Month: November 2021

‘Mobile money’ is a mobile phone-based electronic funds storage and transfer service. The whole development was enabled by the process of changing cash into electronic units of money, e-money, and store in the mobile phone. A user can deposit, store, transfer and withdraw funds from their mobile money account, much like a bank deposit. The firm providing the service is normally a mobile network operator or another type of non-bank, called a ‘mobile money firm’ (‘MM firm’) in this paper. Users can deposit and withdraw funds through ‘cash merchants’. These are corner stores, petrol stations, and other outlets operating on behalf of MM firms.

While growth of mobile money has been significant, it is also uneven. Mobile money growth and use is unevenly concentrated in a small number of countries. These are Kenya, Tanzania, Uganda and several other East African countries. Isolated examples exist in other regions, particularly Bangladesh and Pakistan. Regulation and policy is often given as a key reason for the uneven growth of mobile money. Generally, Kenya, Tanzania and other countries in which mobile money has grown tend to be classified as having ‘enabling’ regulatory frameworks. Countries with more limited growth tend to have more prohibitive regulatory frameworks.

This case study aims to contribute to discussion around appropriate regulatory and policy issues of mobile money by focusing on actions that the Central Bank of Kenya (CBK) took to help M-Pesa grow in a sustainable way. As Governor of the CBK when M-Pesa was first proposed and then launched, I have a range of insights into this process. Policy makers in other countries may find these insights useful for their own regulatory deliverables, particularly those struggling to understand how to help mobile money grow in their jurisdictions.

The African Economic Research Consortium (AERC) held a session at the 19th World Congress of the International Economic Association (IEA) conference.  This forum was to be held in Bali, Indonesia in July last year, but it was to postpone it to July 2021 due to the Covid-19 pandemic. The plenary sessions and a selection of invited meetings was held virtually between July 2-6, 2021. The IEA World Congress is one of the premier events in the economics profession and highly visible, competitive, and reputable. This congress is a highly competitive and reputed global event, thus AERC is very fortunate to have a special session at the symposium.

The AERC’s session on “Re-Examining the Growth-Poverty-Inequality Nexus in Africa” was held on July 2, 2021, and was chaired by Prof. Njuguna Ndung’u, AERC Executive Director. Five papers were presented among them: “Towards a Virtuous Spiral between Poverty Reduction and Growth in Sub-Saharan Africa” by Erik Thorbecke (Cornell University) and Yusi Ouyang (Tulsa University); “Alleviating Poverty in Sub-Saharan Africa: The Role of Inclusive Business Models” by Bernadette Kamgnia Dia and Alban A. Ahouré (Cellule d Analyse des Politiques Economiques du Cires (CAPEC), Cote d’Ivoire);  as well as “Poverty, Inequality and Growth in Sub-Saharan Africa: Survey Evidence from Cameroon and Kenya” by Germano Mwabu (University of Nairobi) and Francis Baye (University of Yaoundé II, Cameroon);

Other papers included “The Role of Redistribution in the Inequality-Growth-Poverty Relationship: Implications for Africa’s Development” that will be presented by Finn Tarp and Miguel Nino-Zarazua (University of Copenhagen and UNU-WIDER) and “Inequality of Opportunity and the Growth-Inequality-Poverty Nexus in Africa” by Christian Ebeke (International Monetary Fund).  The Growth, Poverty, and Inequality Relationships in Africa (GPIR) collaborative research project funded by NORAD is a sequel to one of the most successful collaborative projects of AERC undertaken in late 1990s and early 2000 namely “Poverty, Income Distribution, and Labor Market Issues in Africa”. This project influenced the design of Poverty Reduction Strategy Papers that were adopted across Africa.

“Over the last two decades, poverty declined in Africa, but not at a pace to have deep impacts. The number of the poor increased, hence the need to revisit the growth-poverty-inequality relationships with options for redistributive policies” says Prof. Ndung’u.

This congress is one of the largest gatherings of its kind and brings people from all over the world to discuss their research and policy issues of mutual concern and to address and debate the big economic and policy challenges of our time. The IEA relies on global cooperation for its success, and the selection of papers and organization of sessions, along with a range of partner organizations was managed by a select team.

The IEA believes that every single economic crisis calls for change in the economics profession and new thinking. This was true after the global financial crisis, and it is even more true after the devastating effects of the COVID-19 pandemic on health and livelihoods around the world. It is hoped that the world will pull out of the pandemic quickly. Greater availability of vaccines and their distribution in poor nations will be critical for that. But even with the pandemic behind us, the economic scars on labor markets in advanced nations and the reversal in developmental gains in poor countries will remain with us. And they are likely to exert a long shadow on the future.

Economics is responding to the challenges of our time. Environmental sustainability, inequalities of gender, race, incomes, the rise of authoritarian populism, and the reform of globalization are all centrally on the agenda of the profession. New areas such as behavioral economics, political economy, and the economics of culture continue to develop alongside more traditional fields of the discipline.

The IEA has always stood for a combination of relevance and rigor, as well as for diversity both in terms of perspectives on economic problems and the representation of participants. The Congress is an opportunity for elevating ongoing discussions and debates within Economics onto a truly global stage. The aim is to represent the global economics profession in all its dimensions.

AERC Executive Director Prof. Njuguna Ndung’u presented during the UN WIDER Development Conference Special Session in memory of Prof. Benno Ndulu.

The 2021 UN WIDER Development Conference provides a platform for sharing knowledge on the effects of the pandemic in different regions across the Global South with the aim of connecting research and policy communities around the world to discuss how to move forward.

This UN WIDER Development Conference Special Session commemorates the life and work of Professor Benno Ndulu, who passed away on 22 February 2021 in Dar es Salaam, Tanzania.

The panel recalled his many contributions as an international leader in academic research for African and global development, his key role in bringing top-quality policy, research, and practice together, and his outstanding performance as an institution builder and Former Executive Director of the AERC. Moreover, the panel paid homage to him as a treasured mentor, deliberating on his legacy in the Tanzania economics community.

Apart from Prof. Njuguna Ndung’u, the other presenters included Finn Tarp, Stephen O’Connell, Ernest Aryeetey, and Blandina Kilama.

Growth Sectors for Youth Employment (GSYE) is an African Economic Research Consortium (AERC), Overseas Development Institute (ODI), Economic Research Forum (ERF) and INCLUDE collaborative research that seeks to provide research evidence on economic sectors that have the potential to significantly create employment for youth. The project objectives are to (i) identify promising economic sectors or value chains for job creation for young men and women in selected countries in Africa, (ii) identify the country specific conditions needed for local and foreign private sector to invest in these sectors or value chains, (iii) identify the country specific actors that are needed to create conditions that enhance or reduce investment security, and (iv) identify ways to promote equal access and opportunity for youth to these new sources of work and income, addressing inequality related to gender, socio-economic background and place of residence.

The project is carried out in several phases. The first phase involved the drafting of framework papers. The purpose of framework papers was to help draw some general characteristics on decent employment for Africa’s youth. Another phase is drafting of country case studies (Egypt, Ethiopia, Kenya, Mali, Nigeria, Senegal, Tunisia and Uganda). Country case studies will help in the identification and explanation of nuances and peculiarities of these countries. During the mid-review and the final-review workshops held in mid-August, framework authors presented their final drafts while country case studies teams presented their work-in-progress. Three framework papers were presented:

• “Supporting Jobs for Young Women and Men in Africa: A Framework for Country-Level Analysis”. The paper proposed a four-step framework to identify and create opportunities to create jobs for young men and women. It explains how to identify promising sectors and activities with high growth and (youth) employment potential; how to identify economic and political constraints to developing key sectors relevant for youth employment; identification of general enabling and targeted policies for youth employment; and understanding the political economy around immediate actions to support youth employment.
• “Using Output and Labour Multipliers to Target Incentives for fast Economic Recovery: The Cases of Ethiopia and Kenya”. The paper describes the use of input-output model to calculate output and labour multipliers which are helpful to understand the backward linkages and economy-wide employment generation of specific sectors.
• “Drivers of Industrial Location and Job Creation Potential in Africa”. The framework paper describes the analysis of the drivers of industrial location: investment climate, exports, agglomeration and firm capabilities. The paper also discusses some practical steps to move from the drivers of industrial location to a country level diagnostic, and the value chain analysis.

The following are some key preliminary findings from the country case-studies:

• Egypt; agriculture, extraction of petroleum and mining, manufacturing, and service industries have the highest youth-employment-generating potential. Leather with an employment multiplier of 14.98, food products (4.27) and real-estate (2.66) are sectors with highest employment multipliers. Youth employment and industries with higher employment multiplier tend to be clustered around regions of Greater Cairo, the Delta and upper Egypt.
• Ethiopia; agricultural (74%) and service sectors (0.27%) registered the highest productivity growth during the 2015-2018 period. Dynamic productivity growth is negative and highest in the industrial sector (-11.6%) and service sector (-9.6%) suggesting that labour does not move to sectors with high productivity growth or away from the sectors with low productivity growth.
• Kenyan; informal sector, agriculture, services, tourism, trade, construction, education and ICT sectors have the highest potential for job creation. The employment multipliers are as follows: agriculture (2.1), transport (1.74), trade (1.89), construction (1.84), and education (1.85). The main constraints to job creation include perceptions that the tax rate is high, high number of procedures required to start a business, and high burden of customs procedures, corruption, and business costs of crime and violence.
• Nigeria; construction sector (with employment elasticity of 0.40) was the fastest growing sector and the sector with the most intensive jobs trade sector. Other sectors with positive employment elasticity and hence with higher potential for youth employment include service (0.05) while agriculture, industry and service sectors had negative employment and productivity growth/elasticity.
• Tunisian; agro-food sector had the highest aggregate productivity growth (6.5%) followed by construction materials, ceramics and glass sector (4.5%) and chemical sector (4.2%). The economy was unable to efficiently reallocate resources from low-return to high-return activities. The economy also operates below potential as evidenced by the low rate of GDP growth, and insufficient and low-quality jobs. Structural mismatch between demand for unskilled labour (in trade, service and textile sectors) and growing supply for skilled labour (60% of new job entrants have university degree) has led to an increase in unemployment (30% of university graduates remain unemployed).
• Mali; 9 out of 13 industries had employment creation potential for women and young people aged 15-35 years. The level of employment potential is higher in the agricultural (52.27%) and trade activities (42.35%) but absent in the financial and insurance activities (-0.11%), information and communication activities (-0.17%), and public administration activities (-1.07%). Women and young people have lower access to employment in all sectors of the economy. This is more pronounced in the industrial sector.
• Uganda; sectors with potential to increase the number of youths (18-30 years) in employment are; tea, coffee, wholesale and retail trade, agro-processing and animal husbandry. The labour income multiplier are highest in the service sector (0.21 units), followed by agriculture (0.18 units) and finally, the industrial sector (0.16 units), and within service sector and industrial sectors, skilled youths are the main beneficiaries of youth labour income multipliers while unskilled youth benefit most in the agricultural sector.

The country case study researchers will present their final draft papers in the final dissemination workshop early next year. The findings of this project will also be documented in form of framework papers, country case studies papers, synthesis papers and policy briefs.

The African Economic Research Consortium (AERC) recently participated in an International Conference on Tropical Sciences that focused on the contributions of Science and Technology in addressing the challenges and value of the Tropical region to achieve sustainability. The virtual conference took place on October 25-27, 2021. Prof. Njuguna Ndung’u, the AERC Executive Director made a presentation on “Financial Inclusion Supported by Digital Evolution for Inclusive and Sustainable Development in the Tropics.”

The Conference provided a platform to bring together stakeholders to position the Tropics in the context of global development and identify needed interventions by government, private sector, and academia. High level policy makers, industry captains and researchers engaged in a collaborative environment. The conference addressed Tropical Agriculture, Tropical Architecture and Engineering, Tropical Medicine and Tropical Natural Resources.

Curated discussions under these themes included Changing Landscape of Agriculture in the Tropics, Smart Cities in the Tropics, Sustainable Blue Economy in the Tropics, and the One Health Approach to Tropical Health as well as financial issues. It is important to note that the Tropics has a population of 3 billion, 55 % of whom are under 5 years old, covers 40 % of the world’s agricultural area and 80 % of the world’s biodiversity.

The Mahathir Science Award Foundation and the Academy of Sciences Malaysia convened the Conference to provide a platform to bring together these stakeholders. The Conference attracted renowned personalities including Prof. Jeffrey Sachs, American economist, academic, public policy analyst and former director of The Earth Institute at Columbia University, Prof. Muhammad Yunus, banker, economist, and civil society leader who was awarded the Nobel Peace Prize for founding the Grameen Bank and pioneering the concepts of microcredit and microfinance, Prof. Dr Shenggen Fan, Dean and Policy Chair, China Agricultural University, Prof. Gbolagade Ayoola, President – Farm & Infrastructure Foundation, Prof. Jomo Kwame Sundaram, a leading scholar and expert on the political economy of development, especially in Southeast Asia and Prof. Stewart Lockie, President of the International Sociological Association’s Research Committee on Environment and Society among others.

Prof. Ndung’u noted that developing a mobile phone-based retail electronic payments platform that was real time has pushed the digital financial ecosystem and financial inclusion. He also added that there are now over 1 billion phone-based accounts in 95 developing countries and transacting over US$2.0 billion every day.

He emphasized that beyond financial services, in Africa, citizens can reach out to government services via e-Government. E-learning platforms have been developed and have emerged as important tools for training, capacity building and e-working. Today, FinTechs have designed business models with electronic payments platforms that cut across all sectors of the economy.

“Financial inclusion has been a success, and there is evidence of financial development, inclusive finance, and poverty reduction. And in the retail electronic payments ecosystem – commercial banks are using this technological platform to manage micro depositors and savers”, said Prof. Ndung’u.