Wednesday, February 16, 2011

Media Global (New York): Microsavings Opens Up a World of Possibilities

http://allafrica.com/stories/201102140002.html


For those living on less than $2 a day there are few available financial tools that many of us may take for granted like bank accounts, credit, or insurance. However, even when the denominations are small, these financial tools can make a major difference in the profitability, security, and viability of a family’s finances. A few dollars is generally not enough to open or sustain a minimum balance in savings account at a traditional banking institution yet it can provide substantial security for low income family in times of need. Without the security of a bank account, savings must be kept in hand, in the home, or in risky informal banking and investment ventures. Access to a safe place to keep money can make a major impact on the ability of families and individuals to “manage risks and take advantage of commercial opportunities.”


Without formal banking, saving money can be a risky endeavor. Robbery, flooding, and fires are real risks, not only for property, but for any savings hidden in drawer, under a mattress or in a pocket. Needy friends and family members and impulse spending can also seriously derail efforts to save for future opportunities or emergencies. To fill the void that formal banking institutions have left, many communities have relied on traditional banking, such as the ‘susu’ collectors in Ghana, for security. These small businesses “collect small but regular deposits generally over the course of a month… [then] return the accumulated savings to the client, but keeps a percentage of the savings as commission.” The susu collectors are often the safest and least expensive way to save money in many communities but also carry risk and high cost. The rate of commission is sometimes as high as 40 percent, there is little regulation and no guarantee that the money will be returned. However, many still emphasize their value added to their community in the absence of a better alternative.


In some countries, such as Ghana, where rotating savings and credit associations or susu collectors are very popular, significant efforts have been made to regulate the practice, increasing the safety of saving and investing. With more regulation and security susu collectors are attracting the interest of large financial institutions such as Barclay’s and Citigroup who use the small businesses as an avenue to provide micro credit and loans to individuals. Other international organizations, such as Microsave, provide alternative opportunities for savings accounts as well as micro credit and loan opportunities. Although efforts are being made to expand the availability of these services, nearly 90 percent of those who make less than $2 a day do not have access to formal banking.


While the cost and risk of saving can be high for low income families in Africa the benefits often outweigh them and have influenced many to continue investing. Just a small amount of savings can “help build assets, guard against risks like crop failure, and allow for investment in education, providing future generations with greater opportunity.” Families are able to better deal with unexpected expenses and emergencies increasing their own security and viability. Although providing safe and secure opportunities to save will certainly not eliminate poverty, it can make a major difference in increasing economic stability on a small scale, which is likely to eventually bring more stability to economies on a large scale.



ADDITIONAL INFORMATION

A website dedicated to microfinance in Africa: http://microfinanceafrica.net/

A UN report on Microfinance in Africa: http://www.un.org/esa/africa/microfinanceinafrica.pdf

A short video about an organization in Niger which enables ‘group sharing’: http://www.youtube.com/watch?v=W1-Ked7g-Wo

An IMF working paper on Microfinance in Africa: http://www.insme.org/documenti/wp04174.pdf

A video about Savings and Credit Groups in South Africa: http://www.youtube.com/watch?v=xFX-3tNrNgQ

An IFC report on Microfinance in Africa: http://www.ifc.org/ifcext/gfm.nsf/AttachmentsByTitle/IFC+Africa+Microfinance+Brochure/$FILE/IFC+Africa+Microfinance+Brochure.pdf

DISCUSSION QUESTIONS

1. Do you think micro-finance has the ability to transform a society away from poverty? Why or why not? What could increase the viability of such a transformation in conjunction with micro-finance?

2. Why do you think formal banking institutions do not provide micro-finance opportunities? Do you think that these opportunities could increase a bank’s profitability in the long run or would these services have to be based on charity?

3. What are some things low income families could use a small amount of savings for? Can you think of an emergency cost that could be covered by a small amount of savings? What difference could this make in the long term for these families?

Monday, February 7, 2011

Africa in the News: “Africa's mobile banking revolution”

BBC: “Africa's mobile banking revolution”

http://news.bbc.co.uk/2/hi/business/8194241.stm


A new type of banking has taken root across many parts of Africa. While the number of mobile phone users across the continent has reached an estimated 500 million people most do not have access to a personal bank account or credit cards. This has helped to advance the use of mobile phone banking, a fairly simple process by which mobile user can transfer prepaid credits to another mobile user who can then redeem the credit for cash. Although this method of transferring money is virtually unheard of in the United States, “millions of Africans are using mobile phones to pay bills, move cash and buy basic everyday items.”

People have found a variety of conveniences through this new service. Some use mobile banking to send money to far away relatives, others use it as a secure way to store funds, or making business transactions. One charitable clinic in Tanzania uses the technology to send roundtrip bus fares to low income patients in rural areas allowing them to afford the cost of travel necessary to receive care.[1] However, the major cause for the service’s success is its penetration of a market which had previously existed without any formal banking institutions at all. Those who cannot afford or do not have easy access to traditional bank accounts can send and receive small amounts money relatively cheaply, quickly and safely. The typical transaction of “m-pesa,” a leading Kenyan mobile banking service is “less than $40.” While this is a relatively small transaction the company’s seven million customers are transferring “in excess of $8.5m per day."

While the mobile banking trend is widespread, access is not universal across Africa. There are still large populations which still have no access to traditional or mobile banks due to “low incomes, illiteracy and large signal black spots.” Taxes also apply to these transactions influencing many potential users to stick with cash when they can. While mobile phone use is extensive across Africa, many do not have the means or opportunity access to this technology, putting mobile phone banking out of reach. This has attracted “charitable backing [from] the Bill and Melinda Gates Foundation” which has pledged $12.5 million to “extend services to the poor.”

Despite lack of universal access, mobile phone technology has been highly profitable and is spreading quickly. Major mobile phone service providers have moved into the mobile banking sector, have the means, and see the potential in expanding the service. The South African mobile phone provider, MTN, will be extending service “to the 20 countries where MTN operates, including Uganda, Nigeria, Cameroon and Ivory Coast, which combined have over 90 million mobile phone users.” African born mobile phone banking is clearly thriving across the continent.

ADDITIONAL INFORMATION

An article and video from CNN on mobile banking and healthcare in Tanzania: http://www.cnn.com/2010/WORLD/africa/12/29/mobile.banking.tanzania/index.html

An article from the New York Times on the future of mobile banking in Africa: http://www.nytimes.com/2008/10/03/world/africa/03iht-03oxan-Mobbank.16671846.html?_r=1

An article from TIME magazine on mobile banking in Africa: http://www.time.com/time/magazine/article/0,9171,2043329,00.html

World Bank video Mobile Banking in South Africa: http://www.youtube.com/watch?v=2SKhCYoF0Lg

DISCUSSION QUESTIONS

1. Do you think mobile banking will ever catch on in the United States? Why or why not?

2. Do you think this type of banking will help elevate poverty in Africa? How?

3. How do you think more traditional banking methods and institutions will fare in Africa? Will mobile phone banking change the way they operate?

Wednesday, February 2, 2011

Africa in the News: "The Story of a Food Secure Nation"

The East African (Nairobi): "The Story of a Food Secure Nation"

http://allafrica.com/stories/201101311486.html


Less than three years ago Rwanda put into action a plan aimed at increasing food security. Since then food production has steadily increased at a rate of 16 percent per year, an incredible accomplishment compared with the rate of growth previous to the nationwide effort of only 0.7 percent. Today the country has developed a strong agricultural base which has “bid food deficits goodbye.”

The initiative began with the aim to provide one cow per family in 2006. The cows made significant improvements in the lives of many rural individuals and families by adding additional nourishment, natural fertilizer, and a little income to their homes. The government also enacted policy which would halt land fragmentation and encouraged the merging of smaller farms in order to make the “best use of fertiliser, improved seeds and labour.” Government management of the sector was improved through the reorganization and investment of homegrown agricultural policy and research. These policies were followed by additional programs like the “Crop Intensification Project” which began “distributing high-yielding seed varieties and fertiliser across the country” in 2008.

Of course nature has played its role, however, Rwanda’s concentration on improving agriculture has certainly paid off. Through the distribution of better seeds and training on better farming techniques the country has seen the production of its principle crops – maize, cassava, beans and bananas – soar. The calculated increase in the yields of these crops is at “99 per cent for maize, 43 per cent for wheat 28 per cent for rice and sweet potatoes…[as well as] an 11 per cent increase in bean[s].” The sustained progress of the agricultural sector has even ushered in international development and investment.

However, these increases in food production have not come without sacrifice. Rwanda is “one of the only five countries on the continent that have committed the recommended minimum of 10 per cent of their national budgets to agriculture.” Nevertheless, Rwanda’s success is a wonderful example to others that food security can be achieved by a developing nation.

ADDITIONAL INFORMATION

An article from the BBC on a dairy farm in Rwanda: http://www.bbc.co.uk/news/10131793

A video on the ‘One Cow’ Initiative in Rwanda from ‘Action Aid’: http://www.youtube.com/watch?v=XxvuQqfmMSY

A collection of academic resources from the ‘Rwanda Food Security Research Project’ of USAID and Michigan State University http://www.aec.msu.edu/fs2/rwanda/index.htm

A newspaper article on development in Rwanda: http://allafrica.com/stories/201101190336.html

DISCUSSION QUESTIONS

1. Do you think this type of progress in food security is possible anywhere? Is Rwanda a special case?

2. What do you think are the main reasons why this initiative to increase agricultural yields succeeded? The actions of Rwandan government? Individual farmers? The weather?

3. Do you think that spending 10 per cent of a national budget on agriculture is too much? Is it too little? Why do you think more countries are not spending this ‘recommended minimum’?

Wednesday, January 26, 2011

Africa in the News: "South Sudanese Vote Overwhelmingly for Secession"

New York Times: "South Sudanese Vote Overwhelmingly for Secession"

http://www.nytimes.com/2011/01/22/world/africa/22sudan.html


After much anticipation and anxiety over southern Sudan’s referendum for independence the outcome is clear. Preliminary results from the referendum report nearly 99 percent of voters in southern Sudan have chosen independence from the north. This coupled with a turnout well above the required 60 percent of eligible voters gives a clear indication of an overwhelming preference for succession. Although the official results are not due to be published until 14 February, and any steps to actually initiate the split will not come for months, the results is an unmistakable a step towards the independence of South Sudan.

Despite the clear results, formal independence will not be granted until the peace treaty which necessitated the referendum is due to expire on July 9th this year. In the mean time the southern region “hopes to pick a national anthem and a name; leading contenders are Nile Republic and South Sudan.” There are also much more daunting tasks ahead of split, “namely how the two sides would share the south’s sizeable reserves of crude oil and what to do about the Abyei region, which straddles the north-south border and is claimed by both.” There are also questions about southern Sudanese who live and work in the north, their citizenship status and their ability to continue their lives as is in what will soon be a foreign country.

Independent of the complications from succession itself, both the northern and southern regions of Sudan will have new challenges to face as independent countries. There are fears of backlash in the North over the succession, instability, and the resulting insecure economic climate. The south has many humanitarian issues to address towards its own people, like access to food, medical care and clean water, a challenge only to become more severe as an influx of southern pour from the north back into their homeland. While fragile and potentially volatile issues remain to be resolved a peaceful referendum process bodes well for continued peace. The people have made their wishes clear and it is now up to Sudanese politicians and the international community to ensure that they are carried out in harmony and fairness.

MORE INFORMATION

An article from CNN on the results of the referendum: http://www.cnn.com/2011/WORLD/africa/01/26/sudan.referendum/index.html

A short video from the Kenya Television Network detailing the provisional results of the Sudanese referendum: http://www.youtube.com/watch?v=wBV9CU2xzHI

An article on the results of the referendum from the Sudan Tribune: http://allafrica.com/stories/201101220012.html

The Southern Sudan Referendum Commission website: http://www.southernsudanocv.org/

A video from France 24 entitled “South Sudan: Challenging Times”: http://www.youtube.com/watch?v=DMTBqL9yHkI

DISCUSSION QUESTIONS

1. Are you surprised by the turnout or results of the referendum? Do you think nearly universal vote for separation will make a difference in the succession process?

2. What are the prospects for a peaceful succession for South Sudan? Do you think the referendum is the end of the conflict between the north and the south?

3. What is the international community’s role in ensuring peace for the Sudanese people? What should foreign governments or international organizations do? What should they not do?

Monday, January 24, 2011

Africa in the News: "Cassava Combating Rural Hunger"

Inter Press Service (Johannesburg): "Cassava Combating Rural Hunger"

http://allafrica.com/stories/201101040722.html


After nearly 20 years of research and development scientists in Zambia have finally announced an important breakthrough which has the potential to dramatically improve the vitality of rural communities. Through the country’s domestic “Root and Tuber Improvement Programme (RTIP)” local scientists have generated “four new, early-maturing and high-yielding cassava cultivars.” These plants mature in half the time of the traditional cassava. This initiative targets the rural areas of Zambia which have particular difficulties with poverty and hunger. By generating a more durable but indigenous plant rural communities are able to meet their nutritional needs on their own, more quickly and without environmental degradation. Many believe that this could turn the tide for poor rural communities and even “significantly transform Zambia's slippery socio-economic landscape.”

The researchers from RTIP are so positive about this development particularly because of the widespread usefulness of the cassava plant. Dr. Chiona, the lead researcher for the project, explains that “with this crop, you throw away literally nothing at all,” and can be used as “floor polish, hair chemicals, animal and fish feed from the leaves, firewood and seeds from the stems and fodder from the peels.” In addition to the plant’s usefulness, it is a resource that directly targets rural regions where the bulk of Zambia’s poor reside. For one rural woman, Elias Mwila, the new strain of cassava has made a major difference her live and the ones she supports. She explains, “I have been using the old variety of cassava since 1992 only for meeting my family's basic food needs. But things have changed and now I am even planning to start selling the surplus.” Many Zambian organizations are focusing on agricultural development to help alleviate poverty in the rural areas. The development of stronger, faster yielding cassava is a major step in this development goal.

The hope is that this homegrown agricultural development boosts Zambia’s economy at all levels. For subsistence farmers faster yielding cassava leads to more opportunities for harvest and less fear of drought and floods. Some may even be able to turn a profit through selling access food or producing goods from the plant. An increased number of families or individuals with disposable income are highly beneficial to the economy as a while. Donors and government authorities hope that this will also create greater security and in turn even greater economic growth.


ADDITIONAL INFORMATION

An article from ‘Africa Renewal’ Magazine about Cassava in Africa: http://www.un.org/ecosocdev/geninfo/afrec/vol20no2/202-cassava.html

An article from USAID on a Cassava ‘Mega Project’: http://eastafrica.usaid.gov/en/Article.1154.aspx

A video on a Cassava growing project in Uganda: http://www.youtube.com/watch?v=Vr4IGKA7B3M

An article from the International Food Policy Research Institute on ‘Recent Growth in Africa Cassava’: http://www.aec.msu.edu/fs2/cassava/focus12_03.pdf


DISCUSSION QUESTION

1. Do you think something as simple as a vegetable can begin to transform a developing economy?

2. What else must be put in place to make sure that cassava yields are brought to market and produce an income for the farmers?

Wednesday, January 5, 2011

Africa in the News: "Ghana oil begins pumping for first time"

BBC: "Ghana oil begins pumping for first time"

http://www.bbc.co.uk/news/world-africa-11996983


Ghana has officially begun to pump oil from vast underwater reservoirs found off the country’s shores three years ago. It was found in the ‘Jubilee Field’ and is “estimated to hold 1.5billion barrels of oil.” Another nearby field was discovered this year with an estimated additional 1.4 billion barrels significantly adding to potential revenues and the prospects of a new booming industry. A UK based oil production company, Tullow Oil, is now producing 55,000 barrels every day. The oil’s discovery and production will certainly have a large impact on the African country as revenues are expected to eventually reach $1 billion yearly. Although, some reports are skeptical of the benefits the oil will bring to Ghanaians. In other developing countries of the region, such as Nigeria, the cash flow from oil production has done more to fuel conflict rather than aide development. Indeed there is some concern about the lack of legislation and formal procedure to manage the new industry.

However, Ghana is notably different from countries in the region which have had less than favorable results of oil revenues. Stephen Hayes, head of the Corporate Council on Africa notes that Ghana has a “fairly transparent society compared to other countries dealing in oil - so they've got a better opportunity to get it right.” The country also has developed a strong civil society with activists organized and ready to monitor pending oil legislation in regardless to the environment, civil rights and development. Hayes also points out that Ghana’s economy is diversified, with “oil revenues expected only represents 6% of their economy - compare that to Nigeria where oil revenue represents 92% of the economy or Angola where it's almost 100%.” This allows Ghana to manage the revenue without stalling the economy. This is not to say that oil will not have a large and positive impact on the economy as it is expected to increase the country’s growth by an additional 7 percent in the next year.


ADDITIONAL INFORMATION

A video from Al Jazeera: http://www.youtube.com/watch?v=ncQexNRPvUc

An article from the Ghana Chronicle titled “Oil Flows Today”: http://allafrica.com/stories/201012160131.html

A website dedicated to information and news oil in Ghana: http://www.ghanaoilinfo.com/

An article from National Geographic: http://news.nationalgeographic.com/news/energy/2010/12/1012115-oil-ghana-environment-jubilee/



DISCUSSION QUESTIONS

1. Do you think Ghana will be able to uphold its promise to spread the wealth among the people and not in only a few hands? What challenges may the government/activists face in working towards this goal?

2. Should a country’s natural resources be shared by the people or given to those who discover it? What do you think has been done in most cases? Is it fair? How can we determine this?