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Poverty in Tajikistan: The Impact of Remittances

Poverty in Tajikistan: The Impact of Remittances The Republic of Tajikistan – a landlocked country bordered by Kyrgyzstan, China, Afghanistan and Uzbekistan – is the smallest country in Central Asia. Although rich in natural resources, Tajikistan remains the region’s poorest country, with more than 2 million people living on less than $3.65 per day. Economic growth, driven largely by remittances, contributed to a decline in the poverty rate by around 9% in 2024, with GDP growth estimated at 8.4%. While these gains are encouraging, remittances alone cannot ensure long-term stability and ongoing efforts are necessary to improve living standards.

Remittances and Poverty in Tajikistan

Remittances—monetary transfers made by migrants working abroad—play a central role in Tajikistan’s economy. In 2024, remittances accounted for nearly half of the country’s GDP, with most funds sent by Tajik citizens working in Russia. These transfers help cover essential needs and drive domestic consumption. Tajikistan experienced an economic growth rate that averaged above 7% over the last decade, reducing the number of people living in poverty from 32% of the population in 2009 to around 9% in 2024. While estimates from 2023 suggested that more than 20% of Tajiks were still living in poverty, the decline in 2024 was particularly stark.

Although remittances have been effective in reducing poverty by bolstering private consumption and imports. The country’s reliance on economic success in other nations leaves its fragile economy vulnerable to disturbances and crises. As a result, endurable systemic changes within the country are critical to ensuring improved conditions for those experiencing poverty in Tajikistan.

Sustainable Development Strategies

In its National Development Strategy, the Government of Tajikistan set a goal to double or triple domestic incomes between 2016 and 2030; however, reaching this target will require a changed economic growth model centered around a dynamic private sector. Tajikistan maintains strong potential for economic growth due to a younger, growing population and the country’s potential for success in profitable sectors, such as agriculture, food processing, water, hydropower and tourism. In addition, the country is abundant in valuable natural resources and minerals like petroleum and natural gas, aluminum, gold, silver and limestone. The Tajik Aluminium Company (TALCO), one of Central Asia’s largest producers, is a major contributor to the national economy.

Despite this, weak institutions and limited business infrastructure continue to hinder growth. Labor force utilization remains the lowest in the region at just 44%, suggesting that many citizens are underemployed or unable to access productive jobs. To address these challenges, investments in education, transportation and digital infrastructure are key. Improving access to finance, strengthening energy sector efficiency and promoting inclusive economic competition can also support job creation and long-term poverty alleviation.

Looking Ahead

For 2025, the World Bank projects 6.5% GDP growth and an 8.2% decline in the poverty rate. While these numbers are promising, rising global uncertainty poses risks to economic improvement in the region. Officials can potentially expedite reforms in the private and public sectors to support job growth and remedy longstanding poverty in Tajikistan. Strengthening institutions, improving economic resilience and expanding access to opportunity could help ensure that recent gains in poverty reduction are not only maintained but expanded.

– Erin Hellhake

Erin s based in Old Bridge, NJ, USA and focuses on Global Health and Politics for The Borgen Project.

Photo: Flickr

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How the MOBILIST Program Promotes Sustainable Development

 

How the MOBILIST Programme Promotes Sustainable Development
The Mobilising Institutional Capital Through Listed Product Structures (MOBILIST) program connects global investors to investment products that promote sustainable development in developing countries. In February 2025, the United Kingdom (U.K.) announced up to an additional £100 million in funding for the program. This funding expands the program’s ability to mobilize more investment and strengthen its partnerships with entities such as Thai Credit Bank and InfraCredit.

The MOBILIST Program

The U.K.’s MOBILIST program promotes sustainable development by identifying investment products that align with the Sustainable Development Goals (SDGs) and removing obstacles that prevent those products from listing on public exchanges. MOBILIST helps overcome these challenges by offering expertise, hands-on assistance and government backing. This approach improves investor confidence and funding access for SDG-aligned ventures.

The SDGs, adopted by the United Nations (U.N.) in 2015, are a set of 17, wide-ranging targets that aim to achieve long-lasting progress. The SDGs operate on the premise that goals such as ending poverty must align with other objectives, including economic growth and gender equality. By supporting investment solutions that promote the SDGs, MOBILIST brings these products more funding, widening their impact.

The U.K. expects its £100 million funding pledge to attract between £400 million and £600 million in investments. Since its 2021 launch, the MOBILIST program has assisted the public listing of investment products such as the Thai Credit Bank and InfraCredit. 

The Thai Credit Bank

On Feb. 9, 2024, the Thai Credit Bank completed its public listing with support from the MOBILIST program. The bank provides loans to micro, small and medium enterprises (MSMEs). These enterprises are crucial to Thailand’s economy but have difficulty obtaining the funding necessary to grow. Through funding MSMEs, the bank supports the SDG of economic growth, therefore decreasing poverty and raising standards of living.

The Thai Credit Bank will use the profit from its public listing to further finance MSMEs, specifically focusing on businesses in rural areas and those owned by women. As an essential investor, MOBILIST was key in making the IPO possible. The expansion of this SDG-promoting product is an example of how the program promotes sustainable development. 

Infracredit in Nigeria

The Nigerian-based company, InfraCredit, de-risks investing in Nigerian infrastructure projects by providing credit guarantees to investors. Nigeria needs more than $2.3 trillion from 2021 to 2043 to close its infrastructure gap. InfraCredit’s model supports job creation, infrastructure development and clean energy growth, aligning with multiple SDGs.

On April 14, 2025, MOBILIST announced its investment of $6 million to support InfraCredit’s public listing on NASD. The listing attracted local institutional investors, including pension funds. Subsequently, InfraCredit obtained two investments from pension funds since its NASD listing.  

MOBILIST’s investment also supports InfraCredit’s movement toward investing in renewable energy. Its focus on promoting infrastructure, creating jobs, increasing quality of life and its green movement reflects the SDG of clean energy.

Looking Ahead

MOBILIST’s support for Thai Credit Bank and InfraCredit has strengthened their financial reach and visibility. With the U.K.’s additional investment, more companies that align with the SDGs could gain access to capital markets. The program continues to widen its impact by helping sustainable development-focused businesses scale across emerging economies.

– Madison Fetch

Madison is based in Glasgow, Scotland and focuses on Business and Politics for The Borgen Project.

Photo: Flickr

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MicroLoan Foundation Malawi: Helping Women Escape Poverty

MicroLoan Foundation MalawiIn Malawi, where 70% of the population lives on less than $2.15 a day, poverty is not just a statistic—it is a daily reality. Access to traditional banking services remains limited, especially for the 90% of Malawians living in rural areas. Women are disproportionately affected, but one organization is working to change that. Since 2002, the MicroLoan Foundation Malawi has shown that small loans, combined with training and trust, can spark meaningful change.

Women Leading the Way in Malawi

All of MicroLoan Foundation Malawi’s clients are women, most of whom lack access to formal financial institutions. In a country where commercial banks tend to favor men and urban enterprises, this women-first model is intentional. It recognizes that investing in women borrowers contributes to improved household well-being. Women typically demonstrate higher loan repayment rates and contribute more of their income to household needs and prioritize their children’s education and health.

The foundation pairs small, sustainable loans with extensive business and financial literacy training. Every client receives personalized guidance from a loan and training officer, who supports an average of 419 clients. With an average loan size of just £75, women gain the tools to begin a path out of poverty. In addition to financial support, the foundation encourages peer-to-peer mentoring within loan groups.

These networks provide social support and shared learning, allowing women to exchange advice and build confidence as entrepreneurs. Many clients launch small businesses ranging from tailoring to food vending, generating consistent income and expanding their community influence. The ripple effect often extends beyond financial improvement, with women gaining leadership roles in local cooperatives or village committees. These changes contribute to shifting perceptions around gender roles and create new opportunities for future generations.

From Farming to Financial Freedom in Malawi

Many of MicroLoan’s clients are smallholder farmers whose livelihoods are vulnerable to climate shocks and market instability. To support them, the foundation offers agricultural and irrigation loans, allowing women to invest in farming inputs, equipment and resilience. The results include increased crop yields and higher incomes, which in turn support better nutrition, education access—especially for daughters—and long-term financial stability. Since 2022, the foundation has also scaled up digital literacy by training clients across all branches to use mobile money platforms. By the end of 2024, more than 85% of loan repayments and 30% of disbursements were processed via mobile money. This shift helps improve financial control and safety for rural women.

Toward Long-Term Impact

Microfinance continues to support economic participation in underserved communities. In Malawi, targeted lending and training are equipping women with tools to improve household stability and contribute to local development. As MicroLoan Foundation Malawi expands its reach, its model offers insights for addressing economic exclusion through scalable, community-based solutions. Long-term success potentially depends on partnerships that extend beyond lending—such as linking women entrepreneurs to markets, improving access to insurance and integrating climate-resilience training. These additions could enhance economic security and help ensure that microfinance remains responsive to evolving local needs.

– Linnéa Matlack

Linnéa is based in Boston, MA, USA and focuses on Good News and Technology for The Borgen Project.

Photo: Flickr

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JazzCash: How Fintech Innovations in Pakistan Reduce Poverty

JazzCashPakistan faces significant economic challenges, with a substantial portion of its population living in poverty. As of 2024, the poverty rate stood at 25.3%, marking a sharp increase from the previous year and adding approximately 13 million people to the impoverished population. Financial exclusion exacerbates this issue, particularly among women. In 2021, only 13% of women had access to formal bank accounts compared to 34% of men, highlighting a significant gender gap in financial inclusion. ​

JazzCash’s Role in Financial Inclusion

With 44.4 million customers, JazzCash stands as one of Pakistan’s largest digital financial services platforms. Launched in 2012 by the Pakistani mobile operator Jazz, JazzCash has played a pivotal role in digitalizing Pakistan’s economy, promoting financial inclusion, expanding economic participation and reducing poverty.

Through partnerships with institutions such as the United Nations (U.N.) Women and the Sindh Flood Emergency Rehabilitation Project, JazzCash has introduced microloans, mobile banking and digital finance solutions that support economic activity and empower underserved communities. By leveraging fintech innovations, JazzCash provides secure, efficient and accessible financial services to millions of Pakistanis who previously lacked access to banking.

Here are four key JazzCash initiatives that demonstrate how fintech innovations in Pakistan reduce poverty through economic growth and financial inclusion:

Empowering Women Through Digital Finance

A 2022 partnership with U.N. Women enabled JazzCash to support 10,000 women micro-entrepreneurs by providing mobile wallets, free SIMs, data, calls and SMS bundles by 2025. In addition to digital tools, the initiative offers financial literacy training, ensuring that women gain the knowledge and confidence to effectively use fintech services for business growth and financial independence. With women making up only 21% of Pakistan’s workforce, increasing their participation in the economy is essential for both gender equality and overall economic growth.

The initiative aligns with U.N. Sustainable Development Goal 5 (Gender Equality) and fosters broader poverty reduction by expanding economic opportunities for women. In November 2024, JazzCash announced plans to expand its reach, setting a target to increase the number of women-led businesses using JazzCash from 100,000 to 300,000 by 2027. By integrating women into the digital economy, JazzCash helps close the financial gender gap and provides greater economic independence for female entrepreneurs.

Supporting Disaster Relief Through Fintech

The Sindh Flood Emergency Rehabilitation Project (SFERP), a collaboration between JazzCash and the Government of Sindh, has helped deliver financial assistance to families affected by the 2022 and 2024 floods. As of May 2024, JazzCash has disbursed PKR 2 billion to flood-affected families, with a goal of reaching PKR 15 billion and assisting 1 million households. Additionally, 80,000 new mobile wallet accounts have been created, ensuring that 45% of account holders are women. Traditional relief programs often rely on cash-based assistance, which can lead to delays, inefficiencies and security risks. By offering direct digital transfers, JazzCash provides a more inclusive, transparent and secure alternative, enabling families to rebuild independently and participate in the economy after disasters.

Expanding Social Protection Through Digital Payments

In February 2024, JazzCash became a key partner in the Benazir Income Support Program (BISP), Pakistan’s largest poverty reduction initiative. BISP provides unconditional cash transfers to underserved communities, including 9 million women, serving as a critical social safety net for Pakistan’s most vulnerable populations. JazzCash’s digital disbursement system ensures secure and efficient delivery of PKR 78 billion in cash payments to 1.3 million women by the end of 2025. By November 2024, JazzCash had already successfully transferred PKR 15 billion, demonstrating the effectiveness of fintech in expanding financial accessibility. Beyond facilitating direct aid, this initiative promotes long-term financial inclusion, encouraging women to open digital bank accounts, save money and engage in economic activities that lead to greater financial independence.

Microfinance and Entrepreneurship

JazzCash continues to promote economic inclusion through microfinance, enabling entrepreneurs and small businesses to access capital, process digital payments and expand their operations. Small business owners, particularly in rural and underserved communities, often face significant barriers to accessing credit and banking services. The organization’s microfinance solutions provide secure and efficient financial services, allowing entrepreneurs to scale their businesses, create jobs and contribute to economic growth.

Looking Ahead: The Future of Fintech in Pakistan

As fintech adoption expands, JazzCash remains committed to bridging financial gaps and empowering underserved communities. CEO Aamir Ibrahim has set a target to increase the female customer base from 30% to 50%, ensuring that women gain equal access to financial tools. With the continued integration of financial services into daily transactions, JazzCash is shaping a more inclusive economy where digital finance drives economic participation and poverty reduction in Pakistan.

Expanding financial literacy programs—such as those introduced through the U.N. Women partnership—could be essential in helping more Pakistanis navigate digital finance effectively. By leveraging fintech for economic empowerment, JazzCash is paving the way for sustainable economic growth and greater financial inclusion across Pakistan.

– Oliver Tanner

Oliver is based in London, UK and focuses on Technology and Politics for The Borgen Project.

Photo: Flickr

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How Savings Groups in Uganda Drive Poverty Reduction

How Savings Groups in Uganda Drive Poverty ReductionAbout 37% of adults in Uganda are members of savings groups, making the country a leader in financial inclusion across Africa. These groups, which pool resources and provide loans to members, have gained popularity globally, with many adopting digital tools to enhance security and efficiency. Savings groups are particularly vital in impoverished and rural areas, offering financial services where banks and other institutions are inaccessible or nonexistent. With more than 1.4 billion people worldwide lacking access to formal financial systems, these groups offer a lifeline for promoting financial inclusion and reducing poverty. In Uganda, the community-driven model has become a powerful tool for building resilience and strengthening communities in the fight against poverty.

Types of Savings Groups

There are three main types of savings groups and their use depends on factors such as living standards, the amount of money involved and the participation agreement among members.

  1. Rotating Savings and Credit Associations (ROSCAs). It operates on a simple principle that every member contributes a fixed amount of money, usually agreed upon before formal meetings. Once all members have contributed, the pooled funds are handed out to one person on a rotational basis. In contrast,
  2. Accumulated Savings and Credit Associations (ASCAs). ASCAs, in contrast, do not distribute funds routinely. Instead, the collected money grows over time and members can request loans as needed.
  3. Village Savings and Loan Association (VSLA). The most common type of savings group in Uganda is the Village Savings and Loan Association (VSLA), according to a survey by Financial Inclusion Insights (FII) conducted across 12 countries, including Kenya, Uganda and Nigeria. Like ASCAs, VSLAs allow members to borrow from a shared pool of funds. However, VSLAs differ by equally distributing any interest earned on loans among group members. In Uganda, 11% of individuals involved in savings groups belong to VSLAs. Additionally, 4.7% of those using VSLAs or ASCAs are more likely to live in rural communities than in urban areas, highlighting the significance of these groups in supporting rural financial inclusion.

Driving Financial Inclusion

Promoting financial education globally is essential in the fight against poverty. Savings groups offer individuals opportunities to learn about key financial concepts such as saving, interest rates and loans. These groups also bridge the gap for those without access to traditional financial institutions, providing a pathway to greater financial inclusion and stability.

The World Bank reports that about 50% of Uganda’s population has access to financial institutions. However, 37% of adults in Uganda are involved in savings groups, highlighting their importance in advancing financial inclusion and reducing poverty. Beyond financial education, saving groups empower individuals to understand various social and economic issues. They build partnerships within communities, raise awareness on critical social topics and even contribute to community building and infrastructure development. 

Empowering Women Through Savings Groups

Women face disproportionate impacts from poverty globally. At least one in 10 women live in poverty and women are seven times more likely than men to experience extreme poverty. In Uganda, savings groups play a vital role in empowering women by offering safe spaces to save money and access loans. These loans help women start businesses, provide for their families and meet personal needs, fostering financial independence and stability.

According to a survey conducted by the Fin Mark Trust across 30 countries, including Kenya, Uganda and Nigeria, Uganda has the highest proportion of women engaged in savings groups, with 39% of women participating. Gender inequality remains one of the leading causes of poverty and addressing wage gaps and promoting social benefits for women is critical in reducing poverty among women. Uganda’s savings groups act as a powerful tool in fighting against poverty among women, breaking down barriers they face in corporate, social and family life and building economic empowerment.

Challenges Facing Savings Groups

Despite their benefits, savings groups face several obstacles:

  • Resource Limitations: Many groups in rural areas lack infrastructure and secure storage systems, exposing funds to risks such as theft or mismanagement.
  • Reliance on Physical Meetings: Regular in-person meetings, while essential, can pose logistical challenges compared to the convenience offered by formal financial institutions.
  • Digital Divide: Urban savings groups increasingly use mobile money and digital tools, but rural groups lack access to digital infrastructure, hindering modernization and long-term sustainability.

A more pressing challenge for savings groups is the need to adopt digitized systems. While urban savings groups have started using mobile money and other digital tools, rural communities often lack the necessary digital infrastructure. This gap highlights a growing divide and raises concerns about the long-term sustainability of savings groups in an increasingly digital world. Tackling this issue will require innovation within savings groups and proactive government initiatives to expand digital infrastructure in Uganda’s rural areas.

Sustainability Through Innovation

Organizations like Plan International play a pivotal role in strengthening savings groups. By introducing mobile money and secure savings solutions, it addresses critical challenges and improves efficiency. Plan International, for instance, has supported 1.5 million individuals across 76,000 savings groups in 28 countries, demonstrating the potential for scalable solutions.

Moving Forward

Savings groups in Uganda are transforming lives by providing financial inclusion, empowering women and fostering community resilience. These groups offer a lifeline for individuals lacking access to formal financial systems, enabling them to save, borrow and invest in their futures. While challenges such as resource limitations and the digital divide remain, ongoing innovation and support from organizations and governments can strengthen the sustainability of these groups. Uganda’s savings groups serve as a global model for tackling poverty through grassroots financial solutions, demonstrating the power of community-driven change.

– Zacc Katusiime

Zacc is based in Kampala, Uganda and focuses on Business and Good News, Politics for The Borgen Project.

Photo: Flickr

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Economic Growth and Trade in India

The Transformative Impact of Trade on Economic Growth in IndiaIndia has transformed from a minor player to a formidable economic force in the global market over seven decades. The country’s trade journey reflects resilience, strategic foresight and transformative policy shifts. Starting with a modest trade volume in 1950, foreign trade in India has surged to about $776 billion in recent years.

Evolution of India’s Trade Policy

After gaining independence in 1947, India implemented a protectionist trade policy to foster domestic production and self-reliance, heavily regulating industries and maintaining high import barriers. This strategy emerged from India’s colonial history and its pursuit of economic independence. By 1948, India’s merchandise exports exceeded $1 billion, dominated by jute, cotton, oil seeds and tea, while imports focused on food grains and basic consumption goods. From the 1950s to the late 1980s, India operated under the ‘licence raj’ system, which required businesses to secure permits and adhere to production quotas. By the 1980s, the drawbacks of this model became evident, as the economy grew at a mere annual average GDP rate of 3.6% and the trade deficit widened significantly.

Shift Toward Economic Liberalization

In 1991, facing a severe balance of payments crisis, India dismantled the licence raj, liberalized trade and shifted toward a market-oriented economy. This change opened India to global trade and investment, sparking rapid growth in the services sector, especially information technology. In 1999, a World Trade Organization ruling required India to remove remaining import restrictions on consumer goods, further enhancing trade and economic efficiency. These reforms contributed to accelerated economic growth and significantly reduced poverty.

Impact of Recent Policies

The Foreign Trade Policy (FTP) of 2004-09 launched initiatives to support economic sectors, introducing the Vishesh Krishi Upaj Yojana for agricultural exports and the SEZ Act of 2005 to boost exports. However, the 2008 financial crisis significantly impacted global trade, leading to a decline in India’s exports. In response, the 2009-2014 FTP aimed to diversify exports to stabilize and reverse the downturn. Despite becoming the world’s fifth-largest economy in 2019, India recently adopted a more protectionist stance with initiatives like Atmanirbhar Bharat (Self-Reliant India) to reduce the trade deficit and promote domestic industries, while still seeking to attract foreign direct investment and integrate into global value chains.

Looking Ahead

Trade has significantly boosted India’s GDP growth, job creation and poverty reduction, yet challenges persist. The trade deficit, intense global market competition and the need for infrastructure improvements continue to be prominent issues. Moreover, bureaucratic red tape hampers economic progress and the COVID-19 pandemic has intensified these ongoing challenges. Despite these obstacles, India remains committed to trade reform and economic liberalization, promising sustainable development and inclusive growth across all societal segments.

– Sandeep Kaur

Sandeep is based in Manchester, UK and focuses on Business and New Markets for The Borgen Project.

Photo: Flickr

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The Mattei Plan: Italy’s Billion-Dollar Investment Plan in Africa

The Mattei Plan: Italy's Billion-Dollar Investment Plan in AfricaItalian Prime Minister Georgia Meloni announced the Mattei Plan during the Italy-Africa summit in 2024—a billion-dollar investment initiative aimed at transforming Italy’s foreign aid policy, generating significant profits for Italy and effecting real change in Africa. The Mattei Plan aims to reduce immigration by improving living conditions in the countries from which many immigrants originate and by curbing the spread of radical Islamism in sub-Saharan Africa. The pilot project will launch in nine countries: Algeria, Côte d’Ivoire, Egypt, Ethiopia, Kenya, Morocco, Mozambique, the Republic of Congo and Tunisia, with an initial investment of €5.5 billion.

The pillars of the program

The Mattei Plan has six focus areas to guide its efforts:

  1. Education and Training. This pillar emphasizes improving educational systems by providing teacher training, refreshing curricula and launching new vocational courses that meet labor market demands. It encourages collaboration with businesses, particularly Italian ones and draws inspiration from Italy’s successful small and medium-sized enterprise model.
  2. Agriculture. The focus here is on reducing malnutrition, fostering agricultural value chains and supporting the development of sustainable biofuels. Key initiatives include promoting family farming, preserving forests and addressing climate change through comprehensive agricultural strategies.
  3. Health. This focus area aims to enhance health services by improving access to quality care for mothers and children. It seeks to build local capacities in health care management, training and research and to implement measures to prevent and manage health crises such as pandemics and natural disasters.
  4. Energy. The goal of this strategic pillar is to transform Italy into an energy gateway between Europe and Africa. Efforts will concentrate on the climate-energy connection, promoting energy efficiency and renewable energy. The plan includes accelerating the shift to renewable electricity, improving energy infrastructure and fostering local energy technology innovation through the establishment of innovation centers.
  5. Water. Initiatives under this pillar include drilling solar-powered wells, maintaining existing water sources, investing in water distribution networks and educating communities about the importance of clean drinking water.
  6. Infrastructure. This pillar supports all other areas by developing both physical and digital infrastructure, ensuring the effective implementation of the plan’s various initiatives.

Collaboration is key

This project will be implemented through a collaboration involving various stakeholders from the Italian government—including multiple Ministries and the Italian Export Credit Agency—as well as from the private and civil society sectors. A notable aspect of the Mattei Plan, which has garnered praise, is its inclusive approach; unlike previous initiatives, it will not be enacted unilaterally from the top down. Instead, African leaders will play an active role in executing the programs, with partners jointly designing key goals and targets.

Evidence of this collaborative approach was visible when 21 African Heads of State and Governments attended the summit where the plan was announced. Additionally, the presence of European Union President Ursula von der Leyen highlighted significant European interest in this innovative, collaborative investment approach in Africa. This integrated approach can deliver short-term goals but also identify areas in which other already existing programs can come in and improve. This comprehensive, cooperative format of the Mattei Plan is original and can change the structure of Italy’s international partnerships. 

Benefits for Europe

Italy stands to gain significantly from the Mattei Plan, especially through its “Energy” pillar. Italy aims to become a key energy supplier to Africa, with the state-owned oil and gas company ENI, already a major player in Africa, expecting high returns from the plan. The plan is named in honor of ENI’s founder, Enrico Mattei. Additionally, water services management company ACEA and oil company ENEL are exploring opportunities in Africa related to the environment and energy sectors.

During another meeting involving stakeholders of the Mattei Plan, African Development Bank director Dr. Akinwumi Adesina highlighted the benefits of Italy’s investment in Africa. The continent is home to six of the 10 fastest-growing economies and has the fastest-growing middle class. It also has the highest concentration of the global population under 35 years old, with 75% of the continent’s population below that age.

Looking Ahead

The Mattei Plan, with its €5.5 billion initial investment, aims to transform Italy’s foreign aid policy and foster significant economic and social development in nine African countries. By focusing on key areas such as education, agriculture, health, energy, water and infrastructure, the plan seeks to improve living conditions and reduce migration pressures. Collaborative efforts involving African leaders, European stakeholders and Italian businesses underscore a new model for international partnerships, poised to benefit both Africa and Italy.

– Clara Tripodi

Clara is based in Salvador, Brazil and focuses on Business and New Markets for The Borgen Project.

Photo: Flickr

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The Declining Yen and Its Impact on Japan

Declining YenDespite its small size, Japan has consistently ranked as the world’s third-largest economy, following the United States (U.S.) and China. However, in 2024, the country fell to fourth place, overtaken by Germany. Japan has experienced a declining yen, its weakest in history, leading to a rapid economic decline. Businesses relying on imported goods are facing even greater economic challenges. Several factors contribute to Japan’s economic difficulties and this stagnation poses significant concerns for the country’s future.

Reluctance to the Digital Shift

Japan remains one of the few analog societies, still relying on fax machines and cash while retaining traditional methods. This digital gap stems from Japanese companies’ reluctance to adopt information and communications technology (ICT) and a fixed mindset. Renowned tech companies like Sony, successful in the past, resist adapting to new technologies. Additionally, the COVID-19 pandemic exacerbated this issue. While much of the world shifted to remote work, many in Japan continued working on-site, missing opportunities to embrace digitalization.

Japan’s Economic Golden Age

In the 1960s, Japan’s economy flourished, opening to world trade and focusing on exporting goods. The Income Doubling Plan of 1960, which aimed to boost Japanese income through enhanced government support for social welfare and education, played a significant role. During this period, Japan emerged as a leading manufacturer of electronics, automobiles, metals and chemicals. Companies such as Sony, Nikon, Canon, Toyota, Honda, Mazda, Mitsubishi and Suzuki dominated the international market by emphasizing high-quality and high-technology products.

The Economic Bubble Burst

In the 1980s, Japan’s economy grew rapidly, with soaring stock prices, real estate values and the Yen’s strength. This period of economic excess is known as the bubble economy. However, the bubble burst in 1992 when the Bank of Japan raised its interest rate. This led to a stock market crash and a steep decline in asset prices. Since then, Japan has faced economic stagnation, a period often referred to as the lost decades.

The Dilemma of Low Interest Rates

The Bank of Japan has maintained a low-interest rate for decades, contributing to the continuous decline in the value of the Yen. Higher interest rates can boost a currency’s value by attracting foreign investment, which is why countries often raise rates to curb inflation. For instance, the U.S. increased its interest rate during the COVID-19 pandemic to stabilize the dollar. Conversely, lower interest rates can reduce a currency’s value but are used to stimulate economic activities such as borrowing, spending and investing. In Japan, the strategy to drop interest rates to near zero was intended to encourage consumer spending. However, this approach backfired by making the economy less attractive for foreign investment and further decreasing the Yen’s value.

Path Forward for Economic Recovery

Over the years, Japan has resisted raising its interest rates despite economic stagnation. With low demand for the Yen, Japan feared that higher rates would exacerbate its ability to pay off debts. However, in March 2024, for the first time in 17 years, Japan increased its interest rate from 0% to 0.1%, ending its negative interest rate policy.

By 2026, Japan will face a shortage of 2.3 million digital workers due to a fundamental lack of digital skills. Embracing a digital shift to enhance technology promises to spur economic growth. Additionally, gradually raising the interest rate at a steady pace could eventually strengthen the value of the Yen.

Focusing more on tourism offers another avenue to alleviate economic stagnation. Currently thriving due to the declining Yen, Japan’s tourism industry benefits from government efforts to attract more foreign visitors. In 2024, visitor numbers from the U.S. and Germany, where currency strength outpaces the Yen, surged by 64.3%. The weakened Yen draws tourists looking for cost-effective travel options, presenting an opportunity for Japan. By actively attracting international visitors, Japan could leverage its economic challenges to bolster the tourism industry, potentially significantly contributing to the gross domestic product.

Looking Forward

Japan’s decision to increase interest rates and its openness to digital transformation offers hope for economic revitalization. As Japan adapts to global digital trends and continues to enhance its tourism sector, it sets a path toward overcoming decades of economic stagnation and the declining yen. These ongoing strategic shifts promise to gradually restore the strength of the Yen and reinvigorate Japan’s global economic standing.

– Eunsung Koh

Eunsung is based in Seoul, South Korea and focuses on Technology and Politics for The Borgen Project.

Photo: Flickr