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

47. Credit Access in the Kyrgyz Republic
Kyrgyzstan, though still scarred by a violent government coup d’etat in 2010, has seen robust economic growth thanks to international investment in its agribusiness and energy production industries. National GDP has grown at an average of 4 percent annually since 2015. However, the landlocked Central Asian country still struggles with a pronounced lack of domestic consumption expenditure. Improving low levels of credit access in Kyrgyzstan can boost consumer spending and confidence, which is paramount to ensuring a viable financial future for its citizens.

The Economic Importance of Credit

Credit is integral to the maintenance and growth of a market economy. Individuals and private organizations borrow money to buy goods and services in the market, which raises production and stimulates the consumer economy. Once credit debt and loans are paid back, the cycle continues again and again. It logically follows that if more consumers have access to a reliable credit system that provides loans, the economy expands and poverty is reduced.

This reasoning backs the approach that international multilateral organizations such as the World Bank and the U.N. employ in their efforts to combat poverty. In Kyrgyzstan, agriculture is by far the largest sector of the economy, employing about 40 percent of the working population and comprising nearly 20 percent of the country’s GDP. The Food and Agriculture Organization of the United Nations apprised the industry in 2006 and found that approximately 900,000 households contributed half of the agricultural output on 5 percent of Kyrgyzstan’s arable land. In addition, roughly 250,000 private farms employed half of the agricultural labor population while also contributing 40 percent of total output.

Different Types of Credit Access

Although households and private farms are the two largest employers and producers of agricultural output, they cannot rely on the same systems of finance due to their fundamentally different roles in the economy. The categories of credit access in Kyrgyzstan differentiate based on the debtor. As household farms are usually individually operated, micro-financing institutions (MFIs) and non-governmental organizations more aptly serve their personal needs; these small-scale family farms generally have neither the land nor the assets to pay off the sizeable loans. On the other hand, commercial banking suits the privatized farm industry, which can afford to invest in equipment and expansion while employing up to several hundred laborers.

Recognizing this dichotomy, the World Bank’s International Finance Corporation (IFC) invested in multiple projects across different financial sectors. Its Investment Climate Advisory Services Project, initiated in 2009, works to remove barriers to entry in the market that would otherwise dissuade private businesses from expanding. From 2009 to 2012, the IFC also invested $26 million into Kompanion Financial Group, FINCA Kyrgyzstan and UniCredit Kyrgyzstan, all of which provide microfinance services to individuals and small businesses.

Potential Dangers of Expanding Credit

With the relaxation of government regulation and growth in spending, however, comes the danger of a potentially cataclysmic credit bubble. Eurasianet reported in 2012 that only 100 of the near 450 MFI’s in Kyrgyzstan actively engaged with clients; the barriers to starting an MFI are virtually nonexistent. Interested investors need slightly more than $2,000 USD to found their own MFI, and most have no education or background in finance. This lack of barriers, coupled with borrowers that often do not understand the loaning process, can result in overspending of nonexistent money and consequent high debt, which harms those who borrowed money to escape poverty in the first place.

The failure to properly rear a financial market and the motive of profit before anything else promoted in local populations spells disaster for both loaners and borrowers. Financial education of the local population and proper regulatory oversight is crucial for efforts to expand credit access in Kyrgyzstan to succeed. The implementation of finance in an industry as important to Kyrgyzstan as agribusiness bears the grave possibility of worsening the predicaments of those it was designed to help. However, if managed correctly, it also holds a much greater potential to lift Kyrgyzstan’s citizens out of poverty. 

Alex Qi

Photo: Flickr

Djibouti
Any country can benefit from having greater credit, deposit, payment, insurance, and other services at its people’s disposal. This is why in recent times there has been a larger focus on financial assistance and infrastructure development in developing nations. Credit access in Djibouti has hence become a prime focus for its allies and has the potential to change the economic landscape of the nation when executed properly.

Benefits of Greater Credit Access in Djibouti

 

Credit access has the potential to increase consumers’ access to a variety of services, such as healthcare and government spending, and can improve their general standard of living. When bank accounts are readily available to everyone, financial assets can be better monitored and people who are less informed can make more informed decisions about their investments with the help of bankers. This can also facilitate an easier cash outflow, leading to consumers increasing their spending and positively influencing the gross domestic product of Djibouti. Since Djibouti’s infrastructure is still not optimal, international financial assistance is required to help provide capital for credit access plans while also combating economic issues that the nation does not necessarily have funds for.

The Good News

In May 2014, the World Bank announced its support for Djibouti through a $5.6 million investment to support the government’s Second Urban Poverty Reduction Project. This credit line has been brought in to help the country provide more urban services to poor rural neighborhoods in Djibouti. This is an example of an investment earmarked to improve the nation’s basic infrastructure so as to make it more self-sufficient in improving financial access in the future. The project also aims to involve the people in incorporating new changes while also allowing for more employment opportunities and awareness about financial services among the locals.

The World Bank has seven more projects planned in Djibouti through the International Development Association. These interventions will have a value of close to $57 million and will be further supported by trust funds worth almost $11 million. All these projects are meant to address rural community development, social security, clean energy, poverty reduction, health and education by creating more credit lines for the government, ensuring that there is both financial security for the funds Djibouti receives as well as an increase in the standard of living for its people.

Positive Impact

Thanks to the reforms, credit access in Djibouti has also increased the ease of banking. In recent times, Djibouti’s banking sector generates 10 percent of the nation’s GDP and has attracted several foreign banks to the country. Previously, there were only two banks in Djibouti, Banque pour le Commerce et l’Industrie and the Bank of Africa. This made it harder for people to negotiate loans or reap the benefit of choice by considering the interest rates offered by multiple banks. Now with an influx of banking services, people are able to make deposits at multiple locations, secure loans from other banks even if their first application gets rejected, and make smarter investments in Djibouti and abroad. The number of deposits made by people increased from $1.088 billion to $1.1 billion in 2013, showing a 7.7 percent improvement. This sets up people to use more than one means of payment, enabling them to afford many more services. The positive changes in the banking sector have led to a total increase in domestic credit by 2.1 percent in 2013.

Hope for the Future

As Djibouti’s economy grows, a brighter future for its people becomes more apparent. Credit access in Djibouti has the potential to open up new doors for aspiring businessmen and those willing to expand their services, which will ensure that people have more choice and a better standard of living. International Monetary Fund loans and existing funding from the World Bank and other allies of the nation can help Djibouti improve the existing financial infrastructure and complement the benefits of greater credit access. With funds flowing in from so many channels and the government making more conscious efforts to break out of the credit slump, there is hope for the future.

– Sanjana Subramanian
Photo: Flickr

Credit Access in Chad
Located in Central Africa, Chad is a landlocked country with a population of approximately 12 million people. While the national poverty fell from 54.8% in 2002 to 46.7% in 2011, Chad remains 186th out of 188 countries on the United Nations Human Development Index. Credit access in Chad stands out as one of the leading impediments to economic growth.

Financial Institutions in Chad

Chad’s financial depth is among the lowest in Africa. According to the World Bank’s Global Financial Development Database (GFDD, 2016), financial system deposits of commercial banks and other financial institutions made up 6.8% of GDP in 2014 in Chad, three times lower than the sub-Saharan African median of 24.6%, and the lowest in the sub-region that year.

Likewise, the ratios of private credit to GDP and deposit money banks’ assets to GDP were less than a half of the median in sub-Saharan Africa in 2014, coming at 6.6% and 8.1% respectively.

The role credit has in the growth of developing countries’ economies cannot be overstated. Increased credit access in Chad is essential for allowing farmers, businesses, and consumers across Chad to utilize investment capital and thus help expand economic activity.

Credit Access in Chad

There has been a marked decline in financial and credit access in Chad between 2011 and 2014, according to Global Findex Data. During that period, the proportion of adults with an account at a bank declined from 9% to 7.7%. In comparison, the average proportion of adults with an account at a financial institution in sub-Saharan Africa increased from 23.9% to 28.9%.

Borrowings and savings in Chad experienced a similar trend. Between 2011 and 2014, the number of adults who borrowed money from a bank declined from 6.2% to 2.4%, while the proportion of those who saved declined from 6.8% to 4.6%.

In order for people living in Chad to grow businesses, buy homes or purchase goods, the imperative is that they have access to financial institutions so that they can borrow and save money from those institutions. Credit is essential for building capital and achieving economic growth.

Progress is Being Made

While these statistics might suggest a rather grim financial situation, there is some progress that indicates an improvement of credit access in Chad for its citizens. IMF Financial Access Survey Data report from 2015 notes an increase in ATMs from 30 in 2011 to 64 in 2014. Borrowers at commercial banks have increased from 2.8 to 8.8 per 1000 adults. While these gains are modest and fall short of the sub-Saharan Africa average, they present a glimpse of hope for a country plagued by inaccessible credit and financial institutions.

As mobile banking proliferates throughout Chad’s financial sector, it offers increased access to credit. A Luxembourg based telecommunication firm, Tigo, and Airtel Money, an Indian telecommunications firm have helped facilitate the transition to mobile banking in Chad. They offer services that allow users to pay bills, conduct money transfers, and make everyday purchases. As of 2013, there are 50,000 Tigo Cash users and 53,000 Airtel Money users in Chad.

In addition, a recent U.N. initiative, the Chad Local Development and Inclusive Finance Program, works to promote access to financial institutions and foster sustainable development. The program aims to create 20 multifunctional centers for financial services and 20,000 micro-enterprises. These enterprises will help create jobs for at least 500,000 households.

While Chad’s financial woes are far from over, the proliferation of mobile banking and microfinance across the country have allowed more people to gain access to credit.

– McAfee Sheehan
Photo: Flickr

Credit Access In Samoa
In the past few years, Samoa has seen the emergence of a new banking system with a focus on credit access. This comes after years of financial hardship and a shrinking economy. According to a 2016 report, no new loans had been issued in Samoa in roughly five years. Major financial cornerstones like the Bank of Hawaii had backed out of the country.  In desperation, and on the margins of the mainstream economy, Samoa adopted a public banking system.

The Landscape of Samoa’s Credit Sector

The financial services sector in Samoa encompasses a wide range but is mostly limited to urban areas. The industry has four major commercial banks: two foreign banks and two regional banks. However, the domestic credit market is controlled by Public Financial Institutions. Samoa National Provident Fund holds 22.6 percent of the market; another key player, The Development Bank of Samoa, holds a 10.3 percent share. Much of the success of credit access in Samoa can be attributed to the Central Bank of Samoa. It acts as a regulator and has enforced progressive strategies that have expanded financial services and inclusion.

However, 49 percent of Samoans are outside of the formal financial market. Public constraint has often been attributed to a cash-heavy informal economic sector and inadequate access to distribution points throughout Samoa. The World Bank and The International Finance Corporation have identified Samoa as a struggling credit environment, but policy improvements seek to target these issues.

Somoa’s First Credit Bureau

In 2015, Samoa launched its first Credit Bureau financed by The International Finance Corporation. Its intention was to bring efficiency and transparency to the money-lending market. This was a milestone for Samoa’s financial system, which was historically reliant on cash. It helped many different parties by providing confidence to lenders as borrowers built up their credit profiles. The Credit Bureau was fundamental in establishing a credit infrastructure in Samoa. Backed by the Data Bureau and the largest financial firms in Samoa, technological advancements such as cloud storage and information sharing among banks allowed credit footings to grow. The new technologies meant that lenders could deliver financial services at significantly lower costs to expand credit access to broader segments of the economy.

Expanded Credit Access

Domestic credit to businesses has grown by roughly 60 percent since the mid-1980s. The Strategy For The Development of Samoa, intended for the years 2016 to 2019, outlined plans to increase inclusivity to vulnerable groups and help end all poverty in the region.

Supported by the public domestic credit market, economic resilience accompanies private sector investment and development initiatives to expand credit access. Agriculture and fisheries are especially important to Samoa’s rural economic growth and development. The Development Bank of Samoa finances agriculture through the Agricultural Competitiveness Enhancement Program and Agribusiness Development Program. The Agribusiness Programs, Development Bank and Business Enterprise Center provide increased technical and financial support services for small business development.

Positive Results

Samoa has already left the list of the most undeveloped countries and is on its way to sustainable economic growth. With the continued implementation of credit and financial services aimed at the most vulnerable populations, Samoa has seen growth in per capita GDP of roughly $6,000 USD in 2017, up nearly $500 USD since 2015. 

While extreme poverty does not afflict the region, 20 percent of the Somoa’s population lives under the poverty line and struggles to obtain secure employment. The majority of this population lives in rural areas, lacking access to the resources available in urban areas. With the addition of these financial services aimed at reaching underserved communities and the larger rural economy, many industries are growing and the country is opening new doors for its people. As credit access in Samoa continues to spread, the economy and individual prosperity will also blossom.

– Joseph Ventura
Photo: Flickr

Paraguay
The global indicator “Doing Business” ranks credit access in Paraguay at a not-too-shabby 122 out of 189 countries. The Western Hemisphere Credit and Loan Reporting Initiative stated that Paraguay‘s economy was ‘improving;’ still, the government’s 2014-2018 initiative, National Financial Inclusion Strategy (ENIF), identified two major issues it wishes to mitigate. Namely, it indicated that micro, small and medium enterprises (MSMEs) needed better access to approved loans and that 17 percent of the population had no access to a bank.

What is the ENIF?

The Paraguayan government — working alongside the World Bank and the FIRST Trust Fund Initiative — created the National Financial Inclusion Strategy (ENIF) as part of Paraguay’s National Development Plan. The main goal of this initiative is reducing poverty and promoting economic growth.

The strategy intends to achieve this goal by creating better credit access in Paraguay, as well as access to other financial services for the entire population. The project’s vision explains it best: “Quality and affordable financial services for all people in Paraguay who want them through a diverse and competitive marketplace.”

In order to achieve this vision, the initiative analyzes the issues with Paraguay‘s current state of financial inclusiveness by comparing the objectives to the gap of the “current financial profile versus the financial needs of the five primary income groups.”

It then creates a strategy for closing this gap by identifying the end goals — the ‘key performance indicators (KPI)’ — and a list of tasks to help achieve this goal. Working groups under each KPI then focus on completing these tasks.

Bank Access

About 69 of the 224 districts in Paraguay with more than 2000 inhabitants (17 percent of the population) have no access to banks, bank agents or ATMs because financial services simply cannot survive in an area with such a tiny client base.

This makes access to financial services for the population living in these rural areas very difficult, if not impossible, to obtain. For the two-thirds of this population that live in extreme poverty, this can also prove quite dangerous. Without access to credit, savings, or even government subsidies they can run out of money to buy food and are ill-equipped to handle an economic shock such as an illness or a death.

The ENIF proposes increasing the use of mobile phones and the coverage of mobile networks in the 69 “financially excluded” districts (with an emphasis on the 17 vulnerable districts) to provide those in need with access to money through mobile financial services.

By coordinating with the working groups in other KPIs, ENIF also wishes to provide such populations with access to financial services such as credit, insurance and savings. Along with this, the working group plans to create financial literacy courses and to design products and initiatives that encourage these vulnerable populations to save their money.

Loan Access for MSMEs

While 64 percent of 1.1 million MSMEs wish to have access to a loan, only 35 percent of MSMEs have had the ability to borrow in order to fund their operations. One-fifth of these firms reported not even applying for loans because they anticipated outright rejection.

To the ENIF, this indicates issues with business credit access in Paraguay and a need to improve the loan system. Improving such access will not only help businesses gain more capital for the country, but it will also improve job growth and increase access to opportunity for those in need.

The ENIF believes that credit risk systems of Paraguay’s main bank, Banco Central de Paraguay (BCP), and the collective savings and credit cooperative institution Instituto Nacional de Cooperativismo (INCOOP) should communicate with each other in order to create a collective credit information system. This partnership would allow for better monitoring of indebtedness and to ensure responsible credit is given.

ENIF’s Efforts

Along with this, the ENIF will also help in the creation of other regulatory measures such as:

  • Speeding up the provisioning of micro-credit loans
  • Establishing accuracy, timeliness, disclosure and recourse standards for all institutions
  • Exploring the possibility of implementing factoring and leasing products on the market
  • Monitoring, coordinating and implementing the progress of these KPIs through the Executive Secretary and Financial Inclusion Team. Each working group will send annual reports to the Executive Secretary and a measurement and evaluation system will track their progress
  • Issuing a survey every two years to compare the rates at the individual level to those in 2013

Room to Improve

Hopefully, with a great coordinated effort, the ENIF will see the data of financial inclusion improve and with it, will also see a greater reduction in the number of citizens in poverty. Even with the economy resting at a decent place, a good government knows that its country always has room to improve.

– Elizabeth Frerking
Photo: Flickr

Biggest Issues in the World
The world has several issues, but luckily it also has organizations and individuals ready to combat them every step of the way. The following are a list of the 10 biggest issues in the world we face today.

The 10 Biggest Issues in the World

  1. Poverty. More than 70 percent of the people in the world own less than $10,000 — or roughly 3 percent of total wealth in the world. Geographically, the story is similar. A lack of global emphasis on foreign aid, conflict and political factors have kept poverty as a driving factor. In the last two decades, however, things have started to improve. The “middle class” has doubled in size from seven to thirteen percent.
  2. Religious Conflict & War. Political conflict has drastically increased over the years. Terrorism and the rise of religiously-motivated insurgent groups have forced the hand of several governments. As a result, defense spending around the world has risen steadily since 1995 to $1.7 trillion. While terrorism may be on the rise, the good news is that diplomacy and peace efforts have decreased the number of civil wars and intra-state conflicts around the world from 16 per 100,000 to about 1 per 100,000.
  3. Political Polarization. Political polarization has skyrocketed with the rise of social movements across the world. States have experienced internal strife from events such as BREXIT or the U.S. election of President Donald Trump. PEW claims that the U.S., specifically, has become more polarized than ever. Since 2004, the U.S. has reportedly seen a rise in political partisanship. Bi-partisan groups and organizations, such as the Bipartisan Policy Center, have been actively working to promote a more collaborative political arena.
  4. Government Accountability. Throughout the world, political scandals have led to a distrust of government. Specifically, in the U.S., reports say only a third of Americans trust the government to “do what is right.” Advancements in tech and China’s new surveillance policy do not help. Skepticism on such issues has led to a rise in social movements which have been key in influencing policy.
  5. Education. While education has significantly improved in the last century, there still remains a lot of work to be done. Inequality between genders in specific parts of the world has emerged as a large part of the question. The Malala Fund reports 130 million girls across the world lack proper access to schooling and actively addresses this issue through advocacy.
  6. Food and Water. Currently, 1 in 9 people lack access to clean water across the world and the same ratio are malnourished. The emergence of new technology in agriculture and increased awareness, however, has improved conditions. Several organizations, such as the World Health Organization (WHO), are addressing the issue on the ground and through political influence.
  7. Health in Developing Nations. Statistics has widely shown that aside from malnourishment, access to clean and affordable living conditions has lagged in the developed world. Life expectancy in developing nations is on average 14 years behind developed nations’. Overall health, however, has increased over the years, thanks to organizations such as WHO.
  8. Credit Access. One of the driving factors in continued poverty is the lack of access to credit. Without stable financial services, it becomes difficult for developing nations to grow at a sustained rate economically. Studies show that access to credit can improve economic prospects.
  9. Discrimination. Discrimination covers a wide breadth of issues and takes several forms. Recently, in light of new social movements, it has garnered more attention. Wage gap issues, income inequality, education wage premiums and other problems have appeared at the forefront of social movements. These movements have shown promise for change – the #MeToo movement has brought several employers to justice.
  10. Physical fitness. Obesity has become a global issue. The lack of physical fitness programs and extra-curriculars have created significant issues that could affect future health. Recently, the number has exceeded 39 percent of individuals around the world being overweight and 13 percent being obese. Efforts by the government and even media have started to turn the tide. Professional organizations such as the NFL have implemented Play60 programs to emphasize nutrition and fitness from a young age.

Imminent Progress 

The biggest issues in the world are critical, but not insurmountable. Many have seen concrete progress over the past few decades, and all of them have the attention of different groups and organizations working to improve them.

Continued awareness and effort can ensure these issues have a smaller impact on the world in the future.

– Mrinal Singh
Photo: Flickr

 

Credit Access in Croatia

Croatia, a quaint European country tucked away in the Adriatic Sea, appears to thrive in the Mediterranean. Tourists flock to its squares, and its people show an optimism and cheery spirit. Economically, however, the country has struggled in the past due to external political factors that have had an impact on several parts of Europe throughout the 20thcentury.

The Croatian Economy

Croatia’s problems started long before it became an independent state. Prior to 1991, Croatia had been a part of Yugoslavia. Its communist-based planned economy was successful at first, but it quickly fell apart due to mismanagement and human error. After the planned economy and communist movement fell apart, Croatia experienced high episodes of hyperinflation and inequality. In the past two decades, however, the situation has gotten better.

Croatia has improved significantly from its earlier days of economic turmoil. Despite having a growing economy, the state struggles with the issue of credit access, especially for small businesses. Recently, this can be attributed in part to the 2010 European financial crisis that had an impact on smaller countries on the continent. Challenging market conditions had made it so that receiving credit was harder than usual. In 2008, only 42 percent of Croatians had access to financial services. Since then, Croatia’s economy has stabilized, but the issue of credit access still remains.

Credit in Croatia

The issue is significant. The term ‘credit access’ encompasses a wide variety of financial institutions not limited to strict agencies providing services. Underdeveloped ATMs and local banks create a roadblock to future growth. In order for progress to be made, there have to be several changes made in the infrastructure to unlock the potential in Croatia’s economy.

Legally, there are several hurdles that make changing credit access in Croatia an issue. First, there is the need to alter the legacy banks and institutions in the area. Historically, Croatia has not had a strong financial history, and a large part of its population has grown accustomed to the lack of resources.

In one report, the authors claimed only 14 percent of Croatians were being properly served by the nation’s financial markets. In order to improve this number, there needs to be an institutional change that starts at the legal level.

Currently, around 30 percent of individuals have stated that they had issues with making ends meet. This comes in the context of job insecurity with 29 percent of workers fearing they could lose their jobs in the next six months. The lack of credit access has compounded this worry since these individuals already find their financial situations to be unstable.

Solutions for Improving Credit in Croatia

In other nations, improving credit access has had tremendous success for the economy. Around the world, it has shown to decrease child labor and diversify assets for the poor. Studies have also linked improving credit access to positive agricultural growth. These improvements, undoubtedly positive in nature, have been accomplished at the small price of involving other nations in national affairs.

Similarly, to instigate change through credit access in Croatia, the state has to look to allied nations in Europe as models. Croatia’s membership in the EU may serve it well. Calling upon partnered countries to aid in this specific problem could actually strengthen The EU as a whole. Helping out with the credit issue in Croatia could lead to more benefits than expected with neighboring countries being able to benefit from a more stable trade partner. With an underserved population, there are also business opportunities for several nations to cash in on.

A Brighter Future

Recently, efforts have been made to improve credit access and the Croatian economy in general. To attract investors, the state has repeatedly made tax payments easier for companies. In 2012, Croatia created a private credit bureau to “collect and distribute information on firms” to improve the system and stimulate credit access. These changes have the potential to spur the economy in Croatia in the coming years.

The movement to focus on the economic situation in Croatia has significant implications. Not only could credit access improve but it could also help stimulate regional economic growth and increase jobs. New financial institutions would improve banks and create positions of skilled labor that could attract immigration as well. Improving the financial stature of Croatia could improve its economy in more ways than one.

– Mrinal Singh
Photo: Flickr

Credit access in the Marshall Islands
The Marshall Islands are not a dominant country in the international sphere. Home to only 70,000 people and largely separated as tiny islands that string across the Pacific, the Marshall Islands, and with them their people and businesses, are disconnected from much of the world. Although they lack economic significance in most regards, the Marshall Islands are valuable assets that should be protected and considered when discussing credit access and other business-related activities.

Credit Access Relating to Natural Disasters

Credit access in the Marshall Islands, while small when compared to more developed countries, is an important aspect when considering the looming threat of climate change and the impacts it may have on business development and activity. According to many reports regarding the financial aspects of the Marshall Islands, related relief related to natural disasters is a large component of the credit conversation in the country.

One of the main issues with credit access in the Marshall Islands, whether relating to natural disasters or not, is the limited amount of individuals who are able to oversee and initiate credit activity. As the Pacific Catastrophe Risk Assessment and Financing Initiative reports, “authority lies with a few key individuals who are also responsible for many other portfolios of work.” Already constrained by their regular duties, these authority figures are further stretched when natural disasters take place and require immediate attention. The impact of climate change is growing in this area of the world with rising sea levels, acidification of crops and infrastructural damage, and credit access in the Marshall Islands seems to be entering a time of greater complexity, with few people able to navigate the system.

U.S. Foreign Aid

The Marshall Islands are currently receiving significant levels of aid from the United States. Since 1986, the U.S. has committed roughly $46 million per year to the Marshall Islands, focusing on boosting economic standing within the country. While international aid is a positive aspect as a whole, the fact that a significant portion of the economy and its associated activity rely on outside help is a point of concern, especially because the U.S.-Marshall Island aid agreement is ending in 2023. Foreign aid fluctuations or, in the extreme case, suspension of all aid, could result in disaster for the Marshall Islands and their people.

The Marshallese face not only the prospect of being unable to create and establish new business ventures with a lack of adequate credit, but the possibility that credit already in place could be severely undercut. Credit access in the Marshall Islands is already limited, and international aid is essentially the only aspect keeping the nation afloat.

Difficulties With Microcredit

Microcredit activity is another financial aspect being considered in the Marshall Islands; however, complexities with this activity are also concerning. As the Enterprise Research Institute (ERI) explains, microcredit activity requires “substantial expertise” and diligent follow up, which often prove costly. The ERI finds another issue with microcredit initiatives in the fact that, “usury laws impose a ceiling on lending charges at an effective nominal interest rate of 24 percent per year. This amount is below the minimum sustainable level of successful microcredit institutions in other countries.”

Individual Credit Access

When taking a closer look at individual access to credit, the situation is not much better. While legal rights are widely acknowledged throughout the country, the depth of credit information is severely lacking; the Marshall Islands scored a 0 out of 8 in the category for depth in credit information index. Not only is credit access misunderstood throughout the country, but basic information regarding this area of concern is either limited or held from view. Additionally, the Marshall Islands placed 90 out of 190 countries in the category of “getting credit.” While not at the bottom of the list, there is still substantial room for improvement.

While the Marshall Islands are home to a small population and an economy that predominantly relies on agricultural activity, access to credit remains an important aspect within their economy, especially when considering the looming impacts of climate change on economic activity. Not only is Marshallese credit access reliant on foreign aid from countries like the United States, but it is becoming increasingly tied to the topic of disaster relief. Credit information is limited nationwide, microcredit activity is seemingly non-applicable and authority figures who can properly handle the allotment of credit are already few and far between. As of now, credit access in the Marshall Islands resembles the physical layout of the country: underdeveloped, propped up by international aid and under the constant threat of natural disasters.

– Ryan Montbleau
Photo: Flickr


Credit access in Zambia is limited with only 38 percent of adults having some level of formal financial inclusion. While this number represents progress — as that percentage used to be a mere 23 percent — it also indicates that there is still room for development in the private and financial sector of Zambia.

The Financial Sector Deepening Zambia (FSDZ) is making a substantial effort to increase the availability of financial services and credit access to individuals in Zambia. By working with financial service providers, policymakers and civil society, FSDZ is creating an environment of greater financial inclusion in Zambia.

The Root of the Lack of Credit Access

One of the largest economic drivers in Zambia and several other developing countries are Small and Medium Enterprises (SMEs). SMEs are pivotal to increasing the economy, as they often provide opportunities for low-income people and contribute to Zambia’s GDP by creating growth opportunities. In Zambia, the SME sector comprises approximately 97 percent of all businesses.

However, a majority of SMEs in Zambia face obstacles when attempting to gain support from Financial Service Providers like banks and microfinance institutions to grow their portfolios. According to a business survey conducted in Zambia, a majority of SMEs do not belong to a formal business association or network. Due to this, business owners and farm owners often can only rely on their limited network of friends and family for business, which is not a sustainable growth model.

Conversely, financial institutions emphasize that SME owners often do not have the capacity to prepare bankable business proposals, which was a large constraint to accessing finance. Better relationships between Financial Service Providers and owners of SMEs may create a path of greater understanding and thereby greater financial inclusion.

Long-Term Effects of Enhancing Zambia SMEs Access to Finance

Improving credit access in Zambia and addressing its financial inclusion strategy is key to not only increasing formal financial inclusion but also to growing and developing Zambia’s ever-changing economy. Increasing financial literacy among small and medium enterprise business owners will allow them advocate for themselves among financial institutions. Organizations like International Trade Centre (ITC) work to do just that, facilitating access to financial supply for SMEs with high growth potential.

So far, ITC has provided 105 growth-oriented small or medium enterprises with business development training and individual counseling that improves business management. All of the SMEs that underwent training developed growth strategies that helped them increase sales, invest in new technologies and hire more staff. Through the timeframe of the project, 50 percent of the SMEs that received support and training were able to access formal finance.

The Ripple Effect

Increasing financial inclusion in Zambia will have a ripple effect: if Financial Service Providers provide access to services to owners of SMEs, then SMEs will have more room for growth. If SMEs grow their businesses, then there will be more opportunities for employment, especially for the country’s poor, thereby decreasing poverty rates.

There is still much that needs to be done for Zambia to become more stable as an economy. However, if business owners receive more access to formal financial institutions, then credit access in Zambia will produce many opportunities for its citizens, lead to a more robust economy and alleviate poverty rates.

– Shefali Kumar
Photo: Flickr