Fiscal policy
In developing nations, as well as nations recovering from a crisis such as the COVID-19 pandemic,
fiscal policy is an instrumental tool in revitalizing the economy and alleviating poverty levels. The policies are more than simply “good” or “bad” economics as they are key indicators of a nation’s true political priorities.

In low and middle-income nations, foreign aid and debt relief are invaluable in uplifting their economies. On the other hand, the contributions cannot be fully effective without an effective fiscal system. According to the United Nations, a good fiscal policy centered around poverty reduction, reconstruction and growth will focus on raising the growth rate and fostering lasting economic stability. 

Rising Growth Rate

The International Monetary Fund (IMF) emphasizes that “economic growth is the single most important factor influencing poverty, citing a recent study of 80 countries that revealed that the income of the bottom one-fifth of the population increased in exact proportion with the overall growth of the economy as measured by per capita GDP. In countries recovering from crises, a rising growth rate is one of the most effective ways for an economy to bounce back.

Key Fiscal Policies that Can Promote Economic Growth

  • Shifting Government Spending Away from Subsidies: The World Bank categorizes subsidies as a short-term solution and has indicated that they are typically politically popular because the benefits distribute widely. On the other hand, the World Bank reported that “about half of spending on energy subsidies go to the richest 20%,” as they tend to consume more energy and receive more benefits, leaving the lower-income households with little to show.
  • Investment in Cash Transfers as an Alternative to Subsidies: There is increasing data showing that direct cash transfers are a better solution to important long-run investments within households, such as education. These transfers are more beneficial to the bottom 40% and can stimulate economic activity within communities, and indirectly increase government revenue in both the short and long-term through higher tax revenue. 
  • Implementing a Progressive Tax Structure: A progressive tax structure enables governments to increase welfare benefits, such as unemployment, food stamps and housing benefits to the poor. Tax revenue sources do not change rapidly and improved progressivity in personal income tax, corporate, property, health and carbon taxes offer feasible ways to raise revenue without worsening conditions for the poor. Furthermore, nations may consider indirect taxation, as some of the above methods may not be as effective due to the informality of work in certain economies. Progressive tax structures are most effective in upper-middle-income countries. 
  • Having a National Minimum Wage: National Minimum Wages directly benefit the lowest-paid workers in an economy and reduce wage inequality. A universal basic income (UBI), wherein all citizens receive a weekly benefit to ensure a minimum income guarantee may also be effective.

Economic Stability

Prioritizing spending with long-term impacts is vital in creating a self-sustaining economy that alleviates poverty. Good policies will vary in different country contexts while acting with the future in mind even in crises, despite the fact that the benefits will come to fruition later. Below are some fiscal concepts to stabilize a nation after a crisis and to better prepare for any future challenges. 

  • Debt management is essential to maintain the “fiscal space” for crisis recovery and stabilization. Regulatory reform for financial markets, debt transparency and the implementation of a common blueprint for debt relief and restructuring are useful tools for properly managing national debt. 
  • There are many elements that can equip countries with a strategic plan for an unknown future crisis. First, expanding the reach of automatic stabilizers, such as employment guarantee schemes in nations with a large informal sector, in case of crisis. Setting up adaptive cash transfer programs that can be scaled up when necessary is also a good preparatory measure. 
  • Research and improved data, particularly on the costs and ramifications of certain policy implementations, are essential to maximizing the effectiveness of these policies. Long-term evaluations and research can provide decent indications of long-term outcomes, which is important in deciding which policies are best for unique country circumstances. 
  • In developing economies, a focus on education and diversification of the economy from agriculture to manufacturing fosters a more independent and stable economy. Increased government spending on education cultivates a higher-skilled workforce, and a push towards manufacturing pushes economic development, though proper skills and infrastructure are necessary to accomplish this.

Looking Ahead

Fiscal policy shaped around economic growth and the reduction of inequality has the potential to make great strides toward minimizing poverty. There are limits to the types and degrees of these policies in each country. Therefore, other national policy reforms implemented in tandem with economic policies lead to the best outcome in stimulating growth. Regardless of fiscal policy, foreign aid and international cooperation are invaluable in reducing poverty levels in low-income nations and around the globe.

– Carly Ryan Brister
Photo: Flickr

Money Laundering
At the
G8 summit in 2013 that took place in Lough Erne, Northern Ireland, the leaders of the eight nations committed to a number of measures aimed at preventing the use of businesses and legal arrangements that promote money laundering, tax avoidance and tax evasion, including the G8 Action Plan.

Financial Crime and Poverty

Between April and July 2021, when the rest of the globe was in upheaval, billionaires’ wealth surged by 27.5%, even during a pandemic. Reliable estimates indicate that between $20 billion to $40 billion is stolen annually from developing nations, undermining economic growth and depriving those who need public services the most.

According to a U.N. panel study asking for a global crackdown, systematic tax violations, corruption and money laundering are keeping billions of people around the world impoverished. It claimed that up to 10% of the world’s wealth may be stashed away in offshore jurisdictions at a time when governments are facing mounting budgetary difficulties due to the COVID-19 pandemic and rising inequality. According to a panel of international presidents, governors of central banks and representatives of business and civil society, criminals launder up to 2.7% of the global GDP annually.

The Impact of Transfer Mispricing and Money Laundering on Poverty

According to the OECD, annual tax haven losses in developing nations could be three times greater than annual foreign aid inflows. As an illustration, through transfer mispricing, the Democratic Republic of the Congo (DRC) sold state-owned mines for an incredibly cheap price to anonymous “shell” corporations in the Virgin Islands, only to be sold on to major listed businesses at their market price. Such transactions cost the DRC $1.35 billion USD, which is double the nation’s budget for health and education in a place where 71.3% of the population currently lives in poverty.

Developing nations thus lack the public resources that would give people access to food, healthcare and education to help them escape poverty. Money laundering, on the other hand, has detrimental effects on the economies of developing countries through escalating crime and corruption, lowering foreign investment, weakening financial institutions, compromising the economy and private sector, thwarting efforts at privatization and losing tax revenue. All of the effects are the bricks shaping the foundations of poverty.

G8 Actions Against Financial Crimes

The G8 Action Plan calls for greater disclosure of a company’s ownership and financial details, particularly when it comes to shell corporations that help launder money from questionable sources. The nations vowed to pursue laws that can undergo robust enforcement and have support from “effective, appropriate and deterrent sanctions.”

Now that nations have made the promises that the declaration outlined, each nation will publish a national action plan outlining the specific steps to take. The G8 Action Plan supports the following key concepts that are essential to the openness of ownership and management of businesses and legal structures, subject to our varied constitutional situations and the recognition that a one-size-fits-all approach may not be the most effective.

G8 Financial Crime Principles

  1.  Companies should have adequate, accurate and up-to-date basic information, including knowledge of who controls, owns and benefits from them.
  2.  Onshore law enforcement, tax administrations and other relevant authorities, including, if necessary, financial intelligence units, shall have access to information on the beneficial ownership of firms. Countries should take steps to make it easier for financial institutions and other regulated firms to get information about a company’s beneficial ownership.
  3. Trustees of explicit trusts should be aware of the trust’s beneficial owners, including its settlor and beneficiaries. Law enforcement, tax agencies and other pertinent entities, such as financial intelligence units as necessary, should have access to this information.
  4. In order to reduce the risks to which their anti-money laundering and combating the funding of terrorism system is subject, authorities should recognize them and put in place effective and proportional measures. It is important to tell the appropriate authorities, enterprises that are subject to regulation and other jurisdictions about the findings of the risk assessments.
  5.  It is important to prevent the abuse of financial tools and specific shareholding arrangements that may impede transparency, such as bearer shares and nominee shareholders and directors.
  6. Nations should place effective anti-money laundering and counter-terrorist financing requirements on financial institutions and designated non-financial businesses and professions, including trust and company service providers, in order to identify and confirm the beneficial ownership of their clients.
  7.  Companies, financial institutions and other regulated organizations shall be subject to effective, appropriate and deterrent fines if they fail to uphold their respective commitments, particularly those relating to client due diligence.
  8.  To counteract the misuse of businesses and legal arrangements for illegal conduct, national authorities should collaborate successfully inside their own countries and across international boundaries. Upon requests from international counterparts, countries should make sure that their relevant authorities can quickly, helpfully and effectively give information on basic companies and beneficial ownership.

Looking Ahead

G8’s agenda has enhanced the opportunity to advance the plan that will address illicit finance at the Lough Erne Summit despite the fact that the effects would take time to materialize. The G8’s ability to cooperate in order to launch ground-breaking international projects will determine the degree of success, though. Enhancing financial transparency, good governance, information exchange and accountability must be the main goals of these projects because doing so will significantly reduce the likelihood of criminals being able to access the global financial system.

– Karisma Maran
Photo: Flickr

UniCredit’s Financial Assistance
There is an impending financial crisis in Italy due to rising energy costs in Europe. Energy costs are causing rising prices and inflation rates, and the Italian bank UniCredit announced in early September that it was initiating up to €8 billion ($9.3 billion) in measures aimed at halting the economic downturn. Along with the promised measures, UniCredit’s financial assistance will offer 400,000 homeowners the opportunity to refinance mortgages.

Rising Energy Prices and Inflation in Italy

UniCredit has taken these steps because Italy is fighting soaring prices and climbing inflation rates. The rising prices are due to the energy crisis tearing through Europe as a result of Russia’s invasion of Ukraine. Italy is one of the more Russian gas-reliant nations in Europe, second only to Germany. By the end of 2022, it is estimated that Italy will be spending €100 billion ($99.5 billion) on its natural gas imports. Because Italy imports at least three-quarters of its power, the country is likely to suffer economically as the European energy crisis worsens.

The limits Russia has implemented on its oil and natural gas exports have forced nations to pay incredibly high prices for the resources. The limited exports are due to the conflict in Ukraine. Sanctions on Russian oil have caused an overwhelming increase in oil prices. The latest issue to add to the rising oil costs is the closure of Nord Stream 1, one of Russia’s primary pipelines throughout Europe. The reasoning has been that there was a potential leak in the pipeline, but there has been no progress in repairing the leak nor have any estimates been given on its reopening. The closure has left Russia downsizing its exports, resulting in gas prices in Europe increasing by 28%. These increased costs are causing many European currencies to lose value and inflation rates to rise.

Italy’s inflation rate in August had increased by 8.4% over the year before, which marked a 37-year high. Higher inflation tends to lead to less output and production, which Italians have witnessed already. A decrease in output results in a decrease in minimum wages, effectively sliding many workers into poverty. UniCredit is fighting to avoid any increase in Italian poverty, which is why UniCredit’s measures could not have come at a better time.

Mortgage Payments and Poverty in Italy

UniCredit’s financial assistance comes when Italian mortgage rates are rising, with recently established mortgages more expensive than in previous years. Mortgages with variable rates are suffering from the pressures on the housing market and are increasing so companies and banks are able to keep pace with inflation and the market. If homeowners cannot keep pace with the rising rates or high mortgages, they will likely default on their loans, and the banks could repossess their homes.

In 2020, economic activity dropped. As activity decreased, and before the government disbursed subsidies or the economy shifted to work-from-home economic activity, there were fears of being unable to pay one’s mortgage. According to a survey taken in the spring of 2020, 65% said they would probably be alright. However, a third of the respondents said they would definitely or most likely have difficulty paying their mortgages. This fear has not entirely gone away.

Extreme poverty followed many Italians like a shadow due to the COVID-19 pandemic. By mid-2022, 5.6 million Italian people were in absolute poverty. UniCredit’s measures may help to keep that number from increasing.

UniCredit’s Financial Assistance

UniCredit’s issuing of €8 billion in new loans to cover energy costs and pausing payments will allow millions to re-navigate their finances before surging energy bills and new force them into poverty. A three-month break means enough time to properly refinance a mortgage and get it back in order before payments re-commence. UniCredit’s goal is to help its Italian customers navigate the rising inflation and energy costs, keep customers unburdened from their mortgages and keep the economy working smoothly.

Pauses, more formally called “forbearances,” in mortgage payments have several upsides. The critical thing to remember is that even though the payments are temporarily suspended, there is still an obligation to pay the loans. The homeowner does not need to make mortgage payments during the window of the forbearance but must make them later – usually after the closure of the initial mortgage payment window.

UniCredit’s financial assistance is coming at a crucial time, as the limited gas exports and mounting energy bills are beginning to cause panic in Europe. The Italian government has responded by releasing its stimulus packages earlier in 2022 to generate financial stability for its citizens. In conjunction with UniCredit’s work, the two can help keep Italians out of poverty by creating an economic flow that Italy has struggled to achieve since the beginning of the COVID-19 pandemic.

– Clara Mulvihill
Photo: Flickr

Curbing Inflation in VenezuelaInflation is one of the most significant problems in the world right now, as the global inflation rate rises to 6.7% in 2022, almost double the average of the last decade. This is a consequence of the Russian-Ukrainian war and the effects of the ongoing COVID-19 pandemic. Venezuela, which is one of the most in-need countries in South America has finally come out of one of the longest bouts of hyperinflation in the world after 12 consecutive months of the inflation rate rising below 50%, however, three in four people in the country still lived below the poverty line in 2021. The United States and other major players can still do a lot to help the country and curbing inflation in Venezuela is one of the many solutions necessary to improve poverty and economic stability in the country.

Mounting Challenges in Venezuela

In 2016, Venezuela entered a streak of hyperinflation which is when the rate of inflation increases by more than 50% for 12 consecutive months. In 2022, Venezuela has been able to pull itself out of this downward slide pretty simply. The country ramped up printing money in 2016, which became a real issue at the end of 2017 and caused the recent inflation. This has even been a problem in the United States because innately the more currency circulating, the less each piece of currency will be worth. That, along with deficit spending created one of the worst inflation crises in the world.

The solution to this problem appeared to be just as simple as the cause because as soon as the central government of Venezuela decided to stop printing so much money, the inflation rate eased. Although inflation has been on the decline, poverty has still been on the uptick rising to 76% in 2020. Even though these two statistics would seem to be contradictory there are reasons why simply curbing the inflation in Venezuela is not the end all be all.

Solutions

Curbing inflation in Venezuela is only the first step in a long line in order to help the situation in the country. In June 2022, the U.S. announced more than $314 million in aid to help stabilize Venezuela and the rest of that South American region.

These funds will go to multiple countries and aim to improve education and provide COVID-19 relief along with aid for other basic human needs. These funds will also go toward an effort to help potential migrants leaving the country, fleeing in an attempt to find better financial stability. They will also improve access to health care, which has been a challenge for people to access in Venezuela. As many as 5.4 million people have left the country in 2022 because of the unstable economy.

These funds ensure these people can have safe and productive new lives after leaving the country. Venezuelans will receive access to life-saving humanitarian programs like emergency shelters and obtain health care which has been difficult to access because of Venezuela’s own health care system. The International Rescue Committee (IRC) provided health care to more than 100,000 Venezuelans between 2020 and 2022, and since 2017, the U.S. has donated nearly $2 billion in total to Venezuela and the surrounding region. The humanitarian aid provided to the country has already done a lot to improve the lives of those living there and those attempting to leave. Curbing inflation in Venezuela is a step in the right direction.

Looking Ahead

The inflation crisis is severely affecting the entire world including Venezuela. People are having to leave the countries they call home in search of refuge and the possibility of a better life. A person’s displacement is a life-altering event that can change how they live forever. As more and more countries join in the fight to help Venezuela, hope exists that it will have a bright future.

– Alexander Peterson
Photo: Flickr

Cash Transfers in Government PolicyIn recent years, humanitarian organizations have recognized cash transfers as an effective way to pull children and families out of poverty. In the early 2000s, just a few UNICEF country offices experimented with cash transfer initiatives to reduce child poverty. After a few years, these initial projects and several cash transfer programs implemented by UNICEF in Latin America showed promising results. For this reason, cash transfers form an integral part of UNICEF’s Framework. In fact, as of 2015, more than 70 countries globally are implementing cash transfer programs. These programs show the importance of including cash transfers in government policy.

Conditional Cash Transfer Initiatives

Cash transfers prove to be a simple and efficient way to provide low-income families with access to food rather than providing the food itself. Research shows that families struggling to make ends meet will likely spend cash transfers on pure necessities. However, critics still remain concerned over the misuse of cash transfers given to poorer families.

This is why cash transfer programs often rely on pre-agreed conditions. For example, for a family to be a beneficiary of a cash transfer program, they must agree to send their children for regular health checkups and must ensure school attendance.

In a study conducted by Bastagli et al. (2016), monitoring and assessing 56 cash transfer programs across 30 countries, households noted significant positive impacts from cash transfer programs. In a vast majority of cases, cash transfers led to an increase in household food expenditure, a reduction in the poverty rate and a positive local economic impact.

The Hidden Benefits

Despite the effectiveness of cash transfers in pulling people out of poverty, governments rarely use these programs or do not at all. Why? The short answer would be politics. Voters are not likely to vote for a party that requires higher tax payments from individual citizens but is far more likely to support a “free-school lunch” project. That is because to the average citizen, free lunches to low-income children do not feel like a cost coming from their own pocket while a cash transfer does.

Further, many fail to consider that cash transfers address financial limitations to basic social services, such as education and health care, and thereby, are able to reduce multidimensional child poverty. For many, the cost of school supplies, stationery, health service costs and prescription fees is not within the realm of what is financially possible.

An evaluation of cash transfer programs finds that 13 out of 20 reporting studies note a rise in school attendance rates. Furthermore, nine out of 15 reporting studies witnessed a rise in beneficiaries’ utilization of health care services.

Argentina’s Cash Transfer Program

In 2009, the Argentinian government implemented the Universal Child Allowance (AUH) Programme, a conditional cash transfer program with the goal of breaking intergenerational cycles of poverty. The program targets individuals younger than 18 who reside in financially unstable households, including households facing unemployment or households headed by workers in the informal economy sector.

The individual that qualifies for the program will receive 80% of a specific allowance monthly. The individual will receive the remaining 20% and future payouts on the condition that they satisfy certain school attendance requirements and attend health check-up appointments. By 2018, the program had benefited 3.9 million children since its implementation, equating to 0.6% of the nation’s GDP.

In agreement with the importance of cash transfer programs, the chief executive of the Child Poverty Action Group, Alison Garnham, has argued that countries should ensure a “minimum layer of protection”  via free school meals and sufficient cash transfers in government policy as a part of a long-term poverty reduction campaign.

– Pauline Luetzenkirchen
Photo: Flickr

Unbanked Population
In 2017, the World Bank  reported 1.7 billion “unbanked” adults, meaning these individuals did not have “an account at a financial institution or through a mobile money provider.” Although there remain unbanked individuals in developed countries, most of the unbanked population lives in developing countries. Furthermore, there is a strong link between lacking financial inclusion and living in poverty.

In 2020, the Inclusion Foundation discovered that in the United Kingdom, being unbanked leads to costs of up to £500 annually as these individuals “miss out on discounts reserved for those who pay bills by direct debit.” Additionally, the financial services that institutions offer, such as tools for saving, insurance and credit, are important instruments that help people rise out of poverty and advance financially.

5 Facts About the World’s Unbanked Population

  1. Women account for most of the unbanked. In 2017, about 980 million women did not have a bank account, making up “56% of all unbanked adults globally.” Even in countries with a small percentage of unbanked individuals, women account for most of the unbanked. For example, in Kenya, “where only about a fifth of adults are unbanked, about two-thirds of them are women.” In both India and China, females account for close to 60% of unbanked adults. According to a 2012 World Bank article, the gap grows larger among those in poverty, where women who make less than $2 a day are 28% less likely than men to have an account. Melinda Gates, the co-chair of the Gates Foundation, said that “Financial tools for savings, insurance, payments, and credit are a vital need for poor people, especially women, and can help families and whole communities lift themselves out of poverty.”
  2. China and India have the largest unbanked populations. About 225 million adults in China did not have a bank account in 2017 — the largest unbanked population in a single country. India came in second with 190 million, followed by Pakistan with 100 million and Indonesia with 95 million unbanked people. These four countries, along with Nigeria, Bangladesh and Mexico, accounted for close to 50% of the globe’s unbanked population in 2017.
  3. People remain unbanked for specific reasons. The 2017 Global Findex survey asked those without bank accounts why they choose not to open one. The most common reason provided, with about two-thirds of respondents citing this reason, was simply lack of money. Coming in second, 30% of unbanked adults said they did not need an account. About 26% stated that accounts are too expensive and 26% also stated an account is not necessary because a family member already has an account. Other reasons include distance, documentation requirements, distrust in the financial system and religious concerns.
  4. Providing banking services could lift people out of poverty. World Bank Group President Robert B. Zoellick said that “Providing financial services to the 2.5 billion people who are ‘unbanked’ could boost economic growth and opportunity for the world’s [impoverished].” He stated further that “harnessing the power of financial services can really help people to pay for schooling, save for a home or start a small business that can provide jobs for others.” In fact, research shows that “the more [impoverished] people are banking today, the more they are banking on their future[s].”
  5. Technology as a potential solution. The Bill and Melinda Gates Foundation is a nonprofit organization that fights poverty, disease and inequality around the world. One of the focuses of the Foundation is to reach unbanked populations with solutions to improve financial inclusion so that “people around the globe can build security and prosperity for themselves.” Its strategy is to promote the development of digital payment systems, which can allow for digital or mobile access to financial services without a bank account. This will also allow more women access to financial services, advancing gender equality. The Gates Foundation is currently supporting mobile money platforms in developing countries to increase financial inclusion for the unbanked. For example, in 2010, the Foundation granted $10 million to ShoreBank International to build a highly scalable electronic banking platform in Bangladesh to promote the financial inclusion of low-income people. In 2018, the Gates Foundation invested $3 million in Jordan’s Mobile Money for Resilience platform, which will economically empower refugees and impoverished people in the nation.

Looking Ahead

While for many, banking services seem readily accessible and almost a fact of life, for others, the inability to access such services stunts their growth opportunities. By increasing financial inclusion, institutions can help people help themselves.

– Rachael So
Photo: Unsplash

Women in Senegal
Despite making some considerable progress in areas of political representation and educational enrolment, women in Senegal still have many challenges to surmount. Women in Senegal make up the majority of the population — 51% in 2020 — yet about 33% of employed Senegalese females 15 and older live “below the international poverty line.” In comparison, this rate stands at about 27% for males in the same category, a 6% lower rate. The financial inclusion of women in Senegal increases the likelihood of them rising out of poverty.

Gender Issues Women in Senegal Face

In an interview with The Borgen Project, retired U.N. Women regional director (West Africa), Cecile Mukarubuga, says that “in addition to a lack of education, [women face] structural barriers [such as] negative social norms that claim that women can’t make decisions or own property or assets.” Outdated gender norms see little place for women in Senegal outside household duties. Although women’s participation in the workforce is increasing as the years’ pass, standing at 40% in 2019, most women’s employment does not extend beyond the informal sector. In addition, men in this sector earn “82.9% more than women.”

Gender violence, female genital mutilation, underage marriage and cultural perceptions serve as significant hindrances to women’s autonomy and development and also impact their overall well-being and standing in society. According to a 2018 UNICEF report, in Senegal, 1.6 million girls and women faced childhood marriages. While there are laws and policies in place that protect women from violence, cultural traditions that value men and see a specific place for women hold more societal weight.

An example of this is the practice of female genital mutilation, which can lead to severe health complications or even death among girls and women in Senegal. Even though Senegal declared the practice illegal as early as 1999, the practice continues as it is a deeply entrenched cultural tradition. According to UNICEF data, “one in four women” between the ages of 15 and 49 have experienced female genital mutilation in Senegal.

Financial Inclusion of Women in Senegal

In a world of gender inequality, financial inclusion can enhance women’s economic agency by equipping them with financial services and products that may improve their economic standing. This includes ensuring women have greater control of economic assets as well as equal access to opportunities and financial resources, such as bank accounts, inheritance, insurance and credit programs.

These financial resources are essential in ensuring women in Senegal are able to break poverty cycles. “For the short term, the best strategy would be to advocate for financial institutions to design financial products and services that meet the needs and capacity of women,” Mukarubuga says. However, she also notes that, first, “there’s a need to transform mindsets and change mentalities.”

Whether these advantages materialize as expanding small businesses, managing cash flow or even increasing assets, financial inclusion and opportunities would activate the untapped economic potential of Senegalese women, even setting the stage for them to be a part of the economic decisions in the household. Financial inclusion means families can look beyond “survival mode” and properly plan for their futures. “Women need a security net because when they do get a loan, most use it to feed their children or meet basic needs, so there is a need to adjust the supporting strategy to the most vulnerable women,” notes Mukarubuga.

United Nations Capital Development Fund

The United Nations Capital Development Fund (UNCDF) aims to address gender inequality in Senegal and increase the financial inclusion of women in Senegal. Primarily working with girls and women 10 years and older, the UNCDF looks to improve “awareness of, access to, use of and control over appropriate financial products and services.” Additionally, the organization works to address the socio-cultural environment in hopes of improving the agency of women and girls. In this way, the UNCDF strengthens female “economic empowerment and participation” in Senegal, which play an essential role in their ability to rise out of poverty.

The UNCDF runs various empowerment programs covering areas such as agriculture, digital finance and business management. In 2014, through a partnership with the Mastercard Foundation, UNCDF launched a Mobile Money for the Poor Programme(MM4p) that works to address the lack of digital financial inclusion in West Africa. The program was particularly successful in Senegal. From 2014 to 2020, the digital financial inclusion rate rose “from 13% to 29%.” In 2016 alone, women accounted for 10% of digital finance users in Senegal. The program also helped people set up digital wallets and connected local businesses to the digital payment service.

Looking Ahead

While the financial inclusion of women in Senegal is not an all-encompassing solution to dissolving the complex gender inequality issues within the nation, it serves as an empowerment tool to help women progress in society. The financial inclusion of women in Senegal stands as a potential pathway out of poverty for the nation’s female population.

– Owen Mutiganda
Photo: Flickr

AFR
Access to Finance Rwanda (AFR) is a nonprofit that began in 2010. It aims to stimulate the economy by increasing the use of financial services. AFR addresses the barriers that restrict financial sector service to the low-income population, with hopes to bring sustainable change and financial inclusion. The COVID-19 pandemic impacted their poverty levels and economy drastically, making AFR critical to recovery. Here is some information about Rwanda and how AFR is improving Rwanda’s financial sector.

Poverty in Rwanda

Poverty is not new for Rwandans, since it is one of the poorest countries in the world with 56.5% of the population living on less than $1.90 a day. However, this was before the COVID-19 pandemic which brought this percentage higher. The World Bank explained that “the overall increase in the poverty headcount is 5.7 percentage points, indicating an estimated additional 625,500 people falling into poverty.”

The harsh reality of the pandemic hit Rwanda hard, making foreign aid more important than before. The unfortunate aspect of the situation is the step back from previous successful progress.

How AFR Works

Access to Finance Rwanda (AFR) aims to help boost Rwanda’s financial sector, which is essential for its growth. It implements phases, each lasting five years with specific goals and targets to achieve. Each phase consists of Micro, Meso and Macro level achievements which all aid Rwandans in poverty.

Between 2010 and 2015, almost 1 million people in Rwanda were able to access and use financial services thanks to AFR and its partnership with other institutions. During the second phase, between 2016 and 2020, AFR partnered with the public and private sector and implemented interventions and allowed the access and use of financial services to around 2.5 million people in Rwanda. Its work speaks for itself and with more phases to come, Rwanda has a loyal and strong team fighting on its behalf.

AFR’s Objectives

AFR’s objectives are clear and demonstrate the importance of their job.

  1. “Increase access to financial services for poor rural and urban people and Micro, Small and Medium Enterprises (MSMEs);”
  2. “Improve the livelihoods of poor people through reduced vulnerability to shocks, increased income and employment creation;”
  3. “Provide funding and technical assistance to the public sector/private sector and/or civil society recipients in order to promote, and achieve, the objectives set out in paragraphs (a) and (b) above; and”
  4. “Carry on all other such things that are incidental or conducive to the attainment of the above.”

AFR upholds values of respect, integrity, collaboration, responsibility, quality and value for money. Its mission and vision are to bring inclusivity and diversity to Rwanda’s financial sector. This could bring sustainability and resilience to the economy and people.

Rwanda’s Future

Although the pandemic brought setbacks to Rwanda’s development, its previous progress brings hope for the future. Rwanda continues to have one of the fastest-growing economies in Central Africa. By 2035, Rwanda hopes to gain Middle Income Country Status and High Income Country status by 2050.

The pandemic resulted in Rwanda’s first recession since 1994, which is extremely impressive for this country. Not to mention, its economic growth brought immense improvement in living standards, “with a two-thirds drop in child mortality and near-universal primary school enrollment,” according to the World Bank.

Organizations like AFR grow every day in strength and number, so expect great improvement in years to come. Rwanda could return to making the progress it started over 20 years ago and the benefits could continue to improve life for Rwandans.

– Anna Montgomery
Photo: Flickr

GoodDollar
GoodDollar is both the name of an Israeli cryptocurrency and a not-for-profit company launched in 2020. Cryptocurrency is an immaterial system of money that has secure coding. Additionally, people can exchange it virtually and governments do not control it. Yoni Assia is the mind behind the GoodDollar project and coin (G$), the virtual currency that intends to democratize the economy by working to promote universal basic income and reduce inequality. Universal basic income (UBI) is “a periodic cash allowance given to all citizens… to provide them with a standard of living above the poverty line.” Here is some information about how GoodDollar promotes universal basic income (UBI).

GoodDollar’s Mission

According to Forbes, 80% of the population owns only 6% of the world’s wealth, while the remaining 20% owns the rest. Against this unfair backdrop, GoodDollar is a potential game-changer through how it promotes universal basic income.

Yoni Assia believes that “too many underprivileged people are locked out of opportunities that could take them out of poverty, including access to capital markets and digital work opportunities. Therefore, the GoodDollar project aims to alleviate that by fostering financial inclusion and empowerment around the world.” The creator of GoodDollar is also the founder of eToro, a social trading company and platform, which is responsible for investing $1 million in the new cryptocurrency.

How GoodDollar Works

GoodDollar can benefit anyone who signs up and creates an account (a wallet). For that, people need to record a short video to ensure that they are real humans, not bots, and they can complete the entire sign-up process in less than 5 minutes. There are two groups of users, claimers and supporters. Claimers are people who benefit from free digital cash (G$) without the need to invest any amount, being allowed to claim it every day and use it to pay for goods, services and exchange it with friends. Up to now, 255,000 claimants have received G$180 million, totaling more than $20,000. Supporters are both companies or regular people that believe in the UBI cause and fund a mechanism that generates interest (the DeFi — decentralized finance, protocol).

Interest generates in a blockchain, a kind of extremely safe digital information record system, and becomes the reserve of G$ coins to that undergoes distribution among claimers and supporters. The supporters benefit not only from the interest generated by their initial staked amount, but also the interest generated on top of the previous interest rate. Currently, only small businesses accept G$ coins, and they are not very valuable. However, as more people join the GoodDollar movement, its value will rise.

Hope for GoodDollar’s Growth

“Inequality plagues the world. Let’s solve for it in our future,” is a statement on GoodDollar’s website. The company is still in its early stages, but getting ready to release version 2.0 of the GoodDollar protocol. In the first year of the second version, it plans to distribute around $47,000 worth of G$. AI Multiple’s review on GoodDollar points out that, to grow and make a real difference in its users’ lives, GoodDollar needs to have more supporters and a G$ reserve that grows “faster than the number of claimers.”

The more people use this cryptocurrency, the more valuable it will become. If “a public figure sheds a light on it via their social media platforms or accepts it as a payment method for a business product or service, that could boost its popularity.”

A Promising Future

The Forbes article discusses how basic income distribution could help to reduce the financial inequality that the pandemic exacerbated, and the GoodDollar team has been working hard to make it a reality someday. While the future of the project depends on a combination of factors, blockchain solutions like GoodDollar are undeniably promising and revolutionary economic models.

Tal Oron, GoodDollar project director, hopes that within a few years, “GoodDollar [will distribute] $2 a day per person, and, together, as a global community, without government support, raise hundreds of millions of people above the poverty line.” The way that GoodDollar promotes universal basic income will only benefit people globally.

– Iasmine Oliveira
Photo: Flickr

AkoinYoung entrepreneurs in Africa face unique obstacles when starting their own businesses, which prolongs Africa’s development. Akon, the multi-platinum-selling singer and recording artist, is originally from Senegal in Africa. Therefore, he has a deep understanding of the economic strife facing Africa due to inflation and financial instability. On top of this, about 350 million adults in sub-Saharan Africa remain unbanked, equivalent to 17% of the world’s total unbanked. Akon aims to change this by introducing the Akoin cryptocurrency.

Why Akoin?

Akon is using blockchain technology to help African entrepreneurs. He seeks to provide them with the tools necessary to overcome the difficulty of working between more than 40 currencies across 54 African countries by uniting currencies. With the Akoin cryptocurrency, seamless transfers within and across borders could be possible.

In the early months of 2021, the youth of Senegal took to the streets to protest the economic instability and unemployment facing their generation, highlighting the need for a new economic recovery plan. Although the economy in Senegal has grown in recent years, the growth has not always meant growth in jobs for young adults.

Akon is aggressively seeking to reach his goal of implementing Akoin in Africa because “[i]t brings the power back to the people and brings the security back into the currency system.” The singer-turned-social rights advocate seeks to implement Akoin as a form of payment to provide users access to a suite of business tools. Additionally, the construction of Akon City has been approved by the Senegalese government. Construction will take an estimated 10 years with the cost of this futuristic city being an estimated $6 billion, supported by Akon and other investors.

How it Works

Akoin, the African cryptocurrency token, is part of a decentralized exchange ecosystem that allows users to trade tokens and other cryptocurrencies between each other or major exchanges. After making this technology accessible to emerging entrepreneurs and helping them with the extensive paperwork required by banks when starting a new business, Akon could strengthen the African economy with a stronger infrastructure for startups.

Unlike other cryptocurrencies, Akoin is specific to Africa and seeks to provide optimal support as a transaction medium in otherwise hard-to-reach areas. One major obstacle to the African adoption of cryptocurrency as tender is government uneasiness. Signs show that the wariness of another legal tender remains, potentially due to a lack of public knowledge and the possible insecurity that comes with blockchain technology’s anonymity.

Looking Foward

With Africa awaiting a crypto boom, Akon makes the clarification that Akoin does not necessarily need to be deemed legal tender, only an “alternative financial solutio[n].” According to Chainalysis, a blockchain analytics firm, South Africa, Kenya and Nigeria are ranked among world leaders in peer-to-peer crypto transactions. Mwale Technological and Medical City have beta-tested the transaction platform. More than 2,000 merchants utilized the technology as the “sole currency and payment processor.

Hope remains for the Senegalese government’s adoption of Akoin. Leaders of the African cryptocurrency scene are hopeful for more African countries to adopt and primarily benefit from the plethora of crypto applications.

– Melanie Goldsmith
Photo: Flickr