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Is Cash the Enemy of the Poor?

This post originally appeared on the Better than Cash blog

In wealthy countries, most people conduct their financial activity in digital form; money and value is stored virtually and transferred instantaneously with a touch of a button, and the system provides an easy access to a wide-range of financial services. In contrast, most poor households operate almost entirely in the informal economy, using cash, physical assets (e.g. jewelry and livestock), or informal institutions to meet their financial needs. This creates two fundamental inequities in the financial lives of poor households. First, it is riskier and costlier for them to send, store, and receive money, and when large problems arise, such as a major illness in the family, the tools often break down completely, leaving households exposed. Second, it marginalizes poor households from the formal economy because it makes it costly for financial service providers and other institutions (e.g. governments, utility companies) to contract with them.

According to the Global Findex survey, of the 2.5 billion people who live on less than $2 per day, three quarters do not have a bank account and most of these also lack credit and insurance.   Financial exclusion is the most severe among women and rural residents: globally, 47 percent of women (vs. 55 percent for men) and 22 percent of rural residents in low income economies have a bank account (vs. 35 percent in urban areas).

Although, poor households lead very active financial lives, the market has failed to serve the poor with formal financial services because building and maintaining the bank branches, ATMs, POS terminals necessary to facilitate access to the formal system is expensive and often not profitable in poor areas.

The best way to reduce the costs of reaching poor people with financial services is to help shift the majority of their cash-based transactions into digital form which will strip the majority of costs out of the system and enable robust commercial efforts.

Communication technology now offers innovative new ways to make payments through mobile phones, smart cards and other electronic means. In fact, instruments like mobile money have the ability to reach poor and rural communities faster than any traditional bank. Since its launch in 2009, the Pakistani mobile money deployment EasyPaisa has quickly penetrated lower income segments with 40 percent of active users living on less that 2.5$ a day.

Today across the world, government institutions, multinational companies and donor agencies make billions of dollars of cash payments to poor households every month.  These payments include salaries, payments to vendors, pensions, social welfare stipends, cash-for-work programs, and emergency relief payments. Not only are cash based payments costly and inefficient, they represent a missed opportunity to bring poor people into the formal, digital financial system.

The Better than Cash Alliance is a partnership of governments, NGOs and businesses that believe there is real value in creating an electronic financial services infrastructure that the world’s poor can use. By joining the Alliance, these organizations agree to convert their payments into digital form, strengthening the digital financial infrastructure and fostering the poor’s access to the formal financial system while benefiting from a wide-range of benefits.

Once poor people are connected to institutions like utility companies, enterprises & governments through an e-payment system, transactions can be made instantly. Social welfare payments could reach households directly without some (or all) of that payment being diverted to unintended beneficiaries. Electricity bills could be paid with a push of a few buttons instead of traveling to an often distant office with a handful of cash and waiting in a long queue.

Read the full article at Better Than Cash.

Designing for Women: The Mobile Challenge

Imagine if you picked up a smartphone and didn’t know how to use it. What must it be like to have such a powerful device in the palm of your hand and not be able to utilize it? For many technically illiterate women in the developing world, navigating a smartphone or even a more basic feature phone is a real challenge.

Based on research performed in Egypt, India, Papua New Guinea and Uganda, as part of the GSMA mWomen Program, we know that on average, resource-poor women are 22% less likely to want a mobile phone because they would not know how to use it.  Yet we also know from other GSMA research that mobile phones afford women critical entrepreneurial opportunities, security, and a greater sense of family connection.

Mobile phone use in the developing world is exploding, yet women are at risk of being left behind, missing out on opportunities and services from education to healthcare.  Making the user experience easier would open up a multitude of possibilities. So what if there was a more intuitive way of navigating your phone?

The GSMA mWomen Program, as part of USAID’s mWomen Global Development Alliance, has set out to do just that by launching the GSMA mWomen Design Challenge: Redefining the User Experience at the third annual Social Good Summit in New York. Through submissions from the global design and developer community, the Design Challenge seeks to increase access to life enhancing mobile services so that regardless of someone’s skill level, they can pick up a phone and maximize its potential.

At the Social Good Summit, USAID, GSMA, AusAID, Qtel Group and the design firm Huge, shared possible approaches to solving this issue, by making the mobile user interface and experience more intuitive.  Mobile phones are a real game changer when it comes to tackling global challenges around the world but if the design does not change, hundreds of millions of women risk being left out in this next mobile revolution.  That is a risk we cannot afford to take.

USAID Book Club: A Farewell to Alms

Fall semester @USAID banner image

As part of USAID’s Fall Semester, we will host an online book club for our readers this fall. The Impact Blog will post suggestions from our senior experts at USAID to suggest a book on important issues in international development.  We’ll provide you and your book club with the reading suggestions and discussion questions, and you tell us what you think! Our fall reading list will  explore solutions to the most pressing global challenges in international development—mobile solutions, poverty, hunger, health, economic growth, and agriculture.

This week’s choice comes from: USAID Administrator Rajiv Shah

Dr. Rajiv Shah serves as the 16th Administrator of USAID and leads the efforts of more than 8,000 professionals in 80 missions around the world.

Dr. Rajiv Shah serves as the 16th Administrator of USAID and leads the efforts of more than 8,000 professionals in 80 missions around the world.

Book: A Farewell to Alms: A Brief Economic History of the World, by Gregory Clark

Synopsis: The source of human progress has long been a subject of debate. What makes rich countries rich, and poor countries poor? In the this book,  University of California, Davis, Economist Gregory Clark offers a provocative take on the age-old question, arguing that it was culture—rather than geography, natural resources or centuries of exploitation—that left some parts of the globe behind.

According to Clark, relative stability and effective workforces enabled certain societies to take better advantage of the Industrial Revolution’s new technologies and opportunities. Those countries with lax systems or undisciplined workers lost ground, and stayed there.

Clark’s book is skeptical of whether the poorest parts of the world will ever achieve real progress. For development professionals, it offers up a challenge to the belief that outside intervention can help bridge the vast economic divide between rich and poor.

Review:  This book impacted me because it shows how for hundreds, or even thousands, of years basic economic progress was largely stagnant. You didn’t have rapid compound increases in living standards until the Industrial Revolution when some countries and some societies got on a pathway towards growth – towards better health, longer life expectancy, higher income per person and more investment in education. Others remained on a slower-moving pathway.

That great divergence, and the study of it, is at the core of development. It is that divergence that we try to learn from and correct for. We define success in development as helping communities and countries get on that pathway towards improved health and education, and greater wealth creation.

I didn’t choose this book because I think it is the definitive story on development, but rather because I share its focus on core economic growth as the driver of divergence.

I disagree where Clark concludes that some societies failed to take advantage of the availability of modern technology because their cultures were antagonistic to development. With the right conditions in place, you can unlock a formidable work ethic from a range of different cultures and communities. The last 50 years have shown us that. By investing in local capacity and local institutions, we can leave a legacy of economic infrastructure, strong and capable leadership, and transparent, effective public and private sector institutions.

USAID’s partnerships in Latin America helped country after country develop strong institutions. The same can be said for South Korea. Unfortunately, there have been examples where aid and assistance have been provided in a manner that was not as sensitive to building lasting local capacity and institutions. This is true for all partners, not just our Agency. That’s why we’ve launched a program called USAID Forward, to refocus on working in a way that will create durable and sustained progress.

Administrator Shah is on Twitter at @rajshah. You  can also “Ask the Administrator” your questions on Crowdhall

Discussion Questions

1. Do you agree with Clark that some societies failed to take advantage of the availability of modern technology because their cultures were antagonistic to development?

2. The Nobel prize-winning economist Robert Solow has said Clark does not take into account how institutional factors, such as cronyism, inequitable taxation and ineffectual government cripple development. What role do you think these institutional factors play?

3. Clark challenges how effective outside intervention can be in helping poor nations progress. Do you agree?

4. Regardless of why some nations have fallen behind, how do you think they can bridge that gap today?

5. Has your world view changed after reading this book and how?

Get Involved: Use the comments section of this blog post to share your answers, or tweet them to us at #fallsemester

New Issue of Frontlines: Youth and Technology

frontlines banner graphic

Read the latest edition of USAID’s FrontLines to learn more about how the Agency is engaging youth around the world and how it is embracing mobile technology. Some highlights:

  • Looking to young minds for new ideas to old development challenges is producing fresh solutions. Just ask the young woman who is helping save newborns in Malawi with a jerry-rigged aquarium pump.
  • They’re opening small businesses, building environmental awareness and learning the ins and outs of politics from the village council to Parliament. Through youth-led community groups, more than 700,000 of Kenya’s young people are preparing to become their country’s next generation of savvy citizens and influential leaders.
  • SaysChris Locke: “The last two or three billion people in the world to access the Internet will do it via mobile phone.” Locke is the managing director of GSMA Development Fund, the development arm of the world’s largest mobile industry association. Read what else he has to say about the evolution of mobile technology in the developing world.
  • Before mobile banking came to rural areas of the Philippines, customers might take as long as six hours to journey to a bank branch to conduct business. Now it takes minutes and only their fingers do the traveling.

If you want an e-mail reminder in your inbox when the latest issue of FrontLines has been posted online, subscribe here.

The Power of Storytelling

Sheryl Wu Dunn

Sheryl WuDunn. Photo: Half the Sky

Mikaela Beardsley, Executive Producer, Half the Sky Movement & Sheryl WuDunn, Co-Author, “Half the Sky: Turning Oppression into Opportunity for Women Worldwide”

Storytelling is a powerful tool.  It can raise awareness, build compassion, encourage thinking, and motivate action.  That was the vision behind Half the Sky: Turning Oppression into Opportunity, the book I wrote with my husband, Nicholas Kristof. Our goal was to bring these incredibly personal and powerful stories of women around the world to a mainstream audience.   When Half the Sky was published, Nick and I were floored by the response. The stories resonated with far more people than we imagined.

The U.S. Agency for International Development (USAID) knows that powerful narratives can set the stage for positive action.  From the general public to aid experts in the field, the stories and struggles in the developing play a big role in compelling the general public and aid experts to find solutions to global challenges. Telling these stories is not only an expression of our American values but demonstrates how working together to solve these challenges benefits all of us.

And yet telling a powerful story can be challenging.  Different audiences absorb information differently.  Some need an emotional connection, others respond to hard data and statistics so identifying your audience and finding the right platform is critical.  From films, books, and newspapers to exhibits, mobile gaming, and social media, storytellers are venturing into new and exciting platforms, and adapting the material to resonate with diverse audiences.

That’s why Nick and I didn’t want to limit these incredibly personal and powerful narratives to just print.  We wanted these stories to spread even farther. That’s how Half the Sky turned into multimedia initiative focused on presenting stories through multiple platforms.  Because of this, I’m proud to say that Half the Sky will not only be a documentary on PBS in early October and a Facebook game in November but, with USAID and our NGO partners, we also produced 18 short educational videos and 3 mobile games.

The short educational videos, produced by Show of Force, were filmed in India, Kenya, Somaliland, and Liberia and cover a wide range issues like family planning, health, girl’s education, sex trafficking, women’s economic empowerment, and domestic violence. Focused on community-level change, these videos allow experts and activists to raise awareness and encourage action on critical issues.  Check them out and let us know what you think!

A key audience for Half the Sky project was individuals, families, and communities in the developing world.  We wanted to teach children in the developing world about the benefits of deworming pills – a cost-effective medication that treats fatigue and helps keep kids in school. While many of the people we wanted to reach don’t have access to television, theaters, or the Internet, most have access to a mobile phone so we decided to reach out to them through mobile games, to engage kids with a familiar form of entertainment while simultaneously teaching them healthy practices.  Developed through C-Change, USAID, Show of Force, and Games for Change, these games will launch this October for use in East Africa and India.

Great storytelling relies on powerful characters and feasible solutions, but more importantly demands an understanding of the medium, audience, and objectives. The question, perhaps, is not only how to inspire action through one story, but also how to adapt a story across platforms to engage the greatest number of people.

U.S. Support for Yemen’s Transition

This post originally appeared on The White House Blog

Dr. Rajiv Shah serves as the 16th Administrator of USAID and leads the efforts of more than 8,000 professionals in 80 missions around the world.

Dr. Rajiv Shah serves as the 16th Administrator of USAID and leads the efforts of more than 8,000 professionals in 80 missions around the world.

At the Yemen Donor Conference in Riyadh, which I attended on September 4, I was impressed by how far Yemen has come in the past year. But I think what really made this conference stand out is that we focused on what happens after the conference, and how key “quick impact” programs will benefit from the commitments made and deliver the greatest impact to the most critical challenges facing Yemen.

Last year, Yemen negotiated a political solution that allowed the country to pull itself from the brink of conflict and begin implementing long-overdue political, military, and economic reforms. Yet Yemen is embarking on this promising path under the shadow of significant challenges, including nearly 40 percent unemployment and a dire humanitarian crisis in which ten million people – nearly half of Yemen’s population – go to bed hungry every night. And, Sana’a, Yemen’s capital, could potentially run out of water in a decade.

The Yemeni government’s “Transitional Program for Stabilization and Development” – which was presented at the conference – describes plans to rebuild the economy, advance the political transition, enhance security and the rule of law, and significantly improve the welfare of the Yemeni population. At the conference, Yemen agreed to a “Mutual Accountability Framework,” which outlines the relationship between Yemeni goals to restore political, security and economic stability and the supporting role of donor countries.

Administrator Shah, USAID Yemen Mission Director Robert Wilson, and U.S. Embassy Riyadh Spokesman Mofid Deak meet with U.S. and international press. Photo Credit: U.S. Embassy Riyadh

Yemen cannot carry out its ambitious agenda without significant international support. The Donor Conference, hosted in Riyadh by Saudi Arabia, the World Bank and the Yemeni government, was critical to rallying this support and strengthening donor coordination. During the conference, partner countries pledged nearly 6 billion dollars and I had the opportunity to emphasize the strong commitment of the United States as a friend and partner to Yemen during this incredibly important time.

Supporting Yemen’s transition is a priority for the United States. To do our part, the United States is providing both immediate assistance in response to the humanitarian crisis and longer-term support to help lay the foundation for a stable, prosperous and democratic Yemen. This year alone, the United States is providing $346 million in security, humanitarian, and development assistance to Yemen – more than double what we provided last year.

More than half of what the United States is providing this year, $185 million, is for political transition, humanitarian, and development assistance. Of the $185 million, $117 million is for humanitarian relief, making the United States the single largest provider of humanitarian support to Yemen. The UN estimates that Yemen will need $585 million to get through this humanitarian crisis, but the UN humanitarian appeal is less than 50 percent funded. We urge all nations to generously give to the UN’s appeal for Yemen.

When I visited Yemen in June, I was able to see first-hand the critical impact of our development and humanitarians efforts. To address hunger, our aid has helped feed 415,000 Yemeni people and trained nearly 5,000 famers in good crop production and livestock management practices so they don’t have to rely on food aid. I visited Zinjibar in southern Yemen, where our partnerships are helping rehabilitate schools, clinics, and other public buildings, as well as supporting the recovery of vital public services,
including power and water. Our work also allowed 780,000 Yemenis to benefit from quality medical services at Red Crescent facilities that we refurbished.

Ultimately, we know that solutions to the humanitarian crisis and the nation’s pressing economic and security challenges can only be realized through the development of effective, responsive, and accountable institutions and an inclusive and transparent political system.

The foundations for such institutions and systems will be laid through Yemen’s upcoming National Dialogue Conference. To help prepare Yemeni civil society for participation in the Dialogue, the U.S. Agency for International Development has launched a training academy for 165 civil society organizations, and we have trained nearly 2000 youth in civic engagement.

It is an exciting moment for Yemen, as the Yemeni people come together to resolve some of the most difficult problems that have held their country back, write a new constitution, and build a new future.

Real challenges remain, however, not least of which includes responding to the pressing needs of millions of vulnerable people so that Yemen can successfully undertake the transition it has begun.

But as I saw during my visit to Yemen in June – and as made clear by the Donor Conference– there is real reason to be hopeful as citizens across Yemen take up the call to chart their own nation’s development.

The United States is a proud partner in those efforts.

Video of the Week: Reading in Peru

According to experts, in the first grade children must learn how to read and understand what they read. In the second  grade, they must improve their fluency, vocabulary, and comprehension. With more fluency there is greater chance for children to understand what they have read. That’s why in countries that are are more advanced in education, there are set reading standards for children. In Latin America, children who finish second grade are supposed to read 60 words a minute. Watch this video to learn more about basic reading standards in Peru, and how young Peruvian children learn how to read.

Welcoming to USAID: White House Presidential Innovation Fellows

“Our Agency must serve as a platform that connects the world’s biggest development challenges to development problems solvers – all around the world. We recognize that talent is everywhere, but opportunity is not. – USAID Administrator Raj Shah, August 1, 2012

Credit: Justin Grimes
This Thursday, the White House launched The Presidential Innovation Fellows Program (PIF), which pairs top innovators from the private sector, non-profits and academia with top innovators in government to collaborate on solutions that aim to deliver significant results in six months.   USAID is proud to be part of two pillars of the Presidential Innovation Fellows Program: the 20% Initiative, and the Open Data Initiative.

The Mobile Solutions Division at USAID is excited to welcome fellow Karl Mehta for the 20% Initiative.  A Silicon Valley based entrepreneur, engineer and inventor, he has built and sold three businesses, and has worked in the intersection of media, technology and payments for years.

The 20% Initiative will create a system that supports foreign policy, development assistance, government operations or commercial activities to seamlessly move from making cash payments to electronic payments, including mobile money. The Initiative aims build greater transparency and significantly reduce fraud, and to provide cost savings for both institutions and end beneficiaries of programs through a 20% transition from cash to electronic payments by 2016. USAID is committed to supporting the integration of electronic and mobile payments in our programs and operations and starting within USAID the goal is to include as many U.S. government agencies operating overseas as possible.

The Office of Innovation and Development Alliances (IDEA) is thrilled to welcome open data fellow Nathaniel Manning. Coming from Ushahidi, a non-profit tech company specializing in free and open source software for information collection, visualization, and interactive mapping, Nathaniel has been leading the business development strategy on making the organization market sustainable.

The Open Data Initiative is part of a greater effort for the U.S. Government to serve as a platform for information and engagement to foment innovation and entrepreneurship.   The term “Open Data” can include making information public, transferring information into machine-readable format so that it can be sorted and analyzed on a large scale, or cleaning up data that could be available but needs back end work. Open data has a direct benefit to individuals abroad and domestic and stimulates a rising tide of entrepreneurship, whether helping farmers share information on best practices, tracking trends in global weather patterns, monitoring elections for fraud, finding the right health care resources, or keeping families safe by knowing which products have been recalled.

The Open Data Initiative includes USAID’s Food Security Open Data Challenge. Food security experts, data scientists, technologists, and other skilled volunteers are convening to use public data sets to build innovative solutions in the field of food security and agriculture. Join us in unlocking data so people everywhere can effectively eliminate hunger for their families and their communities. All are welcome to participate!

Sign up for email updates and follow @ProjectTwenty and @ProjectOpenData.

Video: Working for Equality for People with Disabilities in Haiti

The January 2010 earthquake in Haiti increased the challenge of supporting people with disabilities.  Not only were there more people with disabilities, many local disabled peoples organizations were severely impacted.  However, the earthquake also brought increased international awareness to the many barriers to inclusion that existed prior to the earthquake.

Immediately following the earthquake, USAID funded a spinal cord injury center. Recognizing the earthquake as an opportunity to make long-term change for people with disabilities during the reconstruction process, we recently made four new awards to address four different aspects of inclusion and provision of better and more accessible care.


Preventing and Responding to Gender-based Violence Globally

In Angola, where I was Ambassador from 1995-1998, I witnessed firsthand the broad effects gender-based violence can have on a society.  On the heels of the civil war there, demobilized soldiers were returning to their villages.  Often, what should have been happy homecomings were turning into just the opposite.   Out of place in societies that had learned to live without them in decades of absence, the former soldiers’ alienation produced a rash of domestic violence and rape. It was as if the end of the civil war produced an even more pernicious violence against women.

The problem of gender-based violence is not unique to post-conflict situations.  In fact, it’s a global pandemic that cuts across ethnicity, race, culture, class, religion, and educational level. One in three women worldwide has been beaten, coerced into sex, or otherwise abused in her lifetime.

Women and girls are disproportionally affected by gender-based violence.  But men and boys can also be affected; and, in addition, lesbian, gay, bisexual, and transgender people face heightened risk of experiencing violence, including sexual violence.

President Obama recognizes the importance of addressing issues related to gender-based violence.

On Friday, I had the privilege to participate in a White House event to release the United States Strategy to Prevent and Respond to Gender-based Violence Globally.  The Strategy is an interagency response to a Congressional request, led by USAID and the U.S. Department of State.

The strategy  establishes a government-wide approach that identifies, coordinates, integrates, and leverages current efforts and resources. It sets concrete goals and actions to be implemented and monitored by Federal Agencies.   In addition, President Obama issued an Executive Order that creates an interagency working group co-chaired by the Secretary of State and the Administrator of the USAID and directs departments and agencies to implement the new United States Strategy to Prevent and Respond to Gender-based Violence Globally.

Gender-based violence undermines not only the safety, dignity, overall health status, and human rights of the millions of individuals who experience it, but also the public health, economic stability, and security of nations.

I look forward to helping our Missions and operating units in Washington translate the strategy into meaningful action for millions of men, women, and children worldwide. In order to combat gender-based violence, we must redouble our efforts to change attitudes and behaviors by engaging men and boys and empowering women and girls.  Realizing this vision requires the collective efforts of all.  USAID is committed to working in collaboration with other USG agencies, NGOs, faith based communities, private sector companies, and most importantly, women and men around the world impacted by gender-based violence.


To learn more about the United States Strategy to Prevent and Respond to Gender-based Violence Globally, please visit

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