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Why Fintech Programs Should Target Employment Generation

Some 1.4 billion people are desperately poor across the world. They live in some of the worst conditions possible. They do not have enough to eat, lack access to clean water or adequate sanitation, and lack access to medicine. Diseases such as Malaria, AIDS, Starvation, and many others are commonplace. Life expectancy is very low. Children die before reaching adolescence, and many adults die before reaching middle age. Illiteracy is high and higher education is elusive to most of the population.

The most recognized indicator of poverty is the headcount ratio. The headcount ratio measures the proportion of the population considered to earn an income less than the standard required for basic needs. This poverty line may vary from country to country and over time. However, to simplify comparability across countries and over time, the poverty line has been standardized as a daily income of US$ 1 at international standards (UN).

Most of what is described above is what the UNDP would use in measuring what they call the Human Poverty Index (HPI) for developing countries. This measure is designed to reflect shortfalls in the three indexes of human development: long and healthy life, knowledge, and a decent standard of living.

While access to financial products and services has been identified as critical to addressing these indexes of human development, policies or programs that generate employment are particularly more effective. According to the UN, unemployment, and underemployment lie at the heart of poverty. Creating employment or enabling an environment to support employment is an effective fulcrum between economic growth on the one hand, and poverty reduction and development on the other. Increased demand for labor in sectors with reasonable levels of productivity and those that provide essential public goods produces desirable social-impact outcomes for developing economies.

Employment in this context is defined as “paid work”. Self-employment also achieves the same outcomes and, in some cases, becomes a precursor to providing even further employment. Employment in this context becomes a critical asset in breaking out of the dilapidating and sometimes generational poverty cycle. It is essential for achieving poverty reduction and sustainable economic and social development. Access to “paid work” secures income and empowerment for the poor, especially women and younger people.

Given the importance of employment for poverty reduction, job-creation should occupy a central place in not just national poverty reduction strategies but also the design and implementation of products and services by Financial Technology (FinTech) companies. These products and services, at least some of them, should answer the question: “How many jobs (employment or self-employment) can this program potentially generate?

For instance, can we have “shared revenue” programs that enable the poor to perpetually earn income all through their lifetime? Can we provide easy access to existing markets and/or the creation of new markets for farmers and skilled workers? Can we design programs that integrate basic financial literacy in its usage?

Poverty is essentially very stubborn. I may not be able to scientifically fully explain why and how, but I have come to understand that the values held by people experiencing poverty play a significant role in perpetuating their impoverished condition, sustaining a cycle of poverty across generations. Consequently, Poverty Alleviation products and services should be interventionist in design and approach.