ADDIS ABABA— Several United Nations agencies are investing heavily in so-called financial inclusion programs, designed to bring financial services to the poor and make them less aid-dependent. Although the efforts made so far have been sizable, observers are beginning to wonder if the programs can succeed on their own
The idea behind financial inclusion is making financial services such as credit, savings and insurance available to everyone - including poor people in Africa’s rural areas who live on just two dollars a day. It is believed that if these services reached the rural poor, their lives could improve tremendously.
Ertharin Cousin of the World Food Program said that financial inclusion should not be seen as another aid program.
“The goal is to create an opportunity where we begin a program that ultimately becomes a full agricultural value chain improvement that outlives WFP’s participation,” explained Cousin.
With a population of more than 84 million people, and more than 80 percent of them living in rural areas, Ethiopia was chosen for a three-day work visit on financial inclusion by the three U.N. food agencies: the World Food Program, the Food and Agriculture Organization and the International Fund for Agricultural Development.
Seeds and fertilizer are provided to participating farmers by the FAO. Local cooperatives then purchase the harvest with funds that are indirectly provided by the IFAD. Meanwhile, the WFP gives schools budget help so they can buy locally made products for their school meal programs.
Organizers hope to make the programs self-sufficient, and there is a willingness among the farmers and the cooperatives to make it work. Alemetu Yohannes, the chairman of a women’s cooperative that received loans to purchase haricot beans, stressed the importance of self-reliance.
Alemetu said that local people want to create their own jobs and provide for themselves. She said they will stop taking the donations once they are no longer in need of help.
However, it is not yet clear if the rural poor can truly be self-reliant, because these projects have so far been run only on a very small scale.
Another part of the program focuses on financial literacy - educating those living on a few dollars a day of the potential gains from using not using all their money for daily expenses, but to save or invest a percentage of it as well.
Queen Maxima, the U.N.'s Special Advocate for Financial Inclusion, said that financial literacy is important to help people start saving to provide funds for future investments.
“Eventually, you should unleash domestic savings because of the domestic resources that should be put back in to productive loans so that people can actually make the investment, grow the production, increase employment,” said Maxima.
Ethiopia’s financial infrastructure is still very minimal; only eight percent of the population has a bank deposit account. While mobile banking has contributed to economic progress for the rural poor in other African countries, Ethiopia has only recently allowed a pilot project with mobile banking.