Credit access in Jordan
Credit access in Jordan has improved dramatically over the past two years thanks in part to changes in the regulation of funds by the government and the creation of newer, better lending programs across the country.

This year, global indicator, Doing Business has given Jordan’s overall credit access performance a ranking of 159 out of 189 countries, which shows an increase from a dismal 2016 ranking of 185 out of 189 countries. The continued improvement of these numbers will hopefully help Jordan to start pulling itself out of its nine-year stagnation of economic growth.

Background of Credit Access in Jordan

Lack of credit access in Jordan affects all citizens, but especially small and medium-sized enterprises (SMEs). In 2016, SMEs accounted for an estimated 98 percent of all Jordanian business and affected 40 percent of the country’s GDP.

A 2011 survey by the European Bank for Reconstruction and Development (EBRD) reported that 70 percent of SMEs considered themselves ‘credit constrained’ and thus had to put plans of growing and improving their business on hold.

Before the recent creation of new lending systems, SMEs found themselves having to choose between going to one of the many banks in Jordan for a loan and utilizing non-profit microfinance institutions (MFIs). Each of these methods proved to have significant flaws that made accessing credit impractical, if not impossible.

On the one hand, banks found it difficult to work with SMEs as most of them did not have enough collateral to mitigate the risk of providing the smaller business with a loan. On the other hand, while MFIs can provide loans to SMEs without the necessity of collateral, a system of regulation for MFIs did not yet exist within the Jordanian government.

Without regulation, interest rates varied wildly between MFIs, with some of them even going beyond the legal standard. As no clear method of recording credit existed, clients reported receiving the wrong amount of funds.

Remedying the Situation

Providing businesses with alternative forms of funding seems like the best method of helping them cross over the current financial gap. The Jordanian government, as a 2016 Oxford Business Group article reports, has already begun to put forward “initiatives with banks and multilateral institutions to offer more credit to smaller businesses”. The creation of the first credit bureau in Jordan, for example, will hopefully provide a more regulated method of credit access in Jordan than MFIs.

SMEs can also look into more private funding programs. The peer-to-peer lending program liwwa, for example, allows any SME with “business operations that are managed ethically” to apply for loans and, if accepted, campaign to receive loans from an individual or institutional investors. The program also helps regulate these funds by offering such services as negotiating overdue loan repayments with borrowers and investigating the businesses of borrowers to assure qualification. While the program has only processed 305 loans so far, this number can hopefully grow in the future.

The Jordan Loan Guarantee Corporation also provides SMEs with a more accessible finance option by acting as a facilitator between borrowers and investors. Created by a collaboration of USAID with the Overseas Private Investment Corporation (OPIC), this program supports businesses that “(1) have a well-defined marketing opportunity to start-up or expand, (2) need financing to achieve their goal; but (3) lack the collateral banks usually require for making loans” by offering a ‘loan guarantee’ to possible investors (mostly banks in this case). A loan guarantee means that in the case of a borrower defaulting on their loan, a business like JLGC will pay the investor back a large percentage of their investment. So far, the program has issued over 214 loans guaranteed and allowed SMEs to access over $50 million in finances.

Further success in these programs will provide SMEs with the opportunity to expand and thus create more job opportunities for those currently struggling to find employment. Along with this, if credit access in Jordan continues to improve, financially constrained entrepreneurial individuals will have more opportunity to create their business ventures.

Both of the aforementioned benefits can allow even those in poverty to change their social status and become consumers. This, along with expanding businesses, will hopefully improve Jordan’s rate of economic growth.

 – Lyz Frerking
Photo: Flickr

Credit Access in São Tomé and Príncipe
São Tomé and Príncipe (STP) are two islands of volcanic origin located off the coast of western Africa. Since the late 1400s, Portugal began settling convicts on São Tomé and Portuguese became the most commonly spoken language. The island successfully established sugar plantations and became extremely significant shortly after in the transshipment of slaves.

São Tomé and Príncipe

Portugal finally recognized the independence of São Tomé and Príncipe after the coup in 1974. In 1995, Príncipe assumed autonomy and established a multiparty democracy in their 1990 constitution.

Today, the islands have a unitary state comprised of roughly 200,000 people. The country is small, leaving it very fragile to economic shifts, and recent studies estimate that 62 percent of the population is impoverished. Urban poverty is also high because of the limited employment opportunities.

Nevertheless, São Tomé and Príncipe performs high on the UNDP Human Development Index. The gross primary school enrollment is at an astounding 110 percent, and access to basic needs continue to improve. For instance, 97 percent of the population has seen an increase in access to water, and 60 percent of the population can access electricity.

Room For Improvement

The government of São Tomé and Príncipe has implemented several tactics to improve the business sector; however, the country still has issues maintaining its recent levels of growth. The challenges they face are predominantly due to:

  • The government’s delicate economic situation
  • A banking industry with low-performing loans and insufficient capital
  • Outside imbalances

Unfortunately, São Tomé and Príncipe has a small island economy. There is no single economic endeavor that has acted as a driver of growth. Agriculture is mainly used to support the economy, but in recent years it has not been able to counteract the rise of imports; government expenditures have become the principal driver in the country’s growth. The government has been investing in oil exploration and yet production isn’t anticipated until sometime after 2020.

Credit Access in São Tomé and Príncipe

Fortunately, São Tomé and Príncipe has seen some progress in credit. The decade before 2013, the small nation saw a growth in loans for construction, consumption and trade. This growth is likely a result of the potential oil production, but the most recent years have not seen this access.

Credit exposure to specific sectors is very dangerous to STP. In 2015, credit given to the construction sector was mostly offered by one bank. The same can be said for the manufacturing and tourism sectors; however, this comes as a great threat for credit access in São Tomé and Príncipe, as concentration in one bank can make banks susceptible to industry-specific shocks.

Banking and Government Sectors

Banks in STP also face the issue of high operating costs — particularly in utilities like electricity and technology infrastructure — which causes credit access in São Tomé and Príncipe to become at risk. Moreover, in 2015, there was an influx in provisions for loan losses, further troubling the banks. Banks have likewise confessed that since 2013, negative earnings have been on the rise.

The government of STP is working to address the imbalances in the economy by improving domestic revenue, controlling spending and implementing improved management. Public officials are also attempting to secure outside financing through grants and loans. They believe that by supporting economic activities, there will be an increase in earnings from exports.

Furthermore, the government is working to implement policy changes believed to progress the credit market. With these policies, access to credit access in São Tomé and Príncipe is projected to improve and will create opportunities for families at the lower end of income distribution.

Fiscal Success

The World Bank currently works with São Tomé and Príncipe to address their economic issues, and it is believed that the financial sector will greatly improve with increased access to credit in São Tomé and Príncipe. Better-quality credit access and improved energy are the country’s strongest chance to fix their economic problems, and both the agriculture and tourism industries would greatly benefit from better access to loans.

These changes could pull the country, and its most disadvantaged members, out of the fiscal danger zone and on into financial success.

– Stefanie Babb
Photo: Flickr

Credit Access in Mali
Mali is a landlocked country located in West Africa with a population of approximately 18 million people. While the national poverty fell from 55.6 percent in 2001 to 43.6 percent in 2010, Mali remains 175th out of 188 countries on the United Nations Human Development Index.

Diagnosing the Problem

Credit access in Mali stands out as one the leading impediments to economic growth. A smallholder farmer is refused a loan seven times out of ten because of the high risk and unpredictable nature associated with the agricultural sector. This difficulty accessing credit is only further compounded by the fact that about 80 percent of the entire labor force actively participates in farming.

Credit serves an important role in the growth of developing countries’ economies. Increased credit access in Mali is essential for allowing farmers, businesses and consumers across Mali to utilize investment capital and thus help expand economic activity. If 70 percent of farmers are refused loans from the start in a country where 80 percent of the workforce is engaged in farming, significant economic growth becomes nearly impossible.  

Moussa Sylvain Diakite, a mango producer and exporter in Bamako, explains this discrepancy noting that “Malian banks have a commercial focus and not an agricultural one which is why they struggle to accompany agricultural activities.”

Improving Credit Access in Mali

One of the leading initiatives to improve credit access in Mali is the Agricultural Competitiveness and Diversification Project. Led by the Malian government and the World Bank, the program hopes to provide financial support to both individual Mali farmers seeking credit and commercial banks. By enfranchising Mali farmers and reducing risk for commercial banks that offer them loans, the Agricultural Competitiveness and Diversification Project will help scale agricultural production and the number of small and medium enterprises throughout Mali.

Above all, the Project works to “reduce the risk of investing in agriculture endeavors through technical assistance, new technologies, and greater knowledge of the supply chain and key actors,” according to World Bank Agribusiness Specialist Yeyande Kasse Sangho.

Benefits of Greater Credit Access in Mali

Researchers who partnered with Soro Yiriwaso, a microfinance institution in Mali, conducted a two-stage randomized evaluation in 198 villages in rural Mali. The findings point to agricultural lending as an effective means of increasing investments in the agricultural sector, as well as increasing profits and yields.

Village households which were offered loans spent about $10.35 more on fertilizer and $5.08 more on herbicides and insecticides than the households in villages that did not get loans. These loans also contributed to an increase in the value of agricultural output by $32. Many of these households also received grants invested 14 percent more on inputs than households that did not receive grants. Those households also saw output and farm profits increase by 13 percent and 12 percent, respectively.

As the relationships between farmers and commercial banks strengthen, credit access will only continue to spread in Mali and enable further economic growth. With continued efforts and projects as the ones mentioned above, there’s significant hope that the focus on credit access in Mali will serve as an example for the economic development of other impoverished regions.

– McAfee Sheehan
Photo: Flickr

Credit Access in Fiji
To many people around the world, Fiji and its hundreds of islands are known as a peaceful Pacific vacation getaway. While Fiji certainly profits from its lively tourism industry, life for the more than 900,000 citizens of the island nation is much more complex. Read further to learn more about credit access in Fiji.

Fiji gained independence from the U.K. in 1970 and has gone through intermittent periods of political strife since then. Despite this, Fiji’s natural resources and tourism potential have helped make Fiji become one of the most developed Pacific island nations. Not every Fijian enjoys the benefits of this development, though. Nearly a third of Fiji’s citizens live in poverty. Part of the reason for this high number is the ongoing struggle to achieve credit access in Fiji.

Managing Credit in Fiji

Developed and developing economies alike rely on banking and credit to drive innovation, investments, infrastructure and purchasing power. Fiji’s is no exception.

Fiji’s banking system is overseen by the Reserve Bank of Fiji (RBF). The RBF provides services to the government as well as licenses to the six banks that do business in Fiji. It also regulates how much those banks can dip into their deposits which enables the RBF to maintain the delicate balance between not allowing enough credit and letting it go unchecked.

While the infrastructure for banking exists, credit access in Fiji is simply nonexistent for many citizens. This stifles chances for the country’s economy to grow and for Fijians to lift themselves out of poverty. The government recently started taking steps to address this problem.

Tapping into Fiji’s Wealth

The government is partnering with the Asian Development Bank (ADB) to implement secured transaction reform. Such reforms would allow Fijians to use their non-monetary wealth (such as vehicles, goods or crops) as collateral for loans.

In a country where accessing loans is difficult for many people and businesses, the ability to access non-monetary wealth opens up new avenues for credit access. While these collateral loans could be risky for some individuals, it will increase the lenders’ confidence and help stabilize the growth of the Fijian economy.

Fiji’s Financial Literacy and Innovation

The national government is also taking internal steps to pursue the goal of widespread credit access in Fiji. In 2010, it formed the National Financial Inclusion Taskforce (NFIT). Its purpose is to encourage long-term economic growth and help lift Fijians out of poverty by providing better access to banking.

NFIT has had an uphill climb right from the start. Even after four years of progress, there were still 150,000 unbanked Fijians in 2014 and a full third of Fijians are underserved by banks.

A significant part of NFIT’s efforts have been aimed at improving citizens’ financial literacy. Especially in rural areas, many Fijians lack the basic knowledge they need to engage in the banking system. The same year it was formed, NFIT launched a nationwide campaign to ensure that the broader access to banking achieved would not go to waste. The campaign even has a mascot—a turtle named Vuli the Vonu.

One of the more encouraging developments in the process of spreading credit access has been the rise of digital financial services which Fiji launched in 2010. For the first time, Fijians could digitally bank, pay bills and even transfer money to businesses and families across islands. Digital banking covers 80 percent of Fijians’ financial needs and provides access to financial services even on remote islands where there aren’t any physical banks.

There is room for improvement in Fiji’s credit system, but it’s certainly encouraging to see that steps are already being taken to stimulate growth and provide tens of thousands of poor Fijians with access to banking.

– Josh Henreckson
Photo: Flickr

Financial Services in Sub-Saharan Africa
As of 2014, more than 60 percent of adults in Sub-Saharan Africa did not have bank accounts. However, with the growth of digital financial services — including mobile money accounts — companies and organizations work to help more individuals access financial services in Sub-Saharan Africa.

Increasing Access to Financial Services

Overall, financial access benefits Africans by making it easier to save money, receive loans (often for entrepreneurial purposes), and prepare themselves for abrupt changes in the economy. The traditional banking sector in Sub-Saharan Africa has struggled for over a decade, due to “limited physical banking infrastructure and substantial levels of poverty and financial exclusion.”

As a result, mobile money accounts have become increasingly popular in Sub-Saharan Africa, and are the primary reason that financial inclusion has been improving over the past few years. The Partnership for Financial Inclusion was formed in 2012 with the goal of increasing access to digital financial services in Sub-Saharan Africa. Since then, the organization has helped more than seven million Africans become more financially secure.

New Tech Brings New Worries

However, persuading Africans to use digital financial services is not always easy. The Partnership for Financial Inclusion found that many have grown accustomed to using informal financial services and are often mistrustful of formal banking systems. Additionally, they may also be skeptical of new technology or lack the knowledge necessary to use it. Fostering trust in new digital financial services is crucial and primarily driven by banking agents, who help individuals understand and use these services.

The spread of digital financial services increases demand for banking agents, which in turn, creates new job opportunities for Africans. Many DFS (digital financial service) agents are small-scale business owners who have begun offering banking services to their customer base, while others are primarily banking agents, hiring others to help expand their network.

DFS Perks for Women

Interestingly, a study by the International Finance Corporation found that women tend to be more successful than men at being DFS agents. While gender bias prevents many African women from being successful entrepreneurs, some have been able to become thriving DFS agents. On average, female agents register 12 percent more transactions per month than their male counterparts. This could be due to the fact that more female agents were located in low-income areas where these services are less readily available.

The overall success of these banking agents and the growth of trust in digital financial services is reflected in the fact that globally, most of the markets that had more mobile money accounts than traditional bank accounts in 2015 were located in Sub-Saharan Africa. This region is leading the world in the adoption of digital financial services, which companies hope will encourage entrepreneurship and create jobs.

Future of Digital Financial Services in Africa

For small-scale entrepreneurs in particular, DFS are very beneficial. Madagascar entrepreneur Voahirana Mamy Ravelonoro explained the ease with which she was able to get a loan for her restaurant because of these services. She received a text message that she had been approved for the loan, and all she had to do to receive the money was show the banking agent the message and verify her identity.

Additionally, companies, including FinTech and Kalon Venture Partners, are committed to investing in African entrepreneurs, with the goal of creating jobs, increasing GDP, and improving access to financial services. In 2016, investments in startup companies increased by 33 percent. According to IT News Africa, FinTech companies “are looking to go after African problems and opportunities,” improve financial access and spur job creation and the spread of technology.

Kalon Venture Partners is dedicated to investing in “high growth technology companies, with innovative business models, geared to existing and emerging institutions and their consumers.” CEO Clive Butkow refers to Africa as new frontier with “incredible financial inclusion opportunities.”

With the increase in digital financial services and and investments in African entrepreneurs, the percentage of Africans without access to financial services in Sub-Saharan Africa should continue to decrease, eventually improving financial stability throughout the region.

– Sara Olk
Photo: Flickr

Credit Access in the Maldives

Maldives is made up of over 1,100 islands with a population of 400,000 people. According to Maldives Monetary Authority (MMA), they are trying to facilitate potential credit access with measures like the Credit Information Bureau and the “Credit Guarantee Scheme for small- and medium-sized enterprise financing.”

The Credit Guarantee Scheme

Launched on August 7, 2016, the Credit Guarantee Scheme was set up to encourage banks to loan money out to small- or medium-sized businesses, so that individuals can have easier credit access in the Maldives. The program was started for businesses, under normal circumstance, that were unable to secure a loan.

The Credit Guarantee Scheme “will guarantee 90 percent of the loan granted by the participating banks to commercially viable small- and medium-sized enterprises,” according to the MMA. For the program to work, businesses have to meet the following criteria:

  • The business must be registered with the Ministry of Economic Development as a small- and medium-sized business.
  • All shareholders/owners must be Maldivian.
  • The business should be registered with the Maldives Inland Revenue Authority.
  • There should be no overdue loans at any bank or financial institution.
  • The business must be financially viable.

The loan amount can either be 100,000 rufiyaa (approximately $6,450) or 1,000,000 rufiyaa (approximately $64,480). The interest rate is 9 percent and the repayment period is five years. The borrower can have a grace period of six to 12 months with zero collateral and an equity contribution of 20 percent. According to the MMA, in 2016, a total of 68 applications were submitted with a total value of 44,628,896 rufiyaa (approximately $2.9 million).

The Credit Information Bureau

The Credit Information Bureau, the first system of its kind for Maldives, holds the credit information of individuals who are requesting credit. According to Minivan News, “the creation of a formal mechanism for sharing credit information will improve access to finance for small and medium enterprises.”

Maldives’ main income is due to tourism and fishing. According to the World Bank, Maldives is considered to be an upper middle-income country because of the returns of tourism. Maldives poverty “declined from 23 percent in 2003 to 16 percent in 2010 based on the national poverty line.”

Maldives has also experienced a growth in the Gross Domestic Product (GDP). While the rate has been steady in developed countries, Maldives growth is relatively higher. According to Bangladesh Bank, the average growth in the last four years “has been approximately 6.8 percent, which is significantly higher compared to regional growth rates.”

The Maldives are attempting to establish credit for its people so that they’re able to open their small- and medium-sized businesses that were unable to apply for credit before. This not only helps the country but the individuals as well, so they have credit access in the Maldives.

– Valeria Flores
Photo: Flickr

Credit Access in Romania
Given its turbulent history throughout much of the twentieth century, it is inspiring to see Romania’s economy thrive. Romania experienced economic difficulties as part of the Soviet Union and was especially hard hit by the recent global recession. Despite its recent accomplishments, Romania still has many economic woes including a high poverty rate. With its problems, credit access in Romania is essential if the country wishes to alleviate some of its economic hardships. After its most recent elections, the Social and Liberal Democrat parties formed a coalition government. Many of the coalition’s goals and priorities centered on economic issues, some of which include: the improved absorption of European Union (EU) funds and a focus on securing investments in infrastructure and health care, reforming the pension system, and simplifying tax administration.

Poverty in Romania

Generally speaking, much of Romania’s wealth does not “trickle-down” to all of its citizens, which explains part of the country’s problems with combating poverty. The World Bank cites the following statistics regarding poverty in Romania.

  • Romania has one of the highest poverty rates in the EU.
  • The share of citizens at risk of poverty after social transfers increased from 21.6 percent in 2010 to 25.3 percent in 2016.
  • There was a decrease in the share of the at-risk population in Romania: from 41.5 percent in 2010 to 38.8 percent in 2016.

Economic Reform

Much of Romania’s financial system needed reform before its acceptance into the European Union in 2007. Romania’s financial systems were in ruin after the collapse of the Soviet Union in 1989 so the European Union urged the Romanian government to reshape its financial sector in order to better adjust to the new, open-market economy of the EU. Because of its reshaping and restructuring, the Romanian economy was the second fast-growing in Europe in 2017. The World Bank predicts that the Romanian economy will continue to grow.

New legislation regarding access to credit was passed in Romania in 2016. Elena Iacob, an attorney who has analyzed the legislation, concluded: “It remains to be seen whether the various measures enacted by recent legislation will actually help the consumers to have access to more fair terms and affordable credit to satisfy their needs, or, on the contrary, will ‘help’ to the raise of the cost of the credit and to the demise of the market for residential real estate development, already weakened by the economic and financial crisis.”

Benefits of Credit Access

Credit access in Romania would potentially give Romanians more purchasing power. Romanians could spend their money on things they have always wanted, or they could save that money for the future, in preparation for healthcare expense or for a relative’s education. With more disposable income, Romanians could funnel more money into their economies, strengthening their own local and national economies as well as that of the EU.

Iacob’s analysis is cautiously optimistic about Romania’s economic future. While unsure of the effects of the new legislation, Iacob argues that the legislation does favor the consumer. Hopefully, with greater credit access in Romania, many will be able to better themselves financially, all in an effort to lessen the country’s poverty rates. Given its recent economic advances, credit access in Romania could allow the nation to increase its standing and influence in the EU while becoming a shining example of the successes in the war on extreme poverty.

– Raymond Terry
Photo: Flickr

credit access in Uzbekistan
Uzbekistan is setting strong economic precedents for the European and Central Asian region. New supportive legislative policies have increased government spending on education and training programs. Global economists argue this is one of the main reasons Uzbekistan’s GDP has increased by more than eight percent the past three years.

Recent economic success is also attributed to growing economic freedom allowed by a currently changing Soviet-style economy. Uzbekistan has the most diversified economy in Central Asia. This provides an increase in GDP per capita, which has been increasing steadily over the past three years as well. Improvements in GDP per capita are strong indicators of improvement in personal living standards.

At present, the service sector accounts for about 45 percent of GDP. Examples of common Uzbekistan services include car repairs, the medical industry, teaching and the food industry. Not far behind services lies industry and agriculture. Uzbekistan is the world’s fifth-leading cotton exporter and seventh-leading producer.

Economic projections for the private sector show a steady increase over the next few years. Fiscal space in the government budget allows the economy to increase stimulus without increasing public debt. This leaves the public to continue growing in wealth while working simultaneously to steadily boost GDP.

The Banking System

Credit access in Uzbekistan is likely to increase due to recent banking growth. More money circulating through the Uzbekistan economy raises banking lending power. In the past, Uzbekistan banking systems limited access to foreign investments due to governmental regulations. Almost all money contributed had come from the domestic system.

Exclusive banking provided benefits such as domestic accountability. An increase in Uzbekistan credit access relied on loans by the population. Other past pros to this system included resilience to global financial crises. Banks proved most effective in 2014 when domestic capital injections provided immunity from failing global counterparts.

This, however, has changed in 2018. Total banking capital increased 26 percent in 2014, and this year banking directors met to discuss boosting central bank interdependence with foreign allies to target foreseen inflation rates.

Banking directors continue to emphasize the importance of regulation to create and maintain a newly inclusive baking system. The new system would include an interactive global policy regarding foreign loans and cooperation.

Personal Credit Access in Uzbekistan

Smaller banking also influences credit access in Uzbekistan. A closer look reveals smaller economic changes, some of which include assistance from the International Finance Corporation (IFC). The IFC is a member of the World Bank and works to improve business in the private sectors of developing countries.

Private sector investments from the IFC have improved credit access in Uzbekistan in several ways. For example, the financial Markets Infrastructure Program (2009 to present) aims to create and improve credit information sharing. Members of the public can now receive an accurate prediction of loan repayment possibilities.

The current program also educates possible loan participants on formal risk factors associated with taking a loan. The certification for financial institution employees is the most prevalent in this project, as it allows job creation while creating a more knowledgeable private sector.

The Mortgage Market Development Project also instituted public credit access in Uzbekistan by improving mortgage lending procedures in local banks, made possible through set lending practices. Both programs continue today, allowing the general public higher access to jobs, loans and savings options.

Strong Projections

Expansion into the global economic sphere is a huge step for Uzbekistan, as previous years of Soviet-style economics would not have allowed this type of growth. Compared to its European-Asian counterparts, the Uzbekistan economy is at the forefront of balance and diversity.

The shift from exclusive banking to possibly inclusive is a prime example of the forward economic thinking propelling the country forward. Further improvements to liberalize the Uzbekistan economy, establish rule of law, social safety, constructive foreign policy and personal banking are also paving the way for success in the coming years.

– Logan Moore
Photo: Flickr

Rang De Facilitates Peer-to-Peer Microloans in India
According to the World Bank, approximately 20 percent of India’s population is poor. This totals 270 million people. These low-income individuals often lack credit or banking history and are considered too risky to finance by traditional lenders, like banks.

Rang De is a peer-to-peer microlending platform that works to increase low-income Indians’ access to capital. So far, Rang De has disbursed 57,096 microloans in India.

How Rang De Facilitates Peer-to-Peer Microloans in India

Low-income individuals are often unable to access capital from major lenders. Often, this underserved population turns to independent lenders who charge extremely high-interest rates for small loan amounts. Microloans from qualifying lending institutions are an alternative to predatory lenders. Rang De keeps interest rates low, between six and 10 percent.

Loans are financed by social investors, who choose a borrower through the platform and contribute in multiples of Rs.100. So far, 12,443 social investors have helped finance microloans in India.

Interest is used to pay back investors and to fund Rang De’s internal expenses; two percent of interest payments go to each. The rest of the interest payment funds rural partners who conduct literacy training sessions and collect borrower statistics.

Rang De’s Success So Far

Social investors can choose to finance a wide range of borrowers, from entrepreneurs to students to farmers. One example is Pooja Devi, a tailor who secured a loan of RS.10000.

Devi’s husband works at a factory and earns only Rs.7000 per month, too little to pay for their housing. Devi holds a Master of Arts degree but lives in a village with few work opportunities. As a new mother, finding suitable work while looking after her infant has proven impossible.

Devi accessed a Rang De loan to purchase a sewing machine for her at-home tailoring business. Her business is about four months old and she currently earns only Rs.1000 per month but plans to grow her client base. Tailoring at home gives Devi the flexibility needed to look after her infant while providing an additional stream of income for her family.

Ensuring Continued Success for Rang De

Rang De’s cofounder, Smita Ramakrishna, says that Rang De purposely keeps initiatives small so individual lenders receive more assistance. In addition to facilitating microloans in India, Rang De also focuses on increasing the financial literacy of borrowers. “For every sector we work with, we actually design the loan product to make sure that it works for them,” said Ramakrishna.

The majority of Rang De’s microloans in India, 93.25 percent, go to women. To further support this group, Rang De launched a new initiative targeted at women called Swabhimaan. Swabhimaan provides online loan applications and credit scoring. Self-serve kiosks set up around villages serve as portals to the online services. Women will be able to access same-day loans from Rang De with more ease and autonomy thanks to the kiosks.

To tackle skepticism in target borrower communities, Rang De publishes interest rates publicly on its website. The nonprofit also regularly updates social investors and hosts in-person meetings with both investors and borrowers.

Rang De’s hands-on approach and transparent business practices have led to a consistently high loan repayment rate of 93 percent. Ultimately, Rang De’s cofounders believe the innovative initiatives implemented through Rang De will “go a long way in making poverty history in India.”

– Katherine Parks
Photo: Flickr

Credit Access In LibyaThe monetary crisis currently entangling Libyan families has reached unprecedented levels as of late. Credit access in Libya has become a major issue, almost comparable to the ongoing civil war that began in 2014. The only difference is that the latter has somewhat declined whereas the former has become a more rampant issue than ever before.

Starting in 2014, chronic shortages of dinar banknotes and weak valuation of Libyan currency have caused serious problems for Libyans, who are forced to spend their days lining up in front of banks in order to cash their paychecks or simply withdraw some money, only to find out that it cannot be done.

Political Instability a Roadblock to Credit Access in Libya

One of the main factors that has contributed to the lack of credit access in Libya is the precarious political scenario that has effectively held the country hostage. Political stability is all but necessary to kickstart any economy, and Libya has been struggling to achieve this. Ever since the Libyan Political Agreement was reached in Skhirat in December 2015, Libyans have been living under a divided and problematic system.

The eastern part of the country, controlled by the House of Representatives, is based in Tobruk and supported by Field Marshal Khalifa Haftar and his Libyan National Army, but this conglomerate of political and military forces does not support nor recognize the Government of National Accord in Tripoli, which was established by the agreement and has international support.

In economic terms, this unstable political situation resulted in nominal GDP in 2016 falling by more than half compared to 2010, to $33.2 billion from $73.6 billion, and per capita income dropping to $5,000 in 2016 from more than $11,000 in 2010. Furthermore, those who took over the country after Qaddafi’s death kept the regime’s welfare system in place, which has been spending at unsustainable levels. Much of the clientelism, corruption and misappropriation that characterized the old regime has been allowed to continue.

Political instability also has led to a forceful block of hydrocarbon infrastructure by armed militias in the summer of 2013.  Such action caused oil production to drop precipitously, from 1.45 million barrels per day in May 2013 to only 220,000 barrels per day in November 2013.

Immediate Efforts to Address the Credit Access Crisis

The most important step in alleviating the currently disastrous status of credit access in Libya is working towards political stability. However, more short-term efforts to remedy the situation are also underway.

In October 2017, public authorities, businesses and international donors gathered in Tripoli to discuss ways to improve access to finance for entrepreneurs in Libya. Many political authorities were present at the meeting, such as Ahmed Maitieg, Libya’s deputy Prime Minister, and Johannes Han, European Union Commissioner for European Neighbourhood Policy and Enlargement Negotiations. This meeting established a new program funded by Libyan banks to provide €74 million of standard and subsidized loans to small and medium-sized businesses in 2018.

Such strategies can help small businesses survive and grow in the midst of the larger work towards political stability in Libya. Both short and long-term efforts are needed to create lasting stability and resolve the current credit access crisis.

– Luca Di Fabio
Photo: Flickr