It's traditional for bankers and their customers to think about banking as centered on the bank account. Even policy makers talk about "banking the unbanked" as if opening a bank account immediately changes a person from financially excluded to included. The bank account is the top line indicator examined by the Global Findex, the new survey of financial access by 150,000 adults from over 148 countries. The finding that 43 percent of adults in the developing world have bank accounts has quickly become the reference point for financial inclusion.
For decades, balancing one's checkbook has been the cornerstone of personal finance for conscientious adults in the developed world. When I first opened an account of my own, I received a little checkbook-sized booklet in which to write down every deposit and withdrawal. I learned that keeping track of the bank balance was like the personal hygiene of finance, like brushing your financial teeth.
The implicit message, not just for me, but I think for society at large, was that the bank account was the locus of money management. All one's main financial transactions would pass through the account, and the account would serve as a kind of running financial statement, showing not only income and expenses but also personal solvency. (I'm setting aside for now the very important function of accounts as savings vehicles. That's a story for another day.)
I believe this 1950s image of the bank account is an unacknowledged presence in the minds of bankers and policy makers like the G-20 financial inclusion group when they advocate banking the unbanked. There is an assumption that opening an account equates with using an account to manage personal finances.
But what if the low income people who don't have bank accounts -- and many who do -- don't see things that way?
Consider three observations that suggest that the image of the bank account as the central money management tool is simply not relevant for many low income people:
• The Global Findex shows that many bank accounts in the developing world are relatively inactive. While in high income countries, 72 percent of accounts have more than two withdrawals per month, in low and middle income countries that figure plummets to 16-17 percent. Many people appear to be using their accounts simply as a way to get paid.
• Yet Portfolios of the Poor reveals that low income people have complex financial lives in which they manage many financial arrangements at the same time. Individuals often have multiple, complicated transactions going on at once - cash stashed away somewhere, a loan from a friend, sales on credit, etc.
• In many countries that have introduced them, "no frills" bank accounts designed as starter accounts for the poor have experienced very low usage.
This raises the very important question: for low income people who are "unbanked" where does "money management" reside? And what is money management, anyway?
Money management is an essential component of financial capability. I propose the following definition: money management is the ongoing process of keeping track of one's financial status so that as new financial decisions arise one can make them appropriately and maintain personal solvency. The focus is on maintaining a consolidated view of where one's financial assets and liabilities are at any given time.
If I have a bank account that keeps track of deposits and pay outs, I can consult my bank statement whenever I have to make an important financial decision, and therefore I do not need to keep the money management function in my head. I can outsource a big part of my money management process to the bank account.
But what if I am a first time user of an account? I might prefer to keep track in the way I am used to, which in all likelihood means keeping a running tab in my head. Unless I already keep a written record of my financial transactions (probably rare except for sophisticated microenterprises) it might not occur to me to use an account as a money management tool. Moreover, if most of my transactions remain informal, a bank account would not be a very good representation of my financial life.
The implications of this observation for providers and policy makers are profound. Providers and policy makers should not expect people to shift their locus of money management in a twinkling. It is likely to be a gradual process, involving financial education (how to use an account as a money management tool) and, perhaps even more important, the formalization of transactions so more of them flow through the account.
This observation also shows the fallacy of no frills accounts: perhaps the low demand for the money management support provided by an account shows that many people are satisfied with the money management function that resides between their ears. It also poses a challenge to payments innovations like mobile money or remittances sent through money transfer organizations. If provided outside the context of a bank account, such transactions do not result in consolidation of the money management function, but instead require a person to continue to keep track in the head (or somewhere else).
I am finally left with a question I do not know how to answer, but it is a question that should occupy anyone working on financial inclusion. If we want to assist people in their efforts to be competent money managers, what is the best mix of services? I would welcome your thoughts.
German finance minister says Greeks cannot be 'spared' - BBC News
The German Finance Minister, Wolfgang Schaeuble, has said that ordinary Greeks cannot escape painful cuts and must accept them, however they vote.
He told Stern magazine that while he had "really huge sympathy for the man on the street in Greece", he could "not spare him" a cut to the minimum wage.
Germany, the richest eurozone state, strongly opposes relaxing conditions for the bailouts given to Greece.
Mr Schaeuble said Sunday's election in Greece would not change the situation.
Antonis Samaras, head of Greece's main conservative party New Democracy, has again urged voters to reject anti-bailout campaigners.
The country is holding a repeat general election on Sunday after parties failed to agree on a new government following the original ballot on 6 May.
By law, no opinion polls may be conducted in the final two weeks before the election. The last available surveys suggested New Democracy were neck and neck with the far-left anti-bailout bloc Syriza.
'Not easy'Rigid austerity measures were attached to the two international bailouts awarded Greece, an initial package worth 110bn euros (£89bn; $138bn) in 2010, then a follow-up last year worth 130bn euros.
"In a crisis... the little man suffers and the rich feather their own nests," Mr Schaeuble said.
"It is not easy to cut the minimum wage in Greece, when you think of the many people who own a yacht."
But, he stressed, if Greece wanted to regain competitiveness, the minimum wage "must fall".
"An election result will not change anything about the real situation of the country, which is in a painful crisis due to decades of economic mismanagement," the minister added.
On Tuesday, German Chancellor Angela Merkel said countries such as Greece that had received bailouts could not expect the conditions attached to be relaxed.
Immigration pledgeSpeaking to reporters on Wednesday, Antonis Samaras said his party would do "everything for there to be a government" after 17 June.
His two conditions, he said, were amending the last bailout in order to create jobs and staying in the eurozone.
"We have to change this programme in order to stimulate job growth... while at the same time we must try to remain with the Eurozone," he said.
The conservative leader also vowed to "take back" Greek cities from illegal immigrants if his party won on Sunday.
"We have to take back our cities from those who have flowed in without any permission whatsoever," the Greek party leader said.
Illegal immigration is a sensitive issue in Greece, where a far-right party, Golden Dawn, won seats in the May election on an anti-immigration platform.
Exclusive: Syria prints new money as deficit grows: bankers - Reuters
AMMAN |
AMMAN (Reuters) - Syria has released new cash into circulation to finance its fiscal deficit, flirting with inflation after violence and sanctions wiped out revenues and led to a severe economic contraction, bankers in Damascus say.
Four Damascus-based bankers told Reuters that new banknotes printed in Russia were circulating in trial amounts in the capital and Aleppo, the first such step since a popular revolt against President Bashar al-Assad began in 2011.
The four bankers said the new notes were being used not just to replace worn out currency but to ensure that salaries and other government expenses were paid, a step economists say could increase inflation and worsen the economic crisis.
The United Nations says Assad's forces have killed at least 10,000 people in a crackdown, and the government says more than 2,600 members of its security forces have died.
The four bankers, along with one business leader in touch with officials, said the new money had been printed in Russia, although they were not able to give the name of the firm that printed it. Two of the bankers said they had spoken to officials recently returned from Moscow where the issue was discussed.
"(The Russians) sent sample new banknotes that were approved and the first order has been delivered. I understand some new banknotes have been injected into the market," said one of the bankers. All requested anonymity.
Two other senior bankers in Damascus said they had heard from officials that a first order of an undisclosed amount of new currency had arrived in Syria from Russia, although they were unable to confirm whether it had entered circulation.
Outgoing Finance Minister Mohammad al-Jleilati said last week that Syria had discussed printing banknotes with Russian officials during economic talks at the end of May in Moscow. He said such a deal was "almost done", without going into details.
However, the central bank later denied through state media that any new currency had been circulated.
Goznak, the state firm that operates Russia's mint and has exclusive rights to secure printing technology, regularly prints money for other countries. It declined to comment.
"LAST RESORT"
Russia is one of Syria's major political backers and a close trading and economic partner. There are no sanctions in place that would bar a Russian firm from printing money for Syria.
Syrian money was previously printed in Austria by Oesterreichische Banknoten- und Sicherheitsdruck GmbH, a subsidiary of the Austrian central bank. That order was suspended last year because of European Union sanctions, an Austrian central bank spokesman said.
One of the four bankers described the decision to use newly printed money from Russia to pay the deficit as a "last resort" after several months of consideration.
Syria's deficit has swollen because of declining government revenues and loss of oil exports hit by sanctions. The government is loathe to impose unpopular measures to fight the deficit, like cutting subsidies or raising taxes.
"The deficit is there and it is already increasing and increasing quickly. And to finance it they have decided to print currency," said the senior businessman, who is familiar with the subject and in touch with monetary officials.
Bankers say a priority has been to continue salary payments for over 2 million state employees among a workforce of 4.5 million in a country of more than 21 million people.
"You cannot allow the public sector to collapse," said one of the bankers."
"People are getting their wages and there are no complaints if they are paid at the end of every month. If we reach a stage where they are not paid there will be a crisis."
Syria's $27 billion 2012 budget was the biggest in its history, taking many by surprise. Bankers say the spending surge was motivated by a desire to create more state jobs and maintain subsidies to help ward off wider discontent.
The private sector has suffered large scale layoffs, but workers in the public sector have kept their jobs and had steady wages despite a salary freeze.
Financing the spending has proven difficult. The central bank has exceeded borrowing limits from public banks, and private banks are reluctant to buy government bonds, one of the bankers said.
Inflation is already running at 30 percent, although the central bank considers it manageable.
Authorities have spent state funds on subsidies to keep the prices for household utilities and petrol unchanged, and have announced planned price controls on basic commodities. However, electricity prices for big industries have risen by 60 percent and the price of subsidised diesel fuel has also risen.
The authorities plan to inject only a small amount of new currency to prevent runaway inflation, said one of the bankers.
"But there is a limit to how much fresh money could be injected into the economy in such highly uncertain times. Reckless printing of money as a way of buying short term reprieve could be economic suicide," the banker added.
(Additional reporting by Fredrik Dahl in Vienna; Editing by Oliver Holmes and Peter Graff)
'Diablo 3' real-money auction house European launch date confirmed - Digital Spy
Seven arrested in alleged Mexican cartel scheme to launder money in horse racing - CNN
(CNN) -- Seven members of Mexico's Zetas cartel were arrested Tuesday after a U.S. indictment accused a total of 14 cartel members of laundering drug money through the breeding and racing of American quarter horses in the United States, authorities said.
Los Zetas leader Miguel Angel Trevino Morales, 38, and his two brothers were named in the federal indictment, and brother Jose Trevino Morales, 45, and his wife, 38-year-old Zulema Trevino, were among the seven arrested, federal authorities said.
The 14 defendants were charged with a conspiracy using horse racing and breeding to launder the cartel's drug money, authorities said.
"The allegations in this indictment, if proven, would document yet another example of the corrupting influence of Mexican drug cartels within the United States, facilitated by the enormous profits generated by the illicit drug trade," U.S. Attorney Robert Pitman of the Western District of Texas said in a statement.
Opinion: Illicit funds from Mexico find haven in U.S.
Since 2008, cartel leader Miguel Angel Trevino Morales and brother Oscar Omar Trevino Morales directed millions of dollars in drug money to brother Jose and his wife for buying, training, breeding and racing quarter horses in New Mexico, Oklahoma, California and Texas, authorities said. Jose Trevino, his wife and others disguised the ownership of the horses through the use of "front" companies, authorities said.
Among the horses that were part of the alleged laundering operations were Tempting Dash, winner of the Dash for Cash at Lone Star Park racetrack in Grand Prairie, Texas, on October 24, 2009, and Mr. Piloto, winner of the $1 million All American Futurity at Ruidoso Downs on Labor Day 2010 in Ruidoso, New Mexico, authorities said.
Federal authorities are seeking forfeiture of those race horses and others named Dashin Follies, Coronita Cartel and Separate Fire -- as well as property in Lexington, Oklahoma, and Bastrop County, Texas, and money in three bank accounts, officials said.
The indictment alleges the horse racing and breeding conspiracy raised $20 million, and authorities are seeking a monetary judgment in that amount, officials said.
The Los Zetas cartel, headquartered in Nuevo Laredo, Mexico, directly across the border from Laredo, Texas, is Mexico's largest drug cartel in terms of territory and has operations in 11 Mexican states, the indictment said.
The cartel sends thousands of kilograms of cocaine and other drugs annually to the United States, generating many millions of dollars, the indictment said.
"This case is a prime example of the ability of Mexican drug cartels to establish footholds in legitimate U.S. industries and highlights the serious threat money laundering causes to our financial system," Richard Weber, chief of IRS Criminal Investigation, said in a statement.
The five other people arrested Tuesday are Fernando Solis Garcia, 29, in Ruidoso; 26-year-old Carlos Miguel Nayen Borbolla, 32-year-old Adan Farias and 28-year-old Felipe Alejandro Quintero in Los Angeles; and Eusevio Maldonado Huitron, 48, in Austin, Texas, authorities said.
Cartel leader Miguel Angel Trevino Morales and brother Oscar Omar Trevino Morales, 36, are believed to be in Mexico, authorities said.
The five others indicted who haven't been arrested as of Tuesday are Raul Ramirez, 20, of El Paso, Texas; Francisco Antonio Colorado Cessa, 51, of Veracruz, Mexico; Victor Manuel Lopez, 31, of Nuevo Laredo; and Sergio Rogelio Guerrero Rincon, 40, and Luis Gerardo Aguirre, 35, both of Mexico, authorities said.
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