Credit Access in Côte d’Ivoire
Recent reports indicate that the economic performance of the country of Côte d’Ivoire’s is improving.  In 2016, the Ivorian government committed to a National Development Plan designed to transform the country into a middle-income economy by the year 2020. A quick analysis indicates that these efforts have been successful so far. In fact, the country’s economic growth between 2016 and 2017 has it ranked among the most booming economies in Africa. Unfortunately, this growth has not translated into increased credit access in Côte d’Ivoire.

The Importance of Credit Access

In 2017, only 1 in 7 Ivoirians had an account with a financial institution. This statistic has remained unchanged over the past year. Since banks and other formal financial institutions are the primary providers of credit, a lack of access to these institutions can have major effects. Credit is often used to fund education, pay medical bills and purchase property. It is an essential tool in working toward socio-economic mobility. Thus, increasing credit access in Côte d’Ivoire is a crucial step toward improving the lives of the 46 percent of Ivorians currently living in poverty.

Limitations on Credit Access

According to the 2017 Global Findex Survey, the greatest obstacle preventing Ivorians from opening a bank account is a lack of sufficient funds. Roughly two-thirds of Ivorians cite this as the primary reason they do not have an account. Associated account fees are an additional barrier for nearly a third of the population. Other obstacles include a lack of necessary documentation, distance from a physical bank and a lack of trust in these institutions. As a result, more than half of the adult population has never used formal financial services.

The prospects of obtaining an account are even grimmer among disadvantaged populations. The poor are twice as likely as their more prosperous counterpart to be excluded from using formal financial services. Women are 45 percent more likely to be excluded than men; the gap between men and women’s access to financial institutions has risen by 90 percent in the last three years.

Even if an individual overcomes these obstacles, the possession of an account does not guarantee access to credit. Although 15 percent of Côte d’Ivoire’s adult population had a financial institution account in 2017, only 3 percent of Ivorians have borrowed from a financial institution or used a credit card. If a loan is needed, the most common solution among Ivorians is to borrow from friends and family. In fact, only 34 percent have ever borrowed outside of the household.

Mobile Money as an Alternative

While participation in traditional financial institutions remains low, Ivorians are finding other digital means to manage their money. Over the past decade, mobile money has been on the rise. Mobile money is essentially a digital wallet – its basic functions allow users to store, send and receive money as though it were cash. As of 2017, roughly 42 percent of Ivorians have a mobile money account. Moreover, statistics show that mobile money accounts are more accessible to disadvantaged populations.

While mobile money has helped circumvent the barriers associated with traditional banking, it is not designed to offer credit access in Côte d’Ivoire. Digital credit lenders are operating in several sub-Saharan economies, but they have yet to emerge in the Ivorian economy.

However, surveys suggest that Ivorians would welcome these new services. 59 percent of Ivorians express interest in using a digital credit product. Their decision to participate would depend on interest rates and associated fees, the feasibility of the repayment plan and the speed at which they can access the loan. Half of the Ivorians surveyed indicated they would be willing to pay 10 percent interest for a six-month loan if a CFA 100,000 digital loan was made available to them.

The introduction of these new digital credit services could have a profound impact on the Ivorian poor. However, in order to maximize the impact, additional materials must be provided to address low rates of technological and financial literacy. Although 87 percent of Ivorian adults have access to mobile phones, only 50 percent possess a feature phone or smartphone, which is necessary to access the digital financial services. Even fewer know how to navigate the phone’s interface, and even if they can navigate the interface, only 33 percent are considered financially literate. This means that a large group of new credit users in the country may be vulnerable to hidden fees and marketing fraud. Nonetheless, if provided with the proper assistance to improve financial and technological literacy, these digital alternatives to traditional banking could prove to be an effective solution to limited credit access in Côte d’Ivoire.

– Joanna Dooley
Photo: Flickr

This is where the financial technology sectors (Fintech for short) come in. The financial technology sector is comprised of tech startups that exist in the financial services industry. These startups are disrupting the private sector ecosystem in The Middle East. In just the past five years, fintech startups have raised over $100 million.

Fintech and The Middle East

Fintech startups aim to provide a large range of financial solutions using technology. Therefore, financial technology does not aim to replace banking systems; rather, financial technology startups aim to improve the customer experience surrounding banking and other financial services.

Often times, fintech startups address a diverse range of customer needs, whether it be educating them on the process of setting up a bank account or making investing easier to handle. While fintech startups provide differing services, one thing remains the same: fintech is using technology to make financial services more accessible to the general public.

In The Middle East, fintech startups are a new driving force to increase accessibility to the general public. With over fifty startups, fintech companies aim to foster greater financial inclusion. For example, one of the main obstacles for small business owners in The Middle East is gaining financial inclusion.

Startups, such as Ambareen Musa’s Souqalmal.com, address this need by connecting investors with small business owners. This refined database and algorithm allow small business owners to raise capital for a cheaper price while also allowing investors to gain better returns on their deals. Another fintech startup that has raised 20 million dollars in funding is PayTabs, which is an online payment processing solution that allows small businesses to add payment services to their sites.

Funding for Fintech

Funding for fintech startups is done through a combination of crowdsourcing (84 percent), allowing people with startup ideas to get funding from anywhere around the world, and government and industry support. Through crowdsourcing, startup founders can receive money faster than they would be able to from investors; as a result, their businesses can grow faster and have an impact on the public faster.

There is a 380 billion dollar market that is comprised of the world’s financially underserved consumers and businesses. Not only are there economic gains to be made through the rise of fintech but there are also large social gains. Furthermore, governments in The Middle East are contributing to the thriving fintech ecosystem by supporting regulations and initiatives such as accelerator programs.

For instance, The Bahrain Economic Development Board launched Fintech Hive in 2017, a fintech startup accelerator that funds and provides instrumental resources for fintech startups. Banks in The Middle East, particularly the UAE, have also started to adopt some of the digital solutions put forth by fintech startups.

With the public sectors of the government working together with the private sectors in the fintech industry, there is a powerful combination of forces working together to foster greater financial inclusion to those in The Middle East.

– Shefali Kumar

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

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

Credit Access in CroatiaCroatia, 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 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 FijiTo 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

Development Impact Bonds
Development impact bonds are an emerging financial model that is outcome-based — donors and governments only pay if the proposed interventions achieve set goals for improving the lives of people in poor countries. Original funding for development programs comes from the private sector.

In such a model, impact bond initiatives looking for profit mobilize private capital to invest in service activities, and an outcome founder — donors or governments — pays the original investor if the service activities produce results that meet agreed-upon targets.

The First Development Impact Bonds in Education

UBS Optimus Foundation launched The Educate Girls Development Impact Bond (DIB) in June 2015, the world’s first development impact bond in education. UBS Optimus Foundation serves as the investor who recruited Educate Girls, a non-governmental organization (NGO) based in a remote rural district of Rajasthan, as the service provider. UBS Optimus Foundation directly funds Educate Girls’ programs, which works to help enroll girls into primary education and improve the learning of boys and girls in English, Hindi and mathematics.

ID Insights, a non-profit evaluation firm, serves as the third party that confirms and evaluates service progress. The outcome funder is the Children’s Investment Fund Foundation, who pays UBS Optimus Foundation a fixed amount for each unit of improvement in the quality and enrollment of girls’ education.

Satisfactory Results

The DIB functions on a $270,000 budget, and Educate Girls’ services reach 166 schools in 140 villages in Bhilwara. The goal for the program is to help as many as 15,000 children, 9,000 of whom are girls.

By the end of the second year of the three-year program, Educate Girls has achieved 87.7 percent of the proposed total enrollment increase, and 50.3 percent of the proposed total learning progress improvement.

A Focus on Outcome

Precisely because of the program’s outcome-oriented nature, service providers on the ground receive more feedback to help the organization work more efficiently. Safeena Husain from Educate Girls told Brookings that DIB and traditional grant programs are very different: while traditional grant programs only send results to donors, DIB has designed a mechanism over mobile dashboards that allows performance data to circle back to the front line. Thus, more effective strategies could be adopted as early as possible.

As this example shows, development impact bonds best serve those programs that depend on productive human behavior for the delivery of results. In contrast to immunization programs where intended results are almost guaranteed given the availability of vaccines, education programs that require attentive human effort may benefit from the development impact bond model instead.

USAID’s Initiative in India

U.S. Agency for International Development (USAID) has also tapped into the benefits offered by this innovative financial model. USAID administrator Mark Green announced the Utkrisht Bond in 2017, which is a development impact bond for health based in rural India. The investor is again UBS Optimus Foundation, with USAID and Merck for Mothers as the outcome funders.

“What’s most exciting to me is that, if this initiative is successful, which we expect it will be, the Government of Rajasthan will scale the approach throughout the State, which will leave a lasting and sustainable legacy for the people of India,” Green wrote.

These kind of positive, impactful and long-lasting benefits demonstrate the life-changing and, indeed, benevolent outcomes that development impact bonds can bring.

– Feng Ye
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 MaldivesMaldives 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