Microlending Organizations
In the fight against global poverty, one hot-button issue is how to provide aid without the implication of paternalism, the idea that one person or group knows the interests of another group better than that group knows its own interests. Tariq Fancy, the founder of the nonprofit The Rumie Initiative, recalls hearing a Kenyan relative’s view on problems with international aid, saying “don’t walk in assuming that from your perch in North America you figured out all the answers for Africa.” Putting resources and power in the hands of communities both provides aid and acknowledges that they can make decisions about local interests. Microlending organizations have the power to do just that

Microloans are small loans at low-interest rates. Individuals living in poverty often have difficulty securing loans from traditional financial institutions due to a lack of borrowing history and assets to use as collateral. Even when people can get loans, interest rates are often high. People often use microloans to finance small businesses in their early stages, enabling people to overcome barriers and progress toward lifting themselves and their families out of poverty.

Microlending organizations can also issue loans for community projects, like building wells or funding schools. Microlending organizations typically, but not always, issue loans funded by individuals rather than by banks or other financial institutions. Here are four companies and organizations that use microlending in different forms to empower people living in poverty.

Four Microlending Organizations that Empower the Poor

  1. Kiva: Kiva crowdfunds loans from people around the world and uses partners to issue them. The nonprofit has enabled the funding of more than $1.33 billion in loans. Kiva emerged in 2005 and has partnerships with financial institutions throughout the world, where it transfers the crowdfunded money. The local field partners then loan money to Kiva’s lenders. Kiva has a 96.8 percent repayment rate and operates in 78 countries. On Kiva’s website, lenders can sort loans by region or category, such as agriculture, women and eco-friendly.
  2. Zidisha: Zidisha is the first direct person-to-person microlending service that focuses on entrepreneurs and job creation. Its name” comes from the Swahili word meaning “grow.” Unlike Kiva, Zidisha does not loan through financial institutions but facilitates direct lending between people. Zidisha’s loans total more than $16 million and have financed more than 240,000 projects.
  3. Building Resources Across Communities: Building Resources Across Communities (BRAC) is the largest non-governmental development organization in the world in terms of number of employees. Hasan founded BRAC in 1972 and it employs more than 120,000 people in 11 countries. BRAC has a microfinance program, primarily in Bangladesh, which has loaned to 5.6 million borrowers, 87 percent of whom are women. Unlike Kiva and Zidisha, which operate person-to-person lending services, BRAC distributes loans to lenders on its own using donations and other funds. BRAC also does work unrelated to microfinance, investing in schools and in water, hygiene and sanitation services.
  4. Women’s Microfinance Initiative (WMI): Women’s Microfinance Initiative (WMI) began issuing loans in 2008 and trains local women in managing loan hubs. WMI has loaned more than $4.5 million to rural women in amounts of $100 to $250 at an interest rate of 10 percent. According to WMI, 99 percent of its borrowers report doubling their income within six months of being involved in the program. WMI reports a 98 percent repayment rate.

The efficacy of microlending in pulling people out of poverty is up for debate, but some cases have shown promising results. A microfinance program in Uzbekistan resulted in 71 percent of participants reporting an increase in food intake quality. One study showed that when a microfinance program was put in place, there was an 18 percent decline in extreme poverty. While different studies report differing results, microlending organizations like Kiva, Zidisha, BRAC and WMI have certainly been a success.

– Meredith Charney
Photo: Flickr

Fighting Global PovertyPeople helping people. Country helping country. Giving back to the world is not a strange concept and is a welcomed idea in most societies. A popular form of global help is foreign aid. The umbrella term commonly refers to monetary assistance provided by outlying or foreign governments. The funds are generally distributed through humanitarian organizations, non-profit groups or directly from a foreign government. As such, the aid is given to citizens in an abundance of forms, such as money, food or shelter. While some can afford to provide more than others on a purely numeric comparison, the amounts are measured or valued differently depending on the country’s economic standing. This list consists of five countries fighting global poverty who outshine the rest.

Top Five Countries Fighting Global Poverty

  1. Norway begins the list as it provides the largest amount of foreign aid in comparison to its GDP. The government put 1.11 percent of its GDP towards global humanitarian aid, spending NOK 455 million as of 2018. The country utilizes organizations such as the U.N.’s CERF (Central Emergency Response Fund), the Red Crescent Movement and the Red Cross. Recently, Norway channeled much of their funds into CERF in order to assist Venezuela in its growing refugee crisis. Norway’s contributions towards these programs effectively fight against global poverty and prove the nation should be in the top five, as its generosity in comparison to its national budget is the highest in the world.
  2. Luxembourg also contributes a significant portion of their GDP towards humanitarian and foreign affairs. Approximately 1 percent of their national budget, or about USD 413 million, is used for aid. Some of Luxembourg’s projects include poverty reduction through community development in Laos, education improvement in Burkina Faso and health care in Nicaragua. These countries receive specific help from various agencies and organizations like LuxDev and the Directorate for Development Cooperation and Humanitarian Affairs. These groups and projects, though just a few select examples, show how much effort Luxemborg puts in fighting poverty.
  3. Sweden comes forward as another example of a smaller country with a smaller budget who still makes a grand impact in the world. As about 1.04 percent of its GDP, or about USD 5.8 billion, is used for humanitarian and foreign aid, Sweden holds a top ranking. While the money touches on a broad range of topics, from civil rights to education, specific Swedish projects focus on poverty issues. For instance, Sweden recently provided aid to Somalia for drought relief through the United Nations Children’s Fund (UNICEF) and the Somalia Humanitarian Fund. Sweden makes a mark on the world by not only tackling larger, conceptual issues, but by also responding quickly to disasters and world events. Such assistance highlights the country’s proficiency in the fight against global poverty.
  4. The United States is a leader in fighting global poverty as it contributes the most money towards humanitarian and foreign aid. Within the past few years alone, the U.S. contributed USD 30 billion towards various forms of international aid. The nation utilizes several different federal agencies, non-profit groups and other organizations to distribute aid. The U.S. commonly works with popular organizations such as UNICEF or the Red Cross. A prime example of the U.S. effect on the world is with the sheer number of countries it provides for, as it touches nearly 40 different nations, including Pakistan and Mexico.
  5. Germany also provides a significant amount of aid with nearly USD 20 billion contributed towards humanitarian projects in recent years. This accounts for nearly 0.70 percent of the national budget. Popular organizations and agencies include the World Food Program, which Germany utilized to provide relief to Africa. In addition to such organizations, Germany is known to donate large amounts of money to other countries, a notable example being Syria in recent years due to their ongoing crisis. Germany’s monetary generosity also makes it the second-largest donor in the world to foreign aid, falling in just behind the U.S.

Whether it’s a natural disaster or political turmoil, when a country is in need, surrounding neighbors will often step up to help.

– Eleanora Kamerow
Photo: Flickr

Demonetization in India has been one of the most discussed topics since 2016. It became the center of attention after its sudden implementation in a declaration by India’s Prime Minister, Narendra Modi, in November 2016. In simple terms, demonetization means ending the use of existing currency (in this case, 500 and 1000 rupee notes) as the legal currency of a country.

Though demonetization in India has shocked millions across the country, it has occurred before, once in 1948 prior to India’s independence and then again in 1978. In both cases, as in the current case, the goal was to prevent counterfeit and black money.

The process of demonetization in India started six to eight months before the date of its announcement. However, it was declared with no prior warning, and the Reserve Bank of India (RBI) provided a window of only 50 days for the exchange of 500 and 1000 rupee note after its declaration.

Where does India stand after one year of demonetization? What is its effect on common people as well as on the overall economy after one year? So far, the negative aspects of demonetization far outweigh its positives. However, it is important to recognize the positive outcomes:

  • Since the beginning of 2017, there was an increase in the number of digital transactions. According to a report by the National Payments Corporation of India (NPCI), digital transactions spiked from 0.1 million in October 2016 to 76.96 million in October 2017. Digital transactions will help to eradicate illegal transactions and bolster tax collections.
  • Due to the deposit of unaccounted money in the form of Rs.500 and Rs.1000 in cash, which increased liquidity, banks are offering home and business loans at a cheaper interest rate that will boost both the real estate and the small industry sectors, bringing new employment opportunities.
  • Over 200,000 shell companies suspected of money laundering and fraud were closed.
  • The steel industry and auto sector, which both took an initial blow, are performing better than anticipated and are expected to maintain their gradual upward trend.

Unfortunately, citizens like farmers, small traders and daily wage earners, who mostly deal with cash in their everyday lives, have been dealt the hardest blow. It is predicted that almost 100,000 people became unemployed due to the Prime Minister’s sudden decision. Luckily, several minor monsoons had a positive impact on agriculture, which increased income and public consumption in the rural sector.

In the midst of all speculation and controversy, many think demonetization in India has stricken the very core of corruption, and will help make major change in the nation. It’s impossible to know for sure as of yet, but with more time, there is hope that India will see long-term positive effects.

– Mahua Mitra

Photo: Flickr

India_Income
On Nov. 8, 2016, financial assets in India faced the possibility of losing their values completely. This potential instability, along with the ongoing failures of India’s current welfare programs, has pushed the government to consider alternative methods for economic stability. Thus, the government introduced the idea of a universal basic income (UBI).

By replacing India’s current welfare programs with a universal income, families, rich or poor, could receive monthly stipends of equal amounts. The economic survey conducted on a UBI plan proposes a monthly stipend of 893 rupees ($13) per month, amounting to 7,620 rupees ($112) per person each year.

Founding member of the Basic Income Earth Network, Guy Standing, has celebrated the potential positive outcomes from a UBI system, including debt reduction and women’s empowerment. Proponents of UBI hope to see the poor become more self-sufficient and to see social justice promoted.

Faced with corruption and the disproportionate allocation of funds, experts argue that India’s current welfare programs are indignant toward the country’s poor and give them no means of financial control. Transitioning away from such welfare programs would free up 950 existing welfare schemes that could fund a universal basic income plan. Overall, a universal basic income could reduce absolute poverty in India by 21.5 percent.

Currently, India has limited access to ATMs, and a third of Indian adults do not use financial institutions to manage their funds. The direct depositing of funds could encourage the use of formal financial services and could help improve financial infrastructure in India.

Given the recognizable need for reform in India’s welfare programs, current statistics reflect issues that need resolving before establishing a universal basic income. For example, access to a UBI program would only be available for 75 percent of the population, creating quite an expense that would account for 4.9 percent of India’s GDP. Limited access also leads to the question of fairness. Would the wealthy still collect from a UBI program and leave some in extreme poverty without access, or would the rich honorably opt-out as beneficiaries to a program for which they have no need? These dilemmas make the debate on a universal basic income more complex.

The question to consider going forward is: what will be the most efficient way to replace India’s current welfare system? According to India’s Chief Economic Advisor, Arvind Subramanian, there is much to consider in implementing a universal basic income. However, the good news remains that efforts are being made to alleviate the people of India from poverty through a potential plan for a universal basic income.

Amy Williams

Photo: Flickr

Fonkoze_Bank
Using a unique stair-stepping model, Fonkoze Bank helps put money into the hands of some of Haiti’s poorest people. Stationed in Port-au-Prince, Haiti and Washington D.C., Fonkoze has operated for 11 years, working with citizens in Haiti to improve their financial standing and rise out of poverty.

Fonkoze Bank was founded by Father Joseph Philippe, a Haitian priest who made it his goal to help rural Haiti become economically stable.

While Fonkoze Bank helps people of different backgrounds, its primary focus is Haitian women, who are considered to be Haiti’s “poto mitan,” or Haiti’s “backbone”. Women are the head of the household in 44 percent of all Haitian homes and are the largest contributors of small commerce.

Fonkoze Bank is divided into 45 branches which encompass all of Haiti. Since inception, the Bank has provided financial, health and education assistance to more than 60,000 people through its four-step model.

Step One: Chemen Lavi Miyo
Chemen Lavi Miyo stands for “pathway to a better life” and is the first step in Fonkoze’s stair-stepping model. During this step, Fonkoze Bank provides women with the tools and resources needed to escape poverty and transition to a life of self-sufficiency.

Step Two: Ti Kredi
Ti Kredi, which is Haitian for “little credit” is where the microfinance portion of Fonkoze’s services comes into play. The six-month program assists women, especially those coming from vulnerable backgrounds, develop business skills through education and training to help ensure success as micro-entrepreneurs.

On average, 92 percent of Ti Kredi participants graduate from the program. Successful graduates are able to cut their hunger rates by one-third and close to 100 percent of graduates are able to send their children.

Step Three: Solidarity
The Solidarity Program permits groups of five women, called solidarity groups to take out loans to help maintain their businesses during tough economic times.

Teams of five or six solidarity groups will meet a few times a month at “solidarity centers”. The women not only develop plans to repay their loans but also support each other’s businesses in the process. This helps promotes solidarity among micro-entrepreneurs in different geographic locations.

Step Four: Business Development
The final step of Fonkoze’s stair-stepping model is business development. During this step, women are able to take out loans surpassing the amounts they received in the second and third steps. They are also able to participate in a 12-month program giving their businesses the potential to take off and even thrive.

As of 2013, Fonkoze Bank had distributed more than $30 million in loans and continues to positively impact the lives of women who have been unable to access tradition funding from urban banks in Haiti.

Julia Hettiger

Sources: Fonkoze, Charity Navigator, Grameen Foundation
Picture: Google Images


In October 2015, the World Bank raised the international poverty line from $1.25 to $1.90 per day.

The international poverty line was originally introduced in 1990 and is determined by combining national poverty lines from the world’s poorest nations. From there, the World Bank uses Purchasing Power Parity (PPP) rates to convert the poverty line into U.S. dollars and currencies of other developing countries.

The international poverty line has become the benchmark for policy goals regarding poverty, including the U.N.’s Millennial Development Goals (MDGs) and the Sustainable Development Goals (SDGs).

Every few years, the Independent Comparison Program (ICP) publishes new sets of PPPs, reflecting both changes in relative price around the world and methodological changes.

Beginning in 1991, PPPs from 1985 created the very first international poverty line at $1 per day. Since then, new sets of PPPs have been published in both 1993 and 2005, increasing the international poverty lines $1.08 per day and $1.25 per day, respectively.

Using PPPs from data collected in 2011, the international poverty line increased is now set at $1.90, based on an increase in the cost of living globally

Today’s poverty line reflects accurate costs of food, clothing and shelter needs around the world. Based on data from the World Bank, more than 700 million people still live below the poverty line compared to 900 million in 2012.

While extreme poverty has decreased over the past 10 years, organizations similar to The Borgen Project are essential in raising awareness for the continued struggle to end poverty.

New data regarding global poverty will be collected in April 2016 and will determine how well efforts to eradicate poverty have paid off.

Alexandra Korman

Sources: Jagran Josh, The World Bank
Photo: The Guardian

fighting_poverty_with_surveySurveys are one way that the world measures a variety of information. The aim of these data compilations is to improve the quality of a product or service provided.

When looking back on areas that have and have not been surveyed, the World Bank found that between 2002 and 2011, approximately 57 countries only had a 0-1-poverty estimate. So, how can a survey help fight poverty?

According to the World Bank, “Poverty-fighting efforts have long been constrained by a lack of data in many countries.” Without the proper information on how many people are actually struggling and where they are, it is hard to provide the necessary resources to effectively help.

In a report done in April of this year, the World Bank described what they are calling data deprivation. They stated that “the poor are often socially marginalized and voiceless, and the collection of objective and quantitative data is crucial in locating them and formulating policy to help them exit extreme deprivation.”

In order to gain better insight into what is going on in these countries, the World Bank has begun fighting poverty with surveys. They have committed to surveying the 78 poorest nations every three years.

The first round is expected to be completed by 2020. These surveys are expected to provide real in-depth information on poverty issues in each country surveyed.

“Without having the data you cannot do anything about it or you don’t know what’s going on,” said Umar Serajuddin, World Bank member, in a video entitled “My Favorite Number: 77 Reasons We Need Poverty Data.”

Knowing what is actually taking place is the first step in alleviating the poverty crisis in order to succeed in moving forward.

Jim Yong Kim, the World Bank Group head, has expressed his optimism in the project’s undertaking.

“Poverty isn’t something that should be considered as perpetual,” Kim said.

Poverty has already begun to decrease. With data information, this progress is expected to continue.

Katherine Martin

Sources: World Bank 1, World Bank 2, YouTube, Inquisitr
Photo: Flickr

offshore_accounts
As of this year, more than $2 trillion is being stored overseas. This income is not taxable by the U.S. government and has cost the United States approximately $90 billion in tax revenue each year.

When a corporation such as Google, for example, makes profits, the company stores these profits in shell companies overseas in tax havens where the tax rates are very low or nonexistent. Bermuda and the Cayman Islands are two of the most commonly used tax havens in the world for U.S. companies.

The amount of subsidiary (shell company) profits in these nations is often many times the actual size of the tax haven’s gross domestic product, a showcase of the absurdity of the situation.

Various tax code holes and accounting magic constitute the ground for these practices that are essentially in the open but also largely ignored and unaddressed. By using offshore accounts, these companies pay on average a tax rate of 6.9 percent. The U.S. tax rate on this cash would have been 35 percent.

This systematic tax avoidance is unfair to the U.S. taxpayers and should be properly addressed and fixed. Those $90 billion a year could be used for great causes back on U.S. soil and abroad. This taxation loophole hurts everyone and not just Uncle Sam’s wallet.

The current amount of money that the United States spends on foreign aid is in the ballpark of $15 billion per year. If just five percent of the lost revenue ($90 billion) was used for foreign aid, this would increase funding by around a third.

About a third of the money dedicated to foreign aid is used for health purposes abroad–directly improving and saving lives. The rest of the money could help fund critical social assistance programs here at home as well.

By allowing corporations to evade taxation, the United States loses 90 billion chances a year to spend money on foreign aid to help people abroad, fund critical programs to help the poor in the United States and virtually anything else that could need funding.

The opportunity costs of not closing these tax loopholes are enormous to people abroad and people at home. It is an insult to American citizens, and to the aid workers who need more funds to help the poor and simultaneously give these very same corporations more consumers to court in the long run.

Martin Yim

Sources: Forbes, Bloomberg, RT, NPR
Photo: Nation of Change

World_Bank

The World Bank has released a report showing improving economic conditions for the world’s poor. Income inequality, however, continues to be a threat to progress.

The most recent report on gross national income (GNI) per capita shows the number of countries considered to be “low-income” have been halved over the last 20 years. In 1994, there were 64 low-income nations, whereas today there are 31.

Most of today’s low-income countries can be found in Sub-Saharan Africa. Among the poorest are Central African Republic, the Democratic Republic of the Congo and Malawi. Some countries, including Somalia and Syria, are not included because data is incomplete.

To be considered low-income, a country must have a GNI of $1,045 or less. In the last 20 years, several countries graduated into the $1,046 to $12,736 range of “middle-income.”

At the other end of the spectrum were high-income countries: small, wealthy countries like Qatar, Singapore and Norway.

Gross national income is a common way of measuring the prosperity of a nation. When divided by a country’s population, it yields GNI per capita. The data is based on purchasing power parity and is adjusted for inflation.

The report demonstrates rising economic tides for the world’s poorest countries, largely driven by rapid growth in the last two decades. However, with growth often comes rising inequality.That’s why the World Bank says it will take more than growth to end world poverty.

In a paper released in 2014, the World Bank noted the importance of monitoring income inequality; “In countries with rising income inequality, the effect of growth on poverty has been dampened or even reversed,” the paper reported.

To address this concern, the World Bank recommended social protection programs that protect those left behind by growing economies.

“We need a laser-like focus on making growth more inclusive and targeting more programs to assist the poor directly if we’re going to end extreme poverty,” explained World Bank Group President Jim Yong Kim in a press release.

This echoes a concern held by many development agencies. Jobs alone are not enough to end extreme poverty and economic growth is often unequally distributed, leaving millions behind.

While the results of the latest GNI index are promising, there are still 31 low-income nations remaining. As more countries enter middle-income territory, the needs of those left behind by growth will need to be addressed.

Kevin McLaughlin

Sources: World Bank GNI Index, World Bank Press Release, The Guardian
Photo: The Guardian

World_Bank
On July 16, 2015, World Bank Group President Jim Yong Kim and Chinese Finance Minister Lou Jiwei signed an agreement creating a $50 million trust fund to help alleviate global poverty. This agreement will set in motion new investments and organizations that will provide immediate assistance to third world countries all over the globe. The fund also serves to reaffirm the World Bank Group’s relationship with China.

According to the World Bank Group itself, “The trust fund, which is expected to start later this year, aims to enhance the cooperation between China and the World Bank Group and leverage financial and knowledge-based resources to help developing countries achieve inclusive and sustainable development. It will finance investment projects, operations, knowledge development and human-resource cooperation at both global and regional levels.” With the financial support of China’s super economy, the World Bank is poised to make real changes for people in poverty.

China’s renewed partnership with the World Bank Group represents a major step forward in the fight against global poverty. This new partnership will begin in late 2015 and continue throughout the upcoming years. World Bank Group President Jim Yong Kim was quoted as saying, “China is a strong partner in development and a strong partner for the WBG, and we share the commitment to ending poverty and boosting shared prosperity.” The marriage between China and the World Bank Group is all the more significant considering that the two were part of a controversy earlier this year.

It was reported by Outlook India that the World Bank Group redacted a criticism of the Chinese economy in a report made on July 3 of this year. An excerpt from the Outlook India article reads, “The World Bank today refuted claims that it withdrew a report critical of China’s financial sector under pressure from the Chinese government and said the economic fundamentals of the country are sound despite the recent equity market volatility.” For any meaningful reform to come out of the new $50 million trust fund, China and the World Bank must find themselves on the same page.

Diego Catala

Sources: World Bank, Outlook India
Photo: Thanhnien Newsk