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MOBILE MONEY: THE RISE OF CASHLESS ECONOMIES

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MOBILE MONEY: THE RISE OF CASHLESS ECONOMIES

By Sudhesh Giriyan, COO of Xpress Money

With emerging technologies such as blockchain and mobile money, nation-states on every continent are reforming their financial models and accelerating towards a cashless model. From Sweden’s mobile payments network, and the fact that just 1% of all national transactions are now via cash; to China and its dependence on social channels and QR codes, so much so that even the homeless ask for donations via digital wallets – cash is no longer king.

Sudhesh Giriyan, COO of Xpress Money

Sudhesh Giriyan, COO of Xpress Money

Perhaps most surprisingly, cash is being overturned by the biggest degree in the developing world. This is thanks to mobile money, which enables users to pay for items as they would send a text. Kenya’s mobile money network, for example, has surpassed any other in the world, reaching Ksh692 billion (over £5BN) in the second quarter of 2017 alone.

It’s for good reason; cash is a severe barrier to financial inclusion around the world, it weakens national economies, and is at high-risk of corrupt practise. But why is this exactly? And what exactly are the benefits that mobile money brings to nation states around the world?

Helping the world’s unbanked 

Financial inclusion is a good place to start.There are over two billion people that don’t have access to a formal bank account – that’s over a quarter of the world’s total population.Predominantly living in the developing world, many people go without a formal bank account as they are not within close proximity to a physical bank branch. In Kenya, for example, half of the population have to travel more than half an hour to get to the nearest bank.Without access to a bank account, the world’s unbanked are dependent on cash to make financial transactions.

However, this means that saving for the future brings a raft of insecurities – the cash is at risk of loss or theft, no interest can be accrued, and shocks to the economy are absorbed by the saver rather than a financial institution. In developing economies – in which financial inclusion is at its lowest – dependence on cash also stifles the growth of independent businesses, which are not able to reach their full potential without access to credit. As a result, it can be difficult for families and communities to lift themselves out of poverty.

On an anthropological level, households that are dependent on cash can often revolve around a scenario in which family members are reliant on breadwinners – usually men. It results in a situation in which women have a smaller degree of economic participation, and have little autonomy over finances such as household bills and expenses.

The mobile money revolution

Fortunately, the number of unbanked citizens is declining – 700 million adults gained bank accounts between 2011-2014, and it’s partly to do with the emergence of fintech brands and mobile money operators that are taking a collaborative approach to financial inclusion.

Quick to recognise that mobile devices are more accessible than bank branches, mobile money operators such as M-Pesa and Eco Cash are enabling the unbanked to be financially included via their phones – whether it be a smartphone or a cumbersome device from years gone by. With this simple, innovative mobile technology, users can pay for groceries, education fees, and utility bills, as well as make transactions to family and friends.

By paying for items by simply exchanging codes, users have access to all of the benefits of a bank account (and in some cases can even gain interest on savings and take out small loans) without having to be in the general vicinity of a physical bank branch.

It’s giving people complete autonomy over their finances, and helps them to save for a secure future. The technology has proved to be so popular, that mobile device ownership is accelerated far beyond bank account uptake. In Bangladesh alone, more than 75% of the population has a mobile phone, but only 31% have a bank account. 

Mobile money: strengthening GDP 

Cash is a threat to national economies, too. While digital currencies can be officially tracked and enable economies to have complete oversight on how much credit lies within their GDP, notes – which can be easily counterfeited – do not present governments with such transparency.

It’s proved so popular, that Governments such as those in Malawi, Pakistan and Afghanistan pay public sector salaries and state pension payments in this way. And, mobile money also means that tax is harder to evade – after its first year of taking mobile payments, Mauritius reported a 12% increase in tax returns.

Mobile money has also helped support national economies in times of crisis. Look at the Zimbabwe cash crisis, for example. The country was dependent on the US dollar, and the federal reserve subsequently couldn’t print any more notes when the country’s banks ran out of physical cash. ATMs ran dry, meaning that bond notes were injected into circulation, but the Government also promoted the use of mobile money in a bid to reduce dependence on physical notes. It proved to be a good solution when physical cash failed, and mobile money usage in the country has rapidly accelerated as a result – over 80% of financial transactions in Zimbabwe are now made this way.

One thing’s for sure, mobile money is taking hold of the developing world, so much so that the number of active users is expected to hit 450 million in 2017. But financial inclusion will continue to be a global problem for years to come, and cannot be overcome by a single company alone.

The challenge now, is for fintechs, mobile money operators, and remittance brands to continue to innovate their services, and collaborate as much as possible to ensure that their platforms have as wide a footprint as possible.

Finance

The Benefits of Starting A US Non-Profit: The Latest Tax Regulations

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The Benefits of Starting A US Non-Profit: The Latest Tax Regulations 1

Starting a nonprofit organisation can be a very effective way of significantly improving your society’s welfare, and truly assisting those in need. Ultimately, however, understanding all the prerequisite steps mandated to start a nonprofit– as well as the legal obligations and privileges that can be associated with such a process, is crucial before fully committing to and moving forward with your business plan.

Growing a prolific, successful, and impactful non-profit can be a very tedious process and can commonly involve years of consistent effort, diligence, and determination. Consequently, this article will take a deep dive into the relative statutory and federal legislation and critically analyse the plethora of economic, monetary, and social benefits that starting a nonprofit can bring in for you.

Non-profit Organisations: A Quick Overview

Regardless of whether your goal is to address a particular societal issue, form a trade organisation or perhaps create a social club, if you are looking for the opportunity to earn a profit on top of accomplishing your stipulated goals, forming and operating a nonprofit organisation may be the way to go.

Contrary to most social clubs- which are formed to solely provide benefits for their specific members, nonprofits are generally created to provide benefits to the general public. These can include corporations created for educational, scientific and charitable purposes and- as we will further analyse below, are commonly exempt from paying corporate income taxation in accordance with Section 501(c)(3) of the Internal Revenue Code.

The Financial and Structural Benefits of Starting a Non-profit

As briefly touched on above, forming a nonprofit organisation can provide a plethora of benefits for you, these include:

  1. Tax Exemptions- companies that are categorized as ‘public charities’ in accordance with section 501(c) of the Internal Revenue Code are generally exempt from paying corporate income tax on a state and on a federal level. Additionally, after a company has obtained their aforementioned ‘tax exempt’ legal status, a person’s or company’s monetary donations to them is tax-deductible.
  2. Grant Opportunities- There’s a prolific amount of both public and private bodies that unilaterally limit their charitable donations and grants to public charities only. This is because nonprofits can- and commonly do, offer tax deductions to such individuals or corporate entities on an exclusive basis.
  3. Unique Corporate Structure- A nonprofit organisation operates as its own unique legal entity- completely separate from its owners and founders, and consequently is in a position to place its own interests and corporate ethos above the interests of the persons that may be associated with it.
  4. Limited Liability & Perpetual Existence- On top of having a statutory right to exist in perpetuity, nonprofits also have limited liability under the law. Therefore, any damages that may arise from potential legal disputes are limited to the real assets of the actual nonprofit, and not the assets of its founders and/or owners (subject to specific legal exemptions).

Final Overview: The Potential Disadvantages of Forming a Nonprofit

Despite all the advantages laid out above, it should be duly noted that there are a couple of potential disadvantages to forming a nonprofit that you may want to consider before moving forward with your plan.

Firstly, the process of forming a nonprofit can take a significantly long period of time and this is commonly associated with a great deal of both effort and capital. Moreover, in order to apply for some of the benefits listed above- including federal tax exemption, a monetary fee is required and the process also often needs a present attorney or corporate accountant to serve as a corporate consultant.

Furthermore, there are a couple of practical disadvantages to starting a non-profit organisation. These include: a) excessive paperwork- as all nonprofits are legally required to keep detailed analytical records of their practices and submit them to their relevant state de[artment and to the IRS, and b) limited personal control over the organisation- this is particularly the case in states that require nonprofit organisations to have more than one director.

Finally, nonprofits are commonly subject to prolific levels of public scrutiny- especially in relation to their finances, which may act as a disincentive for some private individuals.

Overall, starting a nonprofit can bring in a plethora of economic, monetary, and social privileges for the individuals involved, and- although the process can come with a few potential inconveniences, they are arguably a small price to pay. Companies like TRUiC advise on the varying benefits of different states when it comes to US formations. It is worth conducting thorough research before making your next move.

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Bitcoin rises 5% to $50,942.58

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Bitcoin rises 5% to $50,942.58 2

(Reuters) – Bitcoin rose 5% to $50,942.58 on Wednesday, adding $2,426.23 to its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, has risen 83.7% from the year’s low of $27,734 on Jan. 4.

Bitcoin has fallen 12.7% from the year’s high of $58,354.14 on Feb. 21.

Bitcoin’s price soared this year as major firms, such as BNY Mellon, asset manager BlackRock Inc, credit card giant Mastercard Inc, backed cryptocurrencies, while those such as Tesla Inc Square Inc and MicroStrategy Inc invested in bitcoin.

Ether, the coin linked to the ethereum blockchain network, rose 7.18 % to $1,595.64 on Wednesday, adding $106.84 to its previous close.

(Reporting by Bhargav Acharya in Bengaluru; Editing by Chris Reese)

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Sunak gives UK economy a new boost to see out COVID crisis, tax rises ahead

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Sunak gives UK economy a new boost to see out COVID crisis, tax rises ahead 3

By David Milliken, William Schomberg and Andy Bruce

LONDON (Reuters) – Finance minister Rishi Sunak delivered what he hopes will be a last big spending splurge to get Britain’s economy through the COVID-19 crisis, and announced a corporate tax hike from 2023 as he began to focus on the huge hit to the public finances.

Sunak said in an annual budget speech on Wednesday that the economy would return to its pre-pandemic size in mid-2022, six months earlier than previously forecast, helped by Europe’s fastest coronavirus vaccination programme.

But lasting economic damage equivalent to 3% of annual output would persist, and 65 billion pounds ($91 billion) of extra support was needed in the short term as restrictions were lifted over the next few months, he said.

Sunak’s early warning that he will demand more money from companies – and most individual taxpayers too – makes him one of the first policymakers from rich countries to set out a plan to tighten budget policy after the pandemic.

Britain’s first rise in corporation tax since 1974 will see big, profitable companies pay 25% from 2023 compared to 19% now and the overall rate of taxation in the economy increase to its highest since 1969.

But before then firms can use a two-year “super-deduction” tax break that Sunak hopes will snap them out of their pandemic deep-freeze and invest to boost short-term growth.

The government’s budget watchdog said the move was likely to bring forward investment that would have taken place later.

In his speech to parliament, Sunak repeated his plan to do “whatever it takes to support the British people and businesses” after the economy slumped by 10% last year.

Britain has also suffered Europe’s biggest COVID-19 death toll.

“Once we are on the way to recovery, we will need to begin fixing the public finances – and I want to be honest today about our plans to do that,” he said.

The support measures included a five-month extension of Britain’s huge jobs rescue plan, wider help for the self-employed and the continuation of an emergency increase in welfare payments.

A property tax exemption for retail, hospitality and leisure businesses will now run until the end of June, by when Prime Minister Boris Johnson hopes to have lifted most COVID-19 restrictions.

An existing tax break for home-buyers was extended by three months until June 30 and then for cheaper homes until the end of September.

PUBS AND HOUSE BUILDERS GAIN, BOND PRICES FALL

Shares in housebuilders gained on the news, with Persimmon one of the top risers in the FTSE 100, up almost 7%.

Pub firms JD Wetherspoon and Premier Inn owner Whitbread also rose more than 5%, helped by an extended VAT cut for the hospitality sector.

But British government bond prices fell sharply after Sunak said overall borrowing will be much bigger next financial year than thought just a few months ago – 234 billion pounds, or 10.3% of gross domestic product, compared with a previous estimate of 164 billion pounds, or 7.4% of GDP.

The UK Debt Management Office said it planned to sell 296 billion pounds of gilts in the coming year, well above the 247 billion pounds expected in a Reuters poll.

“The UK’s fiscal stance has become much looser, and more focused on investment, more in line with its U.S. and euro area counterparts,” Morgan Stanley economist Jacob Nell said.

“This shift changes our view of the UK. Near term, we see a stronger and more investment-focused recovery bringing forward the return to pre-COVID-19 levels of output.”

To get a grip on borrowing, Sunak’s future hikes will increase the tax burden from 34% to 35% of GDP by the mid-2020s.

“The UK is thus to become the first major economy to consider such measures,” Valentin Marinov, head of G10 foreign exchange research at Credit Agricole, said.

As well as the COVID shock, many companies are also under strain from Brexit after Britain left the European Union’s single market on Jan. 1, and the government faces the challenge of huge investment to meet its promise to create a net zero carbon economy by 2050.

UK EARLY MOVER ON TAX HIKES

Britain’s Office for Budgetary Responsibility (OBR) said the economy was likely to grow 4% in 2021, less than the 5.5% it had forecast in November, due largely to the current lockdown which began in January. The growth forecast for 2022 increased to 7.3% from 6.6%.

Sunak has already racked up Britain’s highest borrowing since World War Two, with the deficit reaching an estimated 17% of GDP in the 2020/21 financial year that ends in April.

Sunak said the corporation tax rise would still leave the headline rate lower than in the rest of the G7 group of rich nations.

Rain Newton-Smith, chief economist at the Confederation of British Industry, said the hike was “a huge jump” and that other G7 countries would be more competitive than Britain when state and federal level tax breaks were taken into account.

The Institute for Fiscal Studies said that after the tax rises, corporation tax revenues would be a greater share of GDP in Britain than in the United States, Germany, France or Italy.

Sunak also said he would freeze the amount of money that people can earn tax-free and the threshold for the higher rate of income tax at the 2021/22 level until April 2026.

($1 = 0.7161 pounds)

(Additional reporting by Guy Faulconbridge, William James, Costas Pitas, James Davey, Estelle Shirbon, Elizabeth Piper, Paul Sandle, Alastair Smout and Sarah Young; Writing by William Schomberg; Editing by Catherine Evans)

 

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