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Credit Access in Afghanistan

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
 

Increased Credit Access in Iran Boosting Infrastructure Growth

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

How the Mobile Lending Boom Affects Credit Access in Kenya

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

The Impact of Improved Credit Access in Kosovo

Access to credit is an obstacle to economic development in many countries, and this is true in Kosovo as well. Some of the factors inhibiting credit access in Kosovo are unique. Since 1989, property rights in Kosovo has been a highly contentious issue, and the war in the late 1990s only made this worse.

Following 1989, the privatisation of public property in Kosovo caused many land disputes that were only exacerbated by the ethnic conflict. As people fled their homes before and during the war, property became de facto owned by people that did not have the legal right to it. The destruction of property during the war created further disputes that authorities have struggled to fully resolve.

The tumultuous history of property rights over the last 30 years has had a lasting impact on credit access in Kosovo. Given that property is an important form of collateral that is not plentiful in Kosovo, access to credit is very difficult. Many individuals and would-be entrepreneurs lack sufficient collateral to secure a loan, and banks continue to withhold credit from people who ostensibly have the necessary collateral because of legal uncertainty.

This lack of credit access in Kosovo is a major obstacle to economic development and is trapping banks in cycles of what amounts to economic contraction. This situation makes Kosovo a good candidate for aid from the United States in order to improve credit access.

Recently, USAID launched a project to help improve credit access in Kosovo by establishing the Kosovo Credit Guarantee Fund, which has pledged to back 50 percent of the value of loans given to small and medium-sized businesses. The first guarantees for these loans were issued by USAID in just September 2016, but they are already having a major positive impact on Kosovo’s business environment.

Beneficiaries report being able to secure financing that they could not have done without the help of the credit guarantees. This financing turns into investment elsewhere in Kosovo, multiplying the impact of this one small step to improving credit access.

These improvements to the economic situation as a result of improved credit access in Kosovo have a positive impact that stretches well beyond Kosovo’s borders. Kosovo is widely regarded as a good location for U.S. investment, and these improvements to the economy are sure to help the country attract more investment.

Improved economic forecasts also mean that Kosovo is fast becoming a valuable market for U.S. exports. This has the potential to benefit not only the people of Kosovo but of the United States as well. Despite lingering challenges, Kosovo is becoming a poster child for the success of this kind of foreign aid.

– Michaela Downey

Photo: Flickr

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Job Programs Versus Payouts for the Poor

All the foreign aid in the world could be useless if not implemented well. The Borgen Project seeks to help third-world countries join a global market and become self-sufficient. Among the many ways for developing governments to reach this goal, there is a common debate over whether it is better to have foreign aid creating jobs for the unemployed, or to simply give would-be entrepreneurs cash directly. In the debate of job programs versus payouts, each tactic has its own valuable strengths.

Technology reduces access to good entry-level jobs

Supporting a work program would equip workers with what they need for a good job in a competitive world. The World Economic Forum predicts that five million jobs will be lost around the world by 2020. For first-world nations, this loss can be offset by an increase in productivity and wealth. For third-world nations, artificial intelligence means low-wage workers will lose their competitive cost advantage in a global market.

The Financial Times predicts that 85 percent of all Ethiopian jobs are at risk due to automation. Corporations do not wish to pay human employees more in exchange for less efficient work. A job program, for nations striving to reach industrialization, can teach citizens skills that machines cannot learn. And that system will help developing countries keep pace with their richer neighbors.

Each country’s difficulties are best solved through their own workforce

The World Bank examined how small and medium enterprises (SMEs) contributed to the growth of almost 100 developing countries. Its research concluded that SMEs do more than provide the most employment for states. SMEs help developing nations even more than the biggest firms, in contrast to the U.S. economic system. SMEs bring in more than 80 percent of job creation even in countries with net job loss.

Some of a starting business’s greatest obstacles include lack of finances and burdensome taxes. Helping people help themselves would be an efficient use of money. As The New York Times notes about job programs versus payouts, human capital “could catalyze more business investment and activity in low-income neighborhoods, which would further promote economic growth.”

Emerging nations need money invested in its entrepreneurs, not its corporations.

The World Bank admitted that to claim “SMEs provide productivity growth” is dubious. If job programs only train developing nations to be cogs in a global machine, then ultimately only large corporations will benefit.

The USAID website, similar to the World Bank, agrees that entrepreneurs in developing nations need help to get started. But USAID notes that investors don’t contribute to high-risk yet promising early enterprises. If cash only flows to what’s proven to work in an economy, then no startup will escape a global corporation’s shadow. Through several nonprofits and systems, USAID “efforts focus on directly strengthening individual, high potential entrepreneurs.”

The debate of job programs versus payouts may never be solved. Artifical Intelligence will not be the last technology to threaten jobs, and corporations will ultimately never be the only factor taking a nation to greatness. USAID, the World Bank and the Financial Times can all agree on one thing: investment in the poorest among us is the key to our brighter future.

– Nick Edinger

Photo: Flickr

Credit Access in Belize on the Road to Improvement

credit access in BelizeDespite having the third highest per capita income in Central America, credit access in Belize is still in need of improvement. With the help of governmental programs, bank expansions and bank partnerships, credit access will continue to improve.

Belize’s GDP increased from $3.082 billion in 2015 to $3.097 in 2016. However, this increase does not accurately depict the large disparity between the rich and the poor in the country. To combat the approximately 11.1 percent unemployment rate and the 41 percent of the population living in poverty, Belize has actively created programs and partnerships to increase credit access that would benefit those in poverty.

In 2012, in order to increase access to financial services and credit access in Belize, the country created a program called BOOST, which stands for Building Opportunities for Our Social Transformation and provides small cash assistance to poor households. The program has helped children in schools and offers services such as savings and micro-loans as a first step toward financial independence. According to a World Bank Social Protection Specialist, BOOST promotes human capital growth, savings and productive investments.

The following year the country partnered with the International Finance Corporation, a member of the World Bank Group, to help establish the first credit reporting system in Belize. The system would allow financial institutions to share credit information and better manage lending risks. The partnership will also help expand access to finances for individual borrowers and small businesses.

The creation of a credit reporting system, along with BOOST, is key to a sound economy and will help reduce the risks of financial institutions, which will lead to lower interest rates, making loans more affordable and more widely available.

With the continued success of programs such as BOOST and the credit reporting system, credit access in Belize will continue to improve and become more available to everyone.

 – Amira Wynn

Photo: Flickr

Microfinance Expansion Increases Credit Access in Costa Rica

Credit Access in Costa RicaAccording to the World Bank’s financial inclusion data in 2014, 65 percent of Costa Rica’s adult population had some form of bank account, indicating that banking was available to a strong majority of the population. However, only 13 percent of Costa Rica’s adult population has borrowed from a financial institution at all, and only 6 percent have formally borrowed to “start, operate, or expand a farm or business.” The Alliance for Financial Inclusion interprets these facts to mean that credit access in Costa Rica is not so much an issue of access to financial services, but a problem with the types of financial products offered by traditional banks.

The World Bank describes Costa Rica as an upper middle-income country, and the nation is widely seen as a success story for development. However, despite a relatively stable economy and steady growth, one in five Costa Ricans still fall below the poverty line, and Costa Rica lags behind other nations in financial inclusion and modern small business practices. Despite widespread access to banks, traditional loan products remain out of reach or unfamiliar to most people, and increased credit access in Costa Rica could assist the poor in raising their standard of living.

In response to this untapped market, new products targeted at small-scale borrowers began to expand in Costa Rica in the past decade. One leading microfinance company’s loan portfolio expanded by 25 percent per year from 2010 to 2015. By 2015, microfinance-specific institutions held a combined portfolio of at least $81 million in loans in Costa Rica. A forum hosted by Costa Rica’s General Superintendency of Financial Institutions in 2016 provided government and industry officials there with background information on microcredit products, and aimed to increase assistance to the burgeoning sector.

During these same years, younger and smaller firms in Costa Rica grew at a faster rate than larger, more established firms and the general economy grew at around 3.5 percent per year. A 2017 report by the International Monetary Fund stated that credit growth in Costa Rica is healthy, along with other macroeconomic trends.

Costa Rica often tops lists of the happiest nations on Earth. The small Central American country of five million has no national military. The people enjoy a robust social safety net including universal basic healthcare, and about a quarter of its territory is dedicated to protected nature reserves. With the success of microfinance programs, credit access in Costa Rica is expanding along with its rapidly developing economy. As a result, Costa Ricans can look forward to reduced poverty levels in the near future, an outcome that should keep happiness levels near the top of global rankings.

– Paul Robertson

Photo: Flickr

Efforts to Significantly Improve Agriculture Infrastructure in Serbia

infrastructure in serbia
As a major economic contributor to food, incomes, public goods and services in rural areas, agriculture infrastructure in Serbia plays a large role in the livelihood of its people. With over two-thirds of Serbia’s land being agricultural, farming is an important aspect of economic success. The Ministry of Agriculture, Forestry and Water Management (MAFWM) is continually trying to find ways to improve the agriculture sector in terms of efficiency and competitiveness.

Agriculture made up 11.9 percent of Serbia’s GDP in 2016, the large figure due mostly to better weather conditions. Crops were able to grow to an abundance and support the rural area residents. Currently, there are 680,000 people employed in agriculture, which makes up 21 percent of Serbia’s labor force. With such a high percentage of people working in agriculture, the sector became of more importance to infrastructure in Serbia.

The Rural Development Program for Serbia is designed to increase food-safety and competitiveness of the agri-food sector. With the $200 million investment from the European Commission, the program will take six years and the investments will be distributed as grants. These grants will be given to:

  1. Farmers producing milk, meat, fruits and vegetables and other crops
  2. Micro-, small- and medium-sized milk, meat, fruits and vegetable processing farms
  3. Organic production
  4. Development of private rural tourism facilities

By having an agriculture sector that focuses on competitiveness, there then exists a way to find balance between farm viability, environmental protection and the social development of rural areas. In order to improve competitiveness, Serbia is:

  1. Reducing production costs
  2. Increasing economic size of holdings
  3. Promoting innovation and orientation towards the specific market
  4. Trying to create better measurements for agricultural investments pertaining to physical investments and human capital investments
  5. Emphasize the importance of selling quality products

From 2016 to 2017, the Serbian Parliament increased its agriculture budget by 8 percent. This increase in investment will help in positively changing the social and economic conditions in rural areas. These rural areas will benefit greatly from assistance and cause the agriculture infrastructure in Serbia to be able to produce more crops. The continuing emphasis put on agriculture in Serbia creates a positive outlook on the development of better communities.

– Brianna Summ

Photo: Flickr

Credit Access in Lebanon in Need of Improvement

Credit Access in LebanonThe country of Lebanon sits on the coast of the Mediterranean Sea and is bordered by Israel to the south, Syria to the west and Turkey to the north. Lebanon’s tumultuous history with its neighbors has hindered its economic growth and recovery. The last two decades have seen Lebanon wrapped up in wars and invasions from its neighbors.

Since 2011, over one million refugees from the Syrian Civil War have registered with the Lebanese government. These refugees live in camps, supported by the U.N., among the Lebanese population in major cities. The influx of one million people in six years has severely strained the economy of a country of only six million. A report by the World Bank claims that this influx has limited credit access in Lebanon.

Wars, occupations and bombardments have damaged Lebanon’s infrastructure. Although much of the damage was done to Lebanese cities, the countryside was not untouched. Any damaged farmland can significantly hurt credit access in Lebanon. Much of the rural population lives in poverty and already had difficulty gaining access to credit before the war in 2006; damaged fields and lower crop yields only made this more difficult.

To increase credit access in Lebanon, specifically to rural farmers, the International Fund for Agriculture Development (IFAD) launched a program targeting these farmers, called the Hilly Areas Sustainable Agricultural Development Project (HASAD). By organizing crop rotations, water access and soil conservation, the project aims to increase the productivity of the farmers. An increase in crop yield means higher profits for the farmers, which could, in turn, increase their access to credit.

Credit access in Lebanon is much easier to gain in urban areas, where more of the country’s wealth is located. After 16 years of civil war (1975-1990), people found that the banks could not offer sufficient credit. Kalafata was founded in 2000 to assist banks and help small businesses gain credit access in Lebanon. The organization is supported by the European Union, the World Bank and the Lebanese government.

Since the beginning of the refugee crisis, Lebanon’s economy has only grown by one to two percent each year. The refugees have increased the amount of available labor, but many Lebanese blame them for taking their jobs. This increase in labor could potentially help small businesses boom, which will hopefully increase the growth of the Lebanese economy.

Economic growth and credit access in Lebanon will continue to be hindered by the instability of the region. Unfortunately, regional stability does not look to be anywhere in sight. Recently the Prime Minister of Lebanon Saad al-Harir stepped down from power, claiming he feared for his life. This has sparked outrage from the Presidents of Lebanon and Iran. Both parties claim that this is interference from Saudi Arabia. The leader of Hezbollah has decried that this is an act of war against Lebanon.

Most recently, President Donald Trump declared that the United States will move its embassy in Israel from Tel Aviv to Jerusalem, increasing tensions in the Middle Eastern region and possibly hindering the further development of nations like Lebanon. Lebanon’s greatest hope for its future lies in itself and how it will continue to handle the refugee crisis. Perhaps allowing refugees access to work opportunities and credit in Lebanon will give the nation’s economy the boost it needs.

– Nick DeMarco

Photo: Flickr

Credit Access in Russia Since the Collapse of the Soviet Union

Credit Access in Russia
In 1991, the Russian Federation rose from the ashes of the former Soviet Union in economic and political turmoil. Prime Minister Yegor Gaidar led free-market reforms in 1992, and many Russians accused him and the Russian government of corruption and poor management, leading to the rise of the oligarchs. Many former party members and enterprising individuals took advantage of the disorganization of the new state’s economy and government in order to privately take control of assets and former state-run companies.

The high concentration of wealth in the hands of only a few rich men was detrimental to the Russian economy and its new democratic government. Credit access in Russia was easy to acquire for these men, as many ran the banks and largest companies in the country; unfortunately, credit was not as accessible to common Russian people. In 2004, President Vladimir Putin declared war on the oligarchs. As a result, Mikhail Khodorkovsky — one of the richest men in Russia at the time due to his ownership of the oil company Yukos — and Putin’s chief political rival were jailed. Other oligarchs suffered the same fate in the name of improving the lives of the lives of the common Russian people.

The Long Game

Despite these gains, credit access in Russia was not going to improve overnight. The immense size of the Russian Federation hinders banking for the common Russian person still to this day. According to the Alliance for Financial Inclusion (AFI), a major contributor to this issue is the combination of Russians living in rural areas of the country, the ability to reach banks and archaic and dysfunctional banking legislation.

The Ministry for Economic Development (MED), the Ministry of Finance, the Central Bank of Russia and the Russian Micro Finance Center compiled a team of experts to visit and study other banking systems so as to work to improve their own. In 2010, their findings influenced laws that allowed banks broader powers to provide financial services to their clients and ease credit access in Russia. But due to the lack of clarity and infrastructure, the banks were not able to take advantage of these new reforms.

This trend is not new to Russia and had to be fixed by government intervention. Russian’s Ministry of Economic Development received a long-term grant from the AFI in order to improve banking access to Russians. Increased access to banks improves credit access in Russia, and in 2012 the AFI stated that their were 40,000 banks to the 143 million Russians. By the end of their partnership with the MED, their goal is to increase the number of banks to 50,000.

Domestic Banking

The improvement of domestic banks helped the Russian economy to function after the United States and the European Union levied sanctions against Russian companies and government officials. Russian companies were forced to use Russian banks instead of foreign banks, and those companies who were not sanctioned began using Russian banks in fear of finding their name added to the sanctioned list.

This increase in power of the banks has increased credit access in Russia. Although it has been good for businesses, banks have begun a system of predatory lending. Tuva, one of Russia’s poorest and most undeveloped regions, has seen an increase in borrowing. Much of this money is used to either pay off existing accrued debt or to maintain the standard of living.

It is estimated that average household in Russia spends 15 percent of its income managing debt. Interest rates have also climbed higher, thereby making it more difficult for these Russians to climb out of debt and for the banks to make their money back. High interest rates have driven off people who could afford to pay back loans, and this money would help banks recoup their losses. In 2014, the Russian government was forced to bail out two of the country’s top five lenders.

Credit access in Russia has improved dramatically since the collapse of the Soviet Union, but the quality of the banking system has fluctuated. To save its economy, the Russian government needs to once again improve the country’s banking system, including its lending practices. Although rural citizens have better access to credit, it only does them harm if they are unable to save themselves from debt.

– Nick DeMarco

Photo: Flickr