BRIDGING THE GAP – Emerging Technology Increase People’s Access To Finance

Article originally published in February 2017 issue of Business360°, one of Nepal’s premier business magazines, under the monthly column – Innovation Insight. Read original article here.

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January 2017 remained a very important month for smartphone users in Nepal, mainly for two big reasons. First, the iPhone was celebrating its tenth anniversary and the second, Nepal Telecom (NT) was launchingLTE-based 4G services for its postpaid GSM users in Kathmandu and Pokhara effective from day one of this year.

When late Apple co-founder Steve Jobs first unveiled iPhone to the public at Macworld Convention on January 9, 2007; most of the senior Silicon Valley entrepreneurs, including former Microsoft CEO Steve Ballmer, suspected that it would have substantial impact on people’s lives.However, in just one decade iPhone has revolutionised the way people live globally. It transformed a traditional communication device into a real “smart-phone”with sophisticated user interface, easy connectivity, rich app store and took the concept of mobile computing to next level with unlimited potential. Enhanced security features, user-targeted and user developed multimedia rich content and alternative ways of doing things that were traditionally less effective changed people’s way of thinking and acting. These developments have changed the way we communicate online thus affecting most aspects of our lives. In 2016, of an estimated 4.61 billion mobile phone users globally, about 2.1 billion users were thought to have been using smartphones and the latter trend is peaking significantly, especially in emerging economies like Nepal.

While there were less than 50 internet users in Nepal in 1995, the year 2016 saw that number increased to over 30 million according to the mid-September 2016 Management Information System report by Nepal Telecommunication Authority with country’s mobile phone and Internet penetration rates now standing at 116.59 % and 54% respectively. Though mobile phone ownership rate in urban areas is higher by about 15 % than in rural areas, the latter parts of the country are expected to see considerable growth in the near future with improved network coverage and expansion of service facilities. With the recently introduced fourth-generation wireless facilities, eligible NT users now can browse Internet at a peak data rate of 32.4 mbps and if used properly it can help them to significantly enhance their personal and professional development. As NT plans to qualify its prepaid subscribers to use 4G networks towards the second half of the year, the anticipated overall positive impact of mobile computing on lives of Nepalis are quite exciting and most of these would take place in rural Nepal where more than 80% people live.

Globally, mobile computing has been helping emerging economies to minimise the digital divide and facilitate a variety of public and private services in money and banking, education, health, transportation, agriculture, tourism and governance sectors in rural and urban areas alike. However, in the context of Nepal, I see huge potential of leveraging emerging technology in order to increase people’s access to finance, especially in the rural parts of the country, given geographical distribution of the country’s population, their current and potential smartphones subscription patterns and projections, annual incomes, literacy rate and underlying difficulties and high transaction costs for opening branches of banks and financial institutions (BFIs) in these regions.

Finance is at the center of the development process. A 2008 World Bank study has outlined that access to finance with an inclusive, efficient and well-functioning financial system leads to steady economic growth through improvement in opportunities and balanced income distribution and poverty reduction. Access to finance, in simple terms, is the ability of individuals or enterprises to receive financial services, including credit, deposit, payment, insurance and other risk management services. Indicators of whether individuals have bank accounts, use banks as their primary financial institutions and can reach financial institutions by foot are used to measure the extent of access.

According to Nepal Rastra Bank, 61 % Nepali adults have access to formal financial services. In recent years, there has been a surge in the network of banks and financial institutions in the country. However, 18 % adults still do not have access to financial services. As of mid-June 2016, there were 4,219 branches of 182 BFIs in the country and population per branch of financial institution stood at 6,647 national average. In some parts of rural Nepal, this figure remained at 72,026. I see a potential injection of mobile computing in order to minimise the existing inequality among ‘banked’, ‘under banked’ and ‘unbanked’ Nepalis at reasonable costs.

Since the last decade there have been many discourses about and experiments on mobile phone’s potential impact on the financial industry. According to the Global Mobile Systems Association (GMSA), in 2015, people in 93 countries made 33 million daily transactions through 271 mobile money service providers. With these developments, mobile money has been changing the overall financial landscape – in 2015, 37 mobile money markets had ten times more registered agents than bank branches and the total number of registered customer accounts increased by 31 percent and reached 411 million globally. Sub-Saharan Africa still dominates mobile money market with Kenya leading the way in harnessing mobile phone technology in financial services. For example, M-Pesa was the first mobile money transfer service in Kenya. Run by Safaricom, a Kenyan mobile-phone operator, M-Pesa was launched in 2007 for basic money transfer and financial services and has now transformed overall economic interaction of the Kenyans. In 2013, this platform witnessed 237 million P2P transactions amounting 43 percent of the country’s GDP. Currently, M-Pesa has became an integral part of the local daily lives as it allows people to accomplish an array of banking services including money deposit and withdrawal, remittance transfer, utility bills payment and microcredit provisions.In less than a decade, it has extended financial inclusion for an additional 20 million Kenyans and helped to create thousands of other small enterprises. Between 2008 and 2011, Kenyan mobile money services users living under $1.25 increased from 20 percent to 72 percent. After promising accomplishments in Kenya, M-Pesa later expanded its services to nine additional countries in South Asia, Africa and Eastern Europe. In addition to M-Pesa, FNB Connect and WIZZIT in South Africa, GTEasy Savers in Nigeria, Smart Money and GCASH in the Philippines, bKash in Bangladesh and EasyPaisa in Pakistan are some of the other successful mobile money service providers.

With the unprecedented innovations in mobile phones and related technologies in the recent decade, globally, more people now own real smartphones and these new devices are getting cheaper with the Internet too becoming easily accessible at lower cost. A 2014 study by GMSA has anticipated that smartphone features would allow every mobile money service provider to ameliorate the quality of its services through introduction of suitable apps, improved user interfaces, and enhanced functionalities. These features would also potentially ease adoption and usage by giving more intuitive customer experiences. Thus, the overall impact of mobile money services on people’s lives is certain to become even more evident in the future.

These successful experiences from different countries in Sub-Saharan Africa, East Asia and South Asia accompanied by available futuristic smartphones in the Nepali market that also can exploit NT’s 4G services, provide sufficient room for the country’s public and private mobile phone operators to work on utilising technologies to break the barrier among ‘banked’, ‘under banked’ and ‘unbanked’.

Beware Trumponomics

The economic policies of the incoming US president do not bode well for Nepal

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Artwork courtesy: The Kathmandu Post

Later today, Donald Trump will be inaugurated as the 45th president of the United States. When he had announced his candidacy in June 2015, no one really took him seriously. But he started winning the primaries one after another to become the Republican nominee. He went on to trash all election predictions and beat the Democratic contender Hillary Clinton by earning a majority of electoral votes to occupy the world’s most powerful position for at least next four years.

Even before Trump won the election, professionals worldwide had begun issuing many scary predictions. These debates and projections became more heated in the post-election transition period, and economists across America and elsewhere were discussing the domestic and global economic consequences of a Trump administration. Sadly, most economists do not expect better outcomes from Trump’s proposed economic policies. The conclusions of the annual meeting of the American Economic Association held in Chicago and a survey conducted by the University of Chicago’s IGM Economic Experts Panel do not expect Trump’s economic policies will continue Obama’s legacy: an annual growth rate of 2.9 percent, an unemployment rate of less than 5 percent and shrinking budget and trade deficits.

However, all these speculations are based on Trump’s prior experiences, his election agenda, strategies during campaign rallies, updates on social media platforms and portfolios of individuals that Trump has appointed for his cabinet. In reality, except for only a handful of his close aides, no one really knows how a Trump presidency will function. Though no one can deny potential disastrous consequences of ‘Trumponomics’ on the US domestic market and the world’s major economic players, effects on small and emerging economies are often overlooked. With regard to Nepal, I see the Trump administration having noticeable effects on three sectors: trade and investment, macroeconomic stability and foreign aid and remittance.

Trade and investment 
One thing we know for certain is that protectionism seems to be the signature component of Trumponomics. Trump has already revealed that his government will impose a flat 35 percent tax on goods imported from Mexico and 45 percent on imports from China. Similarly, he has decided to leave the Trans-Pacific Partnership and renegotiate other trade deals. If necessary, he wants to leave the North American Free Trade Agreement. In addition, Trump has proposed huge tax cuts in the form of lower income taxes for high-income Americans, and lower capital gains tax and corporate taxes.

The Obama administration recently signed a Trade Facilitation and Trade Enforcement Act with Nepal to ease the entry of Nepali products into the US market. In 2016, Nepal’s exports to the US were valued at $82.7 million and imports from the US were worth $37 million, as per the US Department of Commerce. Under the Trump presidency, these figures may become reversed. Furthermore, Nepal could also suffer from Trump’s plan to restrict American investments outside the US. As per the Economic Survey 2015-16, the US is Nepal’s sixth largest foreign direct investment (FDI) partner with Rs7.096 billion in investments in 298 projects. Though this represents only 4 percent of the total FDI in Nepal, it has immense economic value. Under the Trump administration, these investments might disappear.

Macroeconomic stability
Experts say Trump’s protectionist policies will make imports into the US expensive. This, in turn, will result in an increased US budget deficit and a stronger dollar. The US Federal Reserve System will raise interest rates. With a stronger greenback, currencies of other countries, including the Nepali rupee, will depreciate.

As a result, Nepal Rastra Bank will be forced to lower interest rates which will lead to increased inflation. Thus, Trumponomics may also be a direct threat to Nepal’s macroeconomic stability. Indirectly, subsequent economic and political developments in China, India and other major trading partners will have considerable impact on Nepal’s overall economic stability.

Foreign aid and remittances
Trump’s appointment of Scott Pruitt, whom The New York Times described as a climate change denier, as the new administrator of the Environmental Protection Agency, and his tweets about the United Nations last month help us to imagine what his global development priorities might look like. Though it is very difficult to quantify the exact amount, the development community can expect huge cuts in the US foreign aid budget. The US is one of Nepal’s most important development partners, and it pledged more than $187 million in aid last year to help us recover from the earthquake. However, new priorities under the new president might lead to a decreased net inflow of aid from the US, and this could critically damage the local economy as aid finances one-third of the development activities listed in the budget.

America’s protectionist policies are sure to damage export-oriented markets in Asean and East Asia. In addition, the country’s changing relations with Iran, ongoing crises in Syria and Iraq, a potential economic crisis in Egypt, and Israel-Palestine issues are sure to affect most of the economies where Nepali migrant workers live.

Prolonged instability in any of these regions during Trump’s presidency would damage Nepal’s economy, as remittance in 2015 equalled 31.8 percent of the country’s economy. Though the new world order and world economy seem grim under Trump, many of us still expect him to work in ways that will change our current views about him.

Read article on The Kathmandu Post’s online portal

Can Nepalis Think?

There are three groups of people in this country—complainers, planners and doers

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Artwork courtesy: The Kathmandu Post

Can Nepalis think? This is perhaps one of the most common questions to which thousands of countrymen are seeking a sincere answer. I see all of them considering the problems that modern Nepal faces and the events that led to the current situation. Politically, we are one of the most unstable countries in the world—24 prime ministers in the last 26 years. Economically, we are one of the poorest nations in the world—25.2 percent of the population lives below the poverty line. We have rich religious and cultural diversity, yet have failed to realise the strengths of these assets. Our country has natural resources that could yield immense revenues if exploited well for tourism. However, tourism accounts for only 4 percent of Gross Domestic Product.

Technologically, we are one of the best-connected economies in the Third World—mobile and internet penetration rates stand at 105.15 percent and 44.89 percent respectively. Sadly, I have not seen people taking advantage of this achievement to develop the country. Finally, geographically, we are strategically located between two fast rising economies with the highest populations in the world. However, we lack a balanced diplomatic approach that could help us build warm ties with them and launch mutually beneficial initiatives.

The three types

Some years ago, I read a book entitled Can Asians Think? by Prof Kishore Mahbubani. He has identified three distinct groups of Asians and this classification can be applied to Nepal too—those who cannot think at all, those who may think and those who really think. In my opinion, those in the first group do not think at all. They are active only when there is a personal gain to be made. Individuals in this category believe that if they have sufficient resources, it is more than enough for them. Instead of thinking and acting for the betterment of other people, they prefer to spend their time at unproductive social gatherings, complain on social media, point to other people’s shortcomings and defend their past and current faults. This group believes that other people are responsible for all the problems in the country.

Nepalis in the second group are somewhat concerned about the issues around them. They think and act beyond the first group. They try to create networks to take the lessons learnt from their discussions to the next level. This group of people create platforms for interested individuals to identify causes and potential consequences, and brainstorm to generate ideas to prevent the country from plunging into a greater tragedy. The only drawback is that their solutions depend on the existence of certain ideal conditions, like policy stability. As a result, most of the ideas generated by these people to guide the country towards prosperity are unrealistic.

Nepalis in the final group are not only aware of the difficulties that are prevalent in their communities and the vicinity, but also work to solve them. I have found individuals belonging to this category complaining less. Moreover, the best thing about them is that they happily admit their mistakes and work to correct their faults. They have understood that it will take some time to resolve the country’s major problems, including political instability. Thus, they do not wait for a perfect environment to kick off their initiatives. They consider themselves to be part of the solution and they believe that their individual actions will produce a chain reaction. I have found that the nature and scope of their work define the extent of their contributions to society and public outreach.

Some examples

Individuals like Dr Sanduk Ruit, Mahabir Pun, Indira Ranamagar, Pushpa Basnet, Bir Bahadur Ghale and artist duo Sitaram Kattel and Kunjana Ghimire (Dhurmus-Suntali) belong to this category. Despite the challenges, they have done whatever they can and with whatever they have to bring about positive changes in the lives of people. There are many others whom I would include in this group of Nepalis. There is an apple farmer in my hometown, Jumla, who helps more than 155 local people earn a living, social activists in Doti and Achham who worked to substantially reduce ‘chaupadi’ incidents, young activists in Kathmandu who promote cycling in the Valley and who also pressurised the government to build a cycle-lane on the Maitighar-Tinkune road section, agriculture entrepreneurs in Morang who provide jobs to locals and also work round the clock to cultivate crops and a tourism entrepreneur who encourages and invites guests to travel to different parts of Nepal to help local communities.

We all know that the direction in which we are heading will lead us nowhere. Thus, the time has come for us to reflect upon our past mistakes and work towards building a better Nepal together. But the question remains: Are we thinking enough to take up this challenge?

To read it online, click here

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Vision beyond connecting last two districts into Nepal’s national road network

It has been almost three months since Dolpa, the largest and one of the most remote districts in Nepal, got connected to the national road network. It took six years for Nepal Army to complete 104 km section of the 117.77 km Jajarkot – Dolpa Road with an investment of over 600 million NRs.

The road is expected to touch Dunai, Dolpa’s district headquarter in next nine months. But given geological complications and frequent landslide incidents in neighboring Jajarkot, Rukum and Dolpa districts; proper maintenance of the road after its completion would remain a major challenge for locals and related public and private stakeholders.

As Nepal waits to connect only remaining district, Humla, to the national road network, we should also be working to foster tourism in Karnali and also towards establishing Nepal as a best possible trade-bridge between China and India – two of the world’s most populous and most active economies.

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