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Building A Better Normal: Inclusive And Green Economies

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When I saluted friends and colleagues at the beginning of last year and extended New Year wishes for a great start into the “Golden Twenties”, I was making reference to the 1920s in Germany, more broadly referred to in the western world as the “Roaring Twenties”. This was a time of profound societal, cultural and economic advances following World War I and the 1918 flu pandemic. The ground-breaking transformations of that decade were made possible by the evolution of liberal values and the power of modern technology.

A century later, when I said, “Happy New Year”, I had no idea that 2020 would go down in history as the year of lockdowns, recession and mass unemployment. Since then, there is hardly a country or person on the planet who has not been affected by this crisis.

Early into the COVID-19 outbreak, global opinion leaders were quick to define events as the “new normal”, signaling that the return of daily life and circumstances would never be the same again. Such language reflects the human need to deal with absolute unknowns by regaining at least some control and – most importantly – hope when insecurity was at its peak. From here, we moved quickly towards focusing on the opportunities presented by the crisis with regulators, corporate decisionmakers and strategists committing to “building back better”. Declaring that the crisis should not be wasted became a mainstay in agenda-setting language, allowing the concept of a reset to suddenly become popular.

But how can financial policymakers and regulators leverage the potential gains in front of us to manage or cushion the unintended consequences of a crisis in a concrete, practical and feasible way?

Despite existing opportunities, the economic and social realities we are living in are highly problematic. As the pandemic generates shockwave after shockwave, we must not forget those at the bottom of the economic pyramid who are a hospital bill away from falling into poverty and for whom the economic slowdown means less income and mounting debt. Vulnerable groups are rapidly increasing in number with neither solid safety net to fall back on nor financial resilience.

Silver lining of opportunities

COVID-19 has already been a major setback for the Sustainable Development Goals (SDGs), and the economic crisis that has been developing alongside the ongoing health emergency is not only intensifying existing inequalities in the developed world, but also threatening to set back decades of economic growth and poverty reduction in emerging and developing economies.

In the short term, growth contraction will be most severe in the developed world. In the medium and long term, the COVID-19 impact will be much more critical for emerging and developing economies.

According to the International Monetary Fund (IMF), countries such as the Philippines, India, Mexico, Argentina and Nigeria are at the top of the list of most affected countries with growth projected to shrink by up to 13 percent until 2025. IMF forecasts that declining economic growth will further reduce household incomes of the most vulnerable segments, such as women and less-skilled workers, who are disproportionately represented in the informal economic sector and currently face the brunt of the negative impact of the pandemic. As a result, the gains made in financial, economic and social inclusion we have seen over the last years are at risk.

Furthermore, national and international political processes and decision-making mechanisms remain complex, while trends towards isolationism and nationalism that emerged before the crisis do not seem easily reversed. This was also indicated in the way that COVID-19 was handled by decisionmakers in different regions around the world.

However, what we have learned and achieved over the past decade gives us hope and belief that we can master the outcomes of this crisis. These lessons should be preserved and not wasted, providing a silver lining of opportunities to tame any negative effects on our hard-won gains in inclusion.

Global convergence on financial inclusion

First, one of the most relevant lessons from the 2007-2008 financial crisis was that financial inclusion is among the few practical solutions that can have a substantive impact in strengthening the economic resilience of vulnerable groups and catalyzing economic recovery. We learned that even a simple financial service, such as a mobile money account, can make a huge difference in a poor person’s life.

Over the past decade, financial inclusion has moved into the mainstream of growth and employment, monetary and financial stability, and financial integrity. Global convergence in this space has brought a shared understanding that financial inclusion embraces the provision of safe, sound and sustainable financial services for all. It also includes cutting-edge financial technology (FinTech) policy and regulatory solutions. Resonating with both developing and developed countries alike and breaking traditional distinctions across jurisdictions around the globe, these solutions and policies are designed to respond to major, emerging, public policy challenges such as cybersecurity, systems interdependencies, consumer data management and effective consumer protection.

Although the crisis brought about by the pandemic is different from the global financial crisis, it provides relevant background and experiences for a smart design of policy and regulatory responses. This knowledge could mitigate the immediate, negative socio-economic outcomes of the crisis and facilitate a smooth recovery of hard-hit economies by reinforcing sustainable financial inclusion initiatives.

Leapfrogging

Second, we have learned about innovative policies that allow for and accelerate technological leapfrogging. Emerging markets have shown that deploying technology in a transformative manner permits the rapid emergence of mobile money and digital payments ecosystems beyond conventional banking. For example, Ghana increased the ownership of mobile money accounts (age 15+) to 40 percent in 2017 from 13 percent in 2014. During the same period, female (15+) mobile money account ownership increased to 34 percent from 12 percent.The advancing digital payments infrastructure enabled effective policy responses to the COVID-19 crisis. The use of digital payment and electronic money significantly increased after the outbreak and during the lockdown. Within a year, between October 2019 and October 2020, the total value of mobile money transactions has almost doubled from USD $5.3 billion to USD $10.2 billion.

In Ghana, enabling regulatory approaches have facilitated transformative growth that is technology neutral and gender sensitive through a risk-based approach to licensing and supervision of new financial technologies in the market. These are guided by principles of interoperability and proportionality through Bank of Ghana’s active engagement with the commercial banks, mobile money operators, and wider stakeholder groups. This is just one of the many examples from the developing world that we have learned from on how leapfrogging works in practice.

Development policy

Third, in recent years, trends have moved towards peer learning, country ownership and tailored adoption of policies and away from traditional and expensive expert-led technical assistance modes of development cooperation. Strong country ownership has been exemplified in the more than 50 developing and emerging countries which, since 2012, have adopted national financial inclusion strategies.

With this trend making an impact in many jurisdictions at relatively low cost, multilateral development bodies have recognized this demand and adapted their support to developing countries. Development partners have also realized that they cannot do everything on their own as effectively and cost-efficiently as required. Consequently, win-win partnerships that leverage the unique strengths of all institutions involved are increasingly prioritized.

The pandemic has accelerated this shift. With developments moving so fast, there is an urgent need to understand policy responses from other jurisdictions in real time, opening further opportunities for a bottom-up cooperation model based on peer learning, friendly peer pressure and peer understanding. Former geographical, economic and political patterns, such as north or south, rich or poor countries and developed or developing economies, do not properly reflect reality anymore. The future will bring new coalitions as knowledge and its practical application is scattered in pockets around the globe, and what will be needed is a mechanism to bring it to the surface to be shared for the benefit of all.

Empowering emerging and developing countries toward new growth trajectories does not always and necessarily require huge pots of development finance. Infrastructure finance deployed by multilateral institutions and development banks is indeed important. It is country-owned, demand-driven approaches that secure and maintain the political will needed to implement inclusive growth policies toward which developing economies contribute significant resources of their own.

A good example is AFI’s Inclusive Green Finance workstream. With relatively small investment, we currently have policymaking institutions from 44 developing and emerging economies working together to leverage linkages between financial inclusion, green finance and emerging technologies. The political will is there, paving the way for important policy innovations by financial regulators for a recovery that is both inclusive and green. This is essential given that climate change will be a source of future shocks that will require the building of financial resilience, especially for those at the bottom of the pyramid.

Most importantly, the workstream gives voice to a vital group of stakeholders – both in terms of countries and type of institutions – within the broader global climate change debate. Its innovative policy approaches are balancing financial inclusion and sustainable growth and enabling pathways for development financing and private sector investment to be deployed wisely and cost-efficiently.

Inclusive and Green New Economy for resilient future

I am happy to refer once again to the wise words of Governor Benjamin Diokno from the Central Bank of the Philippines who, when the pandemic hit, explained that we should “prepare for a ‘new economy’, not a ‘new normal’, which is an oxymoron”. I looked up the meaning of “oxymoron” and found that it is a figure of speech in which two opposite ideas are joined to create an effect.

Considering our lessons outlined above, which are a public good, the notion of a “new economy” should be built around the experiences of the many countries that have recognized and understood the need for and have worked on financial and social inclusion over the past decade. Groups disproportionately affected by exclusion, such as women, youth and forcibly displaced persons, should be the focus when emergency and recovery responses are brought underway. Financial inclusion after COVID-19 can unlock and further drive economic participation among women and youth and enable transformative opportunities while leaving no one and their small business behind.

This crisis also offers opportunities to incorporate inclusive green finance into a recovery ushering in the dawn of a ‘new economy’ that is green, resilient and socially inclusive. Building resilience for future crises and risks, such as climate change, can be achieved by investing in low-carbon economies and in the well-being of the most vulnerable. This would enable a just transition that does not come at the expense of those at the base of the economic pyramid. COVID-19 can, therefore, be instrumental in revitalizing the crucial role of the SDGs to overcome the impact of the crisis on marginalized groups.

Finally, the future of financial inclusion and a broader recovery will continue to be shaped by technology. Emerging regulatory and policy frameworks suggest that there is scope for more innovation in the digital finance space, built on effective digital financial literacy solutions for existing customers such as the elderly and newly included groups, like women and youth. Regulators must ensure that new and arising risks are used in responsible, safe and sustainable ways that break down barriers and empower the marginalized and the excluded.

If we agree that further exclusion is not an option and move inclusivity to the core of our thinking and practice, we will be empowered to achieve a “normal” that may not be “new” but will be “better” than what we have been used to due to a solid foundation in the lessons we have learned in past years. We might even be in the position to make a humble contribution to what the second post-pandemic “Roaring Twenties” will be referred to in the history books of the future. However, unlike its predecessor a century ago – which partly contributed to the Great Depression –, the decade ahead of us might show more awareness of shared global challenges and address the disadvantage and inequality of the excluded.

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Rwanda’s Weekly Agro Exports Performance

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Last week Rwanda shipped out various tonnes of horticultural products coffee and tea fetching an impressive amount of foreign revenue.

According to National Agricultural Export Development Board (NAEB) mandated to develop and enhance Rwanda’s agricultural exports, Last week Rwanda exported 255,298Kg of horticultural products which earned U$441,679.

Details show the Main Countries of destination of Rwanda’s horticultural products were mainly Holland, United Kingdom, DRC, Germany, among others including USA, UAE, France, Uganda, Belgium, Tanzania and Denmark.

A total of 431,107Kg of Rwanda Coffee worth U$1,383,622 was exported compared to previous week, export quantities and revenues increased by 86.2% and 83.9% respectively. 52.2% of the consignment was fully washed. Destinations: China, UK, Belgium, Russia, Kenya, South Sudan & Nigeria.

Meanwhile, 449,000Kg of Rwanda Tea  were exported generating U$1,146,118. Compared to last week, the average price slightly reduced from U$2.78/Kg to U$2.5/Kg. Main country buyers were Pakistan, and UK among others.

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Business

Tanzania Unveils Aggressive Plan For Livestock

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Tanzania has announced that it is seeking to revamp its livestock subsector with the aim of making it more profitable.

Dr. Jonas Kizima the Acting Director-General of Tanzania Livestock Research Institute (Taliri) said on Tuesday that Preliminary studies have discovered that most industries in the livestock products category are performing shoddily due to poor production and supply of raw materials.

The Tanzanian government said it is embarking on implementing a special five-year programme (2021-2025) to push for improvement of the livestock industry.

“The programme seeks to enable stakeholders in the beef and dairy cattle chains in all regions of to improve their performance by adopting better technologies and practices so that they can stand a professional chance to meet actual raw material demand in the livestock industry,” Dr. Jonas Kizima said.

Tanzania is therefore arguing that it is going to introduce and help livestock keepers across the country to raise hybrid animals, provide best animal health services, animal compounded and feeds, put in place animal husbandry infrastructure, improve milk handling, grazing systems and maintain good diary animal genetics.

“Inbreeding is the biggest technical challenge livestock keepers are facing- it is detrimental to livestock,” Dr Kizima noted.

The new agenda is in compliance with President John Magufuli’s directive issued to revive and promote animal industries for the next five years in the coastal East African country.

According to Concerns by Magufuli at least 90% of animal skins and skins produced in Tanzania were of very poor quality due to poor slaughtering methods.

Magufuli says he is seeking to motivate investors from within and outside the country to invest in meat industries, but also in leather production and other animal products such as hoofs.

Under this new program, Tanzania wants to construct seven major abattoirs in different regions with the capacity to slaughter at least 6700 cows and 11000 goats per day.

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Business

Global Oil Prices Fall Ahead of OPEC Meeting

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As the alliance of Oil producing countries under OPEC meet on Thursday, global oil prices have reportedly fallen according to sector experts.

Details indicate that the alliance is expected to loosen the taps after prices got off to their best ever start to a year.

But it’s unclear how robustly the group will act, with the Saudi Arabian energy minister calling for producers to remain “extremely cautious.”

The market continues to face risks in the near term. China’s Unipec was re-offering cargoes of April Angolan crude amid weaker sales.

Diesel demand in India was also down versus a year earlier amid record pump prices in the country. Both point to a limit on some of the recent firmness seen within the oil market.

“Now that oil’s back at $60, there’s going to be a push to wean off of those cuts,” said Stewart Glickman, energy equity analyst at CFRA Research.

“The question is how much are they going to bring back. The biggest risk is if supply presumes we’re back to pre-pandemic demand in 2021 and that turns out not to be the case.”

Still, there has been a raft of bullish calls in recent weeks predicting the rally will continue as the producer response trails consumption, while maintenance in North Sea fields is set to further reduce supply.

There are also some signs that demand is starting to pick up. U.S. gasoline demand jumped by 1 million barrels a day last week to 8.76 million barrels a day, a level comparable to March 2020 before the pandemic, according to Descartes Labs.

“People have become very optimistic about the ability of OPEC+ to manage a return to a balanced market,” said Michael Lynch, president of Strategic Energy & Economic Research.

The market continues to “see improved demand down the road and OPEC+ not oversupplying the market as they ramp up again.”

The Organization of Petroleum Exporting Countries and its allies must decide how much output gets restored — and at what pace — with current reductions amounting to just over 7 million barrels a day, or 7% of global supply.

The 23-nation coalition will choose whether to revive a 500,000-barrel tranche in April, and in addition, whether the Saudis confirm an extra 1 million barrels they’ve taken offline will return as scheduled.

Citigroup Inc. thinks the coalition will boost output by about 500,000 barrels a day next month, with Saudi Arabia unlikely to continue its voluntary curbs.

“A higher oil-price environment, an increasingly promising demand picture by summer, and the recovering but still growing U.S. oil production outlook for 2021 should give OPEC+ the confidence to slightly increase supply,” said Louise Dickson, an analyst at consultant Rystad Energy AS.

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