa

A study by the McKinsey Global Institute estimates 3.7 trillion dollars (6 percent of GDP) could be added to the developing world’s collective GDP by 2025 due to a growing digital finance sector. It is 80 to 90 percent less expensive for financial institutions to provide mobile banking services than it is to create new physical branches. This method allows financial institutions to penetrate more of the population in developing and rural areas.

The e-commerce market has the potential to grow enormously over the next five years. Although access to financial institutions is an obstacle that many less privileged individuals face, an increase in mobile money services is helping to create parity. Financial inclusion means an upward trend in the global market participation, and through the development of internet-based trade, the global economy will experience more consumers, products and efficient distribution.

Tera Hofmann
Photo: Flickr

Blockchain Technology
With the development of bitcoin technology and other cryptocurrencies, the avenues for technological progress in the realm of poverty alleviation is improving. With more than 1.3 billion individuals living under the threat of global poverty, it is important to structurally bolster market economies.

Despite the great degree of skepticism regarding the volatility and often, the unpredictability regarding blockchain technology, it can still be a new and innovative solution to potentially remediate global poverty, especially among lesser economically developed countries.

Financial Inclusion

Financial inclusion is an imperative U.N. Sustainable Goal and blockchain technology can finally provide nearly 2.5 billion people with better opportunities and access to banking and financial services in the near future, especially as it allows for a more decentralized database. Blockchain technology will prove particularly effective in more remote, rural communities around the world, especially in the case of increasing social mobility.

Blockchain technology can act as a central banking system especially due to its decentralized nature. It can help cut down on remittance fees because traditional banking systems usually tend to charge high transaction costs. These fees account for nearly $4.32 billion among south Asian countries. In countries like India with a significant expat and migrant population living overseas, blockchain technology helps with transferring funds back home. Virtual currencies can eliminate a number of costs and improve the efficiencies of transactions. They may also be a lot more stable as compared to the financial system as it is vulnerable to national and global economic headwinds.

Moreover, it can be easier to secure property rights and undertake secure investments. Buyers and sellers are able to interact in a secure environment, and record transactions and fraud. With increased ownership of property, a number of countries like Brazil, India, Rwanda and Georgia have set up land magistrates. With more financial inclusion, consumers also have greater opportunities to engage in microtransactions and lending, as well as trading due to minimal interest rates on loans. The chances of setting up start-up businesses and enterprises may also be higher as a result.

Tackling Corruption and Enforcing Accountability

Owing to the reliability of blockchain technologies like Bitcoin, information and transactions are a lot more secure. On the macroeconomic scale, people can channel taxes, loans and funds a lot more efficiently. This can also help improve accountability and transparency of important government funds.

Globally, many countries have inculcated a number of blockchain projects in the health care and education sectors. As a result, governments can take the opportunity to allocate funds to different sectors of the economy and perhaps even extend it to providing development aid and funding to improve social welfare, infrastructure and other services. Likewise, due to transparency, it is also easier to provide people insurance in key realms. For instance, Copenhagen based SPACE10 is embarking on a project that seeks to combine blockchain technology and solar power as centralized sources and off-grid systems are often not economically and cost viable.

Additionally, making donations and conducting philanthropic initiatives may also become more secure and reliable with the further development of blockchain technology. Using this model, nonprofits and international organizations may be able to channel crucial aid, funds and other services through new avenues as well.

To conclude, if bitcoin technology is enforced, it is crucial to transcend the required education and awareness about it to avoid a lack of information and financial risks. With better financial avenues and services, a larger proportion of people will be able to participate in the global market. Further development of blockchain technology can help correct weaknesses and structural limitations in the long run.

– Shivani Ekkanath
Photo: Flickr

Mann Deshi Bank is Changing Lives
A time-tested way out of the poverty cycle is starting a small business. Talent and hard work, when supported by capital investment, can build a business, bringing an idea to life. Today, rural micro-credit institutions like Mann Deshi Bank are changing lives by doing this as the next chapter of the small entrepreneurship revolution story is underway.

The Foundation

Chetna Gala Sinha, the founder of the Mann Deshi Bank, started the bank in 1996 with a determined team of a few rural illiterate neighborhood women. It all started when Chetna’s friend and neighbor, Kantabai, came to her for some friendly advice.

Kantabai wanted to open a savings account to make a daily deposit of 10 rupees (less than 15 cents), but the Bank would not open her account as the amount was too small. According to a recent World Bank report, India has around 224 million people living under the poverty line of $1.90 a day; there are millions of women facing the same predicament.

Unfazed by hurdles, Chetna and her friends decided to take matters in their own hands. After months of persistent effort, they were able to obtain a banking license from the Reserve Bank of India. They started Mann Deshi Mahila Sehkari Bank, the first cooperative bank in India solely run and owned by rural women.

There are numerous rural banks in India today that bolster the growth of small-scale businesses and first-time business owners through micro-loans, loans that are only a fraction of a traditional loan amount at maybe $25 or less. What makes Mann Deshi Bank unique, though, is the extra mile it goes. It builds community and long-term support helping customers along the tumultuous journey of a small-scale woman entrepreneur.

Support Group

Mann Deshi Bank started in Mhaswad, a drought-prone village in the state of Maharashtra, India. Today, the bank has branches at six different locations within the state. When a customer borrows money from any of the bank branches, she comes in contact with a family of female entrepreneurs. These individuals face similar socio-economic hurdles in their entrepreneurship journey including the facts that:

  • They are women who are traditionally dependent on male family members for money.
  • They live in small villages.
  • They save small amounts of money on an everyday basis.
  • They want to start a business.

Workshops, classroom lessons and annual cultural events give a sense of belonging to women entrepreneurs by regularly discussing motivational success stories, offering them customized advisory services and providing a place to network. Together they build a community that engages small business owners, providing them strong emotional and social support essential for successful entrepreneurship. Sugrabi Mulani, one of the beneficiaries of the Bank says, “Mann Deshi’s financial management training was very helpful and the bank also gave me several loans to expand my business. But most of all, I met so many women and I knew I was not alone.”

Financial Literacy

Most customers of Mann Deshi Bank have never been to school. Many of them run businesses that survive on daily or weekly income. To help them overcome everyday challenges, Mann Deshi Bank is changing lives by offering short-term vocational training courses in sewing, basic computers and cattle breeding, etc. In addition, business development workshops that the Bank offers helps new entrepreneurs understand key aspects of running a profitable business, such as:

  • The ratio of profit and investment.
  • The importance of insurance.
  • The significance of marketing.
  • Inventory management among others.

On average, trainees report a 25 percent increase in average annual income which includes 35 percent of women who expanded their business through weekly/regional markets.

In 2006, Mann Deshi Bank established Mann Deshi Business School for Rural Women and designed an affordable year-long MBA program in collaboration with CRISIL and National Payments Corporation. Students can leverage this program to learn essential skills related to marketing, expansion and management of a business. To date, 40,000 women have participated in various programs that the Bank and its schools run.

One of these women is Kavita Bhivre. Kavita participated in one of the Business Development Workshops offered by the Bank. After learning the basics of profit and loan, she went on to pursue her MBA that Mann Deshi Bank Business School offered. Employing her newly earned skills and a small loan from the bank, she opened a bangle shop and successfully turned herself from a stay-at-home mom into a businesswoman. Today, she is not only financially independent but also supports her family. Like her, 67 percent of women have started earning an income after graduating from the specially designed MBA program.

Sports Tournaments

Sports can act as a lever to uplift a whole family from poverty in a single lifetime. A state-level player can easily afford a house, electricity, clean water and education for children. However, less than 2 percent of girls participate in sports in Maharashtra. The bank took the initiative to organize open-house sporting events under the scheme called Mann Deshi Champions. The initiative serves two important purposes including to:

  1. Nourish physical and mental well-being.
  2. Promote sports as a viable career option in drought-prone villages.

In 2010, when the tournament started, 500 children participated in various racing competitions. Over the course of nine years, 4,000 children have benefitted from such events. Every year, hundreds of school-going children between the age of 10 and 16 go to the tournament grounds to participate in sporting events like wrestling, long jump and marathon running.

Under the program, children receive sports training sessions under the guidance of qualified sports coaches. Moreover, prospective outstanding athletes garner specialized professional training.

Young girls like Vaishnavi Sawant, Reshma Kewate and Poonam Kalel, who received training through initiatives of Mann Deshi and went on to win medals at a Northern Virginia regional competition in 2017, inspire the Champions. They hope to play in the Olympics and win medals for their country one day.

The Impact

Mann Deshi Bank is changing lives and has become a way of life for thousands of people. What started as a microfinance bank 30 years ago, is now a reliable partner in growth for women who want to earn a livelihood or financially support their families. With $13 million in deposits spread across 90,000 women account holders, Mann Deshi has become a force to reckon with. The Bank also broadcasts a community radio which has 150,000 listeners spread across 110 villages within a 50 km radius. The radio programs consistently encourage women to start their own business. Last year, with six other peers, Chetna Sinha, the Chairman and Founder of Mann Deshi Bank, chaired the 48th Annual Meeting of World Economic Forum in Switzerland.

– Himja Sethi
Photo: Flickr

Kazakhstan
Kazakhstan, with a population of almost 19 million and territory measuring in at four times the size of Texas, is the largest of the landlocked Central Asian republics. Equally commensurate is its debt problem; credit access in Kazakhstan has been unstable, and the nation’s financial institutions have been similarly debilitated. Widespread individual and corporate debt have weakened the national economy and exacerbated poverty.

The Banking Crisis In Kazakhstan

Today’s banking crisis is hardly new to Kazakhstan. The global recession hit hard in 2008, and the government bailed its financial institutions out by reaching into its reserve funds valued at $43 billion. Nonetheless, even with a state-sponsored safety net, many of Kazakhstan’s largest banks are resorting to mergers in order to maintain operations.

The symptoms of the declining credit access in Kazakhstan are evident in the number of defaulted loans and the country’s tepid economic growth. Two of the main issues are the banking system’s lack of meaningful small and medium-sized enterprises (SMEs) interactions and its subsequent inability to maintain reasonable capital adequacy ratios in the face of financial hurdles.

In developed nations, SMEs contribute a significant share to the national GDP and employ a large majority of the workforce, from 60 to 70 percent on average. Among developing nations, those numbers fall drastically. But, Kazakhstan is behind even its peers in Central Asia in terms of homegrown competitiveness. Giovanni Capannelli, the Kazakhstan director at The Asian Development Bank, noted that “the Kyrgyz and Uzbeks have SMEs which are more competitive than SMEs in Kazakhstan in a number of sectors.”

SMEs in Kazakhstan

Kazakhstan’s SMEs are held back by high-interest rates (up to 14.3 percent) and an unwillingness on the part of major banks to provide loans. Categorized by the system as high-risk debtors, many SMEs have nowhere to turn to except to microfinancing institutions (MFIs). The ones that do manage to get loans from the banks often fail to pay on time, if at all, due to an unfriendly business climate and a lack of government support. A vicious cycle of borrowing money to pay back loans commences, and as SMEs either sink further into debt or shut down with their loans transition into non-performing loans – loans that have not been paid back after a certain period of time.

This cycle feeds into the wider narrative of the recent year’s banking crisis. A high percentage of Kazakhstan’s loans were non-performing in 2017, spiking at nearly 13 percent after a year of averaging at less than 8 percent. For reference, an under-6 percent ratio is considered healthy. As these loans proliferated, banks became unable to maintain a solid capital adequacy ratio.

Capital adequacy ratio is referenced as the minimum ratio of assets and capital to its risk-weighted assets a bank must have. A too-low ratio implies that a bank does not have enough capital to absorb the losses of nonperforming loans and other financial woes. This is precisely what befell Kazakhstan’s financial sector. With inadequate capital and deteriorating credit portfolios (summaries of diverse investments and debts), banks began charging ever-higher interest rates to compensate, reducing credit access in Kazakhstan to a fraction of its former amounts.

Hope for Kazakhstan’s Financial Future

Despite last year’s grim tidings, however, the Kazakhstan government has staved off some of its worst financial woes with a large stimulus package. It aided the ongoing merger of Halyk Bank and Kazkommertsbank, two of the largest banks in Kazakhstan, by injecting $7.4 billion in capital towards writing off accumulated bad loans of the latter bank. The two banks each have now a capital adequacy ratio of above 21 percent.

SMEs have not been forgotten either. The European Union launched its Regional Small Business Programme in 2018, which supplies Central Asian financial institutions with SME banking know-how and employee training designed to foster more stable relationships with local businesses. The World Bank’s 2015 initiative, The SME Competitiveness Project, aims to boost productivity and increase ease of access, “regardless of size or sector,” by 2020.

More can still be done. Kazakhstan’s GDP, to which the oil industry contributes a large portion, needs to be diversified to free the country from fluctuating global energy prices. A more stable economy would result in higher consumer confidence in the government and the banks associated with them, which is something they both lack.

Ongoing efforts in the SME domain could be ramped up further, and a market-orientated reform of Kazakhstan’s business laws has long been overdue. International and domestic collaboration on the issue of credit access in Kazakhstan may yet equip a faltering financial sector with the tools it needs to build a future of national financial growth.

– Alex Qi
Photo: Flickr

Insurance in India
India became independent more than 70 years ago. However, insurance in India has remained neglected. Until recently, 80 percent of the country’s population lived without insurance and largely unfamiliar with the banking system. They didn’t possess bank accounts, an identification card or a driver’s license. This is changing.

Since 2009, the government has undertaken steps to provide a unique identification to every citizen, popularly known as Aadhaar in Hindi. Now, leveraging the benefits of the Aadhaar and the willpower of a strong majority, the current government is taking quick and substantial action to bring Indians under insurance cover.

The Beginnings of Universal Insurance in India

The government has announced a slew of schemes to promote insurance in India. These schemes are offering easily accessible health, crop and business insurance to millions of people in the country. Announced in 2015 and 2016, the schemes are open to all citizens above the age of 18.

Even before people can be brought under the cover of insurance in India, there was an impending need to ensure financial inclusion of millions of people living in extreme poverty in the country. A program called Jan Dhan Yojna offered savings accounts free of cost. The scheme set in motion several other financial welfare schemes which offered subsidy cash transfers, pensions and insurance. A few have been listed below.

Life Insurance Cover

Announced in 2015, this scheme offers affordable life insurance in India to the masses. Each year, the policyholder pays a premium of 330 rupees (approximately $5). In case of the policyholder’s death, his nominee is paid 2 lakh rupees which is equivalent to $3,100.

In Indian economy, this amount is enough to start a small business or pay school fees of two children for around 10 years. More than 30 million people between the ages of 18 to 50 have already enrolled in the scheme.

Accident Insurance Cover

This is a scheme introduced to help people who have been injured due to an accident. The fact that in 2016, half a million people in India were injured in road accidents alone highlights the need for accident insurance in India. This scheme offers to pay 1 lakh rupees (approximately $1,500) in case of permanent disability and 2 lakh rupees (equivalent to $3,100) to the nominee in case of death caused by an accident.

The insurance cover can be renewed annually. Since its announcement in 2015, more than 9,000 people have been given accident insurance in India through this scheme.

Crop Insurance Cover

The majority of people in India are farmers and their livelihoods are highly vulnerable to the weather. Only the right amount of rainfall can result in a good harvest. Often various areas are affected by flood or drought.

This scheme offers to cover the loss suffered by a farmer in case of flood or drought. The government has set a low premium to make it all-encompassing. A crop farmer pays just 1.5 to 2 percent of the total sum assured, and the government pays the rest.

Experts believe that although these government schemes might seem ambitious, they are going to change the landscape of insurance in India in the next decade.

– Himja Sethi
Photo: Flickr