Financial Inequality, Threat To Economic Dev’t

Financial Inequality, Threat To Economic Dev’t

Poverty reduction in developing regions is slowing because of the prevailing nature of extreme income inequality, which is considered a powerful threat to economic progress Blessing Otobong-Gabriel Examines…

Financial inclusion is a key element of social inclusion, particularly useful in combating poverty and income inequality by opening blocked advancement opportunities for disadvantaged segments of the population. 

For almost 25 years, the number of people living in extreme poverty on less than $1.90 per person per day was steadily declining. But the trend was interrupted in 2020, when poverty rose due to the disruption caused by the COVID-19 crisis combined with the effects of conflict and climate change which had already been slowing poverty reduction.

Decreased income, job losses, and work stoppages during the pandemic were especially damaging to poor households. Women, youth, and low-wage and informal workers, especially those living in urban areas, were among the hardest hit. Inequality rose both within countries and between countries, with long-term impacts on access to opportunity and to social mobility.

Although global poverty has more recently resumed its pre-pandemic downward trajectory, between 75 million and 95 million additional people could be living in extreme poverty in 2022 compared to pre-COVID-19 projections, due to the lingering effects of the pandemic, the war in Ukraine, and rising inflation.

Food inflation can have a particularly devastating impact on poor families. A typical person in a low-income country spends about two-thirds of their resources on food, while the same figure for the typical person in a high-income country is closer to 25%.Governments often can mitigate the impact of rising inflation on poor families through social protection policies.

However, somewhat different from the previous periods of high food price inflation, government finances have been depleted due to various fiscal measures enacted through the COVID-19 crisis.

For economies still reeling from the pandemic, the inflationary pressures could not have come at a worse time.Research suggests that the effects of the current crises will almost certainly be felt in most countries through 2030.

Under these conditions, the goal of bringing the global absolute poverty rate to less than 3 percent by 2030, which was already at risk before the pandemic, is now beyond reach unless countries take swift, significant, and substantial policy action.

One could say, financial inclusion connotes all initiatives that make formal financial services accessible and affordable, primarily to low-income people. In recent years, financial inclusion has been perceived as a dynamic tool for attaining multidimensional macroeconomic stability, sustainable and inclusive economic growth, employment generation, poverty reduction, and income equality for advanced and developing countries.  

These are generally underprivileged population segments, vulnerable groups such as rural dwellers, women, and low-income families who benefit enormously from basic financial services like savings, borrowings, payment, and insurance.

Despite decades of rapid progress in reducing poverty and boosting prosperity, a large portion of the world’s poorer population still struggles to attain a minimum standard of living across developing regions.

To this end, the federal government through the ministry of humanitarian Affairs, disaster management and social development position itself in light of the prevailing Humanitarian situation in the country through its Vision, Mission and Core values to promote Human dignity and Integration of basic Humane benevolence and compassion in the treatment of all Nigerians and to have social protection systems that are proactive, humane, inclusive and sustainable for the improvement and general welfare of the people.

The program, government enterprise and empowerment Programme GEEP, was designed for vulnerable and low-income Nigerians who are involved in some sort of commercial activity/capacity but have never had the opportunity to access loans from traditional lending institutions to achieve, amongst others, financial inclusion, and access to credit in furtherance of the attainment of poverty eradication, employment generation, growth, and development of MSMEs throughout the Federal Republic of Nigeria.

 GEEP targets to offer interest and collateral free credit to the millions of Micro SMEs MSMEs, operating at the bottom of the Nigerian economic pyramid. The programme has leveraged on three loan products, so far, to support small to medium sized businesses, youths, and women.

GEEP aims to provide capital to beneficiaries into the formal financial system through bank accounts, mobile wallets, and formal identities.

Since inception, the programme has been able to target, document, profile and deliver incremental loans to over 2.3 million Nigerians under its three signature schemes: MarketMoni, TraderMoni and FarmerMoni.

Consequently, the NSIP-GEEP team, tasked with overseeing the design, coordination, and execution of the program, are supported by approved organogram of Advisers, Special Assistants to President on NSIP, Technical Assistant an Assistant and other Civil Servants i.e., already imbedded in the Ministry structure who help facilitate objectives, operational guidelines for effective and efficient program delivery.

The GEEP is to help eradicate poverty through the empowerment of identified poor and vulnerable groups with enterprising skills, Providing easy access to credit to grow beneficiaries’ businesses, and on-boarding beneficiaries into the formal financial system of banking.

This was targeted towards uplifting under- privileged and marginalized youths (18-40 years) in Nigeria. The scheme is designed specifically to empower talented entrepreneurs such as artisans, artists, tailors, craftsmen/craftswomen, and identified vulnerable groups in clusters. Loan amount of N50,000 is given for period of 6 months (moratorium 3 months).

Skills Categories: Shoe Making, Tie and Die, Cap Making, Screen Printing, Furniture Making, Electricians, Carpentry, Tailoring, Fashion Designing, Drawing, Painting, Pottery and Glass Crafts, Fibre and Textile Crafts, Jewellery Crafts, LeatherworksAccording to the Team Lead of GEEP, Zainab Musawa said In order for the federal government of Nigeria to meet its goal of uplifting 100 million people out of poverty, the upliftment of women is of vital importance for so the ministry focused on female headed household e.g., Widows, divorcees amongst other vulnerable groups to disbursed loan of N50,000 given for period of 6 months (moratorium 3 months) to the categories of Trading (Buying and Selling), Tailoring/Fashion Designing, Pottery and Glass Craft, Fibre and Textile Crafts, Jewellery Crafts likewise the FarmerMoni loan scheme designed to provide the complete value-chain inputs, mechanization, insurance, off taking of agriculture worth up to a maximum of N300,000 to rural farmers that fit the eligibility criteria with the period of 12 months moratorium 9 months for both women, men, youths just for the purpose of Agriculture within the age of 18 to 55 years.

Musawa noted that this is due to the global challenges created by the COVID-19 virus and its debilitating effects, the GEEP programme was not implemented in 2020. However, the programme was ready to be launched under the Ministry by 2021.

The launch event, which took place on 24th of August 2021 has since recorded laudable progress in terms of implementation and has currently at the stage of disbursement; 98,000 beneficiaries have been notified of their success in qualifying for the loan and are awaiting an enumeration process before they can access the loan. 

She said adequate sensitization message has been sent through access bank to provide important details to the beneficiary, information such as the selected loan scheme, loan amount, loan tenure, account number, enumeration process, post-no-debit e.t.c.

A post-no-debit (PND) has been placed on the account to restrict withdrawal until the beneficiaries are successfully verified and enumerated.

“A total of approximately 1,400,000 potential beneficiaries where registered by the COMO’S across the 774 LGA in Nigeria while a total number of 650,000 potential beneficiaries where digitized from the GEEP 2.0 registration booklets onto the GEEP dashboard and access bank verified a total number of 340,000 potential beneficiaries some of the criteria includes credit check, BVN, and NIN”A total of 98,000 beneficiaries have been whitelisted and are awaiting enumeration which has started in the 774 LGA, 98,000 beneficiaries have been communicated via SMS.

The SMS entails sensitization message, account number and enumeration and beneficiaries have been sensitized and are expected to start repayment after moratorium. TraderMoni (3 Month), MarketMoni (3 Month), FarmerMoni (9 Month).

“Access Bank: After being implemented by the Bank of Industry since inception, a presidential directive was issued for a new bank to be procured by the Ministry to help implement the GEEP under the Ministry.

After a rigorous Bureau of Public Procurement process, Access Bank emerged as the preferred bank to partner in implementing the program.

A Memorandum of Understanding (MOU) between the bank and the Ministry was signed on the 23rd of August 2021 and is currently undergoing an addendum process to finalize the document.

Access Bank is expected to provide core banking services required for the program, create BVN and bank accounts for potential beneficiaries and recover loans to qualified beneficiaries. The bank is also required, as signed in the MOU to provide adequate financial reports with regards to the program. 

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COVID-19Financial Inequality

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