Village savings and loan schemes help the poor save in remote communities like this one in Malawi. Photo: Erik Mandell for MercyCorps

The world's poorest have long struggled to borrow. Now, an alternative microfinance model is also making it easier for poor people to save.

Microfinance institutions have provided lending services to millions of the world’s poor people for several decades. But loans must be paid back, and even traditional microlenders are hesitant to lend money to the poorest of the poor—including those living in some of the most remote and unpopulated communities. That’s where the model of village savings and loans associations (VSLAs) comes in, according to a recent Economist article.

The idea is simple: savings, rather than just borrowed money, is key to helping poor people become more stable and less vulnerable. Differing from the better-known Grameen Bank model of microfinance, which provides individual or group loans and operates on credit, a village savings and loan scheme allows a group of community members to pool their savings, lend within the group, and save the interest earned from the loans to disperse to members individually or use for community projects.

This model enables both borrowing capabilities and longer-term savings accumulation for both the group and its members.

CARE International, a humanitarian aid organization focused on fighting poverty, engineered the VSLA model in Niger in 1991. Today, CARE oversees village savings and loan associations in Ghana, Malawi and Uganda. Numerous other non-governmental organizations have promoted village savings groups that serve more than 4.6 million members in 54 countries.

While nonprofits promote the model, the groups themselves are internally managed. Unlike solely credit-based models, group members do not owe repayment to an external bank, but rather to their own pool. Group constitutions are established by members, outlining rules, interest rates, and how savings and interest will be shared. Sometimes transactions, debts and credits are written in basic ledgers, but some groups with no literate members rely on memorization, familiar to those with a culture of oral history, according to Hugh Allen, founder of VSL Associates.

Amid criticism of the effectiveness of traditional microfinance models, as we reported a few months ago, VSLA schemes offer a different path to poverty alleviation.

And for some of the world’s poorest, savings—not a loan— is the golden ticket needed for a better life.

Erik Mandell is a graduate of Middlebury College in Vermont. He is currently pursuing a master's degree in public administration and global leadership at Portland State. Read his other contributions to Global Envision.

The departure of skilled workers in the developing world may, contrary to popular belief, do more good than harm. Photo:banoiff (flickr)

When educated professionals depart a developing nation, does greater wealth arrive? Some scholars in the international development community are saying farewell to the notion that the ‘brain drain’ hinders impoverished countries from expanding human capital and increasing the growth rate.

Exit brain drain. Enter brain gain.

The brain drain has long been perceived as a constraint on the progress of developing nations—much-needed doctors, professors, and scientists often abandon their homelands in exchange for better salaries and more comfortable lives in the developed world. However, research indicates that if countries can hit a sweet spot of sending around 20 percent of their talent to other countries, the residual impact of those individual losses will actually spur economic and educational growth at home.

But how? One way is through remittances, cash transfers from an individual in one country to another elsewhere. Take Ghana, for example. Some figures place remittance levels at $400 million per year, on par with the country's two biggest exports, cocoa and gold, which account for 25 percent of the foreign exchange earnings of the nation. To put this figure in perspective, in previous years Ghana has received around $650 million in foreign aid. Compared to other developing nations, that's low—in some, “remittances are more than double the amount of foreign aid,” as reported by Foreign Policy.

Furthermore, remittances can withstand the tests of natural disasters, and political and economic crises. Chances are an economic and political collapse in Egypt would deter foreign investment but encourage a migrant to increase his or her monetary givings to Egyptian relatives. Now those are derivatives Fannie and Freddie should have bet on.

Much of the new economic activity happening in African countries like Ghana are catalyzed by residents who have traveled or lived in developed countries. New York University professor William Easterly refers to this as “brain circulation,” that is, the movement of ideas and investments from educated professionals between their homes and the West.

Often, brain drainers will eventually return to their country of origin or maintain residency both abroad and at home. Not only do these individuals in turn support the economic development of their hometowns, but they also inspire members of the community to invest in education. According to Easterly, most students are motivated by the idea of living abroad, noting that “if this prospect is closed tightly, this may have an effect on the effort levels of students in the system, and therefore the quality of the graduates of the school system.”

Additionally, travel expands capital horizons. Robert Guest notes in Foreign Policy that “countries trade more with countries from which they have received immigrants.” A migrant living in the UK might inform his sister in Somalia that there is demand in his city for a specific talent she may have the skill sets to provide. Diaspora thus encourages a fluidity of ideas, innovations, and supplies and demands between often disconnected parts of the world.

Investing money abroad can be the best way to bring more of it home. Brainpower may work that way, too.

Reliance on quality produce from Africa prompted Albert Heijn to undertake aid projects. Photo: Erik Mandell for MercyCorps

A Dutch company looks to combine international aid with corporate profit, according to allAfrica.com.

The supermarket chain Albert Heijn is funding and conducting development projects in Africa, including constructing water systems in Ghana, farmer training programs in South Africa, and expanded schooling in Kenya. But the company doesn’t claim that its efforts are based in charity. "It's very much business-driven. It bears almost no resemblance to charity or good causes," says Henri Zondag, chair of the Albert Heijn foundation.

Albert Heijn supermarkets rely heavily on quality produce from Africa, and the idea is that healthier, happier and better-educated suppliers make trade relationships more productive. The Dutch government is a player in this arrangement too, encouraging business-sector participation in cooperative development relationships and economic benefits for the Netherlands. The government hopes that “making a profit can be a great incentive for [development] projects.” The company envisions projects that forge partnerships that lead to greater profit. If both are correct, in the long term all parties involved could win.

Erik Mandell is a graduate of Middlebury College in Vermont. He is currently pursuing a master's degree in public administration and global leadership at Portland State. Read his other contributions to Global Envision.

Women farmers in Africa produce over 60 percent of all food crops. CIMMYT (flickr)

Women comprise 43 percent of the world’s farmers. In Africa, it’s 80 percent. Women plant, harvest, process and sell their crops, but men continue to dominate agricultural science and research. This may be about to change.

African Women in Agricultural Research and Development (AWARD) is trying to close the R&D gender gap. Their program fast-tracks female science careers in agriculture, empowering them to contribute more effectively to hunger and poverty alleviation in their own communities - a model that could be replicated internationally.

Although African women produce 60 to 80 percent of food crops, they receive significantly less (5% as of 2008) of the agricultural training and tools available to men, says the United Nations. A 2010-2011 research report by the United Nations Food and Agriculture Organization shows that women could produce 20-30 percent more if they had equal access. This creates a subsequent increase in household income, health, and community food supply. The East Africa Report emphasizes that research is also pivotal in fostering innovation. Without a seat at the table, women cannot influence practices. Who better to innovate than the farmers themselves?

Women in Ghana conduct business. Photo: IITA Image Library (flickr)

This article was republished in The Christian Science Monitor.

Ghanaian women are mothers, daughters and wives. Add entrepreneurs to the list. Female entrepreneurs are flourishing across Africa, but Ghanaian women are leading the pack.

Education, national stability, and microfinance have spurred their success.

Ghana’s government recognizes the important role women play in reaching the country’s development goals. “No nation can move on without emphasizing the education and emancipation of women,” said Vice President John Dramani Mahama.

One result of that attitude is an increase in women’s education, and the cornerstone of further education is literacy. The literacy rate among females between the ages of 15 to 24 is 78 percent, according to UNICEF, up from 16.6 percent in 1970. This is an impressive jump in the time span of one generation and demonstrates how many more Ghanaian women today can access the kind of skills needed for running a business, like accounting, marketing and management.

Ghana’s stability has also helped catapult its business environment forward. It was the first nation in sub-Saharan Africa to achieve independence in 1957. In the 1970s and 1980s, political instability took its toll on the country. But since then, Ghana has regained political stability and goodwill from the international community, providing an environment ripe for business growth and development. As a result, investor confidence has increased. Rising investment has influenced Ghana’s economic prosperity, and the country is currently the fastest-growing economy of 2011, growing 20.2 percent in the first half of the year, according to Economy Watch.

Ghana's natural resources also boost its per-capita GDP, which International Entrepreneurship reported is twice that of its poorer West Africa neighbors.

Finally, for decades Ghana has been reaping the benefits of microfinance, a tool that may be especially effective in empowering women. As described by the Economics Web Institute, Ghana provided subsidized credit in the 1950s, established an Agricultural Development Bank in 1965 for fish and farm loans, and required commercial banks to set aside 20 percent of their portfolios for agriculture and small-scale industries in the 1970s and early 1980s.

The result? Today, the female labor force participation rate in Ghana is estimated at 50.1 percent—and women account for about 50.2 percent of the entire population of Ghana. With improved education, the prosperity of the country, and a stable microfinance sector, the women of Ghana are making an impact in the entrepreneurial world that cannot be denied.

Within a few years, cheap sorghum-based beer might be the newest gift of the Nile to drinkers and farmers alike. Photo: Tattooed JJ (Flickr)

With barley beer priced out of reach and homebrewed banana beer sending people to the hospital, SABMiller is testing a new ingredient for its African alcohol: sorghum.

The giant global beermaker and its subsidiary, Nile Breweries, see an opportunity to expand their business while potentially halving the price of mainstream beer. Thanks to their tweaked recipes and Africa's abundant natural sorghum resource, prices are already falling fast.

A CNN Money article explains that the average American consumes 77 liters of beer annually. In Africa, not including South Africa, the average person only consumes about 7 liters. Because of this, SABMiller sees cheap sorghum beer as an opportunity to "crack a virgin market." Although sorghum is usually used for syrup and cattle feed in countries like Uganda, Tanzania and Zambia, SABMiller's Nile Breweries developed a beer recipe in 2002. CNN explains that by building high-tech microbreweries and micro supply chains sourcing local ingredients, SABMiller stabilizes the price of beer by reducing dependence on international imports, creating a more self-sustained and cheaper market for Africa. The new product is priced 20 percent less than imported barley beer.

This inexpensive yet high-quality beer is becoming popular very fast—nearly 35 percent of all beer in Uganda is now Nile's Eagle sorghum beer, which CNN reported is also sold in Tanzania, Zambia, Zimbabwe and Swaziland. In 2008, Heineken and Diageo followed suit with a sorghum recipe for Ghana, Sierra Leone and Cameroon. Multinationals are racing into an untouched market.

Not only does the recreated sorghum recipe help boost profit for major beer companies, it sustains Africa's economy. According to a study by French business school INSEAD, Nile Breweries added about $92 million to the Ugandan economy and supported roughly 44,000 Ugandans through agricultural, manufacturing, retailing or distribution jobs in 2007. SABMiller is sending a share of this revenue to subsistence farmers at the bottom of its value chain.

"Our affordability model is attractive because it focuses on local crops and creates additional income for farmers and a new profit pool for us without cannibalizing our core product," says Andy Wales, head of Sustainable Development at SABMiller.

As CNN explains, SABMiller's idea of using local ingredients to tap new markets follows that of Coke and Danone. Africa will contain seven of the world's 10 fastest-growing economies by 2015, CNN says, and roughly 200 million Africans will enter the consumer goods market by 2016. Multinationals, such as Coke, Danone and now SABMiller, see vast opportunities in the very near future.

Not everyone thinks SABMiller's tactics will make a mark in Africa's economy. "Africa is still mom-and-pop," said Don Elefson, a fund manager for the Harding Loevner Frontier Emerging Markets Fund, explaining that multinationals will still remain "on the sidelines." But with SABMiller's next steps of using cassava-based beer in Mozambique and Southern Sudan, seeding a Tanzanian barley industry and creating better processors to preserve products while distributing, the company may be on a fast track to meet its long-term goal of halving the price of beer in Africa and tapping a huge new market.

Mariama Zachary and Akua Azaiz tend to cocoa beans on a drying table in Ghana. Photo: Gates Foundation (flickr)

Food prices are exceeding record highs—prompting policymakers worldwide to take action. A recent meeting of the G-20 agriculture ministers has given reason for hope, but many obstacles to less expensive food remain.

According to the BBC, 44 million people were driven into poverty last year by food price volatility — increasing the risk of conflict and adding to human suffering. Rising food prices also threaten to derail the fragile global economy, acting like an extra tax on consumers, says World Bank head, Robert Zoellick.

"We have been in a period of extraordinary volatility in food prices, which poses a real danger of irreparable harm to the most vulnerable nations and people. High, uncertain and volatile food prices are the single gravest threat facing the most vulnerable in the developing world."

The severity of the crisis has prompted the G-20 and the World Bank to push forward a number of non-contentious initiatives, three of the most important being:

• To reduce the impact of food price variability through loans . Called Agriculture Price Risk Management, the idea is to reduce farmer risk and thereby increase production of staple crops like wheat, rice, corn, and soybeans.
• To reduce food price volatility via information sharing. Known as the Agricultural Market Information System, according to The Wall Street Journal, this initiative encourages collaboration among nations to mitigate the affects of panic buying and export bans (among others), which often exacerbate a food crisis. Click here to observe food price fluctuations around the world.
• Eliminating export restrictions for food aid programs. The G-20 agricultural ministers agreed to abandon export restrictions on food aid bought by the World Food Program, states The Wall Street Journal.

Despite these promising developments, the most contentious issues will be left to future meetings. Of these, three of the most important are:

• The restriction of bio-fuel production. Food production advocates want subsidies eliminated for grains grown for fuel, says the Christian Science Monitor. However, the delegates were unable to reach consensus on reducing farm subsidies for biofuel production.
• Increased regulation of commodity speculators. Derivatives markets played a major role in causing the recent recession, and policymakers around the developed world are passing legislation to mitigate their harmful impact (including on food prices). Policymakers are stepping lightly, afraid over-regulation could stifle production.
• Creation of an African food bank. According to The Christian Science Monitor, member African nations (and international backers) would build up a continental food reserve which could be tapped into when a supply shortage occurs. The risk of underfunding and the politics behind "who pays for what" could prove fatal to this proposal.

Of course, imbalances in population growth and food supply is a major problem too, but that's another story. In general, the G-20 and World Bank's increased focus on food prices has been well-received. "People are hungry for food and for action on a global level," says Robert Zoellick, according to the BBC.

Recycling at its trendiest. Photo: Courtesy of Trashy Bags

In Ghana most people drink water from little plastic bags, or sachets. Once emptied, these sachets are often tossed on the ground, clogging storm drains, littering beaches and polluting the ocean, says a recent CNN article. In fact, water sachets are the most common type of trash found on the streets of Accra, the country's capital city.

British entrepreneur Stuart Gold started Trashy Bags to save the sachets from going to waste. The Accra-based NGO pays locals to collect discarded sachets and sew them into purses, grocery bags and other useful accessories. So far, Trashy Bags has collected over 15 million sachets, notes CNN. And their eco-friendly creations are proving to be a hit among tourists as well as locals.

In addition to tidying up the streets, Trashy Bags is also fueling Ghana's feeble job market. More than 60 Ghanaians are employed full-time to sew the bags, and 100 people work part-time to collect water sachets and juice pouches. Trashy Bags' founder explains the project's environmental and economic mission on the nonprofit's website:

Every bag that we sell reduces land pollution, keeps people employed and serves as a very visible reminder that plastic waste can often be put to good use long after its initial purpose has expired. Every bag that we sell is an opportunity to educate the public about their environment and their responsibility to keep it clean for the good of humanity and of the planet's ecosystems as a whole.

Glasses are one key to improving the economic productivity of poor people in developing countries. Photo: deepchi1 (flickr)

Poor vision may not seem like an economic problem at first glance. But according to the World Health Organization, workers with poor and uncorrected vision cost the global economy hundreds of billions of dollars in lost productivity each year.

Many of these workers struggle to put food on the table, much less purchase an expensive pair of glasses, so their vision problems go untreated. This situation may change thanks to an innovative new series of affordable glasses designs that the New York Times recently highlighted. Their genius lies in two factors: their low cost and how easy it is to adjust them. Production is cheaper when a single model can be made to fit almost anyone, which also cuts out the need for expensive doctors to write vision prescriptions.

How can glasses be one-size-fits-all? One type highlighted by The Times has lenses whose refraction can be adjusted by injecting a clear liquid into them, while another has overlapping lenses that can be adjusted by the user. These models are already improving the lives of wearers in countries like Rwanda, Afghanistan, Ghana, and Tanzania and cost $19 and $4, respectively.

Despite their potential, low-cost eyeglasses still face problems. As The New York Times explains, the glasses could cost only $1-2 per pair if produced in great enough volumes, but supply chains don't yet exist to distribute such quantities of glasses to those who need them.

The field of low-cost eyeglass production and distribution is in its infancy, but keep your eyes open for great things to come.

The World Health Organization has issued a warning for yet another dire consequence of the global economic crisis: the “severe medical workforce crisis” in Africa and Asia, is expected to get worse.

The most recent World Health Report from 2006 estimates that Africa and Asia lack more than 4 million health workers combined. The WHO-sponsored Global Health Work Alliance estimates that 1 in 4 doctors and 1 in 20 nurses will leave Africa to pursue higher-paying jobs abroad.

The repercussions for health worker brain drain are severe, especially in rural communities where access to medical care is limited. In Ghana there is only one doctor per 17,700 citizens — the majority of whom practice in the country's two largest cities. The UN news agency reports that in Ghana the scarcity of doctors and the high cost of medical care are driving some pregnant women to turn to prayer camps, trying to use prayer to get through labor pains.

In an interesting twist, the economic downturn in Europe and the U.S. has driven many well-educated migrants to leave troubled financial hubs like London and New York City and return to their respective home countries in Africa and Asia — a phenomenon some are calling reverse brain drain. As reported in World Focus' online radio show, “Though the U.S. has often been called the "land of opportunity," the country is losing some of its top minds to companies overseas.“

It hasn't hit the health sector yet, but reverse brain drain could help ease the heath-worker crisis. Perhaps a financial recession for some could prove to be a time to regain talent for others.

Photo: BrianScott (flickr)

Ten years ago, farming and hunting communities of Wechiau in the Upper West Region of Ghana had no schools, electricity, or even drinking water.

But today, thanks to a decade-long effort by the community to preserve its endangered hippopotamus population and convert the area into a wildlife sanctuary, revenues from sustainable ecotourism are being used to improve infrastructure and build schools.

With the support of organizations like the United Nations-backed Equator Initiative and Canada's Calgary Zoo, several schools have been built, solar-powered electricity has been installed and wells are being drilled to provide safe drinking water for villages throughout the sanctuary.

The Wechiau Community Hippo Sanctuary is both an innovative effort and an example of how conserving biodiversity can help reduce poverty — while benefiting animals and people at the same time.

In order to minimize human and hippo conflict and provide undisturbed grazing habitat for the hippos, the villagers have moved all farms and fishing camps two kilometers from the river. However, the local community understands that by conserving the environment, they are creating other opportunities for their community and promoting their remote district as an ecotourist destination.

It is often difficult to convince poor communities to engage in long-term environmental protection and conservation. But for the Wechiau Community Hippo Sanctuary, support from traditional chiefs and locals is strong.

This is because the sanctuary is a "genuine community-based initiative led by the traditional chiefs and people with no national government involvement." In fact, it is the first community-owned and managed large-mammal sanctuary in Ghana.

Today, the sanctuary is a testament to the possibilities of ecotourism, covering 40 km² along the Black Volta River and the home to one of the two remaining populations of hippopotamus in Ghana.

With the recent economic turmoil and the declining value of the dollar, some people are turning to gold for economic security in their time of need. In recent months, the price of gold has jumped to a high of nearly $1,000 per ounce.

In light of this, the World Bank’s private branch, the International Finance Corporation (IFC), has helped finance AngloGold Ashanti and Newmont Mining to open gold mines in the rich reserves of Ghana. These organizations claim that by developing the region's resources, they will be able to stimulate economic growth and pull the country's people out of poverty.

However, several NGOs in the region and the above Al Jazeera report claim that is the exact opposite of what this initiative has accomplished. Ghanaians in the west have been experiencing harder times as a direct result of the gold mines. Only the multinational companies that own the mines seem to be reaping the economic benefits. According to Al Jazeera, only 3 percent of the gold profits go back into Ghana.

To build the mines, these companies have also taken over many of the villagers’ farmland where they live and work. Many of the land owners of the region claim that the companies did not compensate them enough for their precious land. The people who worked on the farms were also only paid for a single harvest. Without these farms, many of these farmers have nowhere to live and no way to survive.

Furthermore, Oxfam and FIAN claim that the companies are not respecting the rights and safety of the nearby villagers. Community water sources have been polluted from improper drainage from the worker housing compounds and from the disposal of dangerous chemicals used in mining.

The development of the gold mines could lead to greater problems for Ghana on a national scale. The fertile lands of western Ghana allow even a small farm to be self-sustainable for several generations, which has helped to keep Ghana’s food stores stable. However, by favoring the gold mines over farms, Ghana may eventually begin to suffer the effects of the food crisis that is already plaguing many of its neighbors.

Despite record prices, the real beneficiaries of Ghana's gold remain questionable. Is it the people of Ghana, as the IFC and the mining companies insist, or is it the mining companies themselves?

Malaria nets. Photo: Tomas de la Maza (flickr)

Is malaria's reign of terror coming to an end?

Every year, 500 million people fall seriously ill with malaria — a disease that induces fever, chills, nausea, flu-like illness and, without treatment, coma and death. More than 1 million people die each year from malaria — almost all in the developing world. The near-universal poverty of its victims is one reason it has not received the attention, and therefore the money, necessary to secure its demise.

Even in the face of these scary statistics, malaria may be about to meet it's match. The Economist reports a renewed sense of interest in its eradication, mainly because it jeopardizes the UN's Millennium Development Goals, a set of benchmarks in health, education and human welfare that world leaders committed to attain by 2015.

There's a cost-benefit rationale, too. Malaria costs Africa upwards of $12 billion a year in health expenses and lost productivity. Yet a five-year eradication plan might cost as little as $2.2 billion a year, according to a report by Malaria No More and McKinsey & Company.

With these numbers in mind, last week the UN unveiled a new campaign to fight malaria at its most critical spots. The Roll Back Malaria (RBM) Partnership — created to "enable sustained delivery and use of the most effective prevention and treatment for those affected most by malaria — staged the first World Malaria Day last week. It coincided with a UN plan to spray inside houses and distribute insecticide-treated bed nets to "all people at risk" of the disease by the end of 2010.

Any effort to stamp out malaria must deal with an added layer of complexity. When diminished but not destroyed, malaria can come back with a vengeance. Any letup in the eradication campaign may end up actually increasing the numbers of those at risk.

But considering how much malaria undermines the war on poverty, a risk taken to ensure its eradication may be a risk worth taking.

Photo: JohnMMM (Flickr)

Typically, the discovery of “black gold” in African countries has led to conflict over land and overwhelms governments with more revenue than can be effectively managed. Brutal secessionist conflicts have been taking place for years in countries rich with oil, including Sudan, Nigeria and Angola. Ghana hopes to buck the trend. The country is one of the most stable on the continent and responsible development of its oil industry can provide a good model for other African nations.

"There’s no reason that oil should be a curse,” one government official told Financial Times, which recently published a special report on Africa's fossil-fuel resources. “We want to make sure we follow the example of countries like Canada or Norway who’ve used oil to their benefit."

Why can’t African countries – or any developing country, for that matter – use newfound oil wealth to raise living standards for all citizens? For starters, the oil market is vulnerable to price shocks, and the centralized revenues are susceptible to theft. Dependency on oil as a primary commodity can discourage economic diversification.

Another critical issue is the exploitation of indigenous populations near extraction sites, a prime example being the abuses felt by those in the Niger delta region of Nigeria. Governments frequently overlook the fundamental needs of communities adjacent to oil drilling sites. Ghana’s new oil find may not be very beneficial to communities that fish the waters where the discovery was made.

Can Ghana avoid these pitfalls? The government says it plans to use the oil wealth to turn Ghana into "a middle-income country" by 2015, and to invest in infrastructure, health care and education. That's reminiscent of rhetoric used by officials in Nigeria, Angola, and the Congo — all are failing to follow through with those promises.

Can Ghana succeed in turning the “black gold” into a blessing for its citizens, or will oil once again prove a curse?