|February 27, 2009||Posted by Jeffery J. Smith under Uncategorized|
Outside money — wanted or not — finds new territory
While banks expand, read the pros and cons of free cash. We trim, blend, and append three articles from: (1) the Financial Times, 2008 May 21, on bank expansion by Barney Jopson; (2) OneWorlds Perspectives, 2009 Feb 23, pro aid by Leila Hernandez and Zuleqa Husain (students at American University); and (3) PM, Feb 16, con aid by Mark Colvin.
by Jopson, by Hernandez and Husain, and by Colvin
- As Africas economies gain, banks look to expand
Banks in Africa launched aggressive moves to expand their mortgage businesses — just as housing markets in the developed world falter.
The three big international banks active in east Africa — Barclays and Standard Chartered of the UK and Stanbic, a division of South Africas Standard Bank — are jostling to secure well-heeled mortgage clients in Kenya and Uganda. Their next battleground is likely to be Tanzania. They lend at interest rates of 12-18% and specifying a minimum loan of $30,000.
Economic growth in sub-Saharan Africa has averaged almost 6% a year since 2000 — the best since the 1970s — powered by surging commodity prices and better regulation. African banks have captured more deposits, assembled bigger balance sheets, and reported ever-higher earnings.
Still, mortgages are available only in a dozen or so countries. Most banks restrict their mortgages to salaried customers and some make deals with big employers — including Ms Suleman-Arains Safaricom — to deduct repayments from wages at source in return for a lower interest rate for the borrower. Only in recent years have banks begun to offer credit cards and short-term loans for companies.
Across much of the continent, land titles are murky. In Kenya, 86% of adults did not use a bank. Many work in informal roadside trades such as fruit-selling or tool-making, while renting homes in slums where there is no formal market in land. The high cost of oil and food is seen as a threat to some countries.
The legacy of the previous two decades in the sector hangs heavy. Most banks were poorly capitalized and mainly recycled deposits into low-risk government bonds. Housing finance was the preserve of a corrupt and aloof public sector.
JJS: The private sector in the West has recently revealed itself as equally corrupt and aloof. May Africa be spared that at least. While increased capital there from banks may be new, aid from elsewhere is not.
- Does ‘Our’ Money Help Solve ‘Their’ Problems?
A growing number of experts say foreign assistance dollars have proven to be well spent when they are invested in long-term projects that are conceived and run by local community members in response to that community’s specific needs and circumstances.
A few of USAID’s accomplishments over the past 50 years:
- The number of the world’s chronically undernourished reduced by 50% in the past 20 years.
More than 3 million lives saved every year by immunization.
Literacy rates up 33% worldwide in the last 25 years, and primary school enrollment has tripled in that period.
Commentator Nicholas Kristof said US foreign assistance eradicated smallpox over 30 years ago. Before the United States invested $32 million over 10 years, an estimated 1.5 million people died annually from the disease.
In Mozambique, a health project launched by US President George W. Bush in 2003, helped fight the global HIV/AIDS pandemic, albeit with religious strings attached.
Now US foreign assistance is distributed not only by USAID, but also the State Department, the Defense Department, and many private organizations, with little coordination among them. As a result, programs became more expensive to implement, projects were delayed, and their impact reduced.
JJS: Now for the indigenous con side.
- African aid feeds corruption, stymies innovation
An African economist and development expert argues that it’s time for the West to stop pouring money into the continent. Dambisa Moyo, a Cambridge-educated Zambian who wrote Dead Aid, says that aid not only doesn’t work, it’s counter-productive. She says it has not increased growth or reduced poverty but has squeezed out individual initiative and fed corruption.
Sixty years ago the Marshall Plan worked in Europe because there was already some infrastructure both political and economic that was just simply being rebuilt. And the aid was short and sharp, for five years, about $13 billion, equivalent to $100 billion now. It was directed, targeted, and finite.
Most people in Africa do not even see aid revenues and so wont suffer if the aid is cut off.
Rather, Africans could see an improvement in their lives because they would start to be able to hold their governments accountable.
As an African I would like to see my continent participate on the world stage as an equal partner, not a drag on society.
Jeffery J. Smith runs the Forum on Geonomics.
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