India

Editor's note: This post was authored by Julia Arnold, a Research Fellow with the Global Assets Project, and originally appeared on the Center for Financial Inclusion's blog.

Many of the challenges to saving faced by the world’s poorest people were highlighted in the recent Washington Post article Microsavings Programs Build Wealth, Pennies at a Time.  Among others, the article articulated two especially salient points around microsavings: 1) we know the poor save, and 2) savings can help poor people withstand shocks to their income (such as unexpected medical emergencies or job loss) without going further into debt and poverty. However, low-income people tend to rely on informal methods of savings, often putting their money at risk of being lost, stolen, or ruined by floods or rodents. Having a safe, reliable place to save is both beneficial to and desired by the world’s poorest people. 

One of the more significant recent economic developments in South Asia was the revival of trade talks between India and Pakistan in 2011. A question frequently raised is why India and Pakistan trade so little with each other despite the existence of common history, language, culture, and long borders. Economic theory and evidence from around the world would predict that trade between the two largest economies in South Asia would be far greater than its current level of around $2.5 billion.

The trade normalization process between India and Pakistan will undoubtedly open new trade opportunities. This study assesses trade possibilities between the two countries, examines the physical and regulatory impediments to realizing the trade potential, and suggests how the trade potential can be realized. The main findings and recommendations are summarized below.

The greatest loss of human life and economic damage suffered by South Asia since 2001 has not been due to terrorism and its ensuing conflicts, but rather due to natural disasters ranging from the 2005 Kashmir earthquake and the Indus floods of 2010 to seasonal water shortages and drought.  Although such calamities themselves might not be preventable, their human impact can certainly be mitigated. This report argues that such mitigation of environmental stresses is possible only through regional approaches to ecological cooperation.

Mobile money has an estimated potential worldwide revenue of $1 trillion within the next three years, and has become the “it” technology of the moment. The ability to send and receive money through cell phones simplifies the transaction process and offers customers both mobility and flexibility in managing their money. The most notable mobile money platform in the developing world, Kenya’s M-PESA, had 17 million subscribers as of December 2011, and other countries throughout the developed and developing world are quickly jumping on the bandwagon.

When it comes to savings for the poor and financial inclusion efforts, India is a dynamic market ripe for innovation and experimentation. Its extensive web of financial service providers as well as the incidence of large-scale exclusion are contradictory features that also make it a market worth examining.

One of the most successful tools in the fight against poverty, one that has attracted increasing attention over the past decade, is social protection via cash transfers. In fact, the New America Foundation’s Global Savings and Social Protection Database – which focuses on Latin America, Africa, East and Asia – has identified over 90 cash-transfer programs in 45 countries, with over a half billion beneficiaries. As the Chronic Poverty Research Centre puts it, “social protection is critical in preventing descent into chronic poverty and reducing the depth of poverty...

NAF's Global Savings and Social Protection initiative is excited to release its second heat-mapping of different countries' potential to implement savings-linked social protection programs. NAF has identified 51 countries around the world that have social safety net/public benefit programs that involve cash transfers. Last week we looked at the financial infrastructure in countries with cash-transfer social protection programs - including Commercial Banks, Microfinance Institutions, ATMs and Point of Service terminals - in order to get a first glimpse of these countries’ potential to implement savings-linked social protection programs.