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

Credit Access in TajikistanTajikistan, located in Central Asia, has a population of over 8 million people. Tajikistan has borders to Afghanistan, Uzbekistan, Kyrgyzstan and China. Although Tajikistan’s financial sector has made significant progress since 2000, many new advancements such as credit access are still in need of improvement. In 2017, almost 30 percent of Tajiks were living below the poverty line. Finding a solution to increase credit access in Tajikistan has become an important task for the government of Tajikistan.

Tajikistan’s Reliance on Remittances

Due to Tajikistan’s limited employment opportunities, about 90 percent of Tajiks travel out of the country for work. They often travel to the Russian Federation in search of employment. Many migrant workers send remittances back to their friends and family in Tajikistan. More than 60 percent of Tajik households reported that half of their income comes from remittances with 30 percent of Tajik households reporting that 100 percent of their income comes from remittances.

A 2010 Labor Organization study reported on how Tajik households save their income and remittances. The study found that only 23 percent of people were able to save their remittances with only 9 percent able to save at a partial amount of 21 to 40 percent of the money. When the money can be saved, it is not often for long. In fact, only 11 percent of the people were able to save their remittances for more than six months.

Income savings did slightly better. At least 63 percent reported being able to save part of their income. For example, 51 percent saved about 20 percent of their income. However, only 3 percent could save between 41-60 percent of their income. Since remittances are the main source of income in many Tajik households, money is spent on immediate needs, which results in low percentages in income saving.

Credit Access in Tajikistan

According to a 2010 International Labor Organization study, 95 percent of Tajik households do not keep their savings in financial institutions. Due to Tajikistan’s remote and unique mountainous terrain, 95 percent of Tajik households are not aware of the savings products available to them or know where financial institutions are located. Credit access in Tajikistan isn’t seen as a necessity in many Tajik households because it is very common and traditional for Tajiks to keep their savings at home. There also seems to be “a general distrust” of financial institutions.

In April 2010, the World Bank Group, with the help of the Government of Switzerland, launched the IFC Azerbaijan-Central Asia Financial Markets Infrastructure Advisory Services Project. This three-phase project is aimed at improving the financial infrastructure of Tajikistan and expanding credit for people and small businesses. This would allow for the creation of more jobs.

The project also provided financial literacy training to more than 100,000 Tajiks, which allowed Tajiks to become knowledgable about where their savings go. As a result of the IFC Azerbaijan-Central Asia Financial Markets Infrastructure Advisory Services Project, Tajikistan’s financial sector was able to establish the first private Credit Information Bureau with the help of IFC and the National Bank of Tajikistan.

These crucial advancements have led Tajikistan’s financial sector in the right direction toward improving credit access in Tajikistan as well as addressing the needs of the people of Tajikistan. With impoved credit access comes financial security, an increase in small businesses and a better economic standing.

Jocelyn Aguilar
Photo: Flickr

Financial Inclusion in Australia
Recent reports estimate that globally, nearly two billion adults do not have access to a bank account. As a result, services such as loan credit and financial planning advice are denied to people all over the world. The primary reason that people do not have access to bank services is the lack of accessibility and affordability, especially as major banks all but dominate the entire market share regarding financial services.

However, there has been a global movement to make financial services more readily available to people who could not normally afford them. Financial technology (fintech for short) is an industry that uses technology to offer premium financial services at much more affordable costs and sometimes even for free. While fintech companies do not aim to compete with large banks, they do offer specific services, such as loan credit or financial planning advice. 

Fintech is used to describe new tech that seeks to improve and automate the delivery and use of financial services. In achieving this goal, fintech allows access to financial services to more people and helps fight poverty.

Financial Inclusion in Australia through Fintech

There has been a rise of fintech in Australia. Over the past 12 months, the financial technology sector of Australia has been rapidly evolving. An estimated 600 financial technology companies are currently being operated in Australia and this number has doubled since 2015. In fact, fintech is the largest startup sector in the country, with one in every five startups targeting fintech.

Some of the most successful startups in Australia include Prospa, Zip Money, and AfterPay Touch.

Prospa is Australia’s leading online lender to small businesses. This company has funded over $500 million, allowing small businesses to receive funding in a short period, as little as twenty-four hours. By making these funding more accessible, small and medium business owners will have the proper financial means to expand their businesses.

Zip Money provides microloans to people, free of fees. With over 700,000 users, ZipMoney allows consumers to make important purchases without any delays.

AfterPay Touch is a digital payment service that targets consumer-facing organizations. With over 800,000 customers and 6,000 retail merchants onboard, AfterPay Touch provides payment security, compliance, and fraud services at much more affordable costs.

Fintech Advantages

Although these companies provide vastly different services, they all have a common goal: to make financial services more convenient, accessible and affordable. These companies allow people to absorb unexpected losses, be financially mobile and save for the future. They are very helpful in achieving financial inclusion in Australia and in other countries as well.

Additionally, because these fintech companies are increasing financial inclusion for small and medium business owners, they are allowing business owners more opportunities to grow and expand their businesses. As a result, more jobs will be created and more people will be lifted out of unemployment and poverty. 

The Impact of Fintech in Australia and Other Countries

The impact of fintech in Australia and its booming economy is not just felt domestically, but globally as well. For instance, Australian fintech startups are also working together with the Indonesian government to increase financial inclusion in Australia and Indonesia.

Indonesia has 49 million unbanked micro-enterprises. Australia has a new $1 billion New Payments Platform (NPP) that allows people to make real-time payments over the digital economy. This platform has the potential of advancing financial inclusion for both businesses and individuals in Indonesia. Increased financial inclusion will allow people not just to have access to a banking account, but also to escape poverty and recover from financial setbacks.

Recognizing that financial inclusion reduces inequality and helps millions of people lift themselves out of poverty is key to the development of fintech startups around the globe. As more governments start working together with the private sector, the impact of this new technology can be monumental.

– Shefali Kumar
Photo: Flickr

Bill and Melinda Gates Foundation
The importance of financial inclusion for developing countries has become much more evident in recent years. Financial inclusion, the process of making financial services accessible and affordable, connects people to a formal financial system. This allows them to make better investment decisions, build assets and savings and make general daily living easier.

Often times, poor people around the world rely on cash to facilitate transactions, which can be unsafe and difficult to manage. Financial services, such as bank accounts and digital payments, can help people escape poverty by helping them to make investments in education, business and healthcare.

In fact, financial inclusion for developing countries is part of seven of the seventeen U.N. Sustainable Development Goals, including zero poverty, reduced inequality, and decent work and economic growth. Studies by the World Bank show that mobile money services that allow users to store and transfer funds on their phones lead to higher income earning potential, thereby reducing poverty.

Providing Financial Inclusion for Developing Countries

In 2011, The World Bank Group launched the Global Findex Database, funded by The Bill and Melinda Gates Foundation. The Global Findex increases financial inclusion by tracing financial inclusion efforts globally. By putting a quantitative measure to global financial inclusion efforts, The World Bank Group and other large organizations are able to track and record progress as it relates to increasing financial inclusion and its role in reducing poverty.

The World Bank recently published a report called The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. The report demonstrated that the 69 percent of adults owned a bank account in 2017, which is an 18 percent increase from the 2011 report. This translates to over 1.2 billion adults receiving access to financial tools.

Overall, the rise of financial technology (fintech for short) alongside the greater use of mobile phones and the internet have bolstered financial inclusion efforts over the past decade. Additionally, the data underscores the idea that not only are financial services expanding to more adults across the world but also the increase in financial technology is promoting greater services for those who already have bank accounts.

Financial Inclusion at Work Around the World

A recent study in Kenya found that access to mobile money reduced extreme poverty by 22 percent in households headed by women. Because mobile money allowed users to increase their savings by over 20 percent, 185,000 women in Kenya were able to leave the farming industry and move on to business development and retail, increasing their incomes and overall development.

These women were able to save at higher rates and, therefore, invested an average of 60 percent more in their businesses. Similarly, in Nepal, women who received free savings accounts spent 15 percent more on nutritious food and 20 percent more on education.

The intersection of information and technology is changing how we perceive poverty and financial access around the world. The Global Findex increases financial inclusion by allowing researchers, scholars, technology founders, development practitioners and banks across the globe to have access to data that can help navigate where financial inclusion needs to be more accessible.

The Global Findex increases financial inclusion for developing countries by creating accountability. With The Global Findex, The World Bank will be much closer to its goal of achieving Universal Financial Access by 2020. Furthermore, more people living in poverty will have the means to better allocate, save and eventually invest money in their futures.

– Shefali Kumar

Photo: Flickr