Argument

Obama's Iraq

With U.S. combat troops out, the country remains fragile. But the drawdown has gone much better than anyone expected.

View a slide show of scenes from a still-fragile Iraq

U.S. President Barack Obama has a delicate balance to strike in Tuesday's address to the nation on the subject of Iraq. On the one hand, he should take credit for prudently managing a major downsizing of U.S. forces. Even some Bush administration officials are complimenting the current government on its pragmatic approach -- Vice President Joe Biden has come in for special praise for his behind-the-scenes role in both Baghdad and Washington. Gen. Ray Odierno likewise deserves acclaim as he departs Iraq after spending much of the last seven years there.

On the other hand, this is no time to crow; Iraqi politics are at their most fragile point in perhaps four years, and certainly their most fragile since early 2008.

Violence is trending upward, with many more attacks against the Iraqi security forces (ISF) recently, though the police have been the main target. Most of the brutal slayings are attributed to al Qaeda in Iraq (AQI), which remains distressingly effective despite losing three-fourths of its top leadership over the past year. On several recent occasions, AQI managed to overpower and decisively beat back the ISF, even if just momentarily -- AQI has even gone so far as to raise its flag locally in places it overran. The U.S. military notes that al Qaeda fighters are trying to regain a foothold in Anbar and Baghdad specifically.

Traffic cops are also increasingly becoming targets. They have little to no protection and are unarmed in most cases. Attacks against them instill general unease among Iraqis about security. Several dozen have been killed just in the month of August.

Other bombings have targeted places that were once relatively quiet. The city of Kut in Wasit province, for example, experienced just last week its most lethal car bombing since the war began. There were additional attacks against police in Kut during the tragic Aug. 25 coordinated deadly attacks across the country.

Targeted assassinations also seem to be occurring with greater frequency recently against politicians and elders. The "death squad" style attacks are reminiscent of what happened during the height of the civil war. Leaflets have been left on bodies indicating that such is the fate for cooperating with national security forces.

But violence levels remain 90 percent below those of the peak of the civil war. The ISF seems to be effective at stopping attempted acts of violence through measures such as traffic-pattern changes, car bans during major events, sweeps and arrests after an attack, and so on. The ISF has been leading these efforts for more than a year now in most places; in many cases U.S. assistance has been quite minimal.

And though there has been an uptick in violence recently, that has historically been the case during Ramadan. This year's pattern has been a bit worse than that of the last year or two, but not dramatically so.

Importantly, horrific incidents of violence have draw criticism from the Iraqi people. And polls show that the United States is more popular in Iraq today than perhaps at any time since 2003, as our Iraq Index tabulates.

In fact, the majority of Iraqis seem to wish the United States was not drawing down its forces. Iraqis have doubts that the ISF can protect them. It will be fascinating to see whether a new Iraqi government, once formed, quickly asks to renegotiate the current bilateral arrangement whereby all U.S. forces are supposed to leave the country by the end of 2011.

One of the most pressing issues in Iraq on the eve of the drawdown is little talked about in the United States: electricity. Overall, Iraq's electricity production is way up; the only bad news is that demand is up even more. Iraq's Ministry of Electricity says that Iraq is currently generating 8,000 of the 13,000 to 15,000 megawatts of power required to meet present needs. That compares very well with the 4,000 megawatts that was characteristic of Saddam's rule and also the early post-Saddam years. Funding is increasing and capabilities are expected to grow, but it's likely that increasing demand will continue to outpace plans to develop the grid.

Taken together, these and other statistics paint a better picture of life in Iraq today than one might expect. Of course, any optimism has to be tempered in light of the inability of Iraqis to form a new government. Sectarian wounds that have only begun to heal could easily reopen; on top of that, territorial disputes in the north between Kurds, Arabs, and Turkmen remain unresolved.

The most important thing Obama can do with his speech Tuesday is to look forward, rather than backward, and explain his strategy for helping Iraqis put together a government that is accepted as legitimate by most citizens. Ultimately, Iraqis will make the key decisions, but the United States can and should play a constructive role in the Iraqi political process -- something it has not always succeeded at doing. Iraq has come a long way, and Obama deserves a good chunk of the recent credit -- but it will all matter very little if things fall apart in the coming months.

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Argument

The M-Banking Revolution

Why cell phones will do more for the developing world than laptops ever could.

As recently as two years ago, mobile banking in the developing world was an object of skepticism among financial insiders. While proponents argued that cell phones could revolutionize personal finance in poorer countries, regulators warned of money laundering and most bankers worried that low customer balances wouldn't be worth the transaction costs. Many thought of "m-banking" as a niche product that, at most, could maintain the loyalty of existing traditional bank customers. Few imagined it might bring savings, credit, and liquidity to those who don't belong to a bank in the first place.

Now, however, the doubters have been proved entirely wrong. The spontaneous and unplanned explosion of m-banking in the developing world has gone well beyond expectations. And the effects for development could be monumental.

M-banking began with the widespread use of prepaid cell-phone airtime as an informal currency. Migrant laborers across the developing world would text the serial numbers on prepaid airtime cards to loved ones elsewhere in the country; the recipients of the text messages would then sell the serial numbers to local mobile airtime vendors in exchange for cash, minus a small commission. By remotely selling their airtime this way, laborers were able to avoid taking long bus rides home to the countryside to hand over cash in person.

Three years ago, Safaricom, the Kenyan subsidiary of Vodafone, launched "M-Pesa," a mobile money-transfer service that essentially allowed vendors of mobile airtime cards -- there are apparently 100,000 such vendors in the country -- to institutionalize what they had been doing informally. M-Pesa wasn't the first service of this kind, but it has become the most successful by far. Today, M-Pesa has roughly 10 million customers in Kenya, 40 percent of the adult population. It's the top vehicle for money transfers in the country, with $10 million a day in transactions. Safaricom posted record profits in 2009, some $250 million. Other m-banking products that have met with surprising success are Celpay in Zambia and Gcash and Smart Money in the Philippines.

In May, Safaricom took it one step further, partnering with Equity Bank and offering M-Kesho, an interest-bearing savings account, to all M-Pesa users. Subscribers can now use their cell phones to transfer money from their M-Pesa accounts -- using Safaricom's existing network of nearly 20,000 licensed card vendors -- into their M-Kesho accounts. M-Kesho users are also able to access mobile microinsurance and microloan products. By registering SIM cards that double as individualized account numbers, Equity Bank is seeing 8,000 new customers each day, and its CEO, James Mwangi, recently predicted that, in mere months, Kenya "will be the most-banked country in Africa and the developing world."

M-bankers worldwide already use their mobile accounts as de facto savings accounts simply by keeping cash credit: A 2008 survey found that 75 percent of M-Pesa users were already using their mobile accounts to store money. Respondents found the service over five times safer as a vehicle for savings than traditional methods like keeping the money at home. In fact, more than 95 percent found the service not only safer but faster, more convenient, easier to use, and cheaper.

These developments foreshadow a range of exciting opportunities in servicing the low-income unbanked and reducing the corruption associated with loans and financing in the developing world. With nearly 5 billion mobile subscribers in the world and airtime vendors far exceeding developing-world bank branches, it shouldn't be a surprise that M-Pesa has already inspired 60 copycat businesses across the globe.

By 2012, mobile banking operators could see nearly $8 billion in revenue just by expanding their services to the currently unbanked, according to an estimate by the Consultative Group to Assist the Poor (CGAP). In the developed world, m-banking is gaining traction in Australia, Britain, Korea, and Singapore, as well as in the United States. But only in the developing world does m-banking have such extraordinary ancillary potential. M-banking is the best opportunity yet to deliver financial services to the 1 billion people in the world who don't have a bank account, but do have a cell phone.

The effects of m-banking on the developing world are likely to be huge. The quality and reach of a country's financial services are "crucial determinants of economic growth," as Ross Levine, an economist at Brown University, once wrote. In one study of the impact of financial access on poverty in India, economists Robin Burgess and Rohini Pande estimated that every "1 percent increase in the number of rural locations banked per capita reduced rural poverty by 0.42 percent" and increased economic productivity by 0.34 percent. The potential positive economic effects in Kenya alone are striking: this year, Safaricom projects it will transfer the equivalent of 20 percent of Kenya's GDP through M-Pesa. One scholar who has studied M-Pesa, Olga Morawczynski of the University of Edinburgh, estimates that rural households that are mobile money subscribers see their incomes increase 5 to 30 percent. And though an increase in income is often only a short-term poverty solution, savings and asset-building, as encouraged by programs like M-Kesho, move people toward sustainable economic independence in the long term. Plus, the interest on loans through such programs is usually far lower than what you'd get with an informal moneylender, meaning that the risk of accruing debt is minimal.

There are downsides, of course. Some rural women have complained that their husbands working in the cities, now able to transfer them funds electronically, make far fewer visits back home. Increased demand, also, has strained the ability of some rural agents to keep enough cash on hand for withdrawals. And the successful expansion of m-banking still faces some serious infrastructural and regulatory hurdles, though aid donors -- like the Bill and Melinda Gates Foundation, which has invested heavily in m-banking in places like Haiti -- have recognized the technology's immense potential.

No matter what happens, however, in the context of global development the financial success of m-banking is already one of the greatest success stories of recent years. As U.S. Secretary of State Hillary Clinton said in January, these technologies are "allowing billions of people to leapfrog into the 21st century after missing out on 20th-century breakthroughs." And all it takes is a keystroke.

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