Mobile BankingMobile banking is a clear step toward financial literacy and freedom. It allows users to access and manage accounts without needing physical access to a bank. It is a huge asset and accepted norm in countries like the United States, where it is used by over three-quarters of the population. By 2021, there will be an estimated 7 billion mobile banking users. But in countries where much of the population doesn’t have access to financial institutions, mobile banks presents an option that allows users to gain the financial freedom they wouldn’t otherwise have. Traditionally, without access to banks, there is no access to bank accounts. This makes it not only difficult to save and protect money but also nearly impossible to access loans. Below are three countries where going mobile improves financial inclusion.

Kenya

In 2011, around 80% of the Kenyan population didn’t have a bank account. This was revolutionized by the introduction of mobile banking, resulting in an incredible increase in financial accounts up to 75% in 2014. The percentage of Kenyan’s with a mobile account has since jumped to around 80% in 2019, with that number still growing. Though mobile banking is taking hold in many African countries, Kenya leads the charge of mobile adaption. This success is evident through the country’s recent economic growth, averaging 5.7% in 2019, one of the fastest-growing economies in Sub-Saharan Africa. Mobile banking has been succeeded so rapidly and fruitfully in Kenya due to its incredibly low cost and user ease. After the infrastructure is created, all that’s needed is an old flip phone and a banking SIM card. These products are relatively easy and inexpensive to get, even in countries with fewer resources. Mobile banking has allowed Kenyan’s to save money, send and receive it with ease, apply for loans, and has led to financial inclusion. Kenya acts as a clear leader in developmental growth through mobile banking.

India

In 2017, India had the second largest unbanked population, second only to China, with 190 million of its citizens left without access. In the same year, around 48% of India’s banks were inactive, only adding to the inaccessibility. Despite such a large number of citizens left without a bank account, over 50% of these individuals do have a mobile phone. With the proper infrastructure, mobile banking could revolutionize the way Indians send, receive and save their money. For low-income populations in India, most financial transactions occur in cash, a method that is not conducive to economic growth for poor families. With more universal access to banking, low-income populations could receive their income through direct deposit and pay their bills directly from their account, using their phone. This system promotes saving and also allows tracking of financial habits, producing an easier system for low-income individuals to amass credit and become eligible for loans. As the internet becomes increasingly accessible in India, mobile banking is expected to rise, and with it, financial inclusion.

Indonesia

In opposition to the other nations discussed, Indonesia has a much lower prevalence of mobile banking, but just as it has in Kenya and India, going mobile could revolutionize financial inclusion in Indonesia. Only about 20% of Indonesian’s currently have a bank account, but almost 40% of the population have mobile subscriptions, suggesting mobile banking has huge potential in the country. In 2020, an unexpected source has begun to jumpstart the exponential growth of mobile banking in Indonesia. In the wake of COVID-19, many physical banks are closed, and even those who previously had access are unable to interact with their finances. One bank, namely Bank Rayat Indonesia has even seen a 10% month to month increase in mobile banking, an unprecedented growth. Indonesia presents as a nearly perfect candidate for a “mobile revolution” given its high mobile penetration, low banking rate, and the recent inability of traditional banks to function. Despite the many challenges and tragedies COVID-19 has caused, it could be the driving force for a mobile revolution in Indonesia

— Jazmin Johnson

Photo: Flickr

UPI in India
In 2016, the Unified Payments Interface (UPI) system launched in India. Its goal was ambitious: a level playing field for small businesses and impoverished communities through re-imagined banking. In the midst of a global pandemic that has forced a socially distant lifestyle, UPI has never been more important nor more successful.

UPI’s Humble Beginnings

UPI’s primary purpose was to become an online platform that would eliminate bureaucratic and socioeconomic barriers to financial transactions. The goal was to allow anybody, from small Kickstarter businesses to multinational banks, to have the same access to banking capabilities.

UPI creates a standard set of rules for everybody on the platform—all Indian banks have access. Thus, smaller banks have equal opportunities to reach people as big ones. This goal is feasible due to UPI’s innovative techniques. With UPI, the party collecting money from an individual is decoupled from that individual’s bank account. This allows third-party apps such as Google Pay, PhonePe and Amazon Pay to collect and administer transactions without excess burden to the customer.

UPI makes things even more consumer-friendly by eliminating the need to enter long bank account and routing numbers for transfers. A virtual payment address, a simple username akin to an email address, replaces detailed information.

Finally, it is important to note that UPI serves a myriad of functions in the financial world. Simple peer-to-peer monetary transactions are carried out seamlessly. Advanced maneuvers are also handled with ease, including merging banking features from different banks, micro pensions and digital insurance.

UPI’s Growth

Since its launch, UPI has seen tremendous growth in both users and the number of transactions. Its user base is strong—recent numbers indicate over 100 million users. Its goal is to reach 500 million users by 2022. While this seems ambitious, early critics of the program did not expect UPI to gain the traction it has already.

The novel coronavirus impacted UPI both positively and negatively. During the worst of the lockdown, UPI’s transaction count decreased. People staying at home lowered demand for the platform’s services. However, since May 2020, UPI has boomed in both the number of transactions and the amount of money transferred. The number of transactions grew by 12% in July 2020, with 1.49 billion in the month of July 2020. UPI saw 822 million transactions in July 2019, indicating exponential growth during the last year. Similarly, the amount of money transferred in July 2020 was up to 2.9 trillion Indian Rupees, while July 2019 saw only 1.46 trillion Rupees.

As of July 2020, UPI reports services at 164 banks across India. With service 24 hours a day, seven days a week, UPI is lengthening its reach and its impact on the financial marketplace of India.

Looking to the Future

Looking forward, COVID-19 has provided a new opportunity for UPI and digital banking in general. India wants to decrease the amount of physical currency in circulation, and the pandemic has shown many people the virtues of online banking. For example, young adults wary of infecting their older parents have helped an older generation get on UPI and utilize everything it has to offer.

UPI’s recent boom focuses back to the platform’s original goal: creating an even playing field for all people, regardless of background or socioeconomic status. In 10 or 20 years, it would not be surprising to see all banking conducted virtually. Therefore, it is crucial to create a solid infrastructure that eliminates a system of preferential treatment based on wealth. UPI is helping to fight that fight.

Evan Kuo
Photo: Flickr

Kenyan mobile money system M-Pesa Reduces Poverty in Kenya
Experts argue that expanding access to financial systems and services are an indispensable component of reducing poverty. However, Kenya offers only limited access to banking services outside of central cities. Fixed-line telephones are largely unavailable, and minimum fees for banking services pose an impediment to the rural poor and can deter use. Due to these facts, many rural and poor Kenyan households traditionally lacked access to proper finance-management resources. However, mobile money transfer service, M-Pesa, now provides Kenyans with an alternative to traditional banking. Mobile money reduces poverty in Kenya by creating a simple and accessible resource for individuals and families to manage their finances. In under a decade, the expansion of M-Pesa’s simple SMS-based system changed household finance so drastically that nearly 200,000 Kenyans—around 2% of the population—were able to break out of poverty.

Establishing Financial Resilience

M-Pesa allows individuals to send and receive payments via text, as well as deposit and withdraw cash from M-Pesa agents stationed in villages. With 110,000 agents located throughout the country, M-Pesa helps Keynan households overcome the country’s lack of accessible financial services. Now, there are 40 times more M-Pesa agents stationed throughout Kenya than ATMs. Users can easily and inexpensively store savings by depositing cash into their mobile phones via M-Pesa agents. Increased access to savings helps Kenyan households weather unexpected economic hurdles. One study found that following a financial shock, the per-capita spending of households using M-Pesa was 12% higher than households that didn’t use M-Pesa. The discrepancy is likely due to the increased saving capabilities of M-Pesa users.

Long-Term Implications for Poverty in Kenya

An MIT study in 2016 examined the long-term effects of using M-Pesa’s service. They found that between the years 2008-2016, per capita consumption of goods increased by approximately 18.5%. The mean of the households in the study spent $2.50 per day, which is well above the $1.25 or even the $2.00 per day that constitutes extreme and general poverty. According to the study, M-Pesa directly helped as many as 194,000 Kenyan households escape poverty between 2008 and 2016.

Financial Independence for Women

Additionally, the MIT study found that M-Pesa helps Kenyan households run by women in particular. Between 2008 and 2016, the savings of women-headed households using M-Pesa grew by 22% compared to those who did not. Furthermore, nearly 185,000 Kenyan women using M-Pesa could switch from subsistence farming to more economically productive activities, such as sales or business. This economic freedom came regardless of whether their home had a female or male head. For households with two incomes, M-Pesa gives women the ability to store savings, allowing Kenyan women to gain newfound financial independence and opportunity for their own economic pursuits.

More Resources from M-Pesa

Since MIT’s 2016 study, M-Pesa has increased the number of Kenyans with access to formal financial services from 75% to 83% in 2019. Along with personal banking, M-Pesa helps Kenyan households with a wide array of financial services. These include taking out loans, actively managing savings and collaborating with local banks. With the introduction of M-Pesa, the number of bank accounts held by Kenyans grew from 14% in 2007 to 41% by 2019. Largely due to this mobile money service, Kenya is now ranked third in the continent in citizen access to financial service, behind only South Africa and Seychelles. Researchers hope that M-Pesa’s success in Kenya will encourage further study of how mobile money reduces poverty in other countries.

 – Alexandra Black
Photo: Flickr

Income Inequality in South Korea
As South Korean film “Parasite” celebrates an Oscar win, the conversation about income inequality in the nation is appearing in public discourse again. The film’s portrayal of the income gap between South Korea’s poor and rich portrayed a bleak picture. Income inequality in South Korea is most apparent in the nation’s education system and affordable housing. South Korea recently elected President Moon Jae-in in 2017, whose platform promised to reduce the income gap in South Korea. As a result, citizens are more conscious about income inequality than they have ever been. What is the reality of income inequality in South Korea? What are some of the solutions experts suggest will alleviate this issue?

The Economy

The society and economy in South Korea function on a winner-takes-all mentality. Some studies indicate that South Korea has one of the fastest-growing income gaps. The nation’s P90/P10 ratio, which compares the income of those in the top 10 percent to the income of the remaining 90 percent, indicates an interesting trend. While the overall P90/P10 ratio shows that income inequality in South Korea has improved since 2011, the curve rose between 2015 and 2017. Further, in 2017 the Organisation for Economic Co-operation and Development (OECD) ranked South Korea 32nd based on the P90/P10 ratio.

The Education System

One can see an aspect of income inequality in South Korea in its education system. According to the OECD, nearly 70 percent of South Koreans, aged 25 to 34, completed some form of tertiary education. Comparatively, the United States’ tertiary education attainment rate of 49.4 percent makes it clear that South Korean culture puts a tremendous emphasis on college education. Ironically, this demand for higher education has significantly lessened the value of the degree. This decline of value in college degrees has resulted in students competing aggressively to gain acceptance to the three most prestigious universities in Seoul.

Subsequently, to assure children’s competence in the ever more competitive academic scene, many parents send students to “Hagwon,” or private after-school education institutions. In 2017, for example, reports suggested that 83 percent of 5-year-olds in South Korea were studying in these private institutions.

In addition, estimates determine that South Korean parents spend over $15 billion on private education annually. In only a single year, from 2016 to 2017, South Korean spending on private education rose 5.9 percent. Education in South Korea is becoming more burdensome for Korean parents who are not as financially well-off because, in the case of illegal private tutoring, one institution charged up to $8,000.

The Housing Market

Individuals who live in semi-basement homes also reflect income inequality in South Korea. As of 2015, over 360,000 households have a semi-basement floor-plan. The conditions in these semi-basement homes include lack of sunlight, the prevalence of critters and moldy smell due to homes’ high humidity. As a result, these residences became the stock image of housing for the poor. In Seoul, the country’s capital, the rising housing costs in South Korea are impacting these semi-basement homes.

According to the Korea Appraisal Board, the average apartment price in Seoul surpassed 500 million won (about $413,541), meaning that buyers need at least 300 million won (about $248,125) in order to even consider a purchase. This seemingly continuing rise in housing prices is making it harder for the average person to maintain responsibility for an apartment.

The Government’s Reaction

The government’s response to income inequality in South Korea takes the form of restructured tax policies. Since the 2017 election of President Moon Jae-in, the Korean government is working to expand the country’s elderly welfare and unemployment benefits. In this pursuit, the current administration imposed stiff tax hikes in 2017 which targeted leading corporate conglomerates, investors and high-income individuals. Estimates determine that this newly imposed tax plan will raise approximately $3.14 billion to support welfare programs. Many Koreans hope that this newly gained revenue will improve the circumstances for the ever-aging population of South Korea. In addition to increasing taxes for high-income South Koreans, the current administration has also increased the minimum wage.

However, there are concerns over how effective these new policies might be. For example, some reports suggest that the administration’s increase in minimum wage throughout the country might backfire. In response to the rising minimum wage, many small and medium-sized businesses simply cut back the hours that workers can to work.

Income inequality in South Korea is a complicated issue. The portrayal of families living in semi-basement homes paints a dismal picture of the middle to lower class. The ever-rising housing and education costs limit the accessibility of these resources for many South Koreans. The government’s effort to close the income gap in South Korea does not seem to be entirely effective either. However, it is significant that the South Korean government is taking active measures against income inequality. While there are plenty of issues to tackle, many South Korean citizens hope that the current administration’s efforts will result in a future with more equal opportunities and financial success.

YongJin Yi
Photo: Flickr

Facts About Education in the United Arab Emirates

The United Arab Emirates started focusing on building a modern, mass-scale education system after its independence from Britain in 1971. In the past 50 years, the country revolutionized its education system aligning itself both with a modern and Western approach. Below are eight facts about education in the United Arab Emirates.

8 Facts About Education in the United Arab Emirates

  1. The UAE achieved universal education which was part of its ‘Education for All’ initiative, thus focusing on a new challenge for its UAE Vision 2021, that is, quality education. Its primary goal is to create a ‘first-rate education system,’ intended to enable students in the UAE to rank among the best in the world in the fields of mathematics, reading and science. To achieve this, the government proposes a transformation of the education system and intends to use Smart systems and devices as a basis for new teaching methods. In doing so, the UAE aligns its own national agenda to the United Nations’ 2030 Sustainable Development Goals, aiming to achieve quality education as its Target 4.
  2. The UAE now focuses on ways to develop the economy outside the hydrocarbons sector and sees education as the key to do so. The core mission of the Ministry of Education’s Strategic Plan 2017-2021 is to develop an education system adapted to generate a high-skilled and knowledge-based competitive economy. The founding father of the UAE, Sheikh Zayed Bin Sultan Al Nahyan, stated that the “greatest use that can be made of wealth is to invest it in creating generations of educated and trained people… [T]he prosperity and success of the people are measured by the standard of their education”.
  3. Literacy is a powerful tool against poverty, and the literacy rate in the UAE has increased from 54 percent among adult men and 31 percent among adult women in 1975 to almost 95 percent for both genders in 2019. Besides this considerable improvement, the government is now working on increasing the inclusivity of the education system to migrant workers too, in order to further close the wealth gap in the UAE.
  4. The education system in the UAE comprises both private and public education. Public education, from primary school through university, is free for all Emirati citizens and is entirely funded by the government. The primary language of instruction is Arabic and English is often taught as a secondary language. Public school enrollment is also accessible to non-UAE citizens, provided they pay a tuition fee, however, only 26 percent of the total enrolled students in the UAE are enrolled in public schools.
  5. Approximately 74 percent of students are enrolled in private schools, representing a huge part of the education system. This is mostly due to the transient nature of the expatriate population that opts for international schools. There is an increasing demand for private-sector education in the UAE, and according to the Boston Consulting Group, there is an expected growth in the education market from $4.4 billion in 2017 to over $7 billion by 2023.
  6. The UAE aims to improve considerably its tertiary education system in order to retain a higher number of Emirati citizens in enrolling in tertiary degrees, as well as attract students from abroad. The UAE has an extremely high outbound student mobility ratio, as 7.1 percent of UAE nationals enrolled in tertiary degrees abroad in 2016. Moreover, its inbound mobility ratio is one of the highest in the world, attaining 48.6 percent in 2016.
  7. The UAE emphasizes the importance of inclusiveness and quality education for all and has signed the Convention on the Rights of Persons with Disabilities and Optional Protocol in 2006. The government strongly supports people with disabilities/special needs and has included federal laws to protect the rights of people with special, guaranteeing equal education opportunities. In addition, the UAE aims to increase the inclusiveness of special needs children in mainstream educational environments, through various initiatives and as a part of its 2020 agenda.
  8. In 2019, the UAE allocated a $2.79 billion budget to Education, representing 17 percent of its total federal budget. A part of it will go towards the establishment of an Education Support Fund to incentivize partnerships and involvement with the private sector, in order to achieve its upcoming goals and priorities.

 

These eight facts about education in the United Arab Emirates illustrate the achievements and progress made in the country’s education system and highlights the ambitious aims and goals the UAE has for the future.

Andrea Duleux
Photo: Flickr

women's digital financial inclusionAcross the globe, digital finance services are empowering vulnerable communities to make responsible investments, save for the future and gain access to credit. Between 2011 and 2014, seven hundred million people in the developing world gained access to these services, allowing them to participate in formal economic decisions for the first time. Although there is a long journey ahead for women’s digital financial inclusion in the developing world, much is being done to help close the gap.

Barriers and Challenges

Despite rapid growth, there is still a significant deficit in women’s digital financial inclusion. According to the World Bank, there is a 9 percent disparity in financial inclusion between men and women in the developing world. This number has remained the same since 2011. The disparity is in large part born out of several social, economic and cultural barriers that hinder women in the developing world from gaining access to these kinds of services. Lower rates of mobile phone ownership and low rates of digital literacy among women are arguably the two most prominent barriers for women in the developing world.

A 2018 report recorded that women in low to middle-income countries are 10 percent less likely to own a mobile phone than their male counterparts. That 10 percent translates to around 184 million women without access to a mobile device and, therefore, digital financing services. Without this crucial link to a formal economy, women are excluded from credit approval and economic and political decision-making. They have little to no control over how their personal funds are spent.

In addition, an overall lack of digital literacy causes an assortment of issues for women’s inclusion in financial matters. According to the Alliance for Financial Inclusion (AFI), 75 percent of survey respondents classified a lack of digital literacy as a major barrier in women’s digital financial inclusion. Without knowledge of these innovative services, women in rural and impoverished regions are forced to resort to less trustworthy forms of investment and informal savings. These often yield large negative returns for participants. This method of financing makes the identification of these women extremely difficult. This leads to low loan approval and higher interest rates for those women who are lucky enough to get approved.

Nonprofits Commit to Closing the Gender Gap

Despite various challenges, much is being done to assist women in developing countries on their path to financial stability and independence. In 2014, AFI signed the Denarau Action Plan, which lays out a commitment to halve the financial gender gap by 2021. AFI isn’t alone in their pursuits either. The Bill and Melinda Gates Foundation recently launched an institutional gender strategy that will commit $170 million to the economic empowerment of women. Consultive Group to Assist the Poor (CGAP) also recently joined forces with 200 different organizations in similar pursuits.

The issue of women’s digital financial inclusion is gaining momentum globally. The world is starting to recognize just how much of a positive impact financial gender-equality will have on the global economy. AFI found that global gender-equality could unlock $12 trillion in incremental GDP by 2025 with a specific focus on digital finance services. Although progress is slow, women in developing nations are beginning to reap the benefits of financial inclusion on a more personal scale.

Digital financial services give these women the opportunity to gain financial independence, create and expand their businesses, plan for their families’ futures and make empowered decisions about how their funds will be spent. The world is recognizing women’s digital financial inclusion as a top priority and it is bursting into action to provide these women with financial independence, stability and empowerment.

Ashlyn Jensen
Photo: Pixabay

Tala is Changing the WorldShivani Siroya’s startup, Tala, is changing the world by making a better, more equitable financial system one loan at a time. Billions of people around the world do not have a financial identity, making it impossible for them to advance due to a lack of credit history, but Tala is changing this.

The Financially Anonymous

Only 30 percent of the world’s adult population has a financial identity. The other 70 percent lack a credit history or any way of applying for loans. This severely limits opportunities to financially advance because loans are often necessary for larger investments, like starting a business, purchasing farm equipment or investing in better irrigation systems.

Credit and loans are only accessible with some type of paper trail or financial history if customers are borrowing from traditional banking institutions. It would be too risky to lend money to anyone lacking credit and financial history. Siroya, Tala’s founder and CEO, realized “that there are billions of people around the world who are not ever seen and don’t even have an identity. That felt really wrong.”

How Tala Works

Tala is a smartphone application available to anyone with an Android phone. With permission from the user, the application uses data collected from smartphones to create a digital credit history that determines if the customer is eligible for a loan. It serves the same purpose as traditional credit history to create a unique financial profile for each user. It is currently serving customers in Kenya, Tanzania, the Philippines, Mexico and India with Kenya accounting for the majority of users.

Using nontraditional data, Tala analyzes each of its three billion users using 10,000 unique data points to determine a user’s risk profile and whether they would be a credible borrower. Data points come from information gathered from texts, calls, sales transactions, application usages and personal identifiers that help to create a unique profile for each user. About 85 percent of Tala users receive a loan within 10 minutes of this vetting process. The average Tala loan is $50. Users typically invest these loans in equipment or business licenses, which are important opportunities that are not available to those who cannot access credit.

Tala expects customers to repay the loan within 30 days, which 90 percent of customers do on time. Tala is a loaning service that deals in microloans, ranging from $10 to $500. Since the company’s inception in Santa Monica in 2014, it has granted a total of six million loans worth $300 million and amassed a customer base of 1.3 million. Investors like Revolution Growth, IVP, Data Collective, Lowercase Capital, Ribbit Capital and Female Founders Fund with around 215 employees around the world fund Tala.

How Microloans Change Lives

Tala is a microfinancing company, using small loans to make big changes. Siroya herself has seen how these small funds make disproportionate improvements in people’s lives. Jennifer in Nairobi, a 65-year old food-service entrepreneur, needed credit to invest in a food stall and start her business. However, she had no credit history and banks refused to invest in her business aspirations. Her son heard of Tala and introduced her to the smartphone app. After answering eight to 10 questions, Tala approved her for a loan.

Over the last two years, Jennifer has taken out 30 loans and subsequently opened three food stalls. Additionally, she now has a formal credit history and can borrow money from formal bank institutions. In fact, Jennifer has used this opportunity to take out a small business loan from a bank and begin opening her own restaurant.

There are more people like Jennifer who lack opportunity but with help from Tala, they are beginning to see changes. By developing a real relationship with their customers, Tala is changing the world by updating the face of microfinancing and the very notion of credit history. Now it is possible to identify those who banking institutions ignored and give them a fair chance at empowering themselves.

– Julian Mok
Photo: Pixabay

Access to Financial ServicesOne of the biggest barriers preventing impoverished people from improving their economic status is a lack of access to financial services. In many cases, access to some sort of financial services such as loans, savings accounts, or insurance, is the only thing keeping people impoverished. Below, you can learn how access to financial services fights poverty, as well as find out about organizations which are working to widen the distribution of access to such services.

Types of Services

In the modern-day, digital services are becoming the standard. Digital services are integral to improving the ease of access to financial services on the whole, as it makes those services far more efficient. Such digital services as payments and transfers, insurance, savings, credit and securities are essential to uplifting impoverished people. According to the U.N., digital financial services uplift people in poverty by way of asset accumulation.

Access to devices that can support such services is equally important. Smartphones, for example, have a plethora of finance apps that can be used to level the economic playing field. There are also risks associated with introducing such technology, though it is worth acknowledging that lack of understanding of the technology introduces security risks. To mitigate this, the U.N. recommends not only providing access to these services but also educating the population on how to properly utilize them and manage any necessary risks involved.

Organizations Seeking to Help

A movement organized around how access to financial services fights poverty is no small feat. It takes a significant concerted effort by large groups to make it possible. Thankfully, there are several organizations that are paving paths forward to uplifting impoverished people.

The Bill and Melinda Gates Foundation has a program entitled Financial Services for the Poor (FSP). The FSP program provides funding for partners who are working to establish easily accessible low-cost digital financial services in various at-risk regions. The FSP program prioritizes countries with some of the largest impoverished populations, working in Bangladesh, India, Nigeria, Pakistan, Indonesia and East Africa.

The Grameen Foundation is also working to innovate and improve not only access to financial services to those in poverty but also to the platforms enabling those financial services themselves. The Grameen Foundation works to connect people, especially women (who are disproportionately negatively affected) with necessary technologies such as mobile phones. It also partners itself directly with banks and microfinanciers to provide those services directly to the people who need them. In Kenya, the Grameen Foundation partnered with the 100 percent cashless microfinance institution Musoni to launch a mobile-based agricultural loan known as Kilimo Booster, specifically for small-scale farmers who traditionally lacked access to financial services. Over a three year period ending in 2016, the partnership resulted in more than 6,000 loans and the disbursement of more than $2.2 million.

A Positive Trend for Financial Service Access

Overall, it is important to recognize the ways in which access to financial services fights poverty. Such services are extremely vital in ensuring economic empowerment, and a population of people who can really improve their economic situations. Things are looking up, with a wide array of different organizations all contributing to an improving trend of access to important fiscal services. An estimated 1.2 billion people have gained access to banking since 2011, in part thanks to the efforts of various organizations who are seeking to help. With these collaborations, financial services can be provided and poverty can be downsized significantly as a result.

– Jade Follette
Photo: Flickr

Blockchain Technology
With the development of bitcoin technology and other cryptocurrencies, the avenues for technological progress in the realm of poverty alleviation is improving. With more than 1.3 billion individuals living under the threat of global poverty, it is important to structurally bolster market economies.

Despite the great degree of skepticism regarding the volatility and often, the unpredictability regarding blockchain technology, it can still be a new and innovative solution to potentially remediate global poverty, especially among lesser economically developed countries.

Financial Inclusion

Financial inclusion is an imperative U.N. Sustainable Goal and blockchain technology can finally provide nearly 2.5 billion people with better opportunities and access to banking and financial services in the near future, especially as it allows for a more decentralized database. Blockchain technology will prove particularly effective in more remote, rural communities around the world, especially in the case of increasing social mobility.

Blockchain technology can act as a central banking system especially due to its decentralized nature. It can help cut down on remittance fees because traditional banking systems usually tend to charge high transaction costs. These fees account for nearly $4.32 billion among south Asian countries. In countries like India with a significant expat and migrant population living overseas, blockchain technology helps with transferring funds back home. Virtual currencies can eliminate a number of costs and improve the efficiencies of transactions. They may also be a lot more stable as compared to the financial system as it is vulnerable to national and global economic headwinds.

Moreover, it can be easier to secure property rights and undertake secure investments. Buyers and sellers are able to interact in a secure environment, and record transactions and fraud. With increased ownership of property, a number of countries like Brazil, India, Rwanda and Georgia have set up land magistrates. With more financial inclusion, consumers also have greater opportunities to engage in microtransactions and lending, as well as trading due to minimal interest rates on loans. The chances of setting up start-up businesses and enterprises may also be higher as a result.

Tackling Corruption and Enforcing Accountability

Owing to the reliability of blockchain technologies like Bitcoin, information and transactions are a lot more secure. On the macroeconomic scale, people can channel taxes, loans and funds a lot more efficiently. This can also help improve accountability and transparency of important government funds.

Globally, many countries have inculcated a number of blockchain projects in the health care and education sectors. As a result, governments can take the opportunity to allocate funds to different sectors of the economy and perhaps even extend it to providing development aid and funding to improve social welfare, infrastructure and other services. Likewise, due to transparency, it is also easier to provide people insurance in key realms. For instance, Copenhagen based SPACE10 is embarking on a project that seeks to combine blockchain technology and solar power as centralized sources and off-grid systems are often not economically and cost viable.

Additionally, making donations and conducting philanthropic initiatives may also become more secure and reliable with the further development of blockchain technology. Using this model, nonprofits and international organizations may be able to channel crucial aid, funds and other services through new avenues as well.

To conclude, if bitcoin technology is enforced, it is crucial to transcend the required education and awareness about it to avoid a lack of information and financial risks. With better financial avenues and services, a larger proportion of people will be able to participate in the global market. Further development of blockchain technology can help correct weaknesses and structural limitations in the long run.

– Shivani Ekkanath
Photo: Flickr

Cocoa Farmers in Côte d’IvoireCôte d’Ivoire produces 35 percent of all cocoa, making it the largest cocoa producer in the world. A majority of cocoa farmers in Côte d’Ivoire, however, live below the poverty line. Within the past couple of years, a financial crisis within the cocoa sector has worsened conditions for cocoa farmers. Improving financial inclusion and increasing yields could become ways to bring cocoa farmers out of poverty.

In 2017, the cocoa crisis left many farmers without pay for their work. George Koffi Kouame, a 50-year-old cocoa farmer, told the BBC that he had delivered 1.8 tons of cocoa and had not been paid. This is the result of plummeting cocoa prices, which led up to 80 percent of cocoa buyers to terminate their contracts with farmers.

Living Conditions

However, even without this crisis, most cocoa farmers in Côte d’Ivoire are struggling. As a condition of their poverty, many lack adequate access to education, healthcare and drinking water.

Only 43 percent of farming communities observed in a study by Barry-Callebaut, a major chocolate manufacturer, had a health facility in their village. For 54 percent of the communities, the nearest health facility was, on average, 12 kilometers away, a little over seven miles.

Additionally, 25 percent of villages did not have a primary school, with 22 percent of villages having no school at all. While 87.4 percent of villages had a primary school located within five kilometers, having a school in each village ensures that education is accessible even to the most impoverished, as they may not have the means to travel for schooling.

Finally, access to safe drinking water is also a concern for some cocoa farmers. While 32 percent obtain some of their drinking water from the national water supply and 63 percent have access to pumped water, 5 percent of farming communities do not have access to either source. This suggests that they mainly drink surface water, which is more likely to be unsanitary.

Rural Côte d’Ivoire is in desperate need of better and more abundant schools and healthcare facilities, as well as access to drinkable water in certain villages. These changes would help improve the standard of living of cocoa farmers and their families more generally, potentially aiding in efforts to raise them out of poverty.

Financial Inclusion

Cocoa farmers in Côte d’Ivoire are generally excluded from formal financial services. Rates for all residents of Côte d’Ivoire are high, with 53 percent of men and 64 percent of women lacking access to financial services.

Because of this, the crop cycle generally determines the financial lives of cocoa farmers. Cocoa farmers harvest from October to January and make their money for the year during this period. Then, from February to September, farmers must make the money they earned from this harvest last, as cocoa farming is the main source of income for most farmers.

If their money begins to run out during these months, many are forced to take informal loans with high-interest rates in order to make ends meet. Then, when the next harvest begins generating income, paying back these loans reduces their profit and makes it difficult to save money for the following year.

To improve the financial health of cocoa farmers in Côte d’Ivoire and help them rise out of poverty, more financial products need to be available. Access to formal loans is incredibly important, as loans through the banking sector will have lower interest rates and be easier to repay. Many farmers would benefit from being able to get formal loans for school fees, as these are due before the harvest season has begun.

Additionally, education programs to teach farmers how to best manage their money in combination with access to savings accounts can help farmers become financially sustainable over time. Advans, an international microfinance group, has been working in Côte d’Ivoire since 2015, helping farmers set aside money for the future.

Crop Yields

Another solution, proposed by Barry-Callebaut, is to help farmers increase their crop yields, thereby increasing their income. Farmers sometimes do not use pesticides and fertilizers, decreasing their cocoa yields, partly due to low access to financial services. Improving access to financial services, as well as implementing educational programs for farmers to help them learn better agricultural practices, has the potential to significantly increase farmers’ yields over time.

Overall, improving financial inclusion and crop yields has the potential to help cocoa farmers in Côte d’Ivoire rise out of poverty. Additionally, improving education, healthcare and drinking water access will improve their quality of life. As information about cocoa farming continues to be collected, this knowledge will hopefully be used to benefit impoverished farmers.

Sara Olk
Photo: Flickr