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

 EconomyWomen are dominating the African workforce and increasing revenue in many countries. This domination has led many countries to recognize how female entrepreneurship drives the economy through innovation and success as technology continues to advance.

Companies such as Mastercard are traveling to Egypt, Nigeria and South Africa to partner with nonprofit organizations aimed at teaching young girls why they should enter the workforce and how they can make an impact. With these partnerships, organizations, such as the Mini Enterprise Programme, hope that girls and women will take the initiative to enter the workforce in the near future.

In Ghana, women make up more than half of the labor force; if maximally utilized, the additional personnel could lead to increased production of good services by 2.5 percent within one year. One of the benefits of being able to export more products in a year is the increased revenue it brings in to the country. Female entrepreneurship drives the economy in Ghana by helping to build more jobs and providing more opportunities for other women to enter the force.

Female entrepreneurship also drives the economy by using education to teach youth. Companies work with organizations to empower young girls, as they have recognized the potential young girls have to drive the economy in the future. Many women in the field have stepped up as role models and proven that they can start businesses just as successfully as a man.

Furthermore, women are working faster than men to start businesses in many African countries. According to the World Bank, the time required to start a business for women and men increased about a day between 2015 and 2016,  however, women were still, overall, faster than men by one day.

The opportunity to involve women is a positive step forward not only for the economy but for the alleviation of poverty experienced by many around the world. Approximately six out of 10 of the world’s poorest people are women. They are usually the primary caretakers of the family, yet are often denied the opportunity to earn an adequate living.

The initiatives set out by Mastercard and other organizations give hope to women suffering from poverty and promote the continued empowerment of women. Empowering young girls has led to more African countries seeing the benefits of having female entrepreneurship drive their economies.

– Seriah Sargenton

Photo: Flickr

Credit helps to improve financial status so that a person can buy homes, get credit cards, and build trust between financial institutions and the consumer. Despite the many benefits to having access to credit, Albania still seems to have a low credit market.

Credit access in Albania is low due mostly in part to a supply-demand mismatch. This means that the creditors in Albania don’t have the products that the people are interested in. As a result of this mismatch, the supplier tends to change their product or becomes forced to go out of business.

Part of the reason why the country’s credit access is in a supply-demand mismatch is because some parts of the country have easy access to credit and a reliable supplier, while poorer parts of Albania do not.

Individual Albanian people’s credit access seems threatened by the lack of borrower awareness and protections, as well as a lack of a functioning credit registry. Without these two things, a person is left vulnerable to financial debt and burden that can last years.

Credit awareness is important because it poses as a financial risk for those who cannot afford it. If one is not careful, they can end up with massive debt. Debt hinders the chances of acquring a house, car, or financing any other prosperous items.

According to the World Bank, while individual access may be threatened, cooperate business account for 74 percent of all credit in Albania and small businesses account for majority of the economic population. Though credit access usually reflects the economic stability of a country, Albania relies heavily on cooperations.

For cooperate companies, credit access is important because credit helps businesses receive the funding they need to succeed financially. According to Cardhub in 2015, the average business needs 12-18 months to improve its business credit score.

By improving credit access in Albania, financial status is sure to improve as a result. Albanian credit access can further smart banking and loaning so that the country can decrease their economic expenses.

– Seriah Sargenton

Photo: Flickr

credit access in MexicoAccess to credit and other financial services can lead to profound positive effects on the overall health and welfare of a country, but these services can often be hard to come by in developing nations. This makes it harder for people to start a business or borrow money when an unforeseen circumstance leads to a loss of income.

Mexico is an example of a country that has a lot to gain by increasing credit access among its citizens. Credit access in Mexico has a lot of ground to make up compared to its Latin American neighbors, but it has launched a comprehensive plan to increase credit access to its citizens.

Mexico has been working to improve its economy by increasing credit access to its citizens. A 2016 report by the National Banking and Securities Commission found that Mexico is trailing behind much of Latin America when it comes to credit access, especially among small- and medium-sized enterprises.

The World Bank reported that Mexico’s domestic private-sector credit as a percentage of GDP was 31.1 percent as of July 2016. By comparison, that figure is 109.4 percent in Chile and 69.1 percent in Brazil. Mexico’s banking industry understands the importance of increasing credit access in Mexico and has set the goal of increasing the country’s private-sector credit percentage to 40 percent by 2018.

In order to achieve the goal of increased credit access, Mexico has launched a National Financial Inclusion Strategy (NFIS). The World Bank estimates that this strategy can lead to an additional 29 million Mexican citizens gaining access to a bank account and other financial services. This has the potential to stimulate Mexico’s economy and increase its quality of life.

Mexico’s NFIS seeks to engage private banking, social welfare, public education, telecommunications and other industries in order to provide financial services to the 56 percent of citizens that currently do not have a bank account.

One of the important pillars of this plan is to increase education about financial services and how to use them. This will start with making sure that the subject is taught to children and youth as a part of Mexico’s public school curriculum.

The NFIS also seeks to use new technologies in order to make financial services more readily available. This will include increasing the ways that people can use mobile phones to access financial services and make digital payments.

While credit access in Mexico lags behind much of Latin America, the Mexican government understands that it needs to make improvements in this area. Through the country’s National Financial Inclusion Strategy, Mexico shows that it understands the importance of credit access in helping its citizens, as well as its national economy, thrive.

– Aaron Childree

Photo: Flickr

After a recent series of verbal threats and missile tests from Supreme Leader Kim Jong-un, President Donald Trump put North Korea back on the U.S. list of state sponsors of terrorism, a designation it shares with only three other countries.

Normally, it is in the U.S.’s interest to see credit access increase responsibly around the world because more credit access generally means more investment, growth and opportunities for trade. However, when it comes to countries from the state-sponsored terrorism list, increased growth can give a boost to dangerous regimes—and their (nuclear) weapons programs.

So, while U.S. and global support for improved credit access in North Korea may be complicated, it is still worth looking closer at how credit access is improving the lives of ordinary North Koreans.


North Korea’s Banking System

According to The Wall Street Journal, there are no commercial banks in North Korea. All banking institutions are either state- or party-run, or state- or party-associated, which leaves North Korea with a highly centralized, unwieldy system.

That system is the legacy of a communist system, set up in the 1950s, that provided financial security for North Koreans. But, a major famine in the 1990s led to an economic collapse that crippled that system—and the North Korean government has done little to change it since.


Credit Access in North Korea: Unauthorized and Unregulated

As The Wall Street Journal notes, a semi-market economy emerged in the wake of that economic collapse that helps provide a living for up to three-fourths of the nation and is largely supported by unauthorized private commerce.

As a result, an unregulated system of lending and currency exchange has risen, making it possible to get loans and financing. North Korean defectors have described a system in which private savings are being channeled into lending to make a profit.

Scams were common at first, due to the lack of legal infrastructure and investment guarantees, but over time, it seems that trust and credit have grown. Lenders are investing in everything from crop seeds and fertilizer to merchants who import foreign goods, like smartphones.


Investment Opportunities in North Korea

Reuters reports that, in theory, plenty of investment opportunities exist in North Korea along China’s border. Most of these are related to tourism or manufacturing and had funding from China and other international investors.

However, U.N. sanctions against North Korea have led the Chinese government to ban new or expanded Chinese investment in North Korea and transactions with North Korean banks.

Ultimately, the growth of North Korean credit access and investment depends on the Kim administration dramatically altering course. It would need to show a willingness to cooperate internationally and develop a legitimate market-based economy. Neither seems likely to happen anytime soon.

– Chuck Hasenauer

Photo: Flickr


Learn about poverty in North Korea


The credit financial system allows one party, typically a bank, to provide money as a loan to another party who is obliged to repay and return those resources at a later date. The process of obtaining credit is relatively easy in places such as the United States. However, credit access in Haiti and other small countries is not as simple.

Credit is beneficial to entrepreneurs because it offers a way of obtaining funds that is not illegal. It is also convenient as it offers a system for repaying the loan in the future, when funds are available or when people have a higher income. People can do this as a one-time payment, or they can pay off their credit in a developed installments plan.

For micro and small businesses, especially, credit access in Haiti is very limited. This makes it all the more difficult to establish any sort of entrepreneurial endeavor. The reality of the situation can actually be rather tough: very few individuals can afford to start a practice entirely from their own savings. This is why loans or other forms of investment are necessary.

The Multilateral Investment Fund (MIF) has been working to improve access to new economic opportunities to the over 50,000 micro and small businesses in Haiti (2013). The MIF strategically plans to expand financial services beyond the capital city of Haiti, which is Port-au-Prince.

Fortunately, there are companies that are working to improve access opportunities for those who need it most. For example, in 2010, Technoserve and its partners initiated the Haiti Hope Project. The projected goal was to double the incomes of 25,000 mango farmers within five years of joining. This goal would be accomplished by creating relationships between the mango farmers located in rural areas and investors in the capital.

Many of these farmers were previously excluded from financial programs, making it difficult to kick start and fund any sort of business. This fact is exacerbated given the environmental and economic competition also occurring in the country. The results of the Haiti Hope Project show that 44 percent of the participants now have access to credit.

While credit access in Haiti is still limited, in comparison to other countries, there is a lot of progress being made. Thousands of rural farmers and micro-entrepreneurs are being offered credit and other financial resources. Once adequate incomes are generated, and businesses are steadily entering and competing in the market, the loans can be paid off.

Credit, while seemingly complex, can be a simple way to change the market and economy of countries in need of growth and development.

– Caysi Simpson

Photo: Flickr

Assessing Credit Access in MoroccoMorocco is a North African country bordering the Atlantic Ocean to the west and the Mediterranean Sea to the north. Its economy relies largely on vibrant services and agricultural sectors for growth, and after experiencing a severe drought in 2016, the latter sector has bounced back in 2017. The industrial sector, however, has yet to see significant investment or growth.

According to the Moroccan government’s own estimates, extreme poverty has been eradicated in recent years. The percentage of the population living below the national poverty line was around 4.8 percent in 2014.

One signal of a healthy economy is access to credit. Below are some of the current strategies for improving credit access in Morocco.

Agricultural Credit Access in Morocco: The “Meso-Credit”

As is the case in many countries, rural areas in Morocco have a tougher time gaining access to credit — oftentimes, their residents don’t even bother trying. Innovations for Poverty Action reports that 50 percent of the rural households surveyed indicated that they needed credit in the previous year but never actually requested it.

To meet the needs of the 40 percent of Moroccan farms that are midsized, the Group Crédit Agricole du Maroc offers an innovative “meso-credit” portfolio. Midsized farms are considered too small to take a traditional banking approach but too large for a microfinance approach. Meso-credits are generally loans given to agricultural small and medium enterprises (SMEs) consisting of less than €9,300, with good success and repayment rates.

When the midsized farms can access credit, they can survive, thrive, expand and hire, which ultimately will reduce rural poverty in the area.

The World Bank’s Contribution

In May 2017, the World Bank announced a $350 million program to fund financial intermediation reforms in Morocco.

The program has four main goals:

  1. Support new sources of financing for SMEs
  2. Tighten oversight of the banking sector,
  3. Encourage capital market development by increasing the range of investment tools and protecting Moroccan investors
  4. Invest in the civil service pension fund to keep it solvent

Low-income households are expected to benefit from these reforms, as are female entrepreneurs. The reforms allow women to gain access to more sources of financing and electronic payment systems, which remove social and economic barriers that previously stood in the way of women.

The Takeaway

Many projects are underway to help improve Moroccan investors’ access to credit in a responsible and growth-oriented way.

Hopefully, these efforts—and others like them—will improve credit access in Morocco, get development projects off the ground and lift even more Moroccans out of poverty.

– Chuck Hasenauer

Photo: Flickr

Business Opportunities for Ethiopian Women
On May 24, 2012, the World Bank approved the Women’s Entrepreneurship Development Project (WEDP) to provide business opportunities for Ethiopian women. This simple project has provided over 3,000 women with business loans and an additional 5,000 women with business training.

The project’s objective is to “increase earnings and employment of micro and small enterprises (MSEs) owned or partly owned by participating female entrepreneurs in targeted cities.” The $53 million project will close at the end of 2017.

WEDP aims to minimize the financing gap in Ethiopia. In developing countries, 70 percent of small and medium businesses owned by women cannot obtain the financing needed for them to grow. The project tackles this issue by providing loans to female business owners.

The loans are offered through the Development Bank of Ethiopia and microfinance institutions. WEDP receives additional financing from the international development agencies of the United Kingdom and Canada.

More than assisting with access to microfinance, the program also provides women with skill development, technology and product development. By the end of 2017, the project aims to provide loans to 17,500 Ethiopian women entrepreneurs as well as to improve access to and increase the capacity of existing microfinance institutions.

The investment in women entrepreneurs yields high return opportunities in emerging markets. Historically, women in developing countries played minute roles in entrepreneurship. Expanding their participation through microfinance drastically improves economic output. Because women entrepreneurs tend to hire other women, they are also key drivers of unemployment reduction.

WEDP has had far-reaching impacts, benefiting well over 3,000 women through a line of credit backed by the World Bank’s fund for the poorest countries with a repayment rate of 99.4 percent. The average loan size for the project is $11,000, nearly double the amount that women entrepreneurs were able to receive prior to the project’s implementation.

Recognizing the impacts of women entrepreneurship in Ethiopia and the importance of microfinance, the World Bank adopted the Small and Medium Enterprises (SMEs) Finance Project to complement the WEDP. With a similar objective, the SME Finance Project also provides loans to entrepreneurs.

Financing constraints of Ethiopian SMEs are one of the key obstacles to job creation, growth and new business opportunities for Ethiopian women, according to a recent World Bank study.

Further, small enterprises are more financially constrained than micro or medium/large enterprises. The development of microfinancing projects to target small enterprises will further build upon the success of WEDP, promoting economic prosperity throughout Ethiopia.

Anna O’Toole

Photo: Flickr