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credit access in ThailandThailand, a country in Southeast Asia which borders the Andaman Sea and the Gulf of Thailand, is interestingly the only country in the region to not have been colonized by a European power. Generally speaking, during the last few decades, Thailand has been able to reduce poverty and bolster economic growth with low levels of unemployment and inflation and increased government spending. Credit access in Thailand has become relatively widespread.

A 2013 study conducted by FinScope revealed that 74 percent of the adult population had access to a bank account, with 23 percent using other formal financial services and only 1 percent using informal services. Thus, credit access in Thailand is considered to be quite inclusive and available. However, there are still improvements that can be made in regard to broadening financial access for the remaining 1 percent. Thus, financial inclusion and widespread accessibility do not necessarily account for the whole adult population spanning across all levels of incomes.

Thailand was highly affected by the Asian financial crisis in 1997 and this caused the Bank of Thailand and the Ministry of Finance to largely invest in stable, low-risk bank operations while tightening lending regulations, which evidently excluded the low-income populations working in the informal sector who were considered to be high-risk. Thus, the United Nations Capital Development Fund argues that the main area for improvement could be through widening access for insurance and credit products for various groups of individuals working within this informal sector.

There are several challenges to widening financial inclusion and credit access in Thailand, which include:

  • Limited access to credit for individuals living in rural communities due to proximity
  • The pervasiveness of informal credit services that are available
  • Individuals lacking the necessary documentation to comply with formal financial institutions, especially with an estimated 2.5 million undocumented migrants living in Thailand
  • Lack of literacy and financial knowledge

This has resulted in individuals and small businesses in Thailand having to resort to less credible and desirable forms of money lenders. Another major barrier seems to stem from the laws that surround commercial banks acquiring credit information. Currently, the law prohibits banks to inquire about a guarantor from the National Credit Bureau (NCB) even with consent, but instead, the guarantor must go to the NCB and then submit their credit information to the bank, which is inefficient and time-consuming for both parties.

The Asia-Pacific Financial Inclusion Summit held in October of 2015 outlined some policy recommendations to improve credit access in Thailand, which include:

  • Increasing options for distributing micro-insurance
  • Raising public awareness and support for the improvement of low-income households to interact with financial services through community-level financial education
  • Improving and shaping public policy in regards to financial inclusion.

Although credit access in Thailand has been steadily broadening, there is a portion of the population, albeit small, that is falling outside of this growing financial inclusive sphere. But with ongoing research by various institutions and an increasing awareness of this issue throughout the country, credit access will hopefully become available for everyone in Thailand.

– Miho Kitamura

Photo: Pixabay

credit access in sudanAccess to credit enables people to acquire goods and services exceeding their disposable income. Credit access in Sudan, a lower middle-income country in northeastern Africa, is limited. In 2013, Sudan ranked 167th out of 185 countries based on the ease of getting credit by the World Bank’s Doing Business Report. Limited access to and the lack of affordable credit are largely responsible for small business failures in Sudan.

In Sudan, financial services are concentrated in urban areas; however, efforts have been made to improve access to these services. One example is the Multi Donor Trust Fund-National (MDTF-N) Sudan Microfinance Development Facility Project—a project encouraging the development of affordable financial services, including credit and saving programs. The project serves poor entrepreneurs in the marginalized and war-affected parts of Sudan and has distributed loans to over 380,000 Sudanese households.

Though 480,000 people have credit access in Sudan at market rates, the formal financial sector remains inaccessible to vast sections of the population, including women. Women’s credit access in Sudan is restricted by cultural practices, including the roles of men as provider and head of families and gender-biased inheritance rules favoring men. There are female-headed households; however, they tend to have lower household income than male-headed households due to the side effects of gender discrimination — one being women’s low average education level.

The government’s Central Bank of Sudan identified microfinance — financial services distributing small loans to low-income individuals — as a poverty reduction strategy. To meet their poverty reduction goals, the Central Bank of Sudan has directed significant resources toward increasing the share of loans and credit to small- and medium-sized businesses.

Still, there is more to be done. One suggestion made by the Food and Agricultural Organization of the United Nations is for Sudan to develop gender policies dedicated to increasing availability and access to credit for female household heads. Without prior attention to gender discrimination and income inequality, the prospects for poverty reduction efforts in Sudan are uncertain.

– Gabrielle Doran

Photo: Flickr

credit access in YemenIn 2015, the SANAD Fund for Micro-, Small and Medium Enterprises (MSME) and Al Amal Microfinance Bank signed into effect a loan of $3 million. This loan provided the opportunity for new and small enterprises to develop in Yemen. As SANAD’s first investment in Yemen, this loan allowed a greater possibility for the country’s poor to gain credit access in Yemen for small business ventures.

This loan was a collaborative effort. Al Amal is a microfinance bank in Yemen and MSME was funded by KfW Development Bank, with the German Ministry for Economic Cooperation and Development and the European Union providing the financial support for the loan.

The purpose of this loan was to strengthen the financial market through the development of micro-, small and medium enterprises and practicing principles of responsible finance for new entrepreneurs. Loans such as these allow for small enterprises to prosper by gaining credit access in Yemen.

However, in 2016, because of conflict in the nation, credit access in Yemen decreased on a large scale. Credit access for food cargoes and supplies for civilians in extreme poverty weakened. Lenders became disincentivized to offer lines of credit because of the civil war between the government, the Houthi militia and al Qaeda that is still ongoing.

International banks have declined to process lines of credit due to the instability in the country. This leaves traders to supply a full shipment of cargo without pay until arrival, an extreme risk to the trader.

Yemen’s central bank worsened the situation by stopping reasonable exchange rates for local traders purchasing rice and sugar for import. Yemen relies heavily on imports, and with these less than ideal circumstances, many individuals are left lacking basic necessities.

Government aid is working to combat the effects of poor credit access in Yemen. USAID funded over $100 million to supply roughly 400,000 people with food, water, shelter, healthcare and education.

The Yemeni government received four rehabilitated schools in Abyan and Aden because of USAID funding and a projected 13 more schools will be completed for use in southern Yemen.

Investing and providing credit access in Yemen seems risky, but through foreign aid and private investments to smaller enterprises, conflict may be driven down and local enterprises and trade may be allowed to grow in the country.

– Bronti DeRoche

Photo: Flickr

Credit Access in Tunisia Boosts Economic GrowthCredit access in Tunisia has recently helped boost the country’s struggling economy by fostering the development of small businesses. Still, investment in improved credit access remains an active task.

Obtaining Credit Access in Tunisia

Currently, obtaining credit in Tunisia as an individual or as a small business consists of a lengthy, arguably difficult process.

“The overall offer of inclusive financial services in Tunisia remains fragmented, incomplete and difficult to access,” according to a 2015 World Bank report.

Very small, small and medium enterprises (VSSME) face various obstacles in obtaining credit. This includes “a heavy reliance on collateral, insufficient financial products and a lack of SME transparency,” a release by the Middle East Investment Initiative (MEII) reported.

Franchises have also begun popping up throughout the country. This began occurring after the overhaul of the old regime that stifled the ability to create them. Former policies discouraged foreign countries from opening enterprises in Tunisia, making it nearly impossible for franchises to exist. Now that these policies have changed, franchises have a chance to flourish in the Tunisian market.

Individuals seeking credit may also find it difficult to obtain, even though studies have found that between 950,000 and 1.4 million people have a demand for it. This has led to most Tunisians relying on personal, often unstable, lending methods such as borrowing from friends or family.

In fact, only about 36 percent of the adult population finances through formal lending methods. A 2015 study by the World Bank and the Center of Arab Women for Training and Research (CAWTAR) found that 64 percent of the population has little to no access to formal financial services.

For families, expanding credit access in Tunisia directly affects household consumption and employment. It also gives VSSMEs and developing franchises a boost, allowing them to grow their businesses. This, in turn, creates jobs and stimulates the economy.

Organizations Working to Expand Credit Access

Partnering organizations have worked to expand credit access among Tunisian businesses. This has been achieved through projects designed to ease the process of credit access in Tunisia. MEII and the U.S. Overseas Private Investment Corporation (OPIC) established the Tunisian Credit Guarantee Facility (TCGF) to help provide sustainable lending to Tunisian VSSMEs and franchises.

TCGF intends to increase cash-flow lending. It boasts a $1 million loan size limit, $50 million guarantee facility and a 70 percent loan principal guarantee plus up to six months’ interest. Participating banks also receive technical assistance.

Many international donors support the expansion of credit access in Tunisia. This includes the African Development Bank, the European Investment Bank and the World Bank Group/IFC.

Although improving credit access in Tunisia will not directly eliminate poverty, it plays an important role in stimulating social and economic growth. By investing in the increase of accessible credit, the Tunisian government and supporting organizations can help to improve the quality of life of the population and foster economic growth throughout the country.

– Francesca Colella

Photo: Flickr

credit access in RwandaRwanda has seen great improvement in political and economic areas since the 1994 genocide and civil war. Credit access in Rwanda has made a considerable leap in the landlocked country.

lack of credit access is a challenge in developing countries, as access to credit is an important tool to help people to manage their lives and plan ahead. Developing financial literacy is essential for people to make proper financial decisions. Limited access to credit also impedes growth and innovation. When Rwandans see their potential with credit access, they can not only improve their living conditions but also boost the untapped economy and market towards economic sustainability.

Credit access in Rwanda is expanding, and entrepreneurs have found it useful in growing their startups. The biggest improvement in access to credit is protecting minority investors with reforms that have grown Rwanda’s economy. Investing in people with ideas and innovation opens doors in the global market, moving Rwanda up the economic ladder and away from poverty and instability.

According to African Markets, Rwanda leads all African nations in ease of credit access. Rwanda has been proposing and establishing reforms in order to promote and simplify access to credit during the past seven years. Credit access in Rwanda is making waves with investors and potential businesses, and the progress will benefit Rwandans and improve their living conditions.

Partly due to improved credit access in Rwanda, the country has become a progressive example for African nations. Post-genocide Rwanda has witnessed substantial progress, prospering in innovation and stability. Starting a business is relatively easy in Rwanda and faces little to no barriers.

The gender gap is decreasing in Rwanda, another benefit of the improvements being made in the country. Credit access in Rwanda is readily available to women, though they still face some obstacles. To address this issue, the Women Guarantee Fund (WGF) ensures women have access to credit in Rwanda. WGF intends to financially support women who plan to establish income-generating businesses. WGF has also assisted Rwandan women in entrepreneurship training. Combined with credit access, women and all Rwandans will see prosperity in their lives and in the country.

Access to credit has played a crucial role in Rwanda’s economic prosperity and sustainability. With innovation and financial potential, Rwanda will continue to rise to the top and support its citizens’ developmental endeavors.

– Jennifer Serrato

Photo: Flickr

Economic Reforms in Macedonia Make Doing Business Easier

Unemployment remains high at about 23 percent in Macedonia, but the country maintains its macroeconomic stability. Since its 1991 independence, Macedonia has made progress in liberalizing its economy and improving its business environment. Economic reforms in Macedonia have focused on registering property, protecting minority investors and gaining credit access.

During the global financial crisis, Macedonia maintained its macroeconomic stability by practicing conservative monetary policy. Conservative monetary policy ensures that the domestic currency is pegged to the euro and that inflation remains at a low level.

Macedonia’s economic performance has been halted by internal political crises in the last two years. Gross Domestic Product (GDP), domestic private investments and public investments declined in 2016. The same year, public debt peaked at 50.5 percent of GDP before settling at 47.8 percent at the end of the year. Macedonia distributed a $495 million Eurobond to fulfill 2016 and part of 2017 budget requirements.

Doing Business, of the World Bank, evaluates economic reforms in Macedonia and their influence on the ease of doing business. According to the organization’s measures, Macedonia’s 2017 business reforms are as follows:

  • Getting Credit
    Credit access in Macedonia was strengthened by amending its laws to provide modern features for the collateral registry, to allow parties to grant nonpossessory security rights and to implement a functional secured transactions system.
  • Resolving Debt
    Macedonia made it easier to get out of debt by increasing creditors’ participation in insolvency proceedings and changing voting procedures for reorganization plans.
  • Protecting Minority Investors
    Macedonia reinforced minority investor protections by extending requirements for immediate disclosure of party transactions to the public, increasing access to corporate information during trial and expanding shareholder rights.
  • Enforcing Contracts
    Enforcing contracts has become more difficult with recent amendments to the Law on Civil Procedure that require mediation before a claim is filed. Required mediation lengthens the beginning phase of judicial proceedings.

Most of the past year’s economic reforms in Macedonia focused on registering property, getting credit and protecting minority investors. According to the World Bank, Macedonia ranks eleventh out of the region’s top ranked economies and has carried out 41 reforms, the second highest number among the top 20, over the past 15 years.

Macedonia is the only upper-middle-income economy that ranks within the top 20 economies in the overall ease of doing business. Thus, reforms in Macedonia have made it easier to do business, leading to better quality of life for citizens.

– Carolyn Gibson

Photo: Flickr

The banking system in China went through great reforms in the mid-1990s and 2000s. The Bank of China, Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China are the big four, and rank among the largest banks in the world.

Consumer credit has experienced rapid growth since the market economy began in-depth reforms in 1998. It is common for individual home buyers to seek extended mortgage loans, which are currently among the best assets in commercial banks of China. The use of credit cards is also increasingly popular. However, for national banking systems and policy regulators, there are quite a few challenging issues for improving credit access in China.

In 2015, the World Bank reported that about 79 percent of adults in China had at least one bank account. Central bank credit information systems have information on more than 21 million entrepreneurs and nearly a billion customers. Bank loans are becoming more popular among rural families. Due to the considerably high rate of account penetration in China, financial infrastructure urges fast development.

Furthermore, China is expected to continue reducing financial leverage. The Central Bank has a series of loans and bonds for poverty alleviation, which also provide financial support to the rural disadvantaged groups. For banks of China, reforming rural credit cooperatives and developing new types of financial organizations should be strongly supported, as they are a significant force for inclusive finance.

While China has made substantial progress in inclusive finance, some issues still require further concern. Central Bank governor Xiao-Chuan Zhou has expressed his worries on three systematic financial risks: the credit risk in micro-finance, the high-leveraging ratio and liquidity in the economy and the cross-market and cross-regional shadow banking associated with financial crimes.

Last but not least, some financial exclusion issues caused by de-risking cannot be ignored. For instance, a few large cross-nation banks closed some outlets in Africa due to insufficient support on operations in those regions, which could cause some negative impacts. Advancement of digital technology on credit access in China may help to mitigate the derisking pressures.

While improving credit access in China received strong governmental support, the national banking systems and financial regulations are still far from perfect. Besides the nationwide scheme on “social credit” by 2020, a variety of other measures to promote investment and reduce risks on financial products must also be regulated.

– Xin Gao

Photo: Flickr

Credit Access in AfghanistanWith rural poverty accounting for 84 percent of overall poverty nationwide, Afghanistan is one of the poorest countries in the world. In rural areas, there is not a lot of access to credit. With 77 percent of Afghans residing in these rural areas, this proves to be problematic. Improvements are being made to ensure citizens in these rural areas have better credit access in Afghanistan.

Islamic Investment and Finance Co-operatives (IIFC)

The IIFC is a group of credit unions that aims to help people in rural areas gain better access to capital. Currently, there are 34 IIFCs in Afghanistan. The group provides loans, thus creating thousands of jobs for Afghans. According to Mahir Momand, founder of the IIFC Group, these loans have created 175,012 jobs, assisting more than 700,000 Afghans.

IIFCs also provide job opportunities in areas where it is difficult for the government to create employment. Momand explains that these credit unions not only help decrease poverty but also give Afghans knowledge on democratic principles. IIFCs enable local people to understand how they can have a say in their economic affairs.

Additionally, IIFCs want to tackle other issues with their programs, such as women’s inequality and youth unemployment. IIFCs have empowered women by making 13 percent of their members include women from Afghanistan. They believe it is important to giving women the opportunity to get involved in economic activities.

In addition to providing loans to youth, the IIFC hired 12 class graduates. This internship initiative improves unemployment among youth.

USAID Agricultural Credit Enhancement Phase-II Project (ACE-II)

Another development has been made to increase credit access in Afghanistan through the help of USAID. This project is specifically for female farmers and women operating agriculture-related businesses in Afghanistan. The project seeks to expand agriculture-related credit to improve agriculture business for women and the agricultural economy.

Unfortunately, many women do not understand the benefits of using credit to expand their business. Therefore, the United States Agency for International Development (USAID) has created the Agricultural Credit Enhancement Phase-II project to create women’s awareness about agricultural credit that could help their businesses.

In November 2017, USAID assembled three events called Women’s Agriculture Credit Shuras in Herat to gather women and raise awareness for the cause. They were one-day events, and they had microfinance institutions from Afghanistan participate along with financial experts to share their economic knowledge with women who came.

The event also provided practical training for women on how to apply for credits and how to properly manage them. Additionally, the event made women aware of their economic rights and the types of credits available to them.

This project aims to increase the growth of Afghanistan’s agricultural sector. Allowing women the opportunity to learn more about credit access in Afghanistan will ensure continued growth for the agricultural sector as well as allow women to increase their business prospects and better their lives in the process.

– McCall Robison

Photo: Flickr
 

credit access in IranIran has had a long list of sanctions against it since its revolution in 1979 when hostages were held in the U.S. embassy in Tehran. Since then, Iran has had several restrictions imposed by the United Nations, the European Union and some individual countries like Japan and South Korea.

Due to this, the country has had limited access to the outside world, including its financial and banking sector, which has affected credit access in Iran. In January 2016, most of the sanctions were lifted after Iran met the obligations of the nuclear deal signed in April 2015. The prolonged sanctions and recession have affected small-scale domestic businesses, as they could not secure funding from banks and financial institutions due to high-interest rates.

With the lifting of the sanctions, various government organizations and international banks are eager to sign agreements with the country. China, South Korea, Austria and Denmark are among the notable countries that are taking steps to facilitate financial transactions with Iran.

Iran is building relationships with small foreign banks that are not hindered by the restrictions imposed on the country. The Central Bank of Iran (CBI) said that about 200 small to medium-sized banks have started correspondence with Iranian banks, helping to revive business with foreign countries.

In August 2017, a $9.4 billion deal was signed by the heads of the Korea Export Import Bank and the Export Development Bank of Iran. The credit access provided is considered an important agreement between the two countries and will be spent on various Iranian projects, both in the government and the private sector.

About 12 Iranian banks acting as agent banks have been chosen to utilize the credit. These banks will help support businesses in various sectors like health, transport and energy. This agreement is an important step in boosting credit access in Iran.

China is Iran’s biggest customer in oil trade and has provided $10 billion to fund water, energy and transport projects, which consist of electrifying a 926 km railroad from Tehran to Mashad. China has also committed another $25 billion, of which $15 billion will be spent on infrastructure and production projects.

In September 2017, Austria’s Oberbank and Denmark’s Danske Bank signed an agreement with Iran. Oberbank had business dealings with Iran long before the sanctions, and they were keen to re-establish a relationship with Iran.

Oberbank will extend its credit line of €1 billion to 14 different Iranian banks, which will help increase business in healthcare, infrastructure and green power. Danske Bank has also signed an agreement for €500 million with 10 different banks in Iran, ensuring no conflict with U.S. and EU-imposed sanctions.

In 2017, CBI cut the interest rate of lending to 18 percent and launched a dedicated finance market known as Iran Fara Bourse, making finance easily available and affordable to small and medium-sized businesses.

The partial removal of sanctions and the investments made by foreign banks will definitely boost the economy, help businesses grow and improve credit access in Iran. This will be of great help to Iranian citizens, both in terms of infrastructure improvements and increased income from businesses.

– Mahua Mitra

Photo: Flickr

In any country, access to loans and lines of credit is a sign of a strong, healthy economy and an indicator of future growth. Stronger growth helps lift more people from poverty as opportunities for employment rise, so close attention to credit access is crucial to monitoring the fight against poverty.

Many ordinary citizens have struggled to get credit access in Kenya, but new technologies are narrowing the gap. This points to a better future for finance in the East African nation.

Lack of Credit Access in Kenya

By some measurements, the Republic of Kenya’s economy has the largest GDP in East and Central Africa, owing no small part to its capital city, Nairobi, a regional commercial hub. But the nation suffers from its poor formal credit access for poor rural and urban populations, and small- and medium-sized businesses (SMEs).

As recently as 2009, only 39.6 percent of Kenya’s adult population had access to credit. As the costs of living have risen in Kenya, this lack of access can accelerate poverty levels. But the good news is, recently, the growth of new options like mobile lending have boosted credit access in Kenya.

The Mobile Lending Boom

According to Kenyan newspaper Business Daily Africa, lending via mobile phones has boosted credit access in Kenya six times over the past seven years. This conclusion comes from research done by the Standard Investment Bank.

The number of persons or households with loan accounts rose to 7.2 million between 2010 and 2016. The expansion of credit comes as mobile phone banking solutions have reached those who were left out of banking services due to their lack of traditional credit histories.

Warning Signs and Course Corrections

Although increased credit access is in many ways a good development, Business Daily Africa writes that defaults on loans rose 42.4 percent in 2016, likely the result of a softening job market in the country. A second Kenyan paper, the Daily Nation, suggests that the inability of entrepreneurs and SMEs to get loans via traditional banks is playing a role in this issue.

If Kenyan banks can correct their courses and find a way to make the traditional system work in a responsible way for the nation’s rural and urban poor, the loan system will hopefully stabilize, and non-performing loans will shrink as a percentage of total loans in Kenya.

– Chuck Hasenauer

Photo: Flickr