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Credit Access in Djibouti Growing with Help from Foreign Investment

Djibouti
Any country can benefit from having greater credit, deposit, payment, insurance, and other services at its people’s disposal. This is why in recent times there has been a larger focus on financial assistance and infrastructure development in developing nations. Credit access in Djibouti has hence become a prime focus for its allies and has the potential to change the economic landscape of the nation when executed properly.

Benefits of Greater Credit Access in Djibouti

 

Credit access has the potential to increase consumers’ access to a variety of services, such as healthcare and government spending, and can improve their general standard of living. When bank accounts are readily available to everyone, financial assets can be better monitored and people who are less informed can make more informed decisions about their investments with the help of bankers. This can also facilitate an easier cash outflow, leading to consumers increasing their spending and positively influencing the gross domestic product of Djibouti. Since Djibouti’s infrastructure is still not optimal, international financial assistance is required to help provide capital for credit access plans while also combating economic issues that the nation does not necessarily have funds for.

The Good News

In May 2014, the World Bank announced its support for Djibouti through a $5.6 million investment to support the government’s Second Urban Poverty Reduction Project. This credit line has been brought in to help the country provide more urban services to poor rural neighborhoods in Djibouti. This is an example of an investment earmarked to improve the nation’s basic infrastructure so as to make it more self-sufficient in improving financial access in the future. The project also aims to involve the people in incorporating new changes while also allowing for more employment opportunities and awareness about financial services among the locals.

The World Bank has seven more projects planned in Djibouti through the International Development Association. These interventions will have a value of close to $57 million and will be further supported by trust funds worth almost $11 million. All these projects are meant to address rural community development, social security, clean energy, poverty reduction, health and education by creating more credit lines for the government, ensuring that there is both financial security for the funds Djibouti receives as well as an increase in the standard of living for its people.

Positive Impact

Thanks to the reforms, credit access in Djibouti has also increased the ease of banking. In recent times, Djibouti’s banking sector generates 10 percent of the nation’s GDP and has attracted several foreign banks to the country. Previously, there were only two banks in Djibouti, Banque pour le Commerce et l’Industrie and the Bank of Africa. This made it harder for people to negotiate loans or reap the benefit of choice by considering the interest rates offered by multiple banks. Now with an influx of banking services, people are able to make deposits at multiple locations, secure loans from other banks even if their first application gets rejected, and make smarter investments in Djibouti and abroad. The number of deposits made by people increased from $1.088 billion to $1.1 billion in 2013, showing a 7.7 percent improvement. This sets up people to use more than one means of payment, enabling them to afford many more services. The positive changes in the banking sector have led to a total increase in domestic credit by 2.1 percent in 2013.

Hope for the Future

As Djibouti’s economy grows, a brighter future for its people becomes more apparent. Credit access in Djibouti has the potential to open up new doors for aspiring businessmen and those willing to expand their services, which will ensure that people have more choice and a better standard of living. International Monetary Fund loans and existing funding from the World Bank and other allies of the nation can help Djibouti improve the existing financial infrastructure and complement the benefits of greater credit access. With funds flowing in from so many channels and the government making more conscious efforts to break out of the credit slump, there is hope for the future.

– Sanjana Subramanian
Photo: Flickr

Endless Possibilities: Foreign Aid and Credit Access in Djibouti

Credit Access in Djibouti
Credit access in Djibouti is something that activists in the United States have been working to improve for several years. Foreign aid in the form of economic assistance not only boosts the economic health of Djibouti and other foreign markets, but it also provides people with the means to participate in the global economy as well.

Positive Effects of Improved Credit Access

Credit access is a complicated issue that effects several factors including personal wellbeing, access to governmental aid and availability of health resources. Foreign assistance to improve credit access can help countries combat environmental as well as economic issues.

According to the International Monetary Fund (IMF) report, in 2012 a drought in Djibouti resulted in the government requesting access to credit assistance for an environmental crisis:

“The drought in Djibouti has worsened water scarcity, reduced agricultural production and cattle stock, and accelerated refugee inflows. The authorities have requested an augmentation of access under the ECF of 60 percent of quota. As a result of exogenous shocks, financing needs for 2011–12 are expected to be higher than previously projected, despite the pledges from the international community to help Djibouti address the impact of the drought.”

Recovering from Drought

Credit access in Djibouti provided the government with the means to help citizens combat the detrimental effects of the drought in 2012. Foreign credit assistance can also contribute to improving infrastructure and social mobility in the time of an environmental issue. In 2014, a $5.6 million agreement between the U.S. and Djibouti assisted citizens who had been affected by flooding according to a 2014 report:

“The project targets the 25,000 residents of Q7, a flood-prone area in which 70 percent of households have no sewage system. The residents of this neighborhood, the densest in Djibouti City, will benefit from increased access to basic services, urban mobility, flood management, community development activities, and on-site job opportunities.”

Everyday Benefits

The effects of credit access in Djibouti is not limited to government resources. According to the United Nations Development Programme, the establishment of credit unions have affected the lives of citizens who provide for themselves every day. According to the UNDP, credit union members have risen from 1,600 to 3,041 in just six months.

According to Nima Moussa Warfa, the credit union gave her the opportunity to change her living situation. “I used to live over there but as I borrowed money and as my business grew, I was able to build this house,” she said.

The Global Economy

Credit access increases participation in the global economy, improves economic health as well as generates revenue. Credit access in Djibouti would allow tourism and global market participation to contribute to the success of the economy.

Participation in larger market can also improve the economic budget of Djibouti if aid gives the country the resources it needs to be successful. Overall, improved economic health through foreign aid benefits both the assisted country as well as the global economy.

One way this improvement could be achieved is through credit access in Djibouti. For economies and markets that need assistance improving market participation, credit access is a way for people to participate if they do not have the means to do so already.

IMF Loans

IMF loans is one way that foreign credit assistance is provided to countries across the world. The IMF focuses on providing countries with the financial resources it needs to address social and environmental issues, focusing on “crisis resolution.”

The organization states in its 2017 report that “This crisis resolution role is at the core of IMF lending. At the same time, the global financial crisis has highlighted the need for effective global financial safety nets to help countries cope with adverse shocks.”

Improving National and Global Fiscal Health

Foreign credit assistance is something that financial activists work to provide to countries in need across the world as it improves the health of not only the country in need, but the economic health of global markets as well.

It is a form of aid that provides governments with the means to encourage strong health institutions and businesses. In addition, it gives citizens of countries in need of assistance more autonomy over their financial lives. Activists will continue to look for ways to aid those in need, and credit assistance is an excellent place to start.

– Gabriella Evans

Photo: Wikimedia Commons