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How Chamas in Kenya Fight Poverty

Chamas in Kenya
A chama is a micro-saving society that groups of Kenyans use to pool savings. Beginning in the 1960s, chamas in Kenya have become impressive tools of economic empowerment that follow the spirit of harambee, the Kiswahili word for ‘all pull together.’ Their community approach helps alleviate poverty by providing a means to pay tuition for children, make small-scale investments in community development, buy household items and more. More than 40% of Kenyans are chama members.

A Communal Economic Model

To form a chama, a group of around 15-35 people come together through mutual trust and pay a certain amount of money every week or month. The group then uses the money to offer very low-interest loans to members. Additionally, the group may decide to invest in an asset that members can own collectively, such as a piece of land, or in an industry, such as horticulture.

Chama members understand that fighting poverty must go hand-in-hand with psychosocial well-being. They provide each other with access to employment, help when a member gets sick, support at funerals and are joyful at weddings.

Chamas Help Avoid Economic Crisis

Chamas have been vital in helping Kenyans avoid economic crises. In the 1990s, many of Kenya’s informal retailers had to close down their businesses as their suppliers became too expensive due to the liberalization of the economy. Chamas proved tremendously helpful in dealing with rising prices. For example, a group of garment traders created a chama that enabled them to switch to Chinese suppliers and keep their businesses afloat.

Chamas Empower Women

In Kenya, women often have to be financially dependent on men. However, Kenyan women, who make up half the informal sector, have been able to achieve some financial independence thanks to chamas. According to the World Bank, 55% of Kenya’s urban women aged 15-25 are unemployed. Chamas can help them to avoid or escape poverty by securing financial help from their community to become self-employed. All-women chamas like Wikwatyo Wanoliwa (Hope for the Widows) have proven that women are a key demographic in the fight against poverty.

Chamas are also good avenues for community outreach. For instance, in 2017, around 80 women from chamas received training on the Kenyan electoral process and in turn, encouraged thousands of women in their communities to register to vote. Civic education is important in poverty eradication because it empowers women to match their economic decisions in chamas with democratic decisions on the ballot.

Chamas are a creative and resilient way to fight poverty in Kenya. Their intuitive approach to financial security has become so important to the Kenyan financial sector that banks have even started using it as an economic model to lure more clients.

– Frank Odhiambo
Photo: Wikimedia Commons

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Nauru’s Economic Relationship with Australia

Image result for nauru

Nauru‘s Economic Relationship with Australia has been an essential part of its economy since it gained its independence in 1968. Australia has continued to aid Nauru in many ways. Its partnership with Nauru has been extremely useful because Australia uses Nauru for “offshore processing” for refugees seeking asylum and protection. This was meant to be a temporary solution until 2008, but it became more of a permanent policy in 2012. Recently, Australia has been implementing aid programs to help improve Nauru’s economy.

History of Nauru’s Economic Status

In the 1980s, the country was known for its large amounts of phosphate and quickly became one of the wealthiest countries per capita. When the supply of phosphate began to run low, however, the government quickly ran into debt. The unemployment rate of Nauru is about 90 percent. This leaves the average national income at about $6,746 a year. In order to bring some income back to the island, the government “started selling passports to foreign nationals for a fee and taking in war refugees.” That is where Australia got the idea to use Nauru as a detention center in 2001.

At that same time, Nauru was also listed on the international blacklist due to a concern that the country had been money laundering. For this reason, licenses for Nauru-registered banks were revoked. This forced the government to shut down the Bank of Nauru in 2006. Since the people of Nauru were not allowed to hold money in the banks anymore, the country was forced to become a cash-based economy. To keep their money safe, residents came up with tactics like burying their money in order to ensure that their money was safe from theft. As a result, Nauru opened to negotiations with Australia to process the refugees.

Nauru’s Economic Relationship with Australia

Australia has been an important financial resource for Nauru for many years. In the 2017-2018 fiscal year, Australia provided development assistance for 25 percent of Nauru’s gross domestic product. The Australian Government plans to provide $25.8 million in aid to Nauru during the 2019-2020 fiscal year. With the help of the Australian government, Nauru has been able to increase its employment rates as many households begin to earn higher incomes. However, external challenges such as energy and clean water have hindered the progression of Nauru’s reducing debt. This is due to the lack of skilled and qualified personnel to ensure that these problems are effectively dealt with.

Australia’s aid program has three objectives that have been outlined in the program’s Aid Investment Plan from 2015-16 to 2018-19. These three objectives include improving public sector management, investing in nation-building infrastructure and supporting human development. In 2017-18, Australia’s aid program was able to help Nauru in many ways including the funding support for the installation of two new 2.8MW diesel generators and switchgear. These installations lead to improvements in the supply and stronger electricity and water desalination services.

Nauru’s economic relationship with Australia has been essential to keeping the country going. Australia has benefitted by maintaining an offshore processing center for refugees. Though the offshore processing centers are not a perfect solution to Nauru’s economic hardships, they have helped its economy. Hopefully, Australia’s Aid Investment plans will help strengthen Nauru’s economic future.

– Emilia Rivera and Jenna Chrol
Photo: Britannica

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Top 7 Blockchain Projects for Poverty

Top Seven Blockchain Projects
Traditional perceptions of blockchain technology involve uses in financial technology and under the table transactions. Blockchain, however, has possibilities far beyond finance and digital currency. By its nature, blockchain provides unparalleled security and transparency. By creating a decentralized network of highly-encrypted blocks, a blockchain system creates a secure, unchangeable ledger. No one person can make changes and the encryption means that it is extremely difficult to hack, thus making blockchain one of the most secure and transparent technologies in the world. This technology has the power to revolutionize poverty reduction. Below are the top seven blockchain projects that represent the most successful blockchain for poverty projects that address real, pressing global issues.

Top 7 Blockchain Projects for Poverty

  1. Agri-Wallet: Agri-Wallet is a mobile app that allows farmers to remotely and securely receive payment for their produce and save money on business expenses. The majority of smallholder farmers do not have enough funding, both due to delayed payments for goods and a lack of access to credit. This is because banks are hesitant to lend to poor farmers that do not have a strong credit history or collateral. Through the blockchain financial ecosystem, Agri-Wallet allows farmers access to small loans and guarantees payment the first week of every month, which has been a major boon to Kenyan farmers. Agri-Wallet has already seen extensive success in Kenya, with approximately 4,000 farmers, 14 suppliers and 25 buyers using the app only one year after its large-scale release.
  2. Mojaloop: In developed countries, some may take access to banking for granted, but 1.7 million adults around the world do not have access to a secure banking system. The Gates Foundation sought to change this by releasing Mojaloop, an open-source solution that allows anyone to build financial services software, providing financial security through blockchain-based encryption. The key to Mojaloop’s importance is its egalitarian nature – a developer does not have to be connected to a major company or bank to develop technology using Mojaloop, and the code bridges all financial products and applications in any given market, providing unprecedented access to financial services for poor populations. The app has already gained the confidence of two of Africa’s largest mobile operators and the Gates Foundation estimates that it will reach 338 million existing mobile money accounts through the entire continent of Africa. In other words, this blockchain for poverty app could provide a flexible, universal banking system to 338 million people in Africa.
  3. Diwala: As of June 2019, there are more than 70 million displaced people worldwide fleeing war, persecution and conflict. The ability to join the workforce of refugee’s new home is critical for their integration into their new community and to rebuild their lives. However, when fleeing a war-torn country, it is difficult for refugees to retain certifications or diplomas. Diwala provides a secure, unchangeable digital resume that verifies a person’s skills, education and certifications that employers can rely on to provide an accurate record. The organization currently works with multiple organizations and universities to help issue credentials via Diwala to further verify education and certifications. Diwala is already bringing digital employment verification to Kenya and Uganda.
  4. BitGive: BitGive’s goal is to provide better transparency and accountability between donors and charitable organizations. The company’s blockchain for poverty product, GiveTrack™, allows donors to trace their donations in real-time to see exactly where their money goes. BitGive’s use of blockchain technology provides high-level security while also providing an unalterable ledger that donors can refer to at any time to ensure their money goes to the cause they want and see the real impact they are having on a community. The use of cryptocurrency also means that BitGive can quickly and efficiently transfer funds across the globe. The organization has seen amazing success, including partnerships with Save the Children and The Water Project.
  5. Goodr: According to the U.S. Department of Agriculture, Americans waste approximately 30-40 percent of the U.S. food supply, while 820 million people around the world suffer from hunger. Goodr provides blockchain-based supply chain management tools that allow companies, such as airlines, convention centers and other food operations, to redirect surplus foods to food-insecure communities. As an added incentive, Goodr provides companies with blockchain-based ledgers that allow them to track their food and identify areas of waste. During the 2019 Superbowl alone, Goodr rescued over 100,000 pounds of food.
  6. OneSmart: The World Bank considers government corruption a significant challenge in reducing global poverty, particularly because corruption disproportionately affects poor populations. In 2018, UNICEF funded OneSmart’s OS City project to combat corruption and bring more transparency to local and national governments. OneSmart created a blockchain platform that is flexible enough to be integrated with existing city management platforms, allowing for the implementation of blockchain and artificial intelligence throughout government to avoid waste and increase transparency.
  7. SOLshare: SOLshare seeks to help the 1.1 million people worldwide without consistent access to electricity. It is the first-ever peer-to-peer electricity trading network, allowing villages to create mini-power grids by connecting houses with solar panels to other homes in the neighborhood. The blockchain-based platform allows for the fast, efficient and safe transfer of funds between neighbors, allowing for local, independent electricity grids. SOLshare has already brought electricity to 65 million people in Bangladesh and is helping helps poor villages shape a greener future.

People limit the use of blockchain technology by relegating it to banking or shady online transactions alone. The above top seven blockchain projects show that blockchain has value as a tool to develop solutions for multiple global issues. A blockchain is a useful tool that can address multifaceted issues in fighting poverty. Though it is still an emerging technology, blockchain deserves widespread research and support.

– Melanie Rasmussen
Photo: Flickr

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How Tala is Changing the World One Loan at a Time

Tala is Changing the WorldShivani Siroya’s startup, Tala, is changing the world by making a better, more equitable financial system one loan at a time. Billions of people around the world do not have a financial identity, making it impossible for them to advance due to a lack of credit history, but Tala is changing this.

The Financially Anonymous

Only 30 percent of the world’s adult population has a financial identity. The other 70 percent lack a credit history or any way of applying for loans. This severely limits opportunities to financially advance because loans are often necessary for larger investments, like starting a business, purchasing farm equipment or investing in better irrigation systems.

Credit and loans are only accessible with some type of paper trail or financial history if customers are borrowing from traditional banking institutions. It would be too risky to lend money to anyone lacking credit and financial history. Siroya, Tala’s founder and CEO, realized “that there are billions of people around the world who are not ever seen and don’t even have an identity. That felt really wrong.”

How Tala Works

Tala is a smartphone application available to anyone with an Android phone. With permission from the user, the application uses data collected from smartphones to create a digital credit history that determines if the customer is eligible for a loan. It serves the same purpose as traditional credit history to create a unique financial profile for each user. It is currently serving customers in Kenya, Tanzania, the Philippines, Mexico and India with Kenya accounting for the majority of users.

Using nontraditional data, Tala analyzes each of its three billion users using 10,000 unique data points to determine a user’s risk profile and whether they would be a credible borrower. Data points come from information gathered from texts, calls, sales transactions, application usages and personal identifiers that help to create a unique profile for each user. About 85 percent of Tala users receive a loan within 10 minutes of this vetting process. The average Tala loan is $50. Users typically invest these loans in equipment or business licenses, which are important opportunities that are not available to those who cannot access credit.

Tala expects customers to repay the loan within 30 days, which 90 percent of customers do on time. Tala is a loaning service that deals in microloans, ranging from $10 to $500. Since the company’s inception in Santa Monica in 2014, it has granted a total of six million loans worth $300 million and amassed a customer base of 1.3 million. Investors like Revolution Growth, IVP, Data Collective, Lowercase Capital, Ribbit Capital and Female Founders Fund with around 215 employees around the world fund Tala.

How Microloans Change Lives

Tala is a microfinancing company, using small loans to make big changes. Siroya herself has seen how these small funds make disproportionate improvements in people’s lives. Jennifer in Nairobi, a 65-year old food-service entrepreneur, needed credit to invest in a food stall and start her business. However, she had no credit history and banks refused to invest in her business aspirations. Her son heard of Tala and introduced her to the smartphone app. After answering eight to 10 questions, Tala approved her for a loan.

Over the last two years, Jennifer has taken out 30 loans and subsequently opened three food stalls. Additionally, she now has a formal credit history and can borrow money from formal bank institutions. In fact, Jennifer has used this opportunity to take out a small business loan from a bank and begin opening her own restaurant.

There are more people like Jennifer who lack opportunity but with help from Tala, they are beginning to see changes. By developing a real relationship with their customers, Tala is changing the world by updating the face of microfinancing and the very notion of credit history. Now it is possible to identify those who banking institutions ignored and give them a fair chance at empowering themselves.

– Julian Mok
Photo: Pixabay

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A Look at Credit Access in Moldova

Credit Access in MoldovaThe Republic of Moldova, a small, post-Soviet landlocked country bordering Ukraine to the north and Romania to the south, currently grapples with issues of economic freedom. According to the Index of Economic Freedom, Moldova ranks as the 97th freest economy in the world with Russia at 98th and Burkina Faso at 96th. With 180 countries ranked, the Heritage Foundation categorizes Moldova as a mostly unfree economy. Credit access in Moldova suffers along with its corrupt economic and political culture, affecting the most at-risk individuals in the population.

A Shift Away From the Agricultural Sector

Farming and agriculture once made up the bulk of Moldova’s domestic economy with agriculture accounting for 42 percent of the Moldovan GPD in 2000, according to a multi-national case study including USAID. The CIA World Factbook cites that in 2017, Moldovan agriculture made up only 17.7 percent of the GDP while Services took up 62 percent. In just 19 years, the Moldovan economy has experienced a rapid change. Moldova is transferring from an agrarian economy into a service-based economy, but during this transition, farmers are being left behind and their credit access in Moldova is dismal.

Farmers face the unique challenge of navigating a banking system that is new for their country. Before the year 2000, the Moldovan state owned all agrarian land. A USAID report explains how 800,000 private farmers became landowners and suddenly needed additional financial resources, yet struggled to acquire them since the amounts requested were only a few hundred dollars each–unattractive investments for local banks. The banks refused to work with the burgeoning independent farmer sector, making credit access impossible for many who needed small loans to fund and improve their businesses.

No Access to Investment

Along with the difficulties of learning a new market system, Moldovan farmers also encounter immense corruption in both government and business. The World Bank reports in its Country Partnership Framework (CPF) that “a massive bank fraud in 2013-14 enabled by political interference…led to depreciation of the currency, inflation, financial destabilization and loss of investor confidence.” Those who have no credit access in Moldova also have lower chances of receiving investment from outside the country because the risk of investing in a corrupt country carries too much risk for international investors.

The World Bank CPF explains that “limited access, inefficiency and poor quality have contributed to social exclusion, persistent poverty and vulnerability to shocks, especially in rural areas.” Rural farmers cannot rely on either the state or the banks to offer much-needed investment, and therefore are left without a critical resource essential to operating a thriving business.

The World Bank’s Moldovan Engagement

The World Bank currently sees transparency, accountability and corruption as the most pressing issues to the Moldovan economy. In an effort to stabilize the region and bring economic prosperity, the World Bank has ten active projects in Moldova. The organization cites three objectives: “strengthening the rule of law and accountability, improving access and quality of public services and enhancing the quality and relevance of education and training for job-relevant skills”. The objectives of The World Bank CPF, while broad, would allow for Moldovan farmers to either gain the credit access needed to operate their farms or expand into other sectors of the economy.

Three projects from The World Bank in particular help to solve the issue of credit access in Moldova. To help rural community members that wish to expand their horizons past farming, the World Bank has instituted the Moldova Education Reform Project, which gives out result-based specific loans to certain sectors of Moldovan education to improve the efficiency of the education sector and improve “the ministry of education’s capacity to monitor the reform”.

To help squash corruption and inefficiency, the World Bank also created the Tax Administration Modernization Project which reviews the Moldovan tax code to ensure an equal and comprehensive tax policy that supports the development of small businesses.

In an effort to help all Moldovans, the World Bank’s Moldova Economic Development Policy Operation Project (DPO) helps “to support the government of Moldova in reducing fiscal risks and leveling of the playing field for private sector development [by] strengthening oversight [and supporting] private sector development in access to business opportunities and resources”.

Lessons Learned

While credit access in Moldova is a complex issue, institutions like the World Bank that specialize in economic reform and recovery are getting involved in the country. Supporting institutions such as the World Bank helps the World’s poor help themselves by improving local economies and the governmental and business practices around them.

– Spencer Julian
Photo: Flickr

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The Impact of Credit Access in Micronesia

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

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Increasing Credit Access in Bulgaria

Credit Access in Bulgaria
Bulgaria is an Eastern European country with a population of approximately 7 million people. In 2016, the country’s poverty rate stood at 23.4 percent, which means that around 1.6 million Bulgarians lived below the national poverty line. In addition, Bulgaria has the lowest GDP per capita in the European Union and the highest levels of income inequality among E.U. countries. Increasing credit access in Bulgaria could be one way to recharge the economy and help reduce poverty.

Background

Poverty in the country has been steadily rising. Since 2000, the poverty rate has increased by 9.4 percent. Contradictorily, the unemployment rate has never been lower and wages have never been higher than they are now. To explain this contradiction, it is important to know that Bulgaria has experienced a rapid population decline. Between 1988 and 2018, the population of Bulgaria declined by nearly 2 million people. By 2050, economists predict that the Bulgarian population will fall to 5.5 million if the country does nothing to reverse the trend. This has precarious implications for the nation’s economy, and increasing access to credit is a viable solution to stymie population loss.

Particularly concerning is the fact that young and educated Bulgarians constitute the bulk of those leaving the country. In most cases, they leave to find employment elsewhere in the E.U. Some dubbed this phenomenon a “brain drain,” and studies confirm that it hinders economic growth and development. Experts at the Institute for Market Economics in Bulgaria argue that political stability and economic growth are the surest ways to dissuade young people from leaving the country; in other words, the overall outlook for the country must be bright.

Credit Access in Bulgaria

One possible way to address Bulgaria’s population problem is to increase access to credit. With increased credit access, impoverished Bulgarians can secure the funding they need to start a business, purchase a home or own a car. Expanding credit for small businesses could be due to economic growth. Furthermore, a 2006 study found that increased credit access in Bulgaria had a strong correlation with total factor productivity. Credit access has also led to growth in both the manufacturing and service sectors. A Georgia State University study found that access has led to a 0.34 percent annual increase in value for both sectors. These sectors account for 83 percent of Bulgaria’s GDP.

By further developing access to credit, Bulgaria has a brighter economic outlook. Despite its population decline, the GDP has increased by $52 billion since 2000. In order to reverse the brain drain and address national poverty, financial institutions and the Bulgarian government should continue to invest in credit access. Credit access will allow young entrepreneurs to remain in the country, helping the economy grow and encouraging Bulgarians. Economic growth, according to the Institute for Market Economics, remains Bulgaria’s best chance at recovering its lost population.

– Kyle Linder
Photo: Flickr

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A Look At Credit Access in Cameroon

Credit Access in Cameroon

Cameroon is a country in Central Africa located right below the Sahara Desert. With a population close to 24 million, estimates show that 48 percent of the population lives below the poverty line. The majority of those who live in poverty reside in northern, rural regions. Although Cameroon has experienced growth in GDP since 2018, it is the largest economy in the Central African Economic and Monetary Community (CEMAC), a region that has suffered in Africa due to the fall of oil prices. Cameroon aims to become an emerging country by 2035, which means the real GDP will have to grow by 8 percent. In order to reach this goal, credit access is an advancement that must be focused on. Seeking a solution for credit access in Cameroon is a crucial task for its government.

Unfortunately, in 2017, only 10 percent of Cameroon’s population reported that they have a bank account.

Agriculture and the Economy

It’s clear that financial services and education are not reaching a large portion of Cameroon’s population. Often described as a miniature Africa, Cameroon exhibits all the climates of the continent, with a large chain of mountains separating the arid and green regions. This terrain presents a challenge in acclimating the population to new advancements such as mobile banking and loan access.

Cameroon’s economy is rooted in agriculture, something found mostly in rural regions where access to credit is poor. Because of the country’s rich landscape and natural resources, 70 percent of the population’s labor force is in Cameroon farms. However, 23 percent of farmer households rely on subsistence farming, which means they are working to feed themselves and their family. This is an alternative to both consuming and selling the produce.

While subsistence farming can provide a family with a self-sufficient method towards survival, its success is dependent on a non-hazardous climate and funding. Specifically, this is access to expensive chemical fertilizers. Subsistence farming also doesn’t help improve the economy’s investment sector when many people are farming to live instead of making money to save. Most farmers sell their products at the marketplace, where physical cash is exchanged for goods. Out of the 90 percent who do not own a bank account, the majority reported that they had no money to save or made no regular income.

A Need to Expand Credit Access in Cameroon

There are currently around 840 or so accredited microfinance institutions in Cameroon. The country’s loan performance has worsened due to the number of uninformed loans given to consumers. In 2018, the Risk Prevention Bureau for Microfinance (CREMF) was established as a system that helps these institutions track and disseminate the correct data on all their customers. This makes it somewhat easier for them to recover borrowed money. However, the challenge is still present: the majority of these microfinance institutions are in rural areas with low internet connectivity. This makes it difficult to continue giving out loans to those who need them.

In order to make credit access in Cameroon more financially inclusive, mobile services must be extended to rural areas. Additionally, services should also cover financial education and funding for farmers. In 2008, Express Union introduced mobile money. Mobile money offers a quick method for payments and access to finances.

While there are 6.8 million subscribers, there are only 1.5 million active users of mobile money services. The biggest challenge is implementing a cashless culture in a country that is reliant on a cash-based agricultural market.

Improvement Efforts

In order to establish an equal financial climate, the government of Cameroon and the World Bank Group renewed its strategy. This 2017-2021 project focuses on three main areas:

  1. poverty traps in rural areas
  2. access to better transportation
  3. improving weak governance.

The main objectives of this framework are increased market productivity in the agricultural sectors, improved health and improved access to credit in Cameroon.

Another solution to help foster jobs in Cameroon is the Agriculture Investment and Market Development Project (AIMD). Participants of this project are working to pave a bridge between agriculture and agribusiness. For example, this includes:

  • educating farmers on new techniques
  • providing them with the means to create quality produce
  • connecting them with agro-industrial companies like Guinness through mobile applications.

These advancements have helped to boost the financial sector and improve credit access in Cameroon. As a result, the livelihood of the country’s poor has improved. With consistent improvement, it’s possible that Cameroon’s economy can emerge into one that is economically stable, with more equally-distributed prosperity among regions.

– Isadora Savage
Photo: Pexels

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Credit Access in Tajikistan

Credit Access in TajikistanTajikistan, located in Central Asia, has a population of over 8 million people. Tajikistan has borders to Afghanistan, Uzbekistan, Kyrgyzstan and China. Although Tajikistan’s financial sector has made significant progress since 2000, many new advancements such as credit access are still in need of improvement. In 2017, almost 30 percent of Tajiks were living below the poverty line. Finding a solution to increase credit access in Tajikistan has become an important task for the government of Tajikistan.

Tajikistan’s Reliance on Remittances

Due to Tajikistan’s limited employment opportunities, about 90 percent of Tajiks travel out of the country for work. They often travel to the Russian Federation in search of employment. Many migrant workers send remittances back to their friends and family in Tajikistan. More than 60 percent of Tajik households reported that half of their income comes from remittances with 30 percent of Tajik households reporting that 100 percent of their income comes from remittances.

A 2010 Labor Organization study reported on how Tajik households save their income and remittances. The study found that only 23 percent of people were able to save their remittances with only 9 percent able to save at a partial amount of 21 to 40 percent of the money. When the money can be saved, it is not often for long. In fact, only 11 percent of the people were able to save their remittances for more than six months.

Income savings did slightly better. At least 63 percent reported being able to save part of their income. For example, 51 percent saved about 20 percent of their income. However, only 3 percent could save between 41-60 percent of their income. Since remittances are the main source of income in many Tajik households, money is spent on immediate needs, which results in low percentages in income saving.

Credit Access in Tajikistan

According to a 2010 International Labor Organization study, 95 percent of Tajik households do not keep their savings in financial institutions. Due to Tajikistan’s remote and unique mountainous terrain, 95 percent of Tajik households are not aware of the savings products available to them or know where financial institutions are located. Credit access in Tajikistan isn’t seen as a necessity in many Tajik households because it is very common and traditional for Tajiks to keep their savings at home. There also seems to be “a general distrust” of financial institutions.

In April 2010, the World Bank Group, with the help of the Government of Switzerland, launched the IFC Azerbaijan-Central Asia Financial Markets Infrastructure Advisory Services Project. This three-phase project is aimed at improving the financial infrastructure of Tajikistan and expanding credit for people and small businesses. This would allow for the creation of more jobs.

The project also provided financial literacy training to more than 100,000 Tajiks, which allowed Tajiks to become knowledgable about where their savings go. As a result of the IFC Azerbaijan-Central Asia Financial Markets Infrastructure Advisory Services Project, Tajikistan’s financial sector was able to establish the first private Credit Information Bureau with the help of IFC and the National Bank of Tajikistan.

These crucial advancements have led Tajikistan’s financial sector in the right direction toward improving credit access in Tajikistan as well as addressing the needs of the people of Tajikistan. With impoved credit access comes financial security, an increase in small businesses and a better economic standing.

– Jocelyn Aguilar
Photo: Flickr