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global_poverty
In recent years, businesses, wealth management firms and private investors have put increasing funds into impact investments, which aim to create positive social change for people in need. Gender lens investing, which is focused primarily on yielding benefits for women and girls, is becoming a higher priority for those making impact investments.

Gender lens investing works in a combination of three ways. First, investments increase the amount of funding available for female entrepreneurs. Second, funds can create employment opportunities for women while supporting companies that hire women, particularly in leadership positions. Third, gender lens investing can be used for companies that help women through products or services. Microfinance initiatives, such as providing clean-burning stoves to women in Africa and Latin America, and job training initiatives, such as training women in Southeast Asia to sew, are examples of gender lens investing.

Gender lens investing promotes gender equality, which promotes economic growth. Gender equality through economic growth is a key tenet of development finance. Empowering women through employment provides families with more income to meet health care, nutrition and safety needs that can be a burden on families, especially those in poverty. In Latin America, for example, there was a 30 percent reduction in extreme poverty between 2000 and 2010 following the growth of women’s income.

Investing in women fighting to get themselves and their families out of poverty is an essential strategy to make progress in the movement against global poverty. The gap between men’s and women’s income, while present in the developed world, is significantly larger in developing countries. For example, there is a $287 billion credit gap for female entrepreneurs owning small and medium enterprises, primarily in Latin America. Supporting these women through gender lens investing makes a statement towards gender equality and women’s empowerment in conjunction with providing more social mobility for impoverished families.

Wealth management firms, investors and companies worldwide are paying attention to this disparity, which is a critical step toward making significant change for women around the world. A 2015 survey by The Global Impact Investing Network, a nonprofit advocacy group, found that one third of those surveyed were interested in gender lens investing domestically and abroad. The Global Impacting Investing Network tracks 300 funds, and 130 of these have taken part in gender lens investing. Veris Wealth Partners, a wealth management firm, has utilized $800 million for impact investments; gender lens investing is the number one strategy.

Some investors may be concerned or put off by the possibility of reduced financial returns that may be part of gender lens investing, especially in comparison to more high-risk, traditional investments. However, with gender lens investing comes an increase in the quality of life for many, specifically through the reduction of global poverty, a reduced disparity in men’s and women’s incomes and the empowerment of women. Both now and further down the line, as has been true for previous investments in international development, gender lens investing has the capacity for significant social change.

– Priscilla McCelvey

Sources: Forbes, New York Times
Photo: Forbes

higher_education
Between 2002 and 2013, developed nations invested an estimated $42.6 billion into the growth of higher education programs within developing countries. While this figure alone appears staggering in size, one must also consider the $1.6 trillion in total foreign aid these developed nations invested during the same time period. With investments in higher education responsible for only 2.7 percent of the international development budget, many are now questioning the causes of this disparity.

The United States itself invests approximately three percent of its total foreign aid budget into higher education, which is less than half of the other average contributions made by other donor countries. Many have questioned how a centrally developed nation has failed to deliver the necessary support for tertiary education programs in regions that would clearly benefit from such initiatives.

The roots of this problem may very well date back to the 1980s when the World Bank conducted a series of studies regarding the efficacy of educational programs.

The studies argued that financial investments within primary education programs resulted in double the amount of social capital for youth populations as opposed to investments within tertiary education programs. The findings also included suggestions that the benefits of a youth pursuing further education after secondary school proved substantially higher for the individual as opposed to their nation as a whole.

As a result, the global community prioritized the development of primary education systems and even focused Millennium Development Goal 2 on achieving universal primary education.

Conflicting with many of the beliefs about education adopted in the 1980s, numerous studies conducted in the past fifteen years have challenged many of the conclusions drawn by the World Bank studies.

The Organization for Economic Co-operation and Development (OECD) released a report in 2008, which instead argued that tertiary education is a vital asset to the global community as it encourages social and economic developments through the strengthening of a populations knowledge bases the creation of human capital and the application and dissemination of such knowledge.

A disparaging and growing cycle of educational failures within developing regions has also been found to be in part caused by a lack of growth within higher education. Researchers have argued that without access to strong higher education programs, the inability to train essential officials such as teachers, economic managers and political leaders, who are responsible for ensuring certain standards for the quality of education are reached, will continue to persist.

In recent years, many of the most highly motivated and qualified academic individuals within developing regions such as sub-Saharan Africa have emigrated to higher education facilities in the Western hemisphere. This mass exodus of the most talented minds has caused notable corrosion in the academic climates of universities in developing regions, facilities that are often overwrought with insufficient funding and corrupt governmental proceedings.

Government leaders of both developed and developing nations must cooperatively address the issue of increasing levels of funding for higher education programs within impoverished and underdeveloped regions. While the global community has demonstrated strong dedication in pursuing the achievement of Millennium Development Goal 2, attention must now be turned to the pursuit of universal higher education.

James Thornton

Sources: The Conversation, Vanderbilt
Photo: Flickr

Foreign-Aid-Terror-AttacksOver the past decade and a half, the discussion of terrorism in relation to foreign aid has expanded around the world. Part of this discussion addresses how a lack of foreign direct investment (FDI) poses a serious threat to both developed and developing nations.

FDI allows developed nations to invest in developing nations in the form of foreign aid. FDI is critical for the economies of the developing and developed nations, as developing countries need support until they can economically sustain themselves. If these developing nations fail due to a cause such as terrorist attacks, the developed nations that have invested in them experience a drop in stocks that, in turn, can negatively impact citizens.

Economists Sandler Enders and Adolfo Sachsida found in a study that “terrorist attacks lowered U.S. FDI by 1 percent in nations that belong to the Organization for Economic Cooperation and Development (OECD) but had no statistically significant effect in non-OECD nations.”

Due to recent rapid globalization, no disease, repression or crime is isolated from the rest of the world.

First world countries are not immune to terrorism. The 9/11 attacks, the Charlie Hebdo shooting and the Tunisia museum attack are proof of the international impact these terror groups can have (and seek to achieve). Limiting their abilities and presence in the countries from which they originate would then of course be sensible.

Al-Qa’ida, Boko Haram and ISIS – all major terror groups in developing countries with which the world is familiar. These developing countries are more susceptible to terrorist groups arising because of rampant impoverishment. As Susan Rice, author of “The Threat of Global Poverty” attests, poverty “creates conditions conducive to transnational criminal enterprises and terrorist activity.”

Insecurities in developing nations often leave individuals feeling desperate and hopeless. As individuals become more penurious, they are more inclined to join radical alternatives to sustain themselves and their families.

These struggling nations are less established and unable to prevent terrorist groups from rising to power because of financial hindrances.

In a recent study conducted by the United Kingdom’s Department for International Development, it was found that “a country at $250 GDP per capita has on average a 15 percent risk of internal conflict over five years, while a country at $5,000 per capita has a risk of less than 1 percent.”

Multiple developed nations have set foreign aid funds; however, they are often minimal amounts that are only enough for a nation’s government to survive, rather than thrive. By investing enough in developing countries, developed nations can reduce human suffering, curtail the chances of terrorist groups forming and support the domestic economy through the expansion of markets.

– Katherine Wyant

Sources: Center for the National Interest, Federal Reserve Bank of St. Louis
Photo: The Jerusalem Post

 

foreign aid
The type of foreign aid and methods advocated for by congressional leaders vary. Nonetheless, the impulse of doing something in the face of crises is still there. However, it is not all good news. Of the wealthiest countries, the United States still ranks towards the bottom in terms of the percentage of their national budget allocated to foreign assistance.

Recent studies suggest that foreign aid faces significant challenges, especially due to the mainstream view of it as a charitable act. Following this approach to gather funding or support for foreign aid can indeed be counterproductive, and even harmful.

In a comparison study about what motivates large versus small donors, Economists Dean Karlan and Daniel Wood found that usually large donors are motivated to increase their donation when presented with the broader impact of a foreign aid initiative.

On the other hand, small donors did not pay much attention to the evidence of impact, but actually increased their donation when they were presented with individual stories that appealed to their emotions.

Karlan and Wood’s study illustrates an issue that extends to the entirety of the aid system: “the view of aid as pennies in the box.” Focusing attention on the act of giving, rather than the actual results of foreign aid takes away from the big picture.

A shift towards viewing foreign aid as an investment would be highly beneficial, there is enough evidence to suggest that this kind of investment pays off. In recent years, the flow of foreign assistance in the form of development aid and emergency relief have helped over 500 million people lift themselves out of poverty. What is more, foreign aid sponsored programs have brought basic education to millions of children in poor countries, and reduced child mortality by over 20 percent.

The benefits of foreign aid are not only visible in the results achieved abroad, but they usually find their way back to the donor nations. Industrialized countries greatly benefit from increased global stability, both in economic and security terms. Foreign aid should be taken seriously as an investment opportunity that provides dividend, sometimes in the long term, but dividends nevertheless.

– Sahar Abi Hassan

Sources: Telegraph
Photo: Economist