Electronic money, or e-money, emerged in the countries of the West African Economic and Monetary Union (WAEMU) following the adoption, in 2006, of a Central Bank Instruction establishing a flexible regulatory framework aimed at encouraging e-money business. The activity expanded in 2009 with the involvement of telecommunications operators in the provision of mobile telephone-based financial services, which increased the number of users and the volume of transactions.

A growing business

At the end of September 2015, 22 million people, or nearly a quarter of the people in the union, subscribed to financial services via mobile phone. Approximately 30 percent of those subscribers carried out at least one transaction per 90-day period.

Some 500 million transactions took place over the first nine months of 2015. The cumulative value of the transactions was 5 trillion CFA francs ($8.5 billion) by the end of September 2015, a growth of 142 percent from September 2014. Between September 2013 and September 2014, this value grew from CFA 1 trillion to CFA 2.068 trillion, an increase of 107 percent.

The mobile phone financial services distribution network followed a similar upward trend, rising from 93,621 points of services in 2014 to more than 132,658 at the end of September 2015.

Figure 1. Trends in the value of transactions

The socioeconomic environment in the union goes a long way to explaining the success of mobile telephone payment services. Indeed, this method of providing money transfer or payment services is particularly well suited to people who lack access to the mainstream banking system, and also affords non-bank institutions the opportunity to offer users non-cash money against cash deposits, which can then be used for a variety of financial transactions.

The growing involvement of telecommunications operators

The market is increasingly dominated by partnerships between banks and telecommunications operators, which represented 25 of the 33 licensed or authorized e-money issuers at the end of December 2015. In the framework of this model, known as the bank model, the bank has responsibility for issuing the e-money.

The other seven non-bank institutions, under the non-bank model, are authorized to issue electronic money as “Electronic Money Institutions” (EMIs) [1].

In WAEMU, e-money issuers are supported by a regulatory framework that was revised in 2015 to ensure increased security and quality of payment services backed by electronic money.

Figure 2. E-money issuers in WAEMU

Note: DFS denotes microfinance institutions.

A revised regulatory framework

With the expansion of mobile phone financial services and the growing involvement of telecommunications operators, the Central Bank has revised its regulatory framework with the aim of enhancing the security and quality of payment services backed by electronic money. The most salient improvements must focus on:

• Increasing issuer accountability by clarifying users’ roles in partnerships with technical service providers. With this goal in mind, the activities of technical service providers have been restricted to technical processing or the distribution of e-money under the responsibility of the issuer. In addition, issuers are responsible for the integrity, reliability, security, confidentiality, and traceability of all transactions carried out by all of their distributors; Stimulating competition through transparent pricing with an obligation for issuers to publish their rates;


• Specific requirements in terms of governance and internal and external audits for electronic money institutions, standards of integrity on the part of the management, professional secrecy and regular infrastructure audits;


• Increased protection for bearers of electronic money, including keeping funds in dedicated accounts, requiring a constant equivalence between the amount of e-money and the balances in the dedicated accounts, and mandatory creation of a mechanism to take in and deal with complaints by bearers of electronic money;


• Reinforcement of the supervisory mechanism by reducing deadlines for reporting on issuers’ activities to the Central Bank and adopting sanctions for violations of regulatory provisions.

Provision of mobile-phone-based financial services

Mobile-phone-based financial services provided in WAEMU include three categories of services, namely services involving the use of cash (banknotes and coins), e-money services, and so-called “second generation” services.

The first type of service essentially involves deposits of cash or refilling of electronic wallets, as well as withdrawals. This type of service represents 24 percent of user transactions. Cash deposits predominate; they allow customers to provision their electronic money accounts.

Seventy-six percent of the funds deposited into e-money accounts are used, above all, for purchases of telephone credit, payment of bills, person-to-person money transfers, and money transfers from individuals to businesses and from individuals to government agencies. The main payment services found in WAEMU pertain to payment of water or electricity bills, payment of satellite television subscriptions, and purchases of goods in supermarkets or fuel at service stations.

Payments of taxes or income taxes to government agencies and payments of micro-loan installments are also made through mobile phone financial services, but are much less common.

So-called “second generation” services, namely micro-insurance, micro-savings, and micro-credit, are currently emerging in WAEMU. Their development could be an opportunity to provide access to the banking system for the users of the services.

Finally, interoperability is just beginning to be implemented based on bilateral agreements between stakeholders, particularly with a view to offering cross-border payment services between member states of the union.

Challenges

A review of the development of mobile phone financial services in WAEMU reveals some obstacles to the rapid development of this type of financial service within WAEMU. They include:

• a low number of active users, due to the high cost of the services;
• the fact that the services are not well known due to inadequate financial education;
• the low rate of digitization of government agencies’ payment systems; and
• insufficient partnerships between bank and non-bank issuers with a view to developing a more inclusive range of “second-generation” services.

In collaboration with all stakeholders, the Central Bank has developed a financial inclusion strategy to continuously improve, access to and use of diverse, tailored and affordable financial services. The implementation of these actions as described in the Central Bank of West African States (BCEAO) financial inclusion strategy should support the challenges mentioned above.

Read in French »

[1] EMI: any legal entity, other than a bank, financial payment institution, or decentralized financial system, that is authorized to issue payment instruments in the form of electronic money and whose business activities are restricted to electronic money issuing and distribution.

Although a few political analysts have been focusing on the white working class for years, it is only in response to the rise of Donald Trump that this large group of Americans has begun to receive the attention it deserves. Now, thanks to a comprehensive survey that the Public Religion Research Institute (PRRI) undertook in collaboration with the Brookings Institution, we can speak with some precision about the distinctive attitudes and preferences of these voters.

There are different ways of defining the white working class. Along with several other survey researchers, PRRI defines this group as non-Hispanic whites with less than a college degree, with the additional qualification of being paid by the hour or by the job rather than receiving a salary. No definition is perfect, but this one works pretty well. Most working-class whites have incomes below $50,000; most whites with BAs or more have incomes above $50,000. Most working-class whites rate their financial circumstances as only fair or poor; most college educated whites rate their financial circumstances as good or excellent. Fifty-four percent of working-class whites think of themselves as working class or lower class, compared to only 18 percent of better-educated whites.

The PRRI/Brookings study finds that in many respects, these two groups of white voters see the world very differently. For example, 54 percent of college-educated whites think that America’s culture and way of life have improved since the 1950s; 62 percent of white working-class Americans think that it has changed for the worse. Sixty-eight percent of working-class whites, but only 47 percent of college-educated whites, believe that the American way of life needs to be protected against foreign influences. Sixty-six percent of working-class whites, but only 43 percent of college-educated whites, say that discrimination against whites has become as big a problem as discrimination against blacks and other minorities. In a similar vein, 62 percent of working-class whites believe that discrimination against Christians has become as big a problem as discrimination against other groups, a proposition only 38 percent of college educated whites endorse.

This brings us to the issue of immigration. By a margin of 52 to 35 percent, college-educated whites affirm that today’s immigrants strengthen our country through their talent and hard work. Conversely, 61 percent of white working-class voters say that immigrants weaken us by taking jobs, housing, and health care. Seventy-one percent of working-class whites think that immigrants mostly hurt the economy by driving down wages, a belief endorsed by only 44 percent of college-educated whites. Fifty-nine percent of working-class whites believe that we should make a serious effort to deport all illegal immigrants back to their home countries; only 33 percent of college-educated whites agree. Fifty-five percent of working-class whites think we should build a wall along our border with Mexico, while 61 percent of whites with BAs or more think we should not. Majorities of working-class whites believe that we should make the entry of Syrian refugees into the United States illegal and temporarily ban the entrance of non-American Muslims into our country; about two-thirds of college-educated whites oppose each of these proposals.

Opinions on trade follow a similar pattern. By a narrow margin of 48 to 46 percent, college-educated whites endorse the view that trade agreements are mostly helpful to the United States because they open up overseas markets while 62 percent of working-class whites believe that they are harmful because they send jobs overseas and drive down wages.

It is understandable that working-class whites are more worried that they or their families will become victims of violent crime than are whites with more education. After all, they are more likely to live in neighborhoods with higher levels of social disorder and criminal behavior. It is harder to explain why they are also much more likely to believe that their families will fall victim to terrorism. To be sure, homegrown terrorist massacres of recent years have driven home the message that it can happen to anyone, anywhere. We still need to explain why working-class whites have interpreted this message in more personal terms.

The most plausible interpretation is that working-class whites are experiencing a pervasive sense of vulnerability. On every front—economic, cultural, personal security—they feel threatened and beleaguered. They seek protection against all the forces they perceive as hostile to their cherished way of life—foreign people, foreign goods, foreign ideas, aided and abetted by a government they no longer believe cares about them. Perhaps this is why fully 60 percent of them are willing to endorse a proposition that in previous periods would be viewed as extreme: the country has gotten so far off track that we need a leader who is prepared to break so rules if that is what it takes to set things right.

The Earned Income Tax Credit (EITC) supports millions of single parents and their children each year. Although the majority of these are single moms, Father’s Day provides a good reminder that single dads are also a significant part of the equation.

Using Brookings’ MetroTax model, we estimate that roughly half (49 percent) of all EITC-eligible tax filers in 2014 filed as head of household—a group that includes many single custodial parents. Of these estimated 13.1 million filers, 8.9 million were women, and 4.2 million were men. These female-headed households included an estimated 14.7 million qualifying children, while their male counterparts included 6 million qualifying children.

Although women head of household filers were more likely to be EITC-eligible (69 percent), male heads of household were not far behind, with an estimated 61 percent eligible to receive the EITC in 2014.

To learn more about the EITC-eligible population, visit Brookings’ EITC data interactive.

Event Information

As part of ongoing cooperative work with the U.S. Food and Drug Administration, the Engelberg Center for Health Care Reform has formed a council to bring together expert perspectives on the challenges facing antibacterial drug development. Designed to include representatives from academia, patient advocacy groups, industry, providers, and government agencies, the Brookings Council on Antibacterial Drug Development (BCADD), will convene twice a year to discuss pressing issues in the treatment of infectious diseases and potential steps to address them.  

The first BCADD meeting, held on August 30, 2012, brought stakeholders together to discuss the following:

• Ongoing antibacterial initiatives at FDA and the Clinical Trials Transformation Initiative
• Statistical and methodological approaches that could be harnessed to improve the efficiency of antibacterial drug development
• Balancing benefit-risk and uncertainty considerations with public health needs
• Next steps for council action

For more information on FDA’s Antibacterial Drug Development Task Force, click here.

Event Materials

• 30 antibacterial drug development summary
• Presentation Slides
• FINAL BCADD Discussion Guide 20120828
• FINAL May 9 Summary 20120828
• Participant List_Final

Editors’ Note: According to a new Pew poll, half of Israeli Jews have come to seek not only a Jewish majority but even Jewish exclusivity in Israel. That doesn’t bode well for Arab-Jewish coexistence in Israel, writes Shibley Telhami—even aside from what happens in the West Bank and Gaza. This post originally appeared on the Monkey Cage blog.

When U.S. leaders and commentators warn that the absence of a two-state solution to the Israeli-Palestinian conflict will make it impossible for Israel to be both a Jewish and democratic state, they generally mean that a Jewish democracy requires a Jewish majority; if Israel encompasses the West Bank and Gaza, Arabs will become a majority. What they may not have realized is that, in the meantime, half of Israeli Jews have come to seek not only a Jewish majority but even Jewish exclusivity.

That is one of the most troubling findings of a new Pew poll in Israel. And it doesn’t bode well for Arab-Jewish coexistence in Israel—even aside from what happens in the West Bank and Gaza.

This major study was conducted from October 14, 2014, to May 21, 2015, among 5,601 Israeli adults ages 18 and older. (Disclosure: I served as an adviser to the project). It found that 48 percent of all Israeli Jews agree with the statement “Arabs should be expelled or transferred from Israel,” while 46 percent disagreed. Even more troubling, the majority of every non-secular Jewish group, including 71 percent of Datim (modern orthodox Jews) agreed with the statement.

While age is not much of a factor when it comes to attitudes toward expelling Arabs from Israel, younger Israelis are slightly more likely to agree with the statement that Arabs should be expelled than older Israelis.

These attitudes are anchored in a broader view of identity and of the nature of the Israeli state. Overall, only about a third of Israeli Jews say their Israeli identity takes precedence over their Jewish identity, with the overwhelming majority of every group, except for secular Jews, saying their Jewishness comes first.

This view has consequences for citizen rights. Not surprisingly, the overwhelming majority of all Jewish Israelis (98 percent) feel that Jews around the world have a birthright to make aliya (immigration to Israel with automatic Israeli citizenship). But what is striking is that 79 percent of all Jews, including 69 percent of Hilonim (secular Jews) say that Jews deserve “preferential treatment” in Israel—so much for the notion of democracy with full equal rights for all citizens.

These attitudes spell trouble for Arab citizens of Israel who constitute 20 percent of Israel’s citizens. It’s true that attitudes are dynamic; they are partly a function of Jewish-Arab relations within Israel itself, but also outside, especially within the broader Palestinian-Israeli conflict. Like their Jewish counterparts, Arab citizens of Israel (mostly Muslim, but also including Christians and Druze), identify themselves with their ethnicity (Palestinian or Arab) or religion above their Israeli citizenship. And these ethnic/religious identities intensify when conflict between Israel and the Palestinians in the West Bank and Gaza intensifies. There is no way to fully divorce the broader Palestinian-Israeli conflict from Arab-Jewish relations within Israel.

In recent years, this latter linkage has become central for two reasons: loss of hope for a two-state solution, and the rise of social media that has displayed extremist attitudes that used to be limited to private space. In the era of Facebook and Twitter, Arab and Jewish citizens post attitudes that deeply offend the other: An Arab expresses joy at the death of Israeli soldiers killed by Palestinians, while a Jew posts a sign reading “death to Arabs.” Hardly the stuff of co-existence. Leave it to opportunist politicians, extremists and incitement to do the rest.

But there is also an American responsibility—not so much with regard to failure of diplomatic efforts, but with the very positing of the nature of the conflict itself, and the nature of the state of Israel. As President Obama considers steps he could undertake on the Israeli-Palestinian conflict before leaving office, he may contemplate addressing what has become a distorting and detrimental discourse that serves to give a pass to non-democratic attitudes, and diversion of attention from core problems.

First, there is something wrong with positing the possibility of Arabs as constituting a demographic problem for Israel. It legitimizes the privileging of Jewishness over democracy. It also distorts the reason why Israel is obligated to end occupation of the West Bank and Gaza; it has nothing to do with the character of Israel as such, but with international law and United Nations resolutions.

Second, while states can define themselves as they wish (and are accepted by the international community accordingly), the American embrace of the “Jewishness” of Israel, cannot be decoupled from the Palestinian-Israeli context, or from the overarching American demand that all states must be for all their citizens equally.

In part, this is based on the notion that the UN General Assembly (Resolution 181) recommended in 1947 dividing mandatory Palestine into an “Arab” and a “Jewish” State. In part, it’s based on the notion that the Palestinian-Israeli conflict is a political conflict that can be resolved through two states, one manifesting the self-determination of Jews as a people, and one manifesting the right of self-determination of Palestinians as a people. The two were bound together. An embrace of a Jewish state that excludes a Palestinian state defeats the principle.

If two states become impossible, America chooses democracy over Jewishness. In fact, this has been consistently reflected in American public attitudes across the political spectrum, most recently in this November 2015poll; in the absence of a two-state solution, 72 percent of Americans would want a democratic Israel, even if it meant that Israel ceases to be a Jewish state with a Jewish majority.

More centrally, even with two states—one manifesting Jewish self determination and one Palestinian self-determination—an overarching, principled American position takes precedence: If Israel is a state of the Jewish people, it must also be above all a state of all its citizens equally; (and if Palestine is to be a state of the Palestinian people, it must also be a state of all its citizens equally). This democratic principle, highlighted front and center in a reformulated American position, can help avoid legitimizing undemocratic attitudes in the name of Jewish identity.

On May 17, Egyptian President Abdel-Fatah el-Sissi did something Egyptian presidents have done many times before: he urged Israel and the Palestinians to renew negotiations for peace, this time by backing an international conference promoted by the French foreign minister.

But what made Sissi’s call particularly interesting is that he called on not just the leaders but also political "parties" to seize what he called “a real opportunity to find a long-awaited solution.” Sissi's call offered Israeli Prime Minister Benjamin Netanyahu an opportunity to accommodate Israel's newest best friend, Sissi, rather than the French themselves. It would not have brought peace, of course: though an international conference would offer a glimmer of hope to change some of the worst aspects of the current diplomatic deadlock, it would not solve any of the outstanding substantive issues between Israelis and Palestinians.

Sissi's reference to political parties was no coincidence: it fit perfectly with the domestic political needs of Netanyahu and of Opposition Leader Isaac Herzog, who were angling to bring the Zionist Union joint list into the government and give Netanyahu a much-needed parliamentary cushion beyond his current razor-thin coalition. 

Herzog first had to convince his own highly-reluctant party of the need to join its rival Netanyahu—and if peace was about to break out, how could they refuse? For about 48 hours it seemed like Herzog was indeed about to announce his decision to join the coalition, face the battle in his party, and become Israel's foreign minister.

Then something else happened. Rather than appointing Herzog as foreign minister, Netanyahu is now poised to bring back Avigdor Lieberman, a former foreign minister and Israel's least diplomatic politician. Lieberman won't be returning to diplomacy, however. Instead, he will get a significantly more powerful position, second only to the prime minister: minister of defense. In response, current Minister of Defense Moshe Ya’alon today resigned from the cabinet and the Knesset, refusing to take another cabinet position. He gave a scathing speech, saying that "[E]xtremist and dangerous forces have taken over Israel and the Likud movement."

In what can only be considered brilliant politicking—and reckless policy—Netanyahu jettisoned Ya’alon and Herzog in favor of his former associate and bitter personal rival, Lieberman.

In what can only be considered brilliant politicking—and reckless policy—Netanyahu jettisoned Ya’alon and Herzog in favor of his former associate and bitter personal rival, Lieberman. Herzog is left wounded and humiliated, played for a fool—the gravest sin in Israeli political culture. Netanyahu finds himself at the helm of an enlarged coalition (Lieberman brings with him five members of Knesset, after one member of his faction left the party today in protest of the move), safer from parliamentary shocks and from attacks from the right (the whole right wing is now inside the coalition. Lieberman will still likely criticize Netanyahu from within the government, but not quite as fiercely). 

A cynics’ cynic

Lieberman's pending appointment has been met with astonishment by the opposition in Israel, by many in the military which he will oversee, and indeed here in Washington—and with good reason.

Just these past few months, Lieberman has viciously attacked both Netanyahu and the military brass for what he claimed was a weak response to terrorist attacks. In but one example of many, Lieberman came to the defense of a soldier who the Israel Defense Forces (IDF) had decided to prosecute for killing a Palestinian assailant who had already been thoroughly subdued. The contrast to current Minister of Defense Moshe Ya’alon is striking: Ya’alon defended the military's decision and stressed the importance of ethical norms and of rules of engagement in the military. Ya’alon is very right wing on the Palestinian issue, but he has consistently shown an honorable stance in the face of attacks on democratic norms. 

Lieberman is ostensibly less right-wing on the Palestinian issue—sometimes. Though he is a settler himself, he has endorsed a two-state solution in very general theory, noting he would even move if peace necessitated it. His endorsement, however, has always been couched in the toughest language possible and in utter mistrust of Palestinian intentions or the chances of peace ever materializing. On the niceties of democratic norms, including military law, he is a cynics' cynic. Benny Begin, another former Likud minister and an avowed hawk, has called Lieberman's appointment “delirious.”

As minister of defense, these positions will be highly consequential. Not only will he be in charge of the military brass and its promotion, but he will have statutory authority over many affairs in the West Bank, which is under military rule. Any attempt to improve the daily lives of Palestinians (such as a project just announced to streamline checkpoints for Palestinians) will be under his purview. His open calls to bring down Hamas through a ground invasion of Gaza if there is another round of fighting with Hamas—voiced even while he was a cabinet member during the last round of fighting—will now carry the weight of the minister of defense.

What was Herzog thinking? 

For the past year, since Netanyahu formed his fourth government, Herzog had denied time and again that he was aiming to join Netanyahu rather than replace him. He bemoaned the cynicism of those who simply would not believe him. This week the masks came off. Negotiations between the sides were accelerated and Herzog began a difficult intra-party fight to justify such a move. "National unity" governments are quite common in Israel, starting with the emergency cabinet of 1967, on the eve of the Six-Day War, when a sense of imminent doom swept the country. 

These governments, however, are usually justified by either an acute crisis, like in 1967, or in order to resolve a political deadlock, such as between Shimon Peres' Labor and Yitzhak Shamir's Likud in 1984. Peres and Shamir even "rotated" the post of prime minister. Though the government was incapable of any meaningful diplomatic advances, on which it was divided, it succeeded in tackling hugely important challenges in the economy—bringing inflation down from an annual rate of over 444 percent (not a typo) in 1984, and in defense—extricating Israel from most of Lebanon, following the first Israeli Lebanon War. 

What would be the logic this time? Herzog was promising three things to his party members: a host of portfolios (jobs and titles but also influence on a range of domestic policy issues); a veto on some aspects of policy which Labor finds most damaging, including remote settlement construction and legislation seen as limiting democratic discourse in Israel; and a leading role in any negotiations with the Palestinians, staring with the French peace conference. 

The jobs for Labor would have been real. A veto on policy could have been important—Tzipi Livni, Herzog's non-Labor partner in the Zionist Union, played a crucial role in protecting democratic norms as minister of justice in Netanyahu's previous government. 

On peace, however, Herzog was offering fool's gold. Put it this way: if you think Herzog would have real autonomy to run negotiations with the Palestinians while Netanyahu is prime minister, I have two suggestions. First, ask Tzipi Livni, who had that exact task in the previous government and was accompanied to every negotiation by Netanyahu’s personal lawyer, Yitzhak Molcho. Livni, incidentally, was strongly opposed to joining Netanyahu this time around. 

Second, I have some great real-estate in a swamp in Florida I'd like to discuss with you.

Herzog had a political rationale as well. He is a natural minister and backroom politician: smart, hardworking and prone to pragmatic compromises. He is not a natural public politician. As Leader of the Opposition he has wowed no one with his charisma or ability to stand up to Netanyahu and offer a bold alternative. Better to be in the halls of power than in the open arena. With the prospects of a fierce leadership challenge in his own Labor Party, moreover, he would have bolstered his bona fides as a national leader and therefore give himself a bit more time—the most a politician in Israel can really hope for. 

If there was a political benefit to Herzog personally, the outlook for his Labor Party would have been dismal.

If there was a political benefit to Herzog personally, the outlook for his Labor Party would have been dismal. Having joined Netanyahu, it would have been very hard to present the party as an alternative to his rule. 

What now?

Netanyahu can now feel slightly more secure in his coalition, though once again at the mercy of the mercurial Lieberman. Lieberman will enjoy a powerful post that usually bestows its occupant with new popularity in Israel (the converse is true of the finance ministry). Finance Minister Moshe Kahlon will enjoy a wider coalition to pass his domestic legislation and budget; indeed he'd been pushing for enlarging the coalition since it was formed. 

In the opposition, Herzog is weaker than ever. After being led on by Netanyahu for months, breaking his own word on the negotiations and then losing his gamble, he is severely exposed to challenges within Labor. His party's image has taken a serious hit as well.

Herzog's weakness will allow others in the opposition to claim the mantle of alternative to Netanyahu. Already, Yair Lapid’s centrist Yesh Atid party is the main beneficiary, but others may emerge as well, especially from the ranks of former generals like Gabi Ashkenazi. 

Most importantly, Israel's actual policy may be affected significantly by this move. Of all the governmental posts, defense is the one that has the most effect on the crucial questions of security for Israelis (and on the daily lives of Palestinians). Instead of grand peace plans Herzog was selling, Netanyahu's political brilliance has wrought one of the most hardline governments Israel has ever had.

On Monday, the White House Council of Economic Advisers (CEA) released a report examining the long-term decline in the share of prime-age men (aged 25 to 54) who are either working or actively looking for work. What economists call the labor force participation rate for this population decreased from 98 percent in 1954 to 88 percent today, the second largest decrease among OECD countries. This trend has raised concerns not only for its impact on economic growth, but also because it seems to track an increase in mortality over that time, particularly among white males, as economists Anne Case and Angus Deaton have found.

The CEA report documents a number of possible explanations for this trend, including increasing rates of women in the workforce, rising disability insurance claims, falling demand for less-skilled workers, and barriers to employment for those with criminal records.

The report’s national analysis alone, however, obscures tremendous variation across the United States in employment among this critical group.

According to data from the Census Bureau’s American Community Survey, in 2014, 81 percent of prime-age men nationwide were employed (this statistic differs from the labor force participation rate in that it omits those who are looking for, but not in, work). Yet among the nation’s 374 metropolitan areas for which data are available, that rate ranged from over 93 percent in the oil boomtown of Midland, TX, to just over 50 percent in Kings County in California’s Central Valley.

There are clear regional patterns to this important statistic. Many of the metro areas with the highest employment rates for prime-age men are smaller places located in the middle of the country, from the Upper Midwest, to energy-rich areas in Texas and the Plains states, to the Intermountain West. In several large, economically dynamic metro areas such as Denver, Houston, Minneapolis, San Jose, and Washington, D.C., rates of work among prime-age men are also very high.

Of much greater concern is the large number of metropolitan regions with very low rates of work among prime-age men. These include many small former industrial centers in states like Michigan, Indiana, and Ohio; areas of West Virginia and Louisiana that rely on declining-employment industries like mining; and long-struggling agricultural economies in Arkansas, Texas, and inland California.

These patterns echo findings from the CEA report that falling demand for labor is an important part of the long-term decline in prime-age male employment. In many places where a high school diploma alone once provided the gateway to a middle-class job, nearly one-third of men in this age group are out of work. This is also evident in the local relationship between educational attainment and work—where educational attainment rates are higher among prime-age men, members of that group are more likely to be employed. A 10-percentage point difference in employment rates separates the most highly-educated quarter of metro areas from the least highly-educated quarter.

Beyond education, size seems to matter, too. Large metro areas exhibit higher rates of work among prime-age men than small metro areas. Across the 100 largest U.S. metro areas, 83.2 percent of prime-age males are employed, compared to 79.8 percent in the smaller 274 metro areas. This relationship partly reflects that men in large metro areas have higher rates of educational attainment than those in small metro areas. Yet even men who have no more than a high-school diploma work at higher rates in large metro areas (64 percent) than similarly educated men in smaller metro areas (62 percent). Larger regional economies with greater economic diversity may stimulate stronger demand for workers at lower skill levels.

Several of the policies that the CEA report recommends to improve prime-age male labor force participation, such as bolstering investment in public infrastructure, reforming unemployment insurance, and boosting educational attainment could help boost rates of work in lagging U.S. metro areas. However, none directly addresses the fact that problems in male employment disproportionately affect small and often economically isolated U.S. regions. This evidence suggests that policies to help dislocated workers relocate to larger, more economically dynamic metro areas—particularly by improving the supply of affordable housing in those regions—should be part of a comprehensive strategy to help reverse the troubling long-term decline in men’s work.

William Galston and E.J. Dionne, Jr. make the case for universal voting – a new electoral system in which voting would be regarded as a required, civic duty. Why not treat showing up at the polls in the same way we treat a jury summons, which compels us to present ourselves at the court? Galston and Dionne argue that universal voting would enhance the legitimacy of our governing institutions, greatly increasing turnout and the diversity of the American voter base, and ease the intense partisan polarization that weakens our governing capacity.

Citing the implementation of universal voting in Australia in 1924, the authors conclude that universal voting increases citizen participation in the political process. In the United States, they write, universal voting would promote participation among citizens who are not likely to vote—those with lower levels of income and education, young adults, and recent immigrants. By evening out disparities in the electorate, universal voting would put the state on the side of promoting broad civic participation.

In addition to expanding voter participation, universal voting would improve electoral competition and curb hyperpolarization. Galston and Dionne assert that the addition of less partisan voters in the electorate, would force candidates to shift their focus from mobilizing partisan bases to persuading moderates and less committed voters. Reducing partisan rhetoric would help ease polarization and increase prospects for compromise.. Rather than focusing on symbolic, political gestures, Washington might have an incentive to tackle serious issues and solve problems.

Galston and Dionne believe that American democracy cannot be strong if citizenship is weak. And right now, they contend citizenship is strong on rights but weak on responsibilities. Making voting universal would begin to right this balance and send an important message: we all have the duty to help shape the country that has given us so much.

Galston and Dionne recognize that the majority of Americans are far from ready to endorse universal voting. By advancing a proposal that stands outside the perimeter of what the majority of Americans are likely to support, Galston and Dionne aim to enrich public debate—in the short term, by advancing the cause of more modest reforms that would increase participation; in the long term, by expanding public understanding of institutional remedies to political dysfunction. 

Downloads

• Download the paper

Audio

• Dionne and Galston discuss their paper on universal voting

Recent reports have highlighted how mobile-based financial services are transforming banking and payments in Kenya, Bangladesh, and Peru, and all the hype about how they are about to explode everywhere else. For all of the promise that digital financial systems have for lowering costs and helping people all over the globe, it is unfortunate that their development is hampered by regulation that protects the interests of the largest providers. These regulations create significant barriers and raise the total costs to achieve universal financial inclusion.

It is indeed conceivable that purely digital financial transactions could be handled at vanishingly small unit costs, from anywhere. But the cost that won´t go away is that at the interface between the new digital payment system and the legacy payment system – hard cash. Cash in/cash out (CICO) points are like tollgates at the edge of the digital payments cloud.

Cash is Still King

Even in areas with flourishing mobile banking usage, people tend to cash in every time they want to make a mobile payment, and to cash out immediately and in full every time they receive digital money. Rather than displacing cash, digital platforms have made local cash ecosystems more efficient. Without full backward compatibility with cash, digital payment systems could not take root.

The bigger issue is not the size of the CICO toll, but the fact that small players cannot expect to have the transaction volume to sustain a widespread CICO network. The incumbent banks and telecommunications firms have built in competitive advantages. They can quickly form agreements with brick and mortar shops, attract users from the current customer base, threaten new entrants, and aggregate enough transactions to induce CICO outlets to maintain sufficient liquidity on hand.

Therefore, the competition in digital financial services will not be determined primarily by what happens within the digital payments market itself, but rather by what happens in the contiguous cash market. The power of digital services is their ability to transcend geography, and yet success in the digital payments space will go to whoever has the best physical CICO footprint.

Regulators treat the digital payments service and the CICO service as conjoined twins: each digital financial service provider must have its own base of contractually bound CICO outlets. When the two services are bundled it is not surprising that the tough economics of CICO —and, therefore, the incumbent— dominates.

A Two Market Regulatory Approach

In a recent paper, I argue it is necessary to split up these two markets, from a regulatory point of view. The market for effecting electronic payments (issuing payment instructions and debiting and crediting electronic accounts accordingly) is logically distinct from the market for exchanging two forms of money (hard cash versus electronic value).

Most regulators approve of stores receiving electronic money from customers in exchange for packs of rice on a store shelf. But, if that same electronic money was exchanged for cash then it would violate the law in many countries.

In the latter case, the store is presumed to be an agent of the customer’s financial service provider, and the store cannot offer the CICO service without an agency contract from that provider. But why? The cash that was offered was the store’s as is the account that would receive the electronic payment, and the transaction would have occurred entirely through a secure, real-time technology platform that banks offer all their clients.

A Regulatory Fix

Of course, purely financial transactions are usually held to higher consumer protection standards than normal commercial transactions. My proposal is not to deregulate CICO, but to create a new license type for CICO network managers. Holders of this license would carry certain consumer protection obligations (such as ensuring that tariffs are explicitly posted at all CICO outlets, and that they have a call center to handle any complaints that customers may have on individual CICO outlets) – entirely reasonable expectations for retailers, even if we normally don´t ask them of rice sellers.

But once you have a CICO license, then you could sign up any store you wanted and crucially, offer CICO services on the platform of any financial institution in which you have an account. In other words, you wouldn’t have to beg the incumbent to give you a special agent contract. All you would need to do is to open a normal customer account with them, which the incumbent couldn´t deny you.

This one little change would completely shift the competitive dynamics of digital financial services. Under the current direct agency model, incumbent firms have no incentive to make it easier for competitors to create CICO outlets. Whereas under the independent CICO network manager model, all licensed CICO networks would have the incentive to offer CICO services for all providers, no matter their size: with a full suite of available services, they will find it easier to sign up stores to work for them, and these stores will find it easier to convince more users to walk into their stores.

Incumbents would still be free to establish their own proprietary CICO networks, as today. But they would have to compete with independent CICO networks that are now able to aggregate business from all financial service providers, creating true competition.

All players could then claim a comparable physical presence as the incumbent. They would all benefit from the same branded competition between CICO networks. They could compete strictly on the basis of the quality of their digital financial services offering.

Unbundling the regulatory treatment of digital financial services would help competition reach every segment of the business; the current integrated model only serves the interests of the largest telecommunication companies and banks in the land.

Editor’s Note: Brookings will hold an event and live webcast on Wednesday, August 26 to discuss the findings of the 2015 Financial and Digital Inclusion (FDIP) Report and Scorecard. Follow the conversation on Twitter using #FinancialInclusion 

Access to affordable, quality financial services is vital both for ensuring the financial well-being of individuals and for fostering broader economic development. Yet about 2 billion adults around the world still do not have formal financial accounts.

The Financial and Digital Inclusion Project (FDIP), launched within the Center for Technology Innovation at Brookings, set out to answer three key questions:

• Do country commitments make a difference in progress toward financial inclusion?
• To what extent do mobile and other digital technologies advance financial inclusion?
• What legal, policy, and regulatory approaches promote financial inclusion?

To answer these questions, the FDIP team spent the past year examining how governments, private sector entities, non-government organizations, and the general public across 21 diverse countries have worked together to advance access to and usage of formal financial services. This research informed the development of the 2015 Report and Scorecard — the first in a 3-year series of research on the topic.

For the 2015 Scorecard, FDIP researchers assessed 33 indicators across four dimensions of financial inclusion: Country commitment, mobile capacity, regulatory environment, and adoption of selected basic traditional and digital financial services.

The 2015 FDIP Report and Scorecard provide detailed profiles of the financial inclusion landscape in 21 countries, focusing on mobile money and other digital financial services.

On August 26, the Center for Technology Innovation will discuss the findings of the 2015 Report and Scorecard and host a conversation about key trends, opportunities, and obstacles surrounding financial inclusion among authorities from the public and private sectors.

Register to attend the event in-person or by webcast, and join the conversation on Twitter at #FinancialInclusion.

The 2015 Brookings Financial and Digital Inclusion Project (FDIP) Report and Scorecard evaluates access to and usage of affordable financial services across 21 geographically and economically diverse countries.

The FDIP Report and Scorecard seek to answer a set of fundamental questions about today’s global financial inclusion efforts, including: 1) Do country commitments make a difference in progress toward financial inclusion?; 2) To what extent do mobile and other digital technologies advance financial inclusion?; and 3) What legal, policy, and regulatory approaches promote financial inclusion?

John D. Villasenor, Darrell M. West, and Robin J. Lewis analyzed the financial inclusion landscape in Afghanistan, Bangladesh, Brazil, Chile, Colombia, Ethiopia, India, Indonesia, Kenya, Malawi, Mexico, Nigeria, Pakistan, Peru, the Philippines, Rwanda, South Africa, Tanzania, Turkey, Uganda, and Zambia. Countries received scores and rankings based on 33 indicators spanning four dimensions: country commitment, mobile capacity, regulatory environment, and adoption.

The authors’ analysis also provides several takeaways about how to best expand financial inclusion across the world:

• Country commitment is fundamental.
• The movement toward digital financial services will accelerate financial inclusion.
• Geography generally matters less than policy, legal, and regulatory changes, although some regional trends in terms of financial services provision are evident.
• Central banks, ministries of finance, ministries of communications, banks, nonbank financial providers, and mobile network operators play major roles in achieving greater financial inclusion.
• Full financial inclusion cannot be achieved without addressing the financial inclusion gender gap.

This year’s Report and Scorecard is the first of a series of annual reports examining financial inclusion activities around the world.

View the full report and a full compendium of the country rankings here.

Downloads

• Download the report

Editor’s Note: The Center for Technology Innovation released the 2015 Financial and Digital Inclusion Project (FDIP) Report on August 26^th. TechTank has previously covered the FDIP launch event and outlined the report’s overall findings. Over the next two months, TechTank will take a closer look at the report’s findings by country and by region, beginning with today’s post on India. 

With about 21 percent of the world’s entire unbanked adult population residing in India as of 2014, the country has tremendous opportunities for growth in terms of advancing access to and use of formal financial services.

In the 2015 Financial and Digital Inclusion Project (FDIP) Report and Scorecard, we detail the progress achieved and possibilities remaining for India’s financial services ecosystem as it moves from a heavy reliance on cash to an array of traditional and digital financial services offered by diverse financial providers.

As noted in the 2015 FDIP Report, government-led initiatives to promote financial inclusion have advanced access to financial services in India. Ownership of formal financial institution and mobile money accounts among adults in India increased about 18 percentage points between 2011 and 2014. Recent regulatory changes and public and private sector initiatives are expected to further promote use of these services.

In this post, we unpack the four components of the 2015 FDIP Scorecard — country commitment, mobile capacity, regulatory environment, and adoption of traditional and digital financial services — to highlight India’s achievements and possible next steps toward greater financial inclusion.

Country commitment: An unprecedented year with no sign of slowing

India’s national-level commitment to promoting financial inclusion earned it a “country commitment” score of 100 percent. A historic government initiative helped India garner a top score: In August 2014, Prime Minister Narendra Modi launched the “Pradhan Mantri Jan-Dhan Yojana,” the Prime Minister’s People’s Wealth Scheme (PMJDY). This effort — arguably the largest financial inclusion initiative in the world — “envisages universal access to banking facilities with at least one basic banking account for every household, financial literacy, access to credit, insurance and pension facility,” in addition to providing beneficiaries with an RuPay debit card.

As part of this effort, the program aimed to provide 75 million unbanked adults in India with accounts by late January 2015. As of September 2015, about 180 million accounts had been opened; about 44 percent of these accounts did not carry a balance, down from about 76 percent in September 2014.

The PMJDY initiative is a component of the JAM Trinity, or “Jan-Dhan, Aadhaar and Mobile.” Under this approach, government transfers (also known as Direct Benefit Transfers, or DBT) will be channeled through bank accounts provided under Jan-Dhan, Aadhaar identification numbers or biometric IDs, and mobile phone numbers.

The Pratyaksh Hanstantrit Labh (PaHaL) program is a major DBT initiative in which subsidies for liquefied petroleum gas can be linked to an Aadhaar number that is connected to a bank account or the consumer’s bank details. As of July 2015, about $2 billion had been channeled to beneficiaries in 130 million households across the country.

Mobile capacity: Ample opportunity for digital services, but limited awareness and use

India received 16^th place (out of the 21 countries considered) in the 2015 FDIP Report and Scorecard’s mobile capacity ranking. India’s mobile money landscape features an extensive array of services, and the licensing of new payments banks (discussed below) may drive the entry of new players and products that can improve low levels of awareness and adoption of digital financial services.

An InterMedia survey conducted from September to December 2014 found that while 86 percent of adults owned or could borrow a mobile phone, only about 13 percent of adults were aware of mobile money. Awareness of mobile money is increasing — the 13 percent figure is double that of the first wave of the survey, which concluded in January 2014 — but uptake remains low. The Global Financial Inclusion (Global Findex) database found only 2 percent of adults in India had a mobile money account in 2014.

Implementing interoperability across mobile money offerings, increasing 3G network coverage by population, and enhancing unique mobile subscribership could boost India’s mobile capacity score in future editions of the FDIP report.

Regulatory environment: Opening up the playing field to non-bank entities

India tied for 7^th place on the regulatory environment component of the 2015 Scorecard. The country’s recent shift to a more open financial landscape contributed to its strong score, although more time is needed to see how recent regulations will be operationalized.

India has traditionally maintained tight restrictions with respect to which entities are involved in financial service provision. Non-banks could manage an agent network on behalf of a bank as business correspondents or issue “semi-closed” wallets that did not permit customers to withdraw funds without transferring them to a full-service bank account. These restrictions likely contributed to the country’s slow and limited adoption of mobile money services.

However, 2014 brought significant changes to India’s regulatory landscape. The Reserve Bank of India’s November 2014 Payments Banks guidelines were heralded as a major step forward for increasing diversity in the financial services ecosystem. These guidelines marked a significant shift from India’s “bank-led” approach by providing opportunities for non-banks such as mobile network operators to leverage their distribution expertise to advance financial access and use among underserved groups.

While these institutions cannot offer credit, they can distribute credit on behalf of a financial services provider. They may also distribute insurance and pension products, in addition to offering interest-bearing deposit accounts.

We noted in the 2015 FDIP Report that timely approval of license applications for prospective payments banks, particularly mobile network operators, would be a valuable next step for India’s financial inclusion path. In August 2015, the Reserve Bank of India approved 11 applicants, including five mobile network operators, to launch payments banks within the next 18 months. As noted in Quartz India, the “underlying objective is to use these new banks to push for greater financial inclusion.” India has also made strides in terms of establishing proportionate “know-your-customer” requirements for financial entities, including payments banks.

While India has made significant progress in terms of promoting a more enabling regulatory environment, room for improvement remains. For example, concerns have been raised regarding the low commission rate for banks distributing DBT, with many experts noting that a higher commission would enhance the ability of these banks to operate sustainably.

Adoption: Access is improving, but promoting use is key

India ranked 9^th for the adoption component of the 2015 Scorecard. Recent studies have demonstrated that adoption of formal financial services among traditionally underserved groups is improving. For example, InterMedia surveys conducted in October 2013 to January 2014 and September to December 2014 found that the most significant increase in bank account ownership was among women, particularly women living below the poverty line. Still, further work is needed to close the gender gap in account ownership.

As noted above, adoption of digital financial services such as mobile money is minimal compared with traditional bank accounts (0.3 percent compared with 55 percent, according to the September to December 2014 InterMedia survey); nonetheless, we believe that the introduction of payments banks, combined with government efforts to digitize transfers, will facilitate greater adoption of digital financial services.

While PMJDY has successfully promoted ownership of bank accounts, incentivizing use of these services is critical for achieving true financial inclusion. Dormancy rates in India are high — about 43 percent of accounts had not been deposited into or withdrawn from in the previous 12 months, according to the 2014 Global Findex.

More time may be needed for individuals to understand how their new accounts function and, equally importantly, how their new accounts are relevant to their daily lives. A February 2015 survey designed by India’s Ministry of Finance, MicroSave, and the Bill & Melinda Gates Foundation found about 86 percent of PMJDY account holders reported the account was their first bank account. While this survey is not nationally representative, it provides some context as to why efforts to promote trust in and understanding of these new accounts will be key to the success of the program.

An opportunity for promoting adoption of digital financial services was highlighted during the public launch of the 2015 Report and Scorecard: As of June 2015, it was estimated that fewer than 6 percent of merchants in India accepted digital payments. The U.S. government is partnering with the government of India to promote the shift to digitizing transactions, including at merchants.

The next annual FDIP Report will examine the outcomes of such initiatives as we assess India’s progress toward greater financial inclusion. Suggestions and other comments regarding the FDIP Report and Scorecard are welcomed at FDIPComments@brookings.edu.

How can countries support innovative approaches to facilitating access to and usage of formal financial services among low-income and other marginalized groups while mitigating the risk of misuse within the financial sector?

As part of the Brookings Financial and Digital Inclusion Project (FDIP), the FDIP team recently hosted a roundtable to examine this central question. The objective of the roundtable was to identify and discuss salient challenges and opportunities for financial services providers, government entities, and consumers with respect to balancing anti-money laundering/countering the financing of terrorism (AML/CFT) compliance — a critical component of financial integrity and stability — with inclusive financial access and growth.

We explore several key questions and themes that emerged from the roundtable below.

Do areas of synergy exist between financial inclusion and AML/CFT efforts?

• AML/CFT requirements and financial inclusion have sometimes been perceived as being in tension with one another — for example, stringent “know your customer” (KYC) requirements associated with AML processes can restrict formal financial access among marginalized groups who are unable to fulfill the KYC documentation requirements. However, the objectives of AML/CFT (ensuring stability and integrity within the financial sector) and financial inclusion (providing access to and promoting usage of a broad range of appropriate, affordable financial services) can be mutually reinforcing.
• By moving individuals from the shadow economy into the formal financial system, greater opportunities emerge for introducing underserved populations to a broad suite of formal financial services, and ensuring those services are accompanied by suitable consumer protections. Thus, financial inclusion, financial integrity, and financial stability can act as complementary objectives.
• The 2012 Declaration of the Ministers and Representatives of the Financial Action Task Force (FATF) recognized financial exclusion as a money laundering and terrorist financing risk in approving FATF’s 2012-2020 Mandate. This mandate affirmed FATF’s 2011 guidance on AML and terrorist financing measures and financial inclusion, which stated that “[i]t is acknowledged at the same time that financial exclusion works against effective AML/CFT policies. Indeed the prevalence of a large informal, unregulated and undocumented economy negatively affects AML/CFT efforts and the integrity of the financial system. Informal, unregulated and undocumented financial services and a pervasive cash economy can generate significant money laundering and terrorist financing risks and negatively affect AML/CFT preventive, detection and investigation/prosecution efforts.”

What are key challenges and concerns with respect to balancing financial inclusion with financial integrity?

• Awareness of financial inclusion issues is not universal among individuals who work in the regulatory, compliance, and law enforcement spheres of the financial ecosystem. Engagement among these groups is critical for promoting knowledge-sharing with respect to financial integrity and inclusion.
• Although FATF and other standard-setting bodies (SSBs) have increasingly adopted recommendations favoring proportionate, risk-based approaches to AML/CFT (as evidenced by the 2013 FATF Guidance on Financial Inclusion), regulators often pursue more conservative approaches than SSB guidelines recommend. These conservative approaches may constrain access to and usage of formal financial services among marginalized groups.
• Combating the potential use of low-value transfers within countries and across borders for terrorist financing purposes is a salient concern for the law enforcement community when considering proportionate AML/CFT approaches.

How does the digital component fit into these issues?

• As its name suggests, FDIP is interested in exploring the evolving role of digital technology within the financial services ecosystem. As discussed in the 2015 FDIP Report, digitization of financial services can be more cost-effective for public and private sector providers to manage and safer for consumers than carrying or storing cash.
• For example, a 2013 report found that the Mexican government saved about $1.3 billion annually by centralizing and digitizing payments for wages, pensions, and social transfers. A 2014 report by the World Bank Development Research Group, the Better Than Cash Alliance, and the Bill & Melinda Gates Foundation highlighted several countries, including South Africa, where disbursing social transfers electronically cost significantly less than manual cash disbursement.
• Digital financial services can also promote women’s economic empowerment, as these services are often more private and convenient to access than traveling to a “brick and mortar” financial service provider. Given that as of 2014 there was a 9 percentage point gap between the number of men and women with accounts in developing economies (with women disproportionately excluded from account ownership), facilitating access to formal financial services among the 42 percent of women globally who do not have an account will be a major factor in advancing financial inclusion.
• With respect to financial integrity in particular, digital identification mechanisms such as biometric IDs can help lower access barriers to financial services while ensuring that providers have the information they need to promote security and stability in the financial ecosystem. In its June 2011 guidance, FATF recognized the use of non-documentary methods of identification verification — for example, a signed declaration from a community leader coupled with a photo taken by a mobile phone — for advancing access to formal financial services among underserved groups.
• The Aadhaar initiative in India, which the FDIP team referenced in a previous post, is currently the largest biometric identification program in the world. The unique 12-digit ID enables individuals to meet KYC requirements and has been used as a financial account among those who do not have an account with a financial institution. Another innovative digital initiative is underway in Tanzania, where the government is working in concert with mobile carrier Tigo and UNICEF to provide birth certificates via mobile phones.

What are critical questions and areas of opportunity for fostering financial inclusion and integrity moving forward?

• How can regulators and providers ensure sufficient privacy protections are in place for customers when advancing financial inclusion efforts, particularly through digital channels?
• Through what mechanisms can government entities and non-government financial services providers best mitigate the risks of centralizing sensitive customer data?
• Could an industry utility that facilitates a common solution to AML systems serve as a feasible solution for harmonizing standards?
• What is the proper role of private solutions in the AML/CFT and financial inclusion spaces?
• Could identification verification applications be developed using blockchain technology?
• In what ways can social networks be leveraged with respect to digital identity initiatives and financial inclusion?

Editor’s Note: Brookings will hold an event and live webcast on Thursday, August 4 to discuss the findings of the forthcoming 2016 Financial and Digital Inclusion Project (FDIP) Report. Follow the conversation on Twitter using #FinancialInclusion.

The 2016 Brookings Financial and Digital Inclusion Project (FDIP) Report, the second annual report produced by the FDIP team, assesses national commitment to and progress toward financial inclusion through traditional and digital mechanisms in 26 countries.  

As in the 2015 report, the FDIP team analyzed four key dimensions of financial inclusion: country commitment, mobile capacity, regulatory environment, and adoption of formal financial services. The 2016 report amplifies the geographic diversity of the FDIP country sample by adding five new countries and features descriptions of the financial inclusion landscape in all 26 countries.

The 2016 FDIP Report finds that significant progress has been made toward advancing financial inclusion in many countries, and robust commitment to strengthening the digital financial services ecosystem is evident across diverse geographic, political, and economic contexts.

On August 4, the Center for Technology Innovation will discuss the key findings of the 2016 FDIP Report and host a conversation with public sector representatives about key trends, opportunities, and obstacles regarding financial inclusion in their respective countries and around the world.

Below we provide some context regarding the role of financial inclusion within the global drive for sustainable development.

What is financial inclusion?

The common themes that emerge from many definitions of financial inclusion are the ability to access formal financial services and to utilize those services in a way that promotes financial health.

For example, the Center for Financial Inclusion at Accion defines financial inclusion as a “state in which everyone who can use them has access to a range of quality financial services at affordable prices, with convenience, dignity, and consumer protections, delivered by a range of providers in a stable, competitive market to financially capable clients.”

In short, financial inclusion in itself is not the end goal, but instead serves as a key mechanism for advancing the well-being of individuals, families, and communities. At the macroeconomic level, financial inclusion provides opportunities to advance economic growth, reduce income inequality, and combat poverty.

For the purposes of FDIP, we primarily focus on individuals’ access to and usage of affordable, secure, basic financial services and products, such as person-to-person payments and savings accounts. However, we also recognize the important role that more extensive financial services (e.g., microinsurance and microcredit) can play in enabling individuals to plan for the future and absorb financial shocks. Where possible, we highlight examples of a broad suite of financial services within the country profiles of the 2016 report.

To learn more about the 2016 FDIP Report, please register to attend the launch event in-person or watch the live webcast.

Editor's Note: This piece originally appeared on Lawfare.

The United States began to use drones in Yemen in 2002 to kill individuals affiliated with al-Qaida in the Arabian Peninsula (AQAP) and its predecessor organizations and disrupt its operations there and abroad. Since then, over 200 strikes have killed over a thousand Yemenis, tens of children, and at least a handful of U.S. citizens – one of whom was a deliberate target. The program has drawn widespread condemnation from human rights organizations and some UN bodies, yet it remains in place because the administrations of George W. Bush and Barack Obama view it as a success, as both have publicly stated.

Criticism of the program often takes the form of debates about which legal regime is relevant to judging a state’s use of targeted killings, which critics call “extra-judicial executions” or simply “assassinations.” While dissent has been strongest in academic and human rights communities, some scholars have echoed the arguments made by states that the imperatives of self-defense permit states to carry out such killings as legitimate acts of war. The Lawfare consensus seems in favor of these strikes.

I share the views of the moral and legal dissenters and hesitate to move beyond those debates because I don’t want to suggest that I accept the program’s legality. 

But I do want to engage those who do view the program as working — after all, if the U.S. administration did not believe it was working, it wouldn’t need to justify it legally. But by what metrics should we consider judging its success?

Perhaps the most obvious metric is whether AQAP leaders are actually being killed and, even more, whether their deaths substantially disrupted the group’s activities in Yemen or its ability to pursue objectives outside of Yemen. For advocates of this metric, the program has been successful in the short term — individuals killed – even if the longer-term impact is less clear because new leaders seem to step in with regularity.

Yet the success in taking out AQAP’s leadership is overstated. The numbers of AQAP members and supporters officially reported as killed are questionable, and probably grossly exaggerated. This is because the U.S. administration considers all adult males in the vicinity of the strikes to be combatants, not civilians, unless their civilian status can be established subsequently. Full investigations are neither desirable nor pragmatic for the U.S. government – particularly now that Yemen is the site of a civil and regional war. Even more troubling is that at times the U.S. may not even be certain of its primary targets. It frequently uses language that is so conditional that there seems to be more than a bit of guessing about the identities of those being targeted.

But I would like to focus on different metric: the longer-term impact of the drone strikes on the legitimacy and attractiveness of al-Qaida’s message in Yemen and its ability to recruit among Yemenis themselves. Drone strikes are widely reported in local media and online and are a regular topic of discussion at weekly qat chewing sessions across the country. Cell phone calls spike after drone strikes, which are also widely reported on Twitter and Facebook. The strikes are wildly unpopular, with attitudes toward the United States increasingly negative. An Arab Barometer survey carried out in 2007 found that 73.5 percent of Yemenis believed that U.S. involvement in the region justified attacks on Americans everywhere.

The narrative that the West, and especially the United States, fears the Muslim world is powerful and pervasive in the region. The U.S. intervenes regularly in regional politics and is a steadfast ally of Israel. It supports Saudi Arabia and numerous other authoritarian regimes that allow it to establish permanent U.S. military bases on Arab land. It cares more about oil and Israel than it does about the hundreds of millions in the region suffering under repressive regimes and lacking the most basic human securities. These ideas about the American role in Middle East affairs – many of them true – are among those in wide circulation in the region.

Al-Qaida has since 1998 advanced the argument that Muslims need to take up arms against the United States and its allied regimes in the region. Yet al-Qaida’s message largely fell on deaf ears in Yemen for many years. Yes, it did attract some followers, mostly those disappointed to have missed the chance to fight as mujahidin in Afghanistan. But al-Qaida’s narrative of attacking the foreign enemy at home did not resonate widely. The movement remained isolated for many years, garnering only limited sympathy from the local communities in which they sought refuge. 

 The dual effect of U.S. acceleration in drone strikes since 2010 and of their continued use during the “transitional” period that was intended to usher in more accountable governance has shown Yemenis how consistently their leaders will cede sovereignty and citizens’ security to the United States. While Yemenis may recognize that AQAP does target the United States, the hundreds of drone strikes are viewed as an excessive response. The weak sovereignty of the Yemeni state is then treated as the “problem” that has allowed AQAP to expand, even as state sovereignty has been directly undermined by U.S. policy – both under President Ali Abdullah Salih and during the transition. American “security” is placed above Yemeni security, with Yemeni sovereignty violated repeatedly in service of that cause. Regardless of what those in Washington view as valid and legitimate responses to “terrorist” threats, the reality for Yemenis is that the United States uses drone strikes regularly to run roughshod over Yemeni sovereignty in an effort to stop a handful of attacks – most of them failed – against U.S. targets. The fact that corrupt Yemeni leaders consent to the attacks makes little difference to public opinion.

Regardless of what those in Washington view as valid and legitimate responses to “terrorist” threats, the reality for Yemenis is that the United States uses drone strikes regularly to run roughshod over Yemeni sovereignty in an effort to stop a handful of attacks – most of them failed – against U.S. targets.

The United States cut aid to Yemen in 1990 when the newly united Yemeni state, which had just rotated into the Arab seat on the UN Security Council, voted against authorization for a U.S.-led coalition to reverse the Iraqi invasion of Kuwait. Yemen suffered a tremendous economic blow, as the United States joined Kuwait and Saudi Arabia in unilaterally severing aid to what was then and still is the poorest Arab nation. But with the rise of jihadi activism on the Arabian Peninsula over the next decade, and particularly after the bombing of USS Cole in 2000, Salih welcomed the return of U.S. aid to Yemen. This included a strong security dimension as the United States began tracking those suspected of involvement in the Cole attacks and other al-Qaida activities. Conspicuous caravans of FBI agents became a topic of local conversations, so the return of a U.S. presence in Yemen was also more visible than it had been previously. Salih claimed to have had advance knowledge of every drone strike.

Saudi Arabia has meddled in Yemen at least since the fall of the northern Mutawakkilite monarchy in the late 1960s. The Saudi intervention that began with air strikes in March of this year and escalated to ground troops is thus only the latest — and most egregious — of the kingdom’s efforts to affect Yemen politics. This background is necessary to understand that if Yemen is a “failed state,” despite scholarly protestations otherwise, it is at least in part due to decades of external actors violating Yemeni sovereignty with near impunity. The drone program, like the Saudi-led war, is merely a recent and overt example.

I lived in Yemen for several years spread over the period from 1994-1999. During that time, the optimism about the democratic opening of 1990 gave way to increasing frustrations as Salih solidified his control over united Yemen. He defeated the southern leadership in the 1994 war and curtailed the freedoms and pluralism that marked the early unification period, but open public debate has always been vibrant. Travel throughout Yemen was easy at that time, the only obstacle being the need to hire an all-terrain vehicle and driver who knew the many poorly marked roads.

The Yemenis I met cut across social classes and regions, but were overwhelmingly welcoming and friendly toward Americans. In my research on Islamist political parties in Yemen and Jordan, I talked to hundreds of self-described Islamists. I spoke to people in the larger cities, the smaller towns, and in rural areas. We spent long hours talking about Islam and debating the contemporary political problems facing Yemen, the United States, and the world. In 1995 we spoke extensively about race and class in America as Yemenis watched the O.J. Simpson trial on CNN International. I often marveled at the knowledge Yemenis had of the U.S. political system; I wondered if most Americans had comparable knowledge of any other country at all. I was welcomed into homes and shared holidays with families.

What strikes me now is how most Islamists saw jihadi groups as having no place in Yemeni politics. There were jihadis in Yemen, of course, primarily the “Afghan Arabs” who had returned from fighting abroad in Afghanistan and other theaters of jihad and faced difficulties reassimilating. Islamists donning mustaches complained about Taliban proclamations that adult male Muslims must sport a beard at least a fist long. They also complained of the Saudi-sponsored “scientific institutes” that taught the super-conservative Wahhabi take on Islam. Salih had even enjoined these extremists to launch deadly attacks against Southern socialists in the first years after unification. Most of the individuals influenced by these trends eventually found their way into al-Qaida circles.

But they were relatively few. Al-Qaida found little success in attracting Yemenis who were not already drawn to jihadi ideas. The al-Qaida recruiting pitch of attacking foreign powers inside of Yemen simply rang hollow. Even the 2000 attack upon USS Cole — a warship docked in Aden — was not widely viewed as the legitimate targeting of a foreign military power intervening in Yemeni politics. Al-Qaida had to resort to extremist tactics precisely because its ideas did not attract a following significant enough to spark a popular mobilization.

For al-Qaida, the drone program is a gift from the heavens. Its recruiting narrative exploits common misperceptions of American omnipotence, offering an alternative route to justice and empowerment. Regardless of American perceptions about the legitimacy or efficacy of the attacks, what Yemeni could now deny that the United States is waging an undeclared war on Yemen?

Most recently, this narrative of direct U.S. intervention has been further substantiated by U.S. material and intelligence support for the Saudi-led military campaign aimed at the return to power of the unpopular and exiled-President Abed Rabbo Mansour Hadi. Photographs of spent U.S.-made cluster bombs are widely circulated. Nor have drone attacks ceased; alongside the often indiscriminate Saudi-led bombing, American drones continue their campaign of targeted assassination. 

One might think that the Saudi attacks would not help al-Qaida, but it is contributing to al-Qaida’s growth in Yemen. The indiscriminate targeting of the Saudi-led campaign undermines any sense of security, let alone Yemeni sovereignty. And AQAP-controlled areas like the port of Mukalla are not being targeted by Saudi or Gulf troops at all. The United States aims to take up the job of targeting AQAP while the Saudi-led (and U.S.-backed) forces focus on defeating the Houthis and restoring Hadi to power. But the overall situation is one in which those multiple interventions in Yemen are creating an environment in which al-Qaida is beginning to appeal in ways it never had before.

For al-Qaida, the drone program is a gift from the heavens. Its recruiting narrative exploits common misperceptions of American omnipotence, offering an alternative route to justice and empowerment.

For these reasons, the U.S. use of drones to kill even carefully identified AQAP leaders in Yemen is counterproductive: it gives resonance to the claims of the very group it seeks to destroy. It provides evidence that al-Qaida’s claims and strategies are justified and that Yemenis cannot count on the state to protect them from threats foreign and domestic.

U.S. officials have argued that the drone program has not been used as a recruiting device for al-Qaida. But it is hard to ignore the evidence to the contrary, from counterinsurgency experts who have worked for the U.S. government to Yemeni voices like Farea Muslimi.

It’s not just that drone strikes make al-Qaida recruiting easier, true as that probably is, but that they broaden the social space in which al-Qaida can function. America does not need to win the “hearts and minds” of Yemenis in the service of some grand U.S. project in the region. But if America wants to weaken al-Qaida in Yemen, it needs at a minimum to stop pursuing policies that are bound to enrage and embitter Yemenis who might otherwise be neutral. 

There is an old saying that when the only tool you have is a hammer, everything starts to look like a nail. The U.S. military — let alone its drones — is not the only tool on which the United States can rely. But when the measure of success is as narrow as the killing of a specific person, the tool gets used with increasing frequency. Indeed, drone strikes have significantly expanded under the Obama administration.

It is crucial to see the bigger picture, the one in which long-time Yemeni friends tell me of growing anti-U.S. sentiment where there was previously very little. Public opinion toward America has clearly deteriorated over the past decade, and to reverse it may take much longer. But the use of drones to kill people deemed enemies of the United States, along with the Saudi-led war against the Houthis, is expanding the spaces in which al-Qaida is able to function.  

Mark Muro, senior fellow and policy director of the Metropolitan Policy Program, discusses a plan to address the economic boom-bust cycle in states that rely heavily on “fracking” and how this plan can spur innovation, inclusive economic development, and de-carbonization in the U.S.

“Inclusive economic development is critical; it’s about widening the circle of prosperity to more people. An inclusive economy is a highly innovative one … one that provides many opportunities for building skills, and it is a sustainable one,” Muro says. “Sustainability is about smoothing the boom and bust cycles that are disruptive to people, communities, and the state economy. But it is also about a clean economy.”

Also in this podcast a Coffee Break from Eyerusalem Siba, research fellow with the Africa Growth Initiative in the Global Economy and Development program. Also stay tuned for our presidential election update with John Hudak.

Permanent trust funds: Funding economic change with fracking revenues (by Mark Muro and Devashree Saha)

Busted: State budgets feel fracking crash

Look to advanced industries to help drive productivity gains

Enabling female entrepreneurs and beyond

Bloomberg’s Clinton endorsement signals a big business problem for Trump and the GOP

Thanks to audio producers Mark Hoelscher and Zack Kulzer, plus thanks to Carisa Nietsche, Bill Finan, Jessica Pavone, Eric Abalahin, Rebecca Viser, and our intern Sara Abdel-Rahim.

Subscribe to the Brookings Cafeteria on iTunes, listen in all the usual places, and send feedback email to BCP@Brookings.edu 

Eye-tracking technology now makes it possible for computers to gather staggering amounts of information about individuals as they use the Internet, and draw hyper-accurate conclusions about our behavior as consumers. As the technology becomes more practical, Senior Fellow John Villasenor discusses its benefits and risks.

Video

• Eye-Tracking Technology and Digital Privacy

Audio

• @ Brookings Podcast: Eye-Tracking Technology and Digital Privacy

With new technologies for extracting oil and natural gas producing an energy boom throughout North America, Senior Fellow Charles Ebinger sees the potential in hydraulic fracturing or “fracking” to free the continent from dependence on Middle East oil, and even make some progress on curbing sources of air pollution.
 

##1##

Video

• Fracking and Prospects for Energy Security in North America

Baltimore provides a prime example of how metropolitan areas around the nation are turning to clean, green industries as a source of vibrant, sustainable growth. Expert Jennifer Vey outlines how such communities can identify their assets and capitalize on them to revitalize their economies.

Video

• Baltimore as a Case Study in Metro Economic Recovery

Audio

• @ Brookings Podcast: Baltimore as a Case Study in Metro Economic Recovery

In many African countries, women still cannot own land or resources, a significant barrier to their ability to start businesses and take advantage of the continent’s economic potential.  Fellow Anne Kamau explores their plight.

Video

• Challenges for Women in the African Economy

Partisan gridlock and political extremism threaten to tear down the pillars of public policy and render the U.S. government utterly dysfunctional, argues Senior Fellow Thomas Mann, co-author with Norman Ornstein—resident scholar at the American Enterprise Institute—of It’s Even Worse Than It Looks (Basic Books, 2012). He argues that a flood of super-PAC money, negative ads and cowed mainstream news media are contributing to the problem.

Video

• Mann: Blame for Gridlock Is Squarely on Republican Party

More than a decade after the start of the war in Afghanistan, America continues to face significant challenges in the Middle East. While news of U.S. struggles often dominate foreign policy discussions, Senior Fellow Bruce Riedel says it is important to remember that the United States is also making progress in the region. From the death of Osama bin Laden to an agreement on the use of Afghan military bases for U.S. counterterrorism operations, America is learning from its past mistakes and using these lessons to guide its response to the Arab Spring.

Video

• We Shouldn't Lose Sight of the Positive Developments in the Middle East

Drought, low agriculture productivity and a cascade of bad policy choices have put millions in the Horn of Africa and the Sahel at risk for starvation. Senior Fellow Mwangi Kimenyi, director of the Africa Growth Initiative, says the consequences will haunt the continent for decades to come.

Video

• Mwangi S. Kimenyi: Food Insecurity in Africa Can Be Solved

A little-known yearly survey conducted by the Census Bureau gathers a wealth of information that helps guide everything from investments in highways and schools to business decisions about building supermarkets and department stores. The American Community Survey gathers neighborhood-level data that isn’t collected in the decennial Census, providing invaluable information about issues from immigration to income levels. Losing that ground-level view of the changes in American life year after year would be disastrous, says Senior Fellow William Frey.

Video

• William Frey: Why the American Community Survey Is Important

In his book, Our Divided Political Heart, Senior Fellow E.J. Dionne, Jr. writes that the current deep political divide plaguing American politics has its roots in a fundamental misunderstanding of our founding principles and the strong role our forebears saw for government in protecting individual liberty.

Video

• E.J. Dionne, Jr.: Founding Fathers Believed Common Good Protected Individual Liberty

Year after year, federal spending on poverty programs has been going up, but we still see more and more people who have no margin to guard against unexpected expenses or job loss. At the same time, for different reasons, Americans who are not impoverished have seen their wealth decline sharply. Expert Ron Haskins, co-director of the Center on Children and Families, says the problems are growing deeper, despite increased federal spending on programs to assist the poor. Haskins says everyone must sacrifice, but also says, that people in general, who finish high school, get a job, and get married and delay having children until age 21 are better off.

Video

• Solutions to Poverty's Rise in America