Business and New Markets – BORGEN http://www.borgenmagazine.com Humanity, Politics & You Mon, 20 Aug 2018 14:30:04 +0000 en-US hourly 1 https://wordpress.org/?v=4.9.8 A Market-Based Approach to Sustainable Development in the Third World http://www.borgenmagazine.com/sustainable-development-in-the-third-world/ Thu, 26 Jul 2018 08:30:00 +0000 http://www.borgenmagazine.com/?p=128453 SEATTLE — Ending world poverty is no small task. It takes lifetimes of work from dedicated individuals, as well as a few brilliant ideas. One of these ideas came from a nonprofit organization called iDE, and it was so revolutionary that it has stood the test of time, building around it an organization that has [...]

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SEATTLE — Ending world poverty is no small task. It takes lifetimes of work from dedicated individuals, as well as a few brilliant ideas. One of these ideas came from a nonprofit organization called iDE, and it was so revolutionary that it has stood the test of time, building around it an organization that has been creating sustainable development in the third world for 35 years.

The Borgen Project spoke with Tim Prewitt, the current CEO of iDE. He talked about one of the company’s most cherished bases of operation: “One of iDE’s founding principles is the need to talk to people first before taking any action. We don’t fly in with a preconceived idea about what to do. Instead, we go through a human-centered design process to understand what consumers need… Ninety-six percent of our employees live and work in the communities they are serving, 93 percent of them are actually citizens of those countries.” Before any work is done, iDE establishes a presence on the ground and listens to the local population, as opposed to the conventional approach of anticipating and adjusting.

Recognizing the Importance of Sustainable Development in the Third World

One of iDE’s area of focus is agriculture. It seeks to help small family farms improve how they produce resources, thereby improving the conditions of their communities. Prewitt explains why: “More than 80 percent of the world’s food supply is produced by family farmers, and that percentage is even higher in the developing world. These smallholder farmers, often cultivating less than an acre of land, are the bedrocks of their communities, yet they also are some of the most vulnerable to economic stresses. Helping these small entrepreneurs succeed is key to improving the living standards of rural communities and building a future that provides nutritious food, family stability and sustainable opportunities.”

In order to improve farming in developing nations, iDE has used a market-based approach to make the technologies and practices for better agriculture more readily available to farmers in developing countries. Prewitt explains: “For farmers, we help devise solutions that enable them to buy the products and services they need to grow more, better, higher value crops. Things like drip irrigation kits, manual and solar pumps, improved seeds, advice on planting and crop rotations.” iDE’s Farm Business Advisors are on the ground to help provide farmers with the resources and know-how to integrate these technologies and practices into their agricultural production, creating sustainable development.

Expanding Beyond Agriculture to Address Interconnected Obstacles to Development

Soon after iDE’s agricultural programs became worldwide successes, another issue emerged: lack of water for irrigation. iDE discovered that access to water is one of the major inhibitors of agricultural success in the developing world. Later, the organization made an even more disturbing discovery that many families did not have clean water to drink or access to a toilet. This meant that they were frequently sickened by waterborne diarrheal diseases that spread in unsanitary environments. This discovery led to the development of iDE’s WASH program for water, sanitation and hygiene.

iDE helps discover and develop a multitude of innovative technologies for sustainable development in the third world. Prewitt discussed one in particular designed by Futurepump, a business that iDE helped create. Futurepump was able to produce its Sunflower Pump as a solar-powered irrigation system, which is now being sold in developing markets. Analogous with agricultural innovations, iDE has helped to uncover new technologies as part of its WASH program. One such is the SaTo pan, an inexpensive component that integrates a trap door installed in a latrine, requiring less water to flush while simultaneously shielding the user from the toxic substances below.

Market-Based Approaches Bridge the Gap Between Solutions and the People Who Need Them

The use of market-based solutions as agents against poverty has been confirmed by many major business publications and figures as a beneficial practice. An article in Working Knowledge, a publication by Harvard Business School, states that the problem is not with marketing strategies themselves, but who they are marketing to. Developed nations often overlook the third world as an interested party in new and innovative products or technologies. This is similar to a principal philosophy held by iDE: it is not just about coming up with solutions, it is about providing people with the tools to create lasting change of their own, thereby establishing sustainable development in the third world.

iDE has reached more than 30 million people in the developing world. They reach nearly 2.3 million people annually, and do so without compromising quality, raising the income of each household they reach by an average of $220 annually. The organization’s guarantee is that it will turn every dollar donated into $10 of annual income for people in poverty. Prewitt ends with an explanation of the impact iDE has had: “The untold story about global poverty and sanitation is that the world has made incredible progress over the last century. There are fewer people today living in poverty (in both absolute and relative numbers) than ever before… We believe that iDE’s market-based solution can be a game-changer for these people because it is both sustainable and adaptable.”

– Zach Farrin
Photo: Google

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Credit Access in Senegal Expanding to Reach Underserved Sectors http://www.borgenmagazine.com/credit-access-in-senegal/ Wed, 18 Jul 2018 14:30:38 +0000 http://www.borgenmagazine.com/?p=128306 SEATTLE — Credit access is a key tool for improving the financial stability and well-being of developing nations. Nations with easy access to credit can self-invest by building the necessary capital to get financial ventures off the ground. Nations without this kind of access are at a distinct disadvantage in the economic world, as they [...]

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SEATTLE — Credit access is a key tool for improving the financial stability and well-being of developing nations. Nations with easy access to credit can self-invest by building the necessary capital to get financial ventures off the ground. Nations without this kind of access are at a distinct disadvantage in the economic world, as they have access to one less source for startup capital.

Moreover, nations with improved financial services experience higher output and growth in their medium and small business sectors. Ensuring that developing nations have access to proper financial services and credit is important to the overall goal of addressing global poverty.

Senegal, a West African nation, has a complex relationship with credit access. Many of its most viable sectors are not receiving the requisite financial support.

Women’s Participation Key to Increasing Credit Access in Senegal

According to the U.N. Capital Development Fund, less than 10 percent of women in Senegal are members of financial institutions. That being said, women do not experience direct discrimination once they are members of financial institutions, and men do not receive preferred credit access in Senegal. Firms in Senegal, regardless of the manager’s gender, experience similar rates of improved efficiency and output after receiving startup capital loans. This makes improving women’s general credit access in Senegal a priority, rather than implementing legislation that reduces gender-based discrimination in the financial world.

Women participate less in financial decision making in most Senegalese households, which is the primary contributor towards their lower rates of participation in financial institutions. Increasing their participation and funding initiatives that promote women’s entrepreneurship are key to expanding credit access in Senegal for women. For example, a three-year financial literacy and credit access initiative funded by Energia, a global women-focused renewable energy firm, saw a 72 percent increase in renewables sold by female entrepreneurs. This initiative illustrates the high potential for economic growth that women’s credit access provides. As of right now, women are a largely unsupported potential economic group in Senegal.

Agricultural Support Needed to Grow Senegal’s Economy

Agriculture is a key component of Senegal’s growing economy. While agriculture composes only 17 percent of Senegal’s GDP, it provides employment to 77 percent of Senegal’s workforce. Much like expanding credit access in Senegal for women, providing financial support to Senegal’s agriculture sector will likely confer further momentum to Senegal’s growing economy.

Unfortunately, credit access for the agricultural sector is surprisingly limited. Only 4 percent of lending and credit usage in Senegal is directed towards agriculture. Financial institutions are hesitant to invest in the agricultural sector due to the fickle nature of producing crops. Irregular weather patterns and poor crop seasons pose a huge risk to institutions considering providing credit to the agricultural sector. Additionally, many of Senegal’s banks lack the expertise or programming to properly support local farmers with credit and loans. As Senegal’s economy expands, its farmers will begin to require more support from financial institutions in the form of credit and loans. Credit can aid farmers in purchasing improved machinery, irrigation tools, and other forms of farming-related capital.

Various institutions have taken aim at Senegal’s disproportionate credit access support to its agricultural sector. In 2017, the United States Agency for International Development (USAID) signed a $7.1 million agricultural lending and credit agreement with Locafrique, a Senegalese financial group. This agreement directed funds towards providing loans and credit access for Senegal’s farmers. USAID, as a part of this cooperative effort, promised to share collateral with Locafrique to reduce the risk of providing loans and credit to farmers. The World Bank has also been operating in Senegal, pledging $20 million in 2016 to provide credit for smallholder farmers in the region.

Small Businesses Gain More Options for Loans and Microfinancing

Due to its low-risk nature, the Senegalese commerce sector controls a majority of the nation’s credit. Even so, small commerce businesses like food carts and tailors do not benefit equally from this arrangement. Due to the high entry costs and interest rates, loans can be burdensome or inaccessible for small business owners. In turn, accumulating credit and establishing credit can be just as difficult.

Various approaches have been adopted by Senegal to address the challenge of microfinance. In Senegal’s capital, Dakar, small groups of women have begun forming microfinance co-ops. These co-ops do not require credit; instead, they require their members to buy in on a semi-annual basis. This places the buyer on a rotating list to receive a “pot”, which is a portion of all the members’ contributions. This functions as a credit-free microloan, which helps female entrepreneurs sidestep the challenge of building credit.

Alongside local approaches, large-scale banking institutions have stepped in to invest in Senegal’s micro-economy. Banking group Citi and local microfinance group Microcred Senegal signed a $2.5 million contract dedicated to microfinance in 2017. These funds were tailored specifically to focus on microfinancing and small business loans, and allowed for the microfinancing of roughly 200,000 entrepreneurs in Senegal.

Above all, even as credit access in Senegal is relatively limited, there are variety of initiatives and frameworks that aim to improve this access. With their help, Senegal’s future in credit access and microfinance is bright.

– Ian Greenwood
Photo: Flickr

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The Relationship Between Corporations and the World’s Poor http://www.borgenmagazine.com/corporations-and-the-worlds-poor/ Tue, 26 Jun 2018 14:30:19 +0000 http://www.borgenmagazine.com/?p=128025 SEATTLE — In 2017, as part of its proposals for a new budget, the Trump administration planned on cutting certain foreign relief programs by as much as a third. In response to this, many U.S.-based businesses banded together and committed to sending aid to developing countries. Among these companies was the world’s largest retailer, Walmart. [...]

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SEATTLE — In 2017, as part of its proposals for a new budget, the Trump administration planned on cutting certain foreign relief programs by as much as a third. In response to this, many U.S.-based businesses banded together and committed to sending aid to developing countries. Among these companies was the world’s largest retailer, Walmart.

But what exactly is the relationship between some of the biggest multinational companies and the world’s poorest people? Is it completely altruistic, or are these companies trying to increase their own profits by exploiting and expanding into these previously “untapped” markets? Exploring the answers to these questions can help illuminate the relationship between corporations and the world’s poor.

Foreign Direct Investment from Corporations Has Grown in the 21st Century

Currently, developing countries receive 27 percent more foreign business investment than development aid. The world’s poorest countries receive more aid from private businesses than they do from foreign governments. The amount of aid has increased ninefold since 2000.

What incentives do companies have to invest in the poorest parts of the globe? The most obvious answer is to increase their profits. For starters, investing in these countries creates a new consumer base for these businesses. If the world’s poor have more disposable, discretionary income (either from direct aid or from benefits from aid like education or job training), they can use that income to buy goods manufactured by the same company that invested in the nation in the first place. These companies can also train locals to manufacture and process the goods that these companies need for their products, much as Coca-Cola did with farmers in East Africa.

Access to trade undoubtedly helps developing countries. By aiding developing countries, many businesses are giving nations access to very large trade markets. In an example of the relationship between corporations and the world’s poor, Walmart provides the indigent with access to a wide variety of goods at relatively low prices.

The Varied Effects of Interactions Between Corporations and the World’s Poor

But is there a downside to this apparent altruism? The answer is, unfortunately, yes. While investing in these countries and trying to alleviate the global problem of poverty, many businesses end up exploiting the very people they are claiming to help. Walmart is, sadly, no exception to this. The American Prospect shared the story of a man identified as Zahir Chowdury, who manages apparel factories in Dhaka, Bangladesh, that supply Walmart with clothing. He admires Walmart for some of its business practices and standards, but worries because his costs for raw materials such as cotton are rising. His selling price has changed little over the past five years, but Walmart has yet to agree to pay more for finished products. Moreover, Walmart generally pays about 5 percent less for finished products than its competitors do.

That being said, not all businesses ignore or exploit the developing world. Tyson Foods is an example of this. As part of its Tyson Foods Fellows program, the poultry conglomerate has worked to educate developing nations on sustainable methods in raising poultry. Partnering with the charity World Vision, Tyson helps rural Tanzanians improve their poultry-based husbandry. The joint efforts have been extended to other African nations such as Rwanda and Tanzania. Through these efforts, Tyson Foods battles global hunger.

The relationship between corporations and the world’s poor is a complicated one. While many businesses send more aid to the developing world than some governments do, those businesses are also hoping to increase their own profits, often at the expense of the very people they are claiming to help. It is important to hold corporations to a high standard in their interactions with developing nations to ensure that other companies follow the standard set by Tyson Foods and that impoverished people can benefit from the companies’ actions.

– Raymond Terry

Photo: Flickr

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New Boom of Entrepreneurship in Brazil’s Favelas http://www.borgenmagazine.com/entrepreneurship-in-brazils-favelas/ Sat, 16 Jun 2018 08:30:58 +0000 http://www.borgenmagazine.com/?p=127763 SEATTLE — Entrepreneurship in Brazil’s favelas is booming and creating an incredible community of business owners. In circumstances where many are living in poverty, unique businesses have arisen, creating a greater sense of community and lifting many out of poverty. A favela is a grouping of dwellings, often on hillsides, that are usually equated with [...]

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SEATTLE — Entrepreneurship in Brazil’s favelas is booming and creating an incredible community of business owners. In circumstances where many are living in poverty, unique businesses have arisen, creating a greater sense of community and lifting many out of poverty.

A favela is a grouping of dwellings, often on hillsides, that are usually equated with slums. In Brazil, more than 11 million individuals live in favelas, making up 6 percent of Brazil’s population. One of the defining features of these favelas is the entrepreneurship that emerges.

A study done by the London School of Economics identified that entrepreneurship in Brazil’s favelas is characterized by an action-driven, high-risk approach to business that challenges the traditional economic thought on entrepreneurship. Rather than planning, the entrepreneurs are very goal-oriented. Beginning with only the resources they have at their fingertips, they develop a business and expand as resources accumulate; planning is often not part of the process.

It is a unique approach to business, but one that yields incredible results. These are four examples of successful entrepreneurship in Brazil’s favelas.

Craft Beer Bar in Complexo do Alamão Increases Tourism

Two young entrepreneurs and favela residents, Marcelo Ramos and Gabriela Romualdo, launched a craft beer brewery in Complexo do Almão, a dense favela on the north side of Rio De Janeiro. Bistrô Estação R&R has become popular with both local and foreign visitors for its wide range of artisanal beer from many locations, ranging from the favela itself to Belguim.

“I always say that people who are poor, black and favelada are born entrepreneurs,” Ramos said. “We don’t stand behind the counter waiting for customers to come in so we can make a sale. We go after customers.”

The bar has brought many tourists from all over the world to Complexo do Almão, bringing business to other entrepreneurs and prompting something of a shift of what is traditionally associated with the term favela. Ramos and Romualdo are now expanding to other cities in Brazil, hoping to grow their business.

Bank of Paraisopolis Focuses on Community Development

Entrepreneurs have recognized a need for financial services for favela residents, particularly since they often do not have access to traditional national banks in Brazil. In the south São Paulo favela of Paraisopolis, a new bank gives favela residents the opportunity to open savings, start credit accounts and take out small loans.

One of the creators, Gilson Rodrigues, says the goal is to create community development, not profit. In addition, the bank created a currency, Nova Paraisopolis, that residents can use in the favela in addition to the Brazilian real, in order to create financial stability for the residents.

Casa Brota Creates Work Space for Entrepreneurship in Brazil’s Favelas

In favelas, entrepreneurs are booming. One of these entrepreneurs, who has not released his name to the media, recognized this and created Casa Brota, a space where entrepreneurs can go to develop ideas, hold meetings and explore new ideas.

It is a bright, colorful room in Rio de Janeiro’s Complexo do Almão that encourages imagination. Many in the community use the room for their work. In addition, the space is also rented out on Airbnb for others to enjoy and immerse themselves in the favela culture.

Organic Gardens in Vidigal Provide Education and Empowerment

In one of Rio’s largest favelas, Vidigal, a trend of rooftop gardens growing organic food has emerged. Started by Vidigal favela residents Carlos Agusto Graciano and Graça dos Prazeres, the organic gardens encompass favela culture and encourage a healthier lifestyle for favela residents.

The trend began when Graciano, a local architect, was hired to build a minibus shelter in the favela. He wanted to do something different that encompassed the culture of the community. With help from biology teachers, graffiti artists and other locals, he developed the rooftop garden.

This original garden is called Organic Rooftop and Living Gallery, which the Brazilian government has now deemed a heritage site. The site acts as a gathering place to teach children about plants and biology, while adults are given cooking lessons and access to the food. The food grown there can also be sold, which promotes financial empowerment for many favela residents.

There are approximately nine million micro businesses in Brazil, which make up 27 percent of Brazil’s GDP. The entrepreneurship in Brazil’s favelas are imaginative and fulfills the needs of communities while being an important part of the national economy.

– Katherine Kirker
Photo: Flickr

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Prosperity Candle Is Foreign Aid in Action http://www.borgenmagazine.com/prosperity-candle-foreign-aid/ Fri, 15 Jun 2018 08:30:59 +0000 http://www.borgenmagazine.com/?p=127044 SEATTLE — Extreme global poverty exists in the abstract for most people in the United States, as few will ever see its direct impact. Perhaps even harder to grasp is what foreign aid can do for those in poverty. Few Americans will interact with poverty beyond U.S. borders, and fewer still will see foreign aid [...]

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SEATTLE — Extreme global poverty exists in the abstract for most people in the United States, as few will ever see its direct impact. Perhaps even harder to grasp is what foreign aid can do for those in poverty. Few Americans will interact with poverty beyond U.S. borders, and fewer still will see foreign aid spending in action. However, many will buy imported goods that only exist because of foreign aid spending. There are many companies and organizations that put these funds into action in real time.

Prosperity Candle and Prosperity Catalyst, sister organizations located in western Massachusetts, provide women with the training and materials to make candles, quilts and other accessories to bring in income for their families. The Borgen Project talked with Ted Barber and his wife Patsy at Prosperity Candle to learn more about their work creating and running these organizations.

Prosperity Candle Creates Opportunities for Women

These sister organizations are the brainchild of Ted Barber and Amber Chand, who met as aid workers in Rwanda. They were frustrated by the models employed by aid organizations. Although money went to aid and training, without further support few recipients could use their skills to advance their employment. Ted and Amber wanted to create a new model that would work with aid recipients every step of the way, from training to logistics and marketing.

To this end, they chose candles as the primary product. Candles can be made easily and need to be replaced periodically, creating an opportunity for return customers. As women are disproportionately affected by poverty and provide the highest return on aid investment, Ted and Amber chose to focus on investing in them. Women often pour their profits into strengthening their families and communities—investing in women is investing in a community.

The Prosperity Candle team originally wanted to start in Rwanda, where they had previously worked. But after they partnered with Women for Women International, they found that Iraq would be the best fit. With millions of women widowed after six years of war, there was a huge need to provide sustainable income and few organizations to meet those needs.

However, at a time when mortar fire was still striking the Green Zone in Baghdad weekly, Iraq was a dangerous place. The team could not travel there, and many women could not leave their homes. The women were taught how to craft candles over Skype and had to make candles in their homes. However, these women persevered and despite the dangerous conditions, they were making candles to sell at local markets or even to export, bringing in money to put food on the table and send their kids to school. The team had proven the concept.

Haiti and Iraq Well-Suited to Prosperity Candle Projects

In 2012, two years after the deadly earthquake in Haiti, they responded to the call of the Haitian Prime Minister, who said that Haiti needed economic opportunity in addition to foreign aid. Having proven its concept under much more dangerous conditions in Iraq, Prosperity answered the call and expanded the scale of its operations. Amber became the head of Prosperity Catalyst, which led operations in Haiti.

A safer work environment allowed the establishment of a co-operative, with the candle makers working in conjunction with beekeepers and vessel artisans. Hundreds of women have found safe work with Prosperity Catalyst, which now sells both locally and abroad.

The Borgen Project talked to Zedan, current head of Iraq operations for Prosperity Catalyst, to see how the program was advancing. Born in Iraq, he immigrated to the U.S. in 2009. Having worked on the Iraqi side of nonprofits, he was frustrated with the short-term waste of U.S. aid without long-term investment. Seeking to turn his experience on the ground into progress, Zedan found his place with Prosperity Catalyst. Prosperity turned U.S. grants of about $4 million into 270 active jobs for women, expanded operations to the Kurdish states of Erbil and Dehuk and provided job training and business skills to 1,300 additional women.

U.S.-Based Operations Support Refugee Women

These grants have provided a future not just for hundreds of women in Iraq, but for hundreds of families. With Prosperity Catalyst in charge of overseas operations, Prosperity Candle now operates as a small business helping refugee women in western Massachusetts. Originally they planned to provide women with the resources to start their own companies, but after listening to the refugee community, they found that most women had their hands full dealing with their families and the move to a new country. What they needed was not more responsibilities, but a place to work that was free from sexual and racial harassment, paid well and provided flexible schedules.

Prosperity Candle set up a shop to meet these needs. Located in Easthampton, MA, it serves as a manufacturing and shipping center for its online business. It still imports vessels and accessories from women working overseas with Prosperity Catalyst. Everything is Fair Trade and B-Corp certified for social and environmental sustainability. This is where Ted and Patsy now spend most of their days.

These wonderful projects would never have been possible without foreign aid funding, both from private and public sources. The new model Ted and Amber pioneered has given hundreds of women safe, consistent work, and provided safety to their families and communities as well.

– Nathanael Welford-Small
Photo: Flickr

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How African Coffee Market Expansion Helps the Global Economy http://www.borgenmagazine.com/how-african-coffee-market-expansion-helps-the-global-economy/ Tue, 05 Jun 2018 14:30:56 +0000 http://www.borgenmagazine.com/?p=127636 For many Americans, coffee is less of a luxury drink and more of a daily necessity. As of 2018, 64 percent of Americans consume at least one cup of coffee daily. East Africa, one of the world’s largest coffee producers, is a historically poor region that has seen recent growth in trade due to the [...]

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For many Americans, coffee is less of a luxury drink and more of a daily necessity. As of 2018, 64 percent of Americans consume at least one cup of coffee daily. East Africa, one of the world’s largest coffee producers, is a historically poor region that has seen recent growth in trade due to the growing demand for coffee and support given to its farmers from U.S. foreign aid. These factors are supporting the East African coffee market.

An Expanding Global Market

East African coffee market expansion is the result of a few recent developments. First, the global market for coffee has been expanding as more people are escaping poverty and gaining the means to afford coffee. For example, some of the fastest-growing markets for coffee include Asian countries on the rise such as Vietnam, Indonesia and India.

Due to the expanding coffee market, East African coffee producers can expand their business and look to the future with optimism.  Ugandan coffee producers are explicitly targeting these new markets. In 2017, the country reported a 36 percent growth in production and a 15 percent growth in exports. This fivefold increase in their share of the global coffee market is a direct result of new regions of the world being able to buy their product. In this way, reducing global poverty has a ripple effect that expands the global market and benefits everyone.

The Benefits of U.S. Foreign Aid

On top of the growing market, U.S. foreign aid has been helping to develop the infrastructure necessary to trade goods within Africa.  While European countries have built large infrastructure systems in East Africa to move goods all over the world, the necessities for more local trading have largely been ignored. Thirteen percent of East African trade is within the region, far below the numbers seen in Europe and Asia.

USAID is currently working with East African countries to remove legal trade barriers and make it easier for countries to trade with each other. Through its trade and investment hubs, USAID is able to generate an estimated $9 worth of trade for every $1 of public money spent. This trade helps the participating African countries greatly, but it also benefits the consumers of their products. With a wider market and more opportunity for growth, farmers can invest more in their business  This leads to more opportunities for trade with the U.S. and a higher quality product for coffee drinkers worldwide.

Diversifying the African Coffee Market

Sub-Saharan Africa is home to one of the largest deposits of oil in the world, leading to countries like Sudan building their economy around the resource. Unfortunately for many African countries, oil prices dropped dramatically towards the end of 2014, causing a sharp decline in the overall GDP of oil-rich countries. This drop has caused countries to look elsewhere economically, with agricultural businesses like coffee being a focus.

This shift in the global economic climate has led to a diversification of East African economies, marked in no small part by the booming coffee industry. Overall growth in sub-Saharan Africa rose to 2.4 percent in 2017, showing a rebound after the hit to the oil industry.  Agricultural industries such as coffee showed a spike in growth, as famous coffee producer Ethiopia’s growth rose to 8.2 percent, well above the average.

Drinking coffee may help people all over the world stay awake, but it also helps African countries expand their economies. By taking advantage of the global coffee market, many East African countries are poised to grow rapidly. With the help of USAID, these countries are making sure they improve their quality of life while they export their product all over the world. East African coffee market expansion and the diversification of African economies leads to greater stability and more trade for all countries that enjoy their coffee.

– Jonathon Ayers
Photo: Flickr

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Reinvesting in Locals: The Benefits of Pro-Poor Tourism http://www.borgenmagazine.com/reinvesting-in-locals-the-benefits-of-pro-poor-tourism/ Wed, 16 May 2018 08:30:09 +0000 http://www.borgenmagazine.com/?p=126814 SEATTLE — Tourism accounts for one of every 12 jobs worldwide, and is broadly seen as a viable path to sustainable growth in least developed countries (LDCs). In many LDCs, tourism spending is both the primary driver of economic growth and a source for foreign exchange. But much of the tourism investments fail to reach, [...]

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SEATTLE — Tourism accounts for one of every 12 jobs worldwide, and is broadly seen as a viable path to sustainable growth in least developed countries (LDCs). In many LDCs, tourism spending is both the primary driver of economic growth and a source for foreign exchange. But much of the tourism investments fail to reach, let alone benefit, the poor local communities where the money is spent. However, some novel approaches to tourism, which engage and provide earnings for poor local residents, are succeeding in Africa and Southeast Asia.

These poverty reduction efforts, known as “pro-poor tourism,” are effectively channeling tourism funds towards the poor—and with $2 trillion a year in tourism earnings worldwide, there are ample opportunities for reinvesting these earnings in local communities. A variety of LDCs and developing countries, such as Laos, Uganda and Kenya, are realizing the formerly unknown benefits of pro-poor tourism.

Ecotourism in Laos

Home to tigers, clouded leopards, gibbons and more than 800 species of birds, Laos is arguably the most ecologically dense and diverse country on the Indochina Peninsula. Unsurprisingly, pro-poor tourism programs in Laos tend to focus on sustainable ecotourism.

Ecotourism Laos, under the auspices of the Asian Development Bank, is creating opportunities for local villagers to directly contribute to, and benefit from, fee-generating tourism activities. In Laos, an interactive hiking experience with locally trained guides is one promising example of reinvestment in the local economy and populace.

Utilizing local guides’ extensive knowledge of the plants, wildlife and culture of the region, Ecotourism Laos provides one to three-day treks for tourists interested in, among other things, hidden waterfalls and caves, bird watching and visiting ancient ruins. A sizable portion of the fees goes directly to guides and villagers living in the area. These windfalls are reinvested into ongoing guide training and trail and facility maintenance.

Uganda’s Byoona Amagara Project

Sharing a border with Kenya, Uganda is a popular destination for travelers due to the numerous game reserves and beautiful national parks and lakes. In 2016, travel and tourism generated more than 6 percent of all economic activity in Uganda, while also creating more than 500,000 jobs. Linking this tourism spending to investment in vital services for locals is the aim of the Byoona Amagara Project.

Byoona Amagara is a nonprofit organization that puts 100 percent of its proceeds towards various pro-poor programs. Some of the project’s core initiatives include healthcare treatment, rural education and literacy, organic agriculture and indigenous forestry.

There are other noteworthy initiatives the Byoona Amagara Project promotes that are too numerous to mention here. One common element shared by all is the focus on sustainable community development. Whether it is building a new library and multimedia center on nearby Itambira Island or supporting cross-cultural exchange, the program is providing an active role for the poor local community in the profitable tourism industry in Uganda.

Kenya’s Sustainable Safaris

The benefits of pro-poor tourism are not the sole domain of LDCs. Take Uganda’s more developed eastern neighbor, for example. Kenya, having recently graduated from LDC status, serves as an example for other developing countries in Africa to follow.

The African Pro-Poor Tourism Development Centre (APTDC) is focusing on sustainable safaris to address some of the shortcomings of traditional tourism. Reinvesting the profits from tourism back into the regional economy is the overall goal of the APTDC.

Safaris create an opportunity to enjoy Kenya’s natural beauty and wildlife, while at the same time contributing to improving the locals’ standard of living. A simple 10 percent markup on safaris is put aside as donations to support economic development projects in the local community. More specifically, the slight price hike helps pay for access to fundamental resources, such as water and education, for nearby residents.

Engaging travelers with the livelihood of locals is creating a more interactive and rewarding form of travel for both the tourist and the rural Kenyan community. Although simple, this approach to sustainable safaris in Kenya is a great example of the benefits of pro-poor tourism.

The Benefits of Pro-Poor Tourism for Tomorrow

Like many poverty reduction efforts, there is no single blueprint for pro-poor tourism. However, the examples above of pro-poor tourism initiatives, from Africa to Southeast Asia, show a recurring theme in allowing room for local involvement in the tourism industry.

Providing interaction between tourists and local communities paves the way for a more sustainable development of the tourism industry in that country. Being knowledgeable about the benefits of pro-poor tourism on local villagers should spur greater growth of this unique method of poverty reduction. Countries hoping to graduate from LDC status might find that reinvesting tourism dollars at home today could go a long way towards helping achieve their development goals in the future.

– Nathan Ghelli

Photo: Flickr

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Recent Economic Growth in El Salvador http://www.borgenmagazine.com/economic-growth-in-el-salvador/ Fri, 16 Mar 2018 08:30:07 +0000 http://www.borgenmagazine.com/?p=125765 SEATTLE — Over the past few years, El Salvador has had the slowest growing economy in Central America. However, recent pro-business reforms and strong showings from the agricultural and industrial sectors indicate the potential strengthening of the economy. Doing Business ranked El Salvador as one of the world’s most improved economies of 2016-2017. Though the [...]

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SEATTLE — Over the past few years, El Salvador has had the slowest growing economy in Central America. However, recent pro-business reforms and strong showings from the agricultural and industrial sectors indicate the potential strengthening of the economy. Doing Business ranked El Salvador as one of the world’s most improved economies of 2016-2017. Though the country still faces numerous social and fiscal obstacles, economic conditions appear to be improving.

El Salvador’s Economy

Economic growth in El Salvador averaged only 1.9 percent between 2010 and 2016. Cumbersome commercial regulations, inadequate levels of international trade, little foreign direct investment and social instability driven by violent crime have kept growth low.

Sluggish economic growth in El Salvador has contributed to high domestic poverty levels. Approximately 41 percent of El Salvadoran households lived below the poverty line in 2015. Of these, 10 percent lived in extreme poverty.

However, in recent years El Salvador has experienced a small economic upturn. In 2016, economic growth reached 2.4 percent, though much of this was due to external factors, specifically decreased oil imports and increased remittances.

So far this year, El Salvador’s agricultural and industrial sectors have performed well. Exports have increased relative to last year.

Additionally, 2018 will see higher levels of government spending and fixed investment. On January 5, the Legislative Assembly approved the 2018 fiscal budget with an increase in government expenditures. However, one-fifth of expenditures will be used on debt repayment and not investments in economic growth.

Doing Business Evaluates El Salvador’s Business Regulations

The World Bank’s annual Doing Business report analyzes qualitative indicators of the ease of doing business in 190 different countries. Doing Business monitors 11 different indicators: starting a business, dealing with construction permits, accessing electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labor market regulation.

Doing Business ranked El Salvador as one of the most improved economies of 2016-2017.

Recent reforms in El Salvador have improved business conditions in four of the 11 categories monitored by Doing Business: trading across borders, accessing electricity, paying taxes and dealing with construction permits.

Trade across borders was made easier with an increase in customs officials at the Anguiatú land border. The reliability of electricity was improved with new software allowing for better outage and maintenance management. Ease of filing taxes increased with an online filing platform. Additionally, the risk-based audit selection system will focus more on large companies. Finally, a new online platform can process preliminary construction fees and experience requirements were introduced for construction inspectors.

These positive reforms follow anti-business regulations enforced in prior years. The Doing Business 2016 report noted that an extra border inspection at the Anguiatú land border made trade across borders more difficult. The year before, access to credit became more difficult because the coverage of the credit bureau was reduced.

USAID Programs Target Economic Growth in El Salvador

Continued focus on positive business reforms could spur additional economic growth in El Salvador. Organizations like the United States Agency for International Development (USAID) help promote good business conditions in El Salvador.

USAID fiscal policy programs target some of the economic indicators measured by Doing Business. For instance, USAID has helped the El Salvadoran government streamline tax collection in order to increase the country’s revenues from taxes.

USAID also advocates for free trade and encourages increased sustainable production of key exports like cacao. El Salvador’s economy relies on exports of coffee, sugar, textiles, gold, ethanol, chemicals and electricity. The combined value of imports and exports into the country is 64 percent of its GDP.

Targeted initiatives that encourage economic growth in El Salvador, like those introduced by USAID, could help maintain the promising performance from the past few years.

– Katherine Parks

Photo: Flickr

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Credit Access in Syria a Problem on the Periphery http://www.borgenmagazine.com/credit-access-in-syria/ Wed, 07 Mar 2018 15:30:22 +0000 http://www.borgenmagazine.com/?p=125482 SEATTLE — The early portion of 2011 marked the beginning of a time period commonly referred to as the “Arab Spring” by Western societies. In a general sense, this time can be characterized as the beginning of a significant decline in the political and social stability of several Middle Eastern countries, and its consequences have arguably [...]

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SEATTLE — The early portion of 2011 marked the beginning of a time period commonly referred to as the “Arab Spring” by Western societies. In a general sense, this time can be characterized as the beginning of a significant decline in the political and social stability of several Middle Eastern countries, and its consequences have arguably extended far beyond what anyone could have predicted at the time.

The Arab Spring is a reference to anti-government, pro-democratic protests that took place throughout the Middle East, from Tunisia to Saudi Arabia. Nowhere, however, has seen worse long-lasting effects from this than Syria, a country that has been engulfed in a bloody civil war since then. While this conflict has produced a plethora of travesties, one problem significantly exacerbated by it is the increasingly severe lack of credit access in Syria.

The World Bank defines credit access as the provision of a loan from financial institutions (private and public) to entities such as businesses, local governments or private citizens. For inhabitants of developed countries, the notion of lacking adequate access to credit can be difficult to grasp, but if it became reality, it would render most individuals in those countries unable to use the basic functions of credit cards, acquiring a loan to purchase a vehicle or taking out a mortgage to purchase a home.

Causes of Poor Credit Acces in Syria

The overarching problem of credit access in Syria is multifaceted and would require a diligently planned, likely internationally sanctioned and comprehensive approach to solve, but can be summarized as the decimation of several key components of any well-functioning economy.

As of 2017, Syria had an estimated 50 percent unemployment rate, a 25.5 percent inflation rate, public debt accounting for 58.4 percent of the GDP, a budget deficit of 8.7 percent of the GDP and in 2014, approximately 82.5 percent of the population were estimated to be living below the poverty line. All of these factors have tremendous impacts on credit access and availability.

Another factor inhibiting efficient credit access in Syria is its disproportionately low stock of domestic credit. According to the CIA World Factbook, a country’s stock of domestic credit comes from a percentage of its GDP and can be understood as the total amount of credit that available to them in the form of that country’s currency. In essence, it is the total amount of credit that is available to banks to make loans with.

As of December 2017, Syria’s stock of domestic credit was estimated to be $6.816 billion, making it among the lowest in the world. In comparison, China’s stock of domestic credit was estimated to be $23.02 trillion in 2016, while the U.S. had a stock of $20.24 trillion.

The most likely reason for this is because, similar to many other developing countries, Syria lacks an effective taxation system, with only 4.2 percent of government revenue coming from taxes. As of 2017, Syria was ranked 218 out of 220 countries in taxation as a portion of GDP, above only Nigeria and Somalia. According to a report by The Guardian, the percentage of the GDP that is derived from taxes in most developing countries falls between 10 to 15 percent, while in developed countries this rises to an average of 35 percent.

Lending Rates Inhibit Credit Access in Syria

Aside from the ongoing civil war, one other major obstacle facing the development of quality credit access in Syria is the fact that it has the fifth highest commercial bank prime lending rate in the world, at 33.3 percent. The only countries ranking above them are the Democratic Republic of the Congo, Malawi, Brazil and Madagascar.

The commercial bank prime lending rate is defined as the average annual interest rates charged by commercial banks within the country, yet it is important to note that this rate is applicable only to those who are deemed the most worthy of receiving credit and have the financial assets to prove that. As one can imagine, there are very few people in the country currently capable of handling such a high interest rate. Comparatively, the commercial bank prime lending rates in the U.S. and Canada are 4.3 percent and 2.9 percent respectively.

Signs of Progress

Though looking at why certain factors have led to credit access in Syria being ranked in the 18th percentile of countries across the world can seem like a grim task, there does appear to be some gradual improvement that lends reason for optimism. For example, from December 2016 to December 2017, Syria’s stock of narrow money increased by $1.3 billion and its stock of broad money by $1.17 billion. During this time. the inflation rate also fell from 43.9 percent to 25.5 percent and the central bank discount rate fell from 5 percent to .75 percent.

Though it may not often be taken into consideration by someone it does not directly affect, if the inability to access credit became reality in developed countries, it is likely that the continued functioning of society as it is currently would cease to exist. Though such a claim could be perceived as overreaching or exaggerated, it is important to remember that as of 2017, the total amount debt that was offered in the form of credit for just mortgages on property in the U.S. reached $9.9 trillion, reflecting the degree of reliance developed countries have on credit accessibility.

Having considered that, without the ability to lend and borrow money, the ways in which individuals in developed nations live their lives would be fundamentally altered. Not only would it affect individuals and businesses, it would also affect the economy as a whole in a way far more damaging: inhibiting or destroying the possibility of private sector growth, and Syria serves as one of the most demonstrative case studies for this idea.

– Hunter McFerrin

Photo: Flickr

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Regional Trade in Afghanistan Could Alleviate Poverty http://www.borgenmagazine.com/trade-in-afghanistan-poverty-alleviation/ Tue, 21 Nov 2017 09:30:03 +0000 http://www.borgenmagazine.com/?p=120483 SEATTLE — As a country that has been plagued by war since the 1970s, trade in Afghanistan has been impacted by the socio, political and economic instability in the country. With the GDP showing a great decline in the past 20 years, tapping into the country’s trade potential can go a long way in sustainably [...]

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SEATTLE — As a country that has been plagued by war since the 1970s, trade in Afghanistan has been impacted by the socio, political and economic instability in the country. With the GDP showing a great decline in the past 20 years, tapping into the country’s trade potential can go a long way in sustainably alleviating poverty in the future and attracting foreign direct investment to the country.

Afghanistan is one of the MENAP countries (Middle East, North Africa, Afghanistan and Pakistan) being impacted by the low global oil prices, with the growth in oil exports only averaging about 1.7 percent.

Moreover, it is essential to crack down on the drug trade in Afghanistan so that funding for terrorist groups in the country is cut. Unfortunately, opium is a very commonly distributed drug in the country.

Underlying weaknesses in infrastructure and immobilities in labor and lack of capital and other resources in the country are adversely affecting the state of trade in Afghanistan. Afghanistan was only the 104th largest export economy in the world in the year 2015. The primary exports of the country include fruits, precious stones, vegetables and resins.

The aggregate revenue currently generated by Afghan trade with other countries amounts to $5 billion. This has impacted the terms of trade of the country as they majorly rely on other trade partners for vital raw materials and other essential resources.

The country majorly relies on the export of primary products like natural resources and agricultural goods, making it difficult for them to get a fair share of the value of their export goods. Beneficiation is vital to galvanize trade in Afghanistan so that export goods and services become more competitive with more value added.

Yet, despite the deficits and economic uncertainty, Afghanistan is strategically at the epicenter of a large trading hub and fast-growth economies as it is bordered by countries like Iran and India. The United States, the United Arab Emirates, Turkey and Pakistan are also very valuable trade allies for Afghanistan.

Globally, countries like India are expanding and opening up more outlets for trade in the region. India recently introduced a new trade route with Iran and sent its first wheat shipment to Afghanistan via the Chabahar port. As part of the shipment, India is supplying more than 1.1 million tons in the form of grants.

India has already committed more than $500 million toward edifying infrastructure and communication links by developing road and rail connections in the region. Not only is India a primary export destination for Afghanistan, but it is also ameliorating the state of infrastructure in the country. Afghanistan, in turn, exported nearly 40 tons of dried and fresh fruits to India this year alone.

Improving diplomatic and trade relations with other countries is beneficial in order to attract investment. Consequently, investment between Russia and Afghanistan is currently valued at $200 million.

It is vital to bolster trade in Afghanistan to boost employment and specialization. Economic, social and structural reforms aiming to improve education and training is therefore very important to prepare the nation for further developments.

To conclude, galvanizing regional trade in Afghanistan will help it develop better and normalized trade relations with other neighboring countries which could benefit trade, commerce and connectivity for the country in the long run.

– Shivani Ekkanath

Photo: Flickr

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