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Authors: Louise Anne Sophie Lavaud and Mitch Hsieh*
Throughout the years, Laxmi Shrestha and her husband saw the opportunities that opening an online shop could bring to her family business.
“Looking at the trend of TikTok and other sites, we thought selling online could help us but we weren’t technically sound,” said Laxmi, the owner ofLaxmi Hastakala Store, in Banepa, Nepal, and part of a family of artisans.
As she learned about selling online, she picked up on how to market her shop digitally and, according to Laxmi: “It has surely given our business a push we always wanted. Recently we started selling our products online and we also receive payments online.”
Laxmi Hastakala Store is among the 1,800 women-led micro, small and medium enterprises (MSMEs) in Nepal being trained on digital and financial literacy by Sparrow Pay – one of the winners of the Women Fintech MSME Innovation Fund launched in 2019 by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and the United Nations Capital Development Fund (UNCDF).
Sparrow Pay has created a local digital marketplace where women-led MSMEs can offer products and services to its existing 800,000+ digital payment service users. Additionally, Sparrow Pay is supporting these women entrepreneurs in adopting digital payments and creating a payment history to support access to additional financial services.
MSMEs are a vital source of employment and a significant contributor to a country’s GDP. However, more than 45 per cent of MSMEs in Asia and the Pacific are constrained from accessing finance and other support for their businesses. Socio-cultural norms mean women-led enterprises have to overcome gender-specific barriers to access institutional credit and other financial services.
ESCAP and UNCDF aim to encourage easy access to digital finance for MSMEs in Asia and the Pacific, break the financial barriers surrounding women-led enterprises and support entrepreneur-centric growth and inclusiveness throughout the region. Initiatives by the 10 winning fintech companies are currently supporting more than 9,000 women-led MSMEs in Bangladesh, Cambodia, Fiji, Myanmar, Nepal, Samoa and Viet Nam.
Just like Laxmi, these women business owners plan on successfully growing their companies in the digital area.
The Women Fintech MSME Innovation Fund is part of a regional programme “Catalyzing Women’s Entrepreneurship: Creating a Gender-Responsive Entrepreneurial Ecosystem,” which seeks to support the growth of women entrepreneurs in Asia and the Pacific by enabling a policy environment for such business owners, providing them with access to finance and expanding the use of ICT for entrepreneurship.
*Mitch Hsieh Chief, Communications and Knowledge Management Section
UNESCAP
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Authors: Erin Watson-Lynn and Tengfei Wang*
As digital technology continues to unlock new financial opportunities for people across Asia and the Pacific, it is critical that women are central to strategies aimed at harnessing the digital financial future. Women are generally poorer than men – their work is less formal, they receive lower pay, and their money is less likely to be banked. Even when controlling for class, rural residency, age, income, and education level, women are overrepresented among the world’s poorest people in developing countries. Successfully harnessing digital technology can play a key role in creating new opportunities for women to utilise formal financial products and services in ways that empower them.
Accelerating women’s access to the formal economy through digital innovations in finance increases their opportunity to generate an income and builds resilience to economic shocks. The recently issued ESCAP guidebook titled, Harnessing Digital Technology for Financial Inclusion in the Asia Pacific, highlights the fact that mechanisms to bring women into the digital economy are different from those for other groups, and that tailored policy responses are important for women to fully realise their potential in the Asia-Pacific region.
Overwhelmingly, the evidence tells us that how women utilise their finances can have a beneficial impact on the broader community. When women have bank accounts, they are more likely to save money, buy healthier foods for their family, and invest in education. For women who receive Government-to-Person (G2P) payments, there is significant improvement in their lives across a range of social and economic outcomes. Access to safe, secure, and affordable digital financial services thus has the potential to significantly improve the lives of women.
Despite the enormous opportunity, there are numerous constraints which affect women’s access to financial services. This includes the gender gap in mobile phone ownership across Asia and the Pacific, lower levels of education (including lower levels of basic numeracy and literacy), and lower levels of financial literacy. This complex web of constraints means that country and provincial level diagnostics are required and demands agile and flexible policy responses that meet the unique needs of women across the region.
Already, across Asia and the Pacific, governments are implementing innovative policy solutions to capture the opportunities that come with digital finance, while trying to manage the constraints women often face. The policy guidebook provides a framework to examine the role of governments as market facilitators, market participants and market regulators. Through this framework, specific policy innovations drawn from examples across the region are identified which other governments can adapt and implement in their local markets.
A good example of how strategies can be implemented at either the central government or local government levels can be found in Pakistan. While central government leadership is important, embedding tailored interventions into locally appropriate strategies plays a crucial role for implementation and effectiveness. The localisation of broader strategies needs to include women in their development and ongoing evaluation. In the Khyber Pakhtunkhwa province, 50,000 beneficiary committees comprising local women at the district level regularly provide feedback into the government’s G2P payment system. The feedback from these committees led to a biometric system linked to the national ID card that has enabled the government to identify women who weren’t receiving their payments, or if payments were fraudulently obtained by others.
In Cambodia and the Philippines, governments have implemented new and innovative solutions to support remittance payments through public-private-partnerships and policies that enable access to non-traditional banks. In Cambodia, Wing Money has specialised programs for women, who are overwhelmingly the beneficiaries of remittance payments. Creating an enabling environment for a business such as Wing Money to develop and thrive with these low-cost solutions is an example of a positive market intervention. In the Philippines, adjusting banking policies to enable access to non-traditional banking enables women, especially those with micro-enterprises in rural areas, to access digital products.
While facilitating participation in the market can yield benefits for women, so can regulating in a way that drives systemic change. For example, in Lao People’s Democratic Republic and India, different mechanisms for targets are used to improve access to digital financial products. In Lao People’s Democratic Republic, the central government through its national strategy, introduced a target of a 9 per cent increase in women’s access to financial services by 2025. In India, their targets are set within the bureaucracy to incentivise policy makers to implement the Digital India strategy and promotions and job security are rewarded based on performance.
These examples of innovative policy solutions are only foundational. The options for governments and policy makers at the nexus of market facilitation, participation and regulation demands creativity and agility. Underpinning this is the need for a baseline of country and regional level diagnostics to capture the diverse needs of women – those who are set to benefit the most of from harnessing the future of digital financial inclusion.
*Tengfei Wang, Economic Affairs Officer
This article is the second of a two-part series based on the findings of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) Policy Guidebook: Harnessing Digital Technology for Financial Inclusion in Asia and the Pacific, and is jointly prepared by ESCAP and the Griffith Asia Institute.source: UNESCAP
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Every conflict sooner or later ends in peace. Such is the conventional wisdom that can often be heard from those who, amid the current situation of the sanctions tsunami and confrontation with the West, are trying to find hope for a return to “normality”. The logic of such wisdom is simple. At some point, the parties will cease fire and sit down at the negotiating table. The end of hostilities will lead to a gradual reduction in sanctions pressure on Russia, and our businesses will be able to return to work with Western partners.
We have to disappoint those who believe in such a prospect. Sanctions against Russia, for the most part, will not be lifted even in the event of a ceasefire in Ukraine and a peace agreement. There will be no return to “pre-February normality”. Instead of remembering a lost past, we will have to focus on creating a new future in which Western sanctions remain a constant variable.
Why is the lifting of Western sanctions on Russia extremely unlikely? There are several reasons.
The first reason is the complexity of the conflict between Ukraine and Russia. It has every chance of being prolonged for a long time. There may be pauses in active hostilities. The parties may conclude temporary truces. However, such truces are unlikely to remove the political contradictions that gave rise to the conflict. Currently, there are no parameters for a political compromise that would suit all parties. Even if an agreement between Moscow and Kiev is reached, its sustainability and feasibility are not guaranteed. The experience of Minsk-2 shows that the mere appearance of agreements does not automatically resolve political problems and does not lead to the lifting or easing of sanctions. The Ukrainian problem can smoulder and flare up again for decades, partly because both sides are limited in the possibilities of a decisive military victory and complete surrender of the enemy. Relations between Russia and Ukraine are at risk of entering the ranks of long-term conflicts, similar to relations between India and Pakistan, or North and South Korea. The complexity and longevity of the conflict guarantee Western sanctions for the long term.
The second reason is the stable nature of the contradictions between Russia and the West. The conflict in Ukraine is part of a larger Euro-Atlantic security palette. An unstable system of asymmetric bipolarity has formed in Europe, in which the security of Russia and NATO can hardly be indivisible. Russia has no way to crush the West without doing unacceptable damage to itself. However, the West, despite its colossal superiority, cannot crush Russia without incurring unacceptable losses. Containing Russia is the best strategy for the West. Ukraine is doomed to remain one of the areas of containment. For Russia, the strategy of asymmetric balancing of Western superiority remains optimal. It is possible that part of such a strategy will be a course towards a radical territorial redistribution of Ukraine, tearing away from it the eastern and southern parts. But in itself, such a redistribution will not remove the problems of Western sanctions.
The third reason is the institutional features of the sanctions policy of the initiating countries. Experience shows that sanctions are relatively easy to impose but very difficult to lift. Thus, with regard to Iran, a whole “web of laws” has formed in the United States, which significantly limits the administration’s ability to lift sanctions. Even if the sanctions are not enshrined in law, their cancellation or mitigation still requires political capital, which not every politician is ready to spend. In the US, such steps will cause criticism or even opposition in Congress, and in the EU – disagreements among member states. Of course, individual restrictions are lifted or relaxed in the interests of the initiating countries themselves. The experience of sanctions pressure on the Republic of Belarus shows the existence of the “sanction remissions” when restrictions are eased. However, the legal mechanisms of sanctions themselves remain and can be used at any time.
The fourth reason is the quick reversibility of the sanctions. Often, their abolition is accompanied by political demands, the implementation of which is a complicated process. For example, the Iranian nuclear deal required several years of complex negotiations and significant technological decisions. However, the return of sanctions can be carried out overnight. There is an asymmetry in the fulfilment of obligations. Fulfilling the requirements of the initiators requires significant changes, while the return of sanctions requires only a political decision. Rapid reversibility breeds distrust among target countries. It is easier for them to continue to live under sanctions than to make extensive concessions and risk receiving new sanctions. Historical experience shows that the initiators of sanctions tend to play the game of “finishing” the opponent. After the concessions come new, more radical political demands and the threat of new sanctions. The “Pompeo 13 Points” – a list of US demands on Iran beyond the limits of fulfilling the terms of the nuclear deal – have already become a textbook example. The Iranian lesson, apparently, was well learned in Moscow. Iran itself is actively working to achieve its goals in the field of nuclear arms. Ultimately, this shows the ineffectiveness of sanctions in terms of influencing the political course of the target country. But questionable effectiveness does not negate the fact that sanctions continue to be applied and enforced.
The fifth reason is the ability to adapt. Without a doubt, Russia will suffer enormous damage from the restrictive measures which have been introduced. However, the possibility of it adapting to the sanctions regime remains high. Russia has the chance, first, to partially make up for the shortfall in supplies from abroad with the help of its own industry, although this will require political will and the concentration of resources. Second, it has access to non-Western markets, as well as alternative sources of goods, services and technology. The key conditions for solving this problem will be the creation of reliable channels for financial transactions that are not related to the US dollar, the Euro, or Western financial institutions. Such a task is feasible both technically and politically, although it will also require time and political will. Iran’s experience shows that sanctions have seriously hit the country’s development opportunities. However, they did not interfere with the development of agriculture, industry and technology. The modernisation of the Soviet Union also proceeded under severe Western sanctions. The ability to adapt reduces the motivation for concessions to the demands of the initiating countries, especially given the risk of playing for “finishing”.
These reasons make the prospect of lifting or significantly reducing sanctions pressure on Russia extremely unlikely. The US, EU and other initiators have already introduced the most severe restrictions on Moscow. But the upward wave of sanctions escalation has not yet been exhausted. In addition, the achievement of the ceiling of the applied measures is unlikely to mean the abolition of those already introduced. However, the sanctions also do not mean the “end of history” of the Russian economy. It found itself in new conditions that will require adaptation and the search for new opportunities for development and growth.
From our partner RIAC
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The modern policy of sanctions resembles, to some extent, the management practices of the Mongol Golden Horde. One of its elements was a system of labels (jarligs), orders, or permissions that were issued by the khan to his vassals. We remember well from history textbooks about the jarligs which were issued to rulers, that is, the permission the khan granted to the Russian princes to own this or that land. Jarligs were also issued to the clergy, freeing them from taxes or giving them other privileges. The jarlig was an instrument of imperial policy, fixing the decisions of the khan in relation to rulers or institutions dependent on him. It had a transboundary character, that is, it was a tool for managing a subordinate, but at the same time alien territory. On the one hand, it was the property of the khan. But on the other hand, it was a separate state unit. Historians have traced the subsequent influence of the Horde’s legacy on the formation of a centralised Moscow state.
For example, the historian Georgy Vernadsky underscored such an influence. It would seem that it makes sense to discuss Horde practices in relation to Russia, pointing to the “Asian” nature of its political power, its despotism and excessive concentration of power. A similar narrative, in one form or another, has been developing for centuries among Russia’s Western neighbours. However, some imperial practices appear to be universal. Today they can be observed in US policy and, to some extent, in the policy of the European Union. Russia itself has largely lost its imperial heritage, becoming a nation-state even to a greater extent than its Western rivals. Which, of course, does not preclude a transition to an imperial organisation in the future under certain circumstances.
The characterisation of the modern US and EU as empires gives rise to two risks at once. There is an intellectual risk, associated with the obvious differences between the empires of the past and modern political entities. In many respects, they are simply incomparable. The comparison of modern industrialised mass democracies with the despotic and economically primitive empire of the Mongols is sure to prompt indignation among some and a condescending smile from others. The Americans and Europeans themselves created the idea of regulatory risk. For all the differences between them, the Western states are defined by their belief in the free organisation of their political institutions, which precludes violence or coercion. Their political communities are organised voluntarily, unlike the empires of the past, which were organised on the basis of violence and coercion.
The American and European identity is grounded in the idea of the superiority of the political governance they created. It seems to be the most fair from the point of view of the equality of people in their rights, as well as the freedom of citizens within the limits of the social contract. The “significant others” for such an identity are both the despotisms of the past and some modern states that rely on autocracies. First and foremost, these include Russia and China. The superiority of capitalism and the market is also part of the Western identity. It is opposed to non-free economies, in which the state plays a key and directive role. From a normative point of view, calling the US and the EU empires would be almost tantamount to a political provocation.
Nevertheless, such a thought experiment seems justified, especially since it reflects certain intellectual developments. Among others, we can recall, for example, “Empire” by Michael Hardt and Antonio Negri. This experiment posits two assumptions. The first is that in modern international relations, inequality and hierarchy are preserved, and are determined by differences in power, economic and human potentials. The second is that the voluntary nature of an organisation does not exclude coercion and domination. The softness of politics in comparison with the empires of the past hardly indicates the absence of coercion and domination as such. In addition, the democratic structure of individual states does not exclude coercive relations between them, not to mention relations with other states.
In the 20th century, the United States was indeed able to create a unique international community that could be called a “soft empire”. At its core, no doubt, was an instrument of force and coercion. It took shape as a result of the Second World War, in which the United States, together with its allies, defeated and then occupied a number of large states (Italy, Germany, Japan). Much more important, however, was the economic, technological, and financial superiority of the United States. America became the most important source of reconstruction of post-war Europe and Japan, which later became major economic players. The United States not only did not interfere with their development, but also benefited from it. During the Cold War with the USSR, a Euro-Atlantic community system was formed, in which the United States dominated both militarily and economically, avoiding excessive control and coercion. Such control, however, was characteristic of the USSR’s relations with its allies in Eastern Europe, despite the fact that the Soviet economic base turned out to be noticeably smaller than that of the United States and its European allies. The differences between the Western and Eastern blocs in terms of the level of coercion employed during the Cold War, made it possible at the ideological level to underestimate its presence in the ranks of the former and exaggerate in the ranks of the latter.
The movie epic Star Wars in the late 1980s became a kind of archetype for mass consumption, illustrating the differences between the two systems. The victory in the Cold War and the collapse of the Soviet bloc can be considered the pinnacle of the development of the American “soft empire”, and globalisation, which gained momentum in the late 20th and early 21st centuries, when it peaked.
Europe, in turn has developed its own “soft empire”, fundamentally different from the United States, but at the same time closely connected with it. It was never based on military-political coercion. The European Union, which was established to facilitate economic integration, created its “universe” through the establishment of common standards and rules of the game, which were accepted by its members voluntarily. However, over time, the European project acquired a growing political component. So far, it has been insignificant as a military-political player, remaining a junior partner of NATO. However, through the strength of its standards, rules and bureaucracy, the EU has established a relationship of power and coercion with its member states and in the orbit of its economic influence that is no less effective than the use of force.
The financial and economic power of the US and the EU is one of the factors that allows their “empires” to remain “soft”. The United States retains its role as a global and financial leader. The American dollar is a convenient and efficient instrument for international settlements. The EU is a large market, and the euro has also taken on a prominent role in international finance. Of course, the humanism and “softness” of Western “empires” have had their limits. Whenever the use of force was relatively unhindered and technically possible, it was employed quite harshly. This was evident in the defeat of Yugoslavia and Iraq. Against Iran, however, the possible use of force ran into the prospect of much larger losses. The use of economic measures made sense as a cheaper, but at the same time devastating alternative technique for using power.
Economic sanctions can be considered the key technology of the modern “soft empires”. The US is far ahead of the rest of the world in their application, although the EU is also using them to a growing extent, and the UK has incorporated them into its independent foreign policy post-Brexit. The global nature of dollar settlements allows the US financial authorities to track transactions around the world, restricting them where they conflict with political interests. In a global economy with a US-centric financial system, blocking US sanctions is likely to result in extensive losses or even spell ruin for any large company with an international presence. The use of blocking sanctions to target strategic exporters can cause enormous economic damage to the economies of individual countries; this has been aptly demonstrated in the use of sanctions against Iran, Venezuela and Russia. The use of secondary sanctions, as well as fines and criminal prosecution for violating US regulations, has led to businesses being disciplined, regardless of their country of origin. For example, the Chinese authorities condemn the US sanctions, but Chinese companies have been forced to take them into account and generally avoid violating them, fearing financial losses and the loss of the US market. Until February 2022, Russian big business also attempted to avoid violating the US sanctions regimes, even though Moscow officially condemned their use, and Russia itself had been hit by a number of restrictive measures. European businesses have also been hit hard by US fines and are complying with US regulations despite Brussels’ grumblings. The European Union itself is actively developing its own tools and restrictive measures.
The modern policy of sanctions also gives rise to the reincarnation of the practice of issuing “jarligs”. By imposing restrictions in a particular area, the US Treasury can, for example, issue a general license that allows certain transactions. Similar permissions are possible in the policy of the European Union. Two recent examples illustrate the use of “jarligs” vis-à-vis Russia.
The first example is the situation with food exports from Russia. Formally, the United States did not impose an embargo on the export of Russian grain, fertilizers or agricultural products. However, a number of Russian agribusiness assets have been hit by blocking sanctions. Fearing secondary sanctions and fines amid large-scale financial and economic sanctions against Russia in the wake of the outbreak of the military conflict in Ukraine, foreign banks have refused to conduct transactions involving export deals for Russian suppliers. For similar reasons, shipping companies have refused to ship Russian products. Combined with the difficulties affecting Ukrainian food exports due to hostilities, rising food prices, droughts and other factors, restrictions on Russian supplies have threatened to have serious global consequences. The answer was the “jarlig” of the US Treasury in the form of a general license for transactions involving Russian food.
The second example is that of Lithuanian attempts to partly block Russian transit to the Kaliningrad region. EU sanctions prohibit the import, transportation and transfer of a number of Russian goods. Under this pretext, their transit through Lithuania was blocked. In this case, the “jarlig” had already been issued by Brussels, which specified that the sanctions do not apply to the transit of these goods by rail.
In the context of the sanctions tsunami, Russia will have to face the good old practice of bans and “jarligs”, recalling the experience of the Horde. The “jarlig” will be issued where the interests of the initiators of the sanctions so require. They can also be given out as rewards for “behavior change”. Ultimately, in the modern doctrine of sanctions policy, “behavioral change” is one of the main goals. Accordingly, Russia can either continue to rely on “jarligs” or create conditions under which foreign restrictions can be circumvented. In relation to the aforementioned example with food exports, we could talk about a system of financial settlements with consumers of Russian exports independent of the control of Western authorities and an accelerated build-up of our own merchant fleet. With regard to Kaliningrad transit, this means the development of maritime transport to the Russian exclave. Such measures will require investment and political will. The alternative is dependence on “jarligs” that can be issued today and revoked tomorrow.
The experience of the Golden Horde, like many other empires, is that “jarligs” lose their meaning when the mass of players who ignore them becomes critical. Western “soft empires” continue to retain a large margin of safety. However, the resistance of major players like Russia may gradually undermine their dominance. Involving China in the process will pose an even more serious challenge to the “soft empires”. China’s policy will be extremely cautious, but the experience of an economic attack on China during the presidency of Donald Trump in the United States has already forced Beijing to take measures to ensure its economic sovereignty and develop insurance mechanisms for use in the event of inevitable exacerbations. So far, China puts up with “jarligs” for its large companies. However, the question is, how long will such humility last?
From our partner RIAC
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