Challenge of Limited Credit Access
Access to credit is a major challenge for businesses and individuals in BRICS countries, largely due to traditional banks' reluctance to extend credit to SMEs and individuals. This situation hinders growth, entrepreneurship, and overall economic development. BRICS countries must adopt a multipolar financial system to create new avenues for credit access. The New Development Bank (NDB), an Alternative Financial Institution established by BRICS, provides an alternative source of credit, particularly for infrastructure projects in developing countries. BRICS must also promote the development of strong local banks and microfinance institutions that cater to borrowers' specific needs who may not qualify for traditional bank loans. Small and medium-sized enterprises (SMEs) play a crucial role in job creation and economic growth, and BRICS must focus its initiatives on creating credit channels designed specifically for SMEs.
BRICS Collateral Requirements ...
It is essential to acknowledge that currently, there are no standardized collateral requirements for BRICS. BRICS represents a group of nine countries, including Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, and the United Arab Emirates, each with its own financial regulations and systems, leading to individual credit markets and financial institutions that establish their unique collateral requirements for loans. These requirements may differ based on various factors, such as the type of loan, the borrower's creditworthiness, and the lender's policies. BRICS aims to create a multipolar financial system, which may lead to a greater emphasis on local banks and institutions in each country, owing to their better understanding of local economic conditions and potential to have more flexible collateral requirements than global lenders.
BRICS Loan Accessibility
The BRICS countries, namely Brazil, Russia, India, China, and South Africa, have established a bank called "The New Development Bank" (NDB). This lending institution offers loans for infrastructure and sustainable development projects not only in BRICS countries but also in other developing economies. It is important to note that the NDB does not provide loans directly. However, member countries of the NDB, including Bangladesh, Egypt, United Arab Emirates, and Uruguay, along with the founding members, are eligible for borrowing. While private companies from non-member countries can be eligible for loans, it is a requirement that they meet specific criteria. The NDB places priority on infrastructure and sustainable development projects in its member countries, including renewable energy, transportation, clean water, and sanitation. Recently, the NDB provided a $1 billion loan to Brazil to support its economic recovery.
BRICS mBridge
It is important to note that as of April 2024, the proposed concept of BRICS mBridge is not yet a fully operational system. There has been some confusion due to the similarity in name between an existing "mBridge" and "BRICS mBridge". BRICS mBridge is a potential future payment system that is currently being discussed by the BRICS group, which includes Brazil, Russia, India, China, and South Africa. The aim of this system is to utilize blockchain technology and digital currencies to create an independent payment infrastructure for BRICS nations. This could potentially help reduce reliance on the US dollar for international transactions.
On the other hand, the existing mBridge is a separate project that is already operational. It involves multiple central banks, including some BRICS members like China. The platform facilitates cross-border payments using central bank digital currencies (CBDGs).
Microfinance and BRICS Economies
Microfinance is a powerful tool that can help the developing economies of BRICS - Brazil, Russia, India, China, and South Africa - in several ways. The primary benefit of microfinance is that it provides access to credit, which can help reduce poverty. With microfinance, people can start or expand their businesses, which can be a stepping stone out of poverty. Microfinance can also empower women who are often excluded from traditional financial services and give them the resources they need to start or grow their businesses. Additionally, microfinance can create jobs and boost economic growth by increasing productivity and consumption. By investing in microfinance, we can help the impoverished communities of BRICS and create a better future for all.
Rules Based International Order
There are differing opinions on the ideal structure of international relations in the global sphere. The US and its allies support a "rules-based international order" (RBIO), while China and Russia prefer a "multipolar" world. However, China and Russia have raised concerns that the US may not always adhere to the principles it promotes under RBIO, which has led to skepticism and criticism. Russia and China have expressed their belief that the decline of US global power is inevitable and necessary for a more equitable world, where multiple centers of power operate. They suggest that a "multipolar world" will allow for greater diversity and respect for different cultural perspectives. On the other hand, the US and the EU recognize that other nations may have different views on the ideal world order, but they believe that the RBIO is the most effective system for promoting peace and stability. They acknowledge that the US, like any country, has made mistakes in the past, but they remain committed to working with other nations to strengthen international norms and institutions. It is important for all nations to engage in respectful dialogue and seek common ground in addressing these complex issues. By working towards a multipolar world, we can build a more stable and prosperous international community that benefits all nations and peoples not just US and its allies.