Financial Markets

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Nicole Tosh, a program associate with the Global Assets Project at the New America Foundation. She discusses how cash transfers can empower girls living in poverty and the technological innovations that stand to facilitate cash transfers. Yesterday was the first annual International Day of the Girl. A number of initiatives, partnerships and even films are being released, directing the attention of policymakers, NGOs, and governments squarely to the issues facing girls in poverty. Finally the world is waking up to a reality that 600 million girls are already acutely aware of: life as a girl at the bottom of the pyramid is tough. The chief argument made by those leading this effort is that anti-poverty interventions targeting girls—rather than women or children generally—disrupt the intergenerational cycle of poverty that traps whole communities. Of course, there are a handful of dissenting voices who disagree with this ever-growing movement. As I’ve written previously, their opposition tends to be based either on a simplistic understanding of the research or generally misdirected. Research on investments in girls shows that more education leads to fewer but healthier children and higher earnings. Having fewer children leads to a decreased risk of death and other pregnancy-related complications, and more earnings means more money reinvested in the girl’s family. All of this cannot happen, however, unless girls are empowered. What does empowerment mean? It means giving a girl the opportunity to stay in school rather than forcing her to work in the home or wed in her teenage years, providing her with the resources and knowledge to deal with family planning and other health issues, and allowing her to make her own decisions—financial or otherwise. The numbers show empowerment matters. Maternal mortality is the single greatest cause of death among girls aged 15 to 19. While the Millennium Development Goals (MDGs) have made education equality a top priority, girls still comprise 53 percent of out-of school youth; and 75 percent of AIDS-infected youth in Africa are girls. In light of the stark realities that girls confront, policymakers, NGOs, and governments are beginning to focus their efforts on providing direct assets to girls (DATG). While the term “asset” can refer to a number of different tangible objects (think: bike) and even intangible quantities (think: education), the most basic and literal asset—money, in the form of direct cash transfers to girls—may just be one of the most promising. The reasons for this are many. Cash transfers, an increasingly recognized antipoverty tool, provide beneficiaries with the means to meet their needs, but perhaps equally important, cash transfers offer economic independence for many of the world’s poorest. But that’s not all. Study after study has shown that cash transfers can have an impact on beneficiaries’ education, health, and overall social capital. In fact, findings shared at this year’s International AIDS Conference on Kenya’s Cash Transfer for Orphans and Vulnerable Children Program showed a decrease in HIV risk behavior among youth who received cash transfers. Specifically, the results indicate that children receiving payments were 30 percent more likely to delay their sexual debut, and 7.2 percent less likely to have multiple sexual partners over the last year. While research continues to assess the impacts of conditional versus unconditional cash transfers—those that require beneficiaries to meet certain conditions versus those that do not—in general, cash transfers to the poor represent a seismic shift in the way aid is doled out to those who need it most. Whereas in-kind aid (food, fuel, etc.) meets a specific need and seems to imply that the donor rather than the recipient knows best, cash transfers allow individuals to use the money to meet their family’s multiple needs and accepts that the recipient may in fact know what’s best for his or her family. This is the crux of the argument behind the 2010 book, Just Give Money to the Poor, written by policy experts Joseph Hanlon, Armando Barrientos, and David Hulme. The Global Assets Project at the New America Foundation released a paper yesterday, Investing in Girls: Opportunities for Innovation in Girl-Centered Cash Transfers, examining the landscape of girl-targeted government-to-person (G2P) cash transfer programs across Latin America, Africa, and Asia. Seventeen programs across six countries—Guatemala, Yemen, Pakistan, Nigeria, India and Bangladesh—are likely just the beginning of this trend. Improvements in electronic payment (e-payment) platforms, experimentation with encouraging savings and asset building, and innovations like biometric identification promise to not only allow for more efficient payments to girls, but also to enhance the impacts of cash transfer programs on their lives. E-payments not only reduce leakages and corruption, but they have the potential to provide beneficiaries with a secure place to store their money away from those who could exert control over girls’ limited financial resources. SMS messages to their mobile phones reminding girls of savings goals could help encourage them to develop a savings habit, which would not only ensure that girl beneficiaries have money set aside for a rainy day, but would also provide long-term benefits for their ability to manage money. Finally, biometric IDs (which rely on voice, iris scans, fingerprints and other unique biological traits) are being implemented in India, where early female marriage is common despite laws in place prohibiting girls to marry before age 18. Biometric IDs can help ensure that girls are “counted” and thus have an identity that allows them to access financial institutions for storing and saving cash transfer payments and that cannot be falsified by parents eager to marry off their daughters. Of course, there are hurdles to overcome. First and foremost, data on many of these programs is very limited. We need researchers to not only conduct impact evaluations on the overall effectiveness of programs, but also on specific components of program design, paying special attention to the payment and delivery mechanisms. Second, developing countries often lack the infrastructure to provide full financial inclusion. This is where mobile network operators (MNOs), branchless banking systems, and other out-of-the-box approaches to financial access can play a role. Financial inclusion in many of these countries will not happen overnight, but incremental avenues through mobile banking, branchless banking, and in-school banking can open the door for many “unbanked” girls in the developing world. With the launch of the recent Better Than Cash Campaign, which is encouraging governments to transition to electronic payments for beneficiaries of pensions, social protection programs, and other G2P transfers, more governments will likely jump on the e-payment bandwagon. And with increased attention dedicated to the unique needs and power of girls in the developing world, more of these payments could be directed their way. As these two trends merge together, especially in light of the technological innovations underway, new and exciting opportunities for girls in poverty are sure to follow.

In the aftermath of the Marikana strike and associated violence, the rand has remained highly volatile against the dollar. Industrial unrest is spreading in the mining and trucking industries.  Last week, Moody’s, the international ratings agency, downgraded the South African government bond rating from A3 to Baa1. It cited uncertainty about the government’s ability to address the country’s socioeconomic problems as justification. Yesterday, Bank of America warned of the risk of a further credit downgrade by Moody’s, Standard & Poor’s, and Fitch if the uncertainty persists. What is happening? Far from going away after the mining giant Lonmin settled with the strikers at Marikana, labor unrest has spread throughout the mining industry.  The Financial Times estimates that eighty thousand workers are on strike, perhaps 15 percent of the underground labor force.  Most of these strikes are illegal. Ominously, the Financial Times reports that the strikers are not negotiating through “establishment” trade unions tied to the governing African National Congress (ANC) but instead using “workers’ representatives” that are more militant. The gold mining giant Anglo Gold Ashanti has announced that it may curtail its operations in South Africa if the labor unrest continues. Twenty thousand transport workers are also on strike over wage disputes, resulting in shortages ranging from medicine and gasoline to cash at ATM machines. This directly impacts the general population in a way that the striking miners do not. Violence has been reported, but no deaths. President Jacob Zuma is using the South African National Defense Force to supplement the police. The proverbial “elephant in the living room” is the ANC’s December convention where Zuma’s party leadership, and likely his continued presidency, will be directly challenged. As of today, I think Zuma will surmount those challenges.  But if the labor unrest intensifies, Zuma’s odds will decline. At the very least, there is now a climate of political uncertainty as well as spreading labor unrest.  International investors–and the international ratings agencies–do not like uncertainty. South Africa is not in crisis, but I would watch the rand exchange rate.

I had always thought that Africa was a cornucopia of mineral riches:  gold, platinum, coal, diamonds, oil--you name it; Africa has it all. Maybe not so, writes Bright Simons in "Africa’s Fabulous Mineral Wealth that Isn’t all There," published in African Arguments.  He argues, inter alia, that on a per square mile and on a per capita basis, Africa is poorer in mineral production and reserves than the world average. Only ten of the hundred minerals most important to industrial production play a major role in African mining. Further, their production and reserves are concentrated in only four countries: South Africa, Angola, Congo, and Guinea. His "per capita" argument is intriguing:  Norway and Nigeria each produce about the same amount of oil per year.  Using 2012 prices, he calculates that if the oil revenue were divided equally among all 4,707,270 Norwegians, he or she would each receive $15,000.  But under the same methodology, the nearly 170,123,740 Nigerians would receive only $460. His discussion of the value of minerals is also fascinating.  He states that the worldwide value of gold reserves is about $2.6 trillion using 2012 prices.  The total value of gold production in 2011, again using 2012 prices, was $138 billion. Africa’s share was worth about $30 billion.  Iron is in short supply in Africa.  Worldwide, he estimates the value of iron reserves at $128 trillion.  The value of 2011 iron production was about $475 billion. So, the value of iron reserves and production greatly exceeds the value of gold.   And while Africa has the latter, it has little of the former. Simons’ argument is the beginning of a conversation, not the end. But, these considerations highlight the possibility that advocates of the “resource curse” argument may be short-sighted. It is also relevant to note that when the African National Congress came to power in South Africa after the 1994 ‘non-racial’ elections, its leaders were surprised that the country was not nearly as rich as they had thought it to be.

In the bloody aftermath of the 2008 elections, the Southern African Development Committee (SADC)  drew up and approved a unity government scenario to move the country forward.  In this scenario, incumbent Zimbabwe African National Political Union-Patriotic Front’s (ZANU-PF) Robert Mugabe continued to serve as president, while opposition Movement for Democratic Change’s (MDC) Morgan Tsvangirai became prime minister.  They also planned to draft a new constitution and submit it to the people for ratification.  Finally a new voters’ role would be established. Only then would national elections be held. That unity government has now all but broken down.  Mugabe, elderly and probably ill, and his supporters want elections sooner rather than later.  There is also deadlock between ZANU-PF on the one hand, and the two opposition parties, MDC and MDC-T, on the other,  over the new constitution. Over the past two years, the Constitution Parliamentary Select Committee (COPAC) drafted a new constitution, which it thought had been approved by the party principles and could be submitted this month to the voters for ratification.  But ZANU-PF’s politburo has insisted on a complete re-write of the draft to preserve the current powers of the presidency and appears to provide other advantages to ZANU-PF.  Many in the Zimbabwean opposition suspect that Mugabe’s goal in pushing for elections sooner is to ensure they are held before the new constitution is adopted; effectively ensuring a ZANU-PF victory. The MDC and MDC-T are asking South African president Jacob Zuma to intervene to break the deadlock over the constitution.  Zuma may have the leverage to break the constitutional impasse, but only if he is willing to pressure Mugabe. In a development that may be related to the Zimbabwe constitutional stalemate, the Zimbabwe finance minister is asking South Africa for a loan, possibly for as much as $U.S. 10 million, though that amount has not been confirmed.  The South African opposition party, the Democratic Alliance (DA), is urging Zuma’s African National Congress (ANC) government not to give Zimbabwe a "blank cheque" but to ring-fence it for specific purposes.  The DA shadow finance minister said he shared the suspicion of Zimbabwean opposition figures that the money could otherwise be used by ZANU-PF in the upcoming election campaign. Zimbabwe does, however, appear to be running out of money.  The Zimbabwean finance minister says there is no money to conduct by-elections in thirty-eight vacant constituencies.  There are also reports that government revenue from diamonds is diverted from the treasury to ZANU-PF and the military.

Baron David Alton of Liverpool, a member of the UK House of Lords, has raised with Baron David Howell of Guildford, a minister at the Foreign and Commonwealth Office (the UK foreign ministry), his concern that a London-based Islamic charity, Al Muntada, is providing some financial support for Boko Haram.  The London press reports that Lord Alton raised these concerns in July;  it is not clear why the UK media is only carrying the story now.  However, spokespersons for the Royal United Services Institute (RUSI), the UK’s military think tank, and Christian Solidarity Worldwide have, during the past year, issued alarms about Boko Haram activities and the possibility that they could spread to the UK. For the RUSI report, see here.  It is well known that a number of radical Islamic organizations are based in London where, presumably, their activities are monitored appropriately by the Metropolitan police.  A spokesperson for the UK Charity Commission (the entity that regulates registered charities in the UK) confirmed knowledge of Lord Alton’s concerns, but cautioned that there are a "number of registered charities with a similar name to this organization, so the commission is not able to confirm at this stage whether or not this relates directly to a UK registered charity." There has been speculation in Nigeria and elsewhere about how Boko Haram funds its operations. It would seem intuitive that radical jihadist organizations outside Nigeria may be funneling money to it.  But, if so, the amount and significance is unclear. Boko Haram operations do not seem especially costly. Explosives are readily available, and cheap, in Nigeria and Boko Haram elements appear able to steal weapons from government armories.  It is likely too, that the flood of Libyan weapons has reached Nigeria, depressing the prices. Given the huge number of unemployed Muslim "youth" in northern Nigeria, Boko Haram can recruit "foot soldiers" for its operations for little money. Further, elements of Boko Haram have been directly linked to bank robberies, likely an important source of funding. Boko Haram appears to be essentially an indigenous phenomena, with any international links having marginal influence.  Its funding, too, is likely to come mostly from within Nigeria.

Microfinance undoubtedly figures among the most important development innovations in the past several decades. Beginning in the 1970s, microfinance pioneers promoted the radical idea that it was possible to unlock the talents and energies of the poor themselves by providing them with small loans without collateral – a concept dismissed by traditional financial institutions. Over the years, as the industry has grown and evolved,  it has also attracted substantial critical attention, including in books like David Roodman’s Due Diligence: An Impertinent Inquiry into Microfinance. Today, as debates over regulation and best practices continue, microfinance is regarded as one tool for poverty reduction, women’s empowerment, and financial inclusion, but far from a silver bullet for development. No institution is more closely associated with microfinance than Grameen Bank, started by Nobel laureate Muhammad Yunus, which launched the microfinance movement in Bangladesh. According to its website, Grameen has given loans totaling more than $11 billion to over 8 million borrowers, 96 percent of whom are women. But political tensions are threatening Grameen’s work and Yunus himself, as I wrote yesterday on my blog. A new ordinance essentially gives the government control over appointing the bank’s managing director, raising concerns about the bank’s independence.  As I write: For sure, microfinance as an industry has had its fair share of problems. But trailblazing Grameen—and its millions of poor women owners –deserve better than a politically motivated government takeover. You can read the full post here.