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

solidarity lendingFor too long, the plight of the urban poor had monopolized the concerns of those working to eradicate abject poverty. The millions of people in rural poverty have been forced to toil in silence, overshadowed by their urban counterparts and underrepresented by the advocates of economic development. Most are relegated to subsistence agriculture, making the best of what little they have. However, a renewed emphasis on the rural poor has facilitated new and innovative techniques to help, among them solidarity lending.

One such pioneer is SHARE Micro Finance Limited, which offers loans to rural women in India in an attempt to fund entrepreneurship among the rural poor. Recently, a number of studies have been conducted to assess the effectiveness of such programs, with some encouraging results. An article from the Stanford Graduate School of Business tells the story of Vinod Khosla, a venture capitalist from India. Khosla described solidarity lending as a “virtuous pyramid scheme” where groups of women are given modest loans from SHARE. This program differs from individual loans because “the group members are under strong social pressure not to default…and if one person does, the others have to make up for it”.

The program empowers women to invest the money in a stall at the local market or use it to invest in equipment which enables them to produce or transport their items more efficiently. To some, this may seem like only a marginal benefit, but Khosla reports that among nearly 200,000 clients, 77 percent saw reduced poverty.

To test the feasibility of such programs further, a study on solidarity lending was conducted in Mongolia, which compared the results to those of regular lending practices. Research showed that while repayment rates were similar, food consumption increased among group lenders, an encouraging sign to researchers.

Another study on group lending conducted by the African Growth Institute in Kenya revealed that “microcredit is an important entrepreneurial tool in alleviating poverty”. They also found that group lending was a way of achieving greater financial stability.

Because of innovative initiatives like solidarity lending, the rural poor are better equipped to prosper. By providing groups with much-needed access to financial capital, farmers from India to Mongolia to Kenya are no longer overlooked.

– Brendan Wade

Photo: Flickr

Credit Access in Montenegro

As with many countries in the region, the real estate bubble that burst in 2008 exposed longstanding weaknesses in the Montenegrin financial sector and left a laundry list of obstacles for the country to overcome in its wake. These obstacles have become major inhibitors of credit access in Montenegro.

As is often the case, small and medium-sized enterprises have been hit particularly hard by this credit squeeze. Fortunately, the international community has stepped in to improve short-term credit access in Montenegro in the short term while the Montenegrin financial sector modernizes for the long term.

Prior to 2008, the Montenegrin financial sector was plagued by poor governance, little oversight and inadequate and outdated financial infrastructure. In the wake of the crisis, key stakeholders have been working to rectify these problems against a backdrop of ongoing deleveraging. While these changes were needed, this restructuring has left Montenegrin banks incapable of meeting the demand for credit.

Business owners who can secure loans from Montenegrin banks complain of high interest rates, extensive collateral requirements and overall a very risk-averse lending policy. For many business owners, securing a loan from a Montenegrin bank is simply not an option. This gap between supply and demand is being filled in two different ways: by the informal economy and by international actors.

Many would-be business owners (and individuals) have turned to the informal economy to meet their financing needs. This often entails borrowing under the table from loan sharks. Not only does this open borrowers up to unnecessary risk, but it also presents an obstacle to modernizing the financial sector.

The other option is to secure financing from international actors. Many organizations are working to provide improved credit access in Montenegro while the country’s financial sector gets back on its feet. These include the EBRD, the Investment-Development Fund of Montenegro, internationally-backed microfinancing institutions and other international organizations that have stepped in in a microfinance capacity.

There are signs that positive change is coming. In late 2017, the government passed a law aimed at comprehensively reforming the financial sector and improving credit access in Montenegro. The law creates new financial instruments available to business owners and opens up new opportunities for those struggling to secure a loan to avail themselves of financing and guarantees from the government.

The law also updates the regulations that govern the Montenegrin financial industry and help to bring Montenegro into line with international best practices. It is hoped that these laws will help to prevent another disaster like 2008 and ensure that credit access in Montenegro will not be affected by the next economic downturn. This legislation serves to prove that developing economies often need just a little bit of international support while they work to modernize their financial infrastructure, and that this support enables them to create improved frameworks that provide greater confidence moving forward.

– Michaela Downey

Photo: Flickr

fintech startups in AfricaFinancial technology, or fintech, refers to innovations aimed at new ways of delivering financial services. With the goal of changing lives, fintech startups in Africa are moving people forward on a digital route. Fortunately, such firms have no lack of funding.

According to a recent report from Disrupt Africa, the overall funding from venture capitalists jumped by 51 percent to $195 million from 2016 to 2017, with fintech funding accounting for one-third of the funds. The regions that were considered as the top three investment destinations were South Africa, Nigeria and Kenya.

Over the past several months, the African tech scene has trended in a positive direction as consumers turn to more digitally driven services in the region. After the success of MPesa in Kenya, many fintech startups in Africa are aiming to bridge the digital gap across other unreached communities in the region.

Here are three leading fintech startups in Africa that are rethinking ways to digitalize communities in Africa.

 

Flutterwave


Flutterwave was founded in 2016 and provides payment technologies and infrastructure to the continent’s largest financial institutions. With the aim of disrupting the traditional banking style in Africa, its instant rise captures the current tech scene of Africa.

The company currently operates in more than 36 countries and has partnered with 10 bank partners in Africa. With as much as 34 percent of adults in sub-Saharan Africa with bank accounts, Flutterwave has a practically untapped market to reach.
Founded by ex-bankers, entrepreneurs and engineers, the technology aims to make banking simple for its customers. With 10 million transactions processed, Flutterwave has processed $1.2 billion in payments and receives the backing from venture capitalists like Y-Combinator, Ventures and Social Capital. The company provides solutions for banks, enterprise and entrepreneurs, with no upfront, annual or special project fees.

According to a World Bank report, roughly $20 billion a year is sent to Nigeria alone, and foreign remittances made up the second-largest source of foreign exchange receipts in Africa’s biggest economy after oil revenues. Flutterwave aims to target the digital payment gap, enabling users to transfer money into different bank accounts. Such fintech initiatives will allow the communities and families in Africa to receive digital payments from family members and business relatives from across countries and, in turn, will spur growth in the developing region.

 

Pezesha


Launched in Kenya, Pezesha aims to become Africa’s largest peer to business microlending marketplace by including Africa’s low-income borrowers in the financial system. As one of the leading fintech startups in Africa, Pezesha is driven by the core values of integrity, security, reliability, excellence in teamwork, accountability, responsibility and innovation.

Instant loans can be availed by borrowers on the peer-to-peer lending platform via SMS, provided the minimum criteria is met. Such services allow low-income borrowers in Africa to generate credit scores using data analytics. Pezesha also extends funding for small and medium enterprises (SMEs), which could indirectly benefit jobs and employment in the small business sector.

SMEs create 80 percent of the region’s employment and fuel demand for new goods and services. But according to The World Bank, an estimated 50 percent of SMEs have no credit access and are less likely to secure loans when compared to larger firms. By providing microcredit access, small businesses will get funding support and allow entrepreneurs to design bankable projects.

Pezesha was recently selected to participate in the BlackBox Connect 20 accelerator programme, powered by sponsors like Google, IBM, Stripe and Silicon Valley Bank.

 

Riby

Riby has become one of the best 50 emerging fintech startups in the world, according to the recent annual Fintech 100 report by KPMG and H2 Ventures. Based in Nigeria, Riby offers a mobile app-based service for a range of financial management features including the digitization of collaborative saving, lending and investments.

Riby acts as a platform for groups, employees, individuals, associations and financial development institutions and remotely helps them controls their financial activities.

The app includes features like personal savings, cooperative savings and loan management, peer-to-peer lending, agent management and personal and group investment management. Through the digitization of collaborative saving, lending and investments, Riby aims to increase financial literacy amongst individual members of the groups.

A major reason for the fintech rise is the usage of mobile phones in Africa, which has increased from five percent in 2003 to 73 percent in 2014. With 650 million mobile phone owners in the continent (more than in the U.S. and Europe combined), the 3G mobile network is also growing rapidly.

According to Disrupt Africa, more than 300 fintech startups are active across the African continent. It is evident that fintech startups in Africa are attracting the attention of banks and investors, but more importantly, they are helping the lives of many unbanked customers in Africa and indirectly improving the economic condition of the country.

For the African economy, the tech wave has just started. The untapped market could provide a wealth of opportunities for many fintech startups, equipping customers with more sophisticated digital tools.

– Deena Zaidi

Photo: Flickr

Kiribati is dedicated to providing the best educational system for its children. Education in Kiribati was improved with the National Development Strategy, which was created to provide universal education to students in primary and secondary school. This means that students who attend primary school (grades 1-6) and Junior Secondary School (grades 7-9) will not have to pay, which takes an enormous financial burden off their parents.

This system is designed to take children out of the workforce, and so far it has been a large success. By 2005, there were 18,138 students enrolled in primary school. This number slowly declined to 16,710 by the year 2013, then quickly grew to 18,208 for the year 2014.

Not only does this program introduce children to education, but it also retains a very high percentage of students. Nearly 88 percent of those that participate in primary schooling move on to Junior Secondary School.

The issue that arises with education in Kiribati is when students move onto Senior Secondary School. The first obstacle that students must overcome if they wish to continue their education is passing the Junior Secondary Certificate Examination. As with most examinations, not everyone will pass, and this limits how many students can move on.

For those who have passed the exam and wish to move on, money is the next issue. As mentioned, while primary and Junior Secondary School are paid for by the government, Senior Secondary School is not. These school fees can be too much for a family to afford, even though the Kiribati government does provide some scholarships to students.

The third issue for incoming students is finding a school they can attend. Most Senior Secondary Schools are on the South Tarawa island. For students who are in other areas of Kiribati, like the Outer Islands, this means they must find a relative in the South Tarawa area or board at the school. This transportation and new residence can also cause a great financial burden on the family, which may be why only about one-third of students move onto the Senior level.

In the past several years, the government has taken steps to address the issues with education in Kiribati. In 2009, Kiribati and Australia agreed to a Partnership for Development, which concentrates on growing access to education, improving the education curriculums and developing workforce skills in students. Kiribati also launched its own Education Improvement Plan the following year, a ten-year plan which focuses on some of the same areas, but also on improving government policies and services. These programs show that Kiribati is committed to addressing the obstacles to education in the country and ensuring that all children can access it.

Scott Kesselring

Photo: Flickr

Addressing the Macedonia Poverty Rate

Just north of Greece in southeastern Europe lies the mountainous country of Macedonia, carved by rocky valleys and three large freshwater rivers. The country has a population of 2.1 million people, most of whom have been suffering a few notches below the poverty line. Looking at the Macedonia poverty rate will shed some light on what can be done to better people’s lives.

An estimated 21.5 percent of the Macedonian population lives below the poverty line, per the most recent data. In 2008, the rate was only 1.3 percent. A majority of impoverished people in Macedonia live on only $1.90 per day. Additionally, the country has a poor history of income distribution, as the poorest 20 percent of the population make only one quarter of the income of the richest sector of the population.

Rural poverty is the most rampant in Macedonia, where 40 percent of the population and two-thirds of the country’s poor lives. People in these areas either make their living off of small-scale farming and livestock production or they are among the rural unemployed. Farmers can usually provide only enough food for their families plus a small surplus for selling, while the unemployed have no accessible employment or resources in the rural community. Rural markets have always suffered and, in turn, so has the economic production of agriculture since the collapse of the country’s communist system and the Yugoslav republic divided. Financial resources to bring small farmers back to business then became almost nonexistent. The International Fund for Agricultural Development concludes that the major causes of poverty in the country are massive unemployment following the collapse of the command economy, lack of technical and financial resources for improving agriculture and lack of access to local and international markets for products.

Reports in the last several years note the deepening poverty crisis in Macedonia, which particularly affects young people and families with small children. The poverty rate in 2011 was 30.4 percent, or one in three Macedonians, with more than 40 percent of people under 39 years old being poor. There was also a spike in the percentage of poor married couples with children from 28.9 percent to 35.1 percent between 2010 and 2011. Almost half of all poor people in the country live in small households with five or more family members, creating a worrying trend of families with low incomes and many mouths to feed but not enough resources.

Because they live in low-income households, children and youth are the most adversely affected. A study by UNICEF in 2006 elects that child poverty leads to social exclusion, risky behaviors during adolescence and vulnerability to exploitation. Children are more susceptible to the results of being dependent on an impoverished family: lack of education and future employment, inaccessible resources and support, little food and clean water to nourish growing minds and bodies and declining emotional and physical development. However, UNICEF strongly urges that child poverty become a central point of national policy. Constraints on the country’s progress in alleviating poverty include poor financial management, little public expenditure on healthcare and education, lack of social protection and inadequate legislative and institutional framework which might bring balance back to at-risk families and children. This and other studies on the Macedonia poverty rate reveal the the impacts of poverty on families and individuals are largely irreversible.

By addressing the situation of poverty in Macedonia, the hope for change lies in reform, stronger protective legislation, broader income distribution and an eye-opening call to action benefiting the poor in this country.

Olivia Cyr
Photo: Flickr

Georgia's Poverty RateGeorgia is located between Europe and Asia and has become a crucial junction for trade flows across the two regions. Since the country’s political independence from the Soviet Union, the government has made a considerable effort to increase funding to social sectors and improve the transparency of public expenditure. While the country has made significant strides in recent years regarding human development, Georgia’s poverty rate continues to impede further development.

In 2015, about 20.1 percent of the population of Georgia was recorded as living below the poverty line by the Asian Development Bank. While the country has also experienced significant economic growth over the beginning of the 21st century, it has failed to translate it into equal wealth. Income disparities exist in pockets across the nation. As the country continues to urbanize, large differences between rural and urban areas continue to exist.

Those living in rural Georgia earn much of their income through the agriculture sector. Only 27 percent of rural dwellers earn their income through salaried work and 28 percent of rural incomes come from social payments. As the country’s agriculture production has become stagnant in recent years, much of the poverty today can be attributed to the agricultural sector which tends to account for around 45 percent of rural household income.

Georgia’s poverty rate also tends to be impacted by household sizes. Households with children have higher chances of falling into poverty than those without children. In rural areas of Georgia, around half of the children live in poverty, which is significantly greater than in urban areas.

In Georgia, one in every five children lives in poverty and one out of six live at the minimum subsistence level, according to UNICEF. These children that live in poverty also experience less educational opportunities than their peers living in wealthier families. The UNICEF representative of Georgia, Laila Omar Gad, professes that “We need to invest more in reaching the most vulnerable children, or pay the price in slower growth, greater inequality, and less stability”.

While large pockets of poverty remain, Georgia’s poverty rate has decreased by 14.4 percent in only four years, between 2010 and 2014. This result is partially due to the increase in the employment rate of those living in poverty from 50.7 percent to 56.6 percent over the same period.

Improving living conditions through economic activity has proven to reduce poverty in the country and should continue to be a tool to improve the living conditions for the people of Georgia. The World Bank Group has noted that the fiscal policies, inclusive economic opportunity creation and the deeper analysis of the rural economy all have driven the poverty reduction in Georgia.

To continue on the path toward development, Georgia must continue to engage in poverty alleviating policies while also working to ensure equal opportunities for all.

Tess Hinteregger

Photo: Flickr

Financial Inclusion in JordanAccording to the World Bank, financial inclusion is the point at which individuals and businesses in disadvantaged or low-income societies have access to affordable financial products and services. Financial inclusion in Jordan is increasingly important for economic growth, where nearly a third of the population lives below the poverty line. The influx of Syrian and Iraqi refugees, high unemployment rates and a strain on natural resources are plaguing the Jordanian economy.

The importance of financial inclusion in everyday life is that it eases monetary needs and helps people to prepare for the future. While progress has been made for financial inclusion in Jordan, there are still a great number of people who lack affordable financial services.

Around two billion people don’t use formal financial services and more than 50 percent of adults in the poorest households are unbanked,” the World Bank stated about financial inclusion across the globe.

As of early August 2017, financial inclusion in Jordan was behind the curve, with only 24 out of every 100 Jordanians over the age of 15 having a bank account.

Among Middle Eastern countries, Jordan has one of the smallest economies. In 2016, it slowed drastically and has remained stagnant. While crises in Iraq and Syria are key factors in the slowing of growth, the lack of affordable financial services is also to blame.

In today’s world where digital payments are king and cash seems to be the enemy, access to a secure network to receive, store and use money is a stepping-stone to financial inclusion and economic growth.

According to Visa, Inc., access to financial services allows children to get a proper education and homes to be safer, healthier and happier. As a part of the World Bank’s call for universal financial access, Visa, MasterCard and other payments companies have made a commitment to provide financial services to the unbanked adults of the world.

The Central Bank of Jordan has also devised a strategic plan for financial inclusion from 2018 to 2020. The Jordan News Agency reported that the plan will focus on the areas of financial literacy, protection of financial service recipients, support of small- and medium-sized projects, micro-finance and online payments.

The plan will also work on improving financial inclusion rates for women, young people and refugees in Jordan, as these groups are often alienated financially.

Madeline Boeding

Photo: Flickr

US Budget Cuts Could Weaken Global Fight Against AIDS
The President’s Emergency Plan for AIDS Relief (PEPFAR) has been the largest national effort by any country to combat a single disease and has resulted in 11.5 million people put on antiretroviral treatment. PEPFAR has received wide bipartisan support since its inception in 2003, but the Trump administration has proposed a 17 percent cut to the program as part of the 2018 budget proposal. Experts are now warning that these cuts to PEPFAR and other global health programs could inflame the AIDS epidemic.

Laurie Garrett, a senior fellow for Global Health at the Council on Foreign Relations fears the worst. “Without a revolutionary breakthrough in either vaccines or the entire model of HIV control, a massive second global wave of AIDS will come, perhaps within the next 10 years.” These predictions come as the U.S. shows a greater reluctance to commit funds to fighting HIV/AIDS.

With the wide distribution of antiretroviral drugs, deaths from AIDS have been halved over the past decade, but new infections haven’t slowed down. Two million people are infected with HIV annually, and these new infections are showing greater resistance to traditional treatments. Despite the need for further research, global funds for research and development have been declining. The Trump administration has proposed a 20 percent budget cut to the National Institutes of Health, America’s leading funder of HIV research.

Though the proposed budget would uproot U.S. efforts in the global fight against AIDS, political analysts have predicted that Congress will fight to reduce these cuts. PEPFAR has bipartisan support and the Republican majority considers it a party accomplishment due to its enactment by President George W. Bush. The National Institutes of Health have also recently gained bipartisan support with both Republicans and Democrats supporting greater funding.

Although the Trump administration’s cuts will likely be reduced by Congress, advocates worry that the proposed cuts will keep these programs from operating at their current levels. “I have no doubt Congress will succeed in restoring some level of funding,” says Scott Morris, director of the U.S. Development Policy Initiative at the Center for Global Development. “But it strikes me as an insurmountable lift to get back to the level of funding these programs currently enjoy.”

Carson Hughes
Photo: Flickr

Why the EPA Budget Is ImportantPoverty and the environment are often treated as separate problems, each with their own set of issues and potential legislative solutions. These issues are actually intrinsically linked, however, as the work of the Environmental Protection Agency (EPA) demonstrates.

The agency’s mission is to ensure access to clean water and air for underprivileged Americans. This extends abroad, where the EPA promotes sustainable development. As a result, it contributes to poverty alleviation efforts around the globe. These projects include assisting with urban air quality management in India, and advising the International Water Association in East Africa to improve access to safe drinking sources.

In 2017, the EPA is experiencing a particularly severe series of budget cuts and limitations as a result of the new administration’s policy toward it. Newly-appointed administrator Scott Pruitt is a long-time fossil fuel industry ally, and the agency is expected to see 30 percent of its budget cut – around $2.6 billion.

Many of the programs the agency has expanded in recent years emphasize why the EPA budget is important in the fight against global poverty. The Border 2020 Program combined domestic environmental protection with poverty alleviation on the U.S.-Mexico border. The initiative was able to provide clean air and water to poverty-stricken communities on both sides of the border; however, it is now slated to be dismantled under the EPA’s new budget. Ongoing projects such as a wastewater infrastructure system would therefore have to be stopped.

Many of the most pressing problems facing the world’s poor population stem from the environmental degradation the EPA seeks to inhibit. Rising temperatures are linked to more frequent droughts in Guatemala and Ethiopia. Erratic rainfall causes floods, and changes in crop conditioning make food shortages more likely. Research suggests that recent strides made in poverty reduction could be undone by inaction regarding climate change. To avoid this, the EPA’s budget needs to be preserved.

Congress has the capability to prevent these potentially devastating EPA cuts. Members of the House Appropriations Committee, both Democrats and Republicans among them, have already spoken out in support of the current EPA funding level. Tom Cole, a Republican from Oklahoma, commented that Pruitt would be the first EPA administrator who “has come before this committee in many years who actually gets more [money] than he asks for.”

Congress clearly recognizes why the EPA budget is important in the fight against global poverty. By preserving it, Congress can ensure the EPA’s work can continue contributing to global poverty alleviation efforts, which will ultimately help prevent environmental degradation in the process.

Jonathan Riddick

Photo: Flickr