The consultation window is now open for the Financial Action Task Force (FATF)’s revisions to its Guidance on AML/CFT and Financial Inclusion. As discussed in previous blogs, the Guidance has a real impact on the financial inclusion of millions worldwide, and the financial inclusion community has a critical role to play in informing and shaping the Guidance. But what is it that stakeholders can do?
Stay informed
The draft revised guidance was released on February 25 on the FATF website, and will remain open for feedback until April 4, 2025. It’s essential for stakeholders to familiarize themselves with the contents of the draft, and consider the impact of the proposed changes.
1. Analyze the draft
Identify strengths and weaknesses – especially areas where the Guidance can be improved, asking questions such as:
Does it provide sufficient guidance on appropriate indicators and factors to be used to assess money laundering and terrorist and proliferation financing risks as lower or even as low?
Does it clarify FATF’s position on how much or how little residual risk can be tolerated when control measures are simplified?
Does it guide regulators, supervisors and institutions to identify overly cautious compliance responses and take effective corrective actions?
Will the Guidance help regulators and supervisors adopt effective responses to address undue de-risking (also known as de-banking)?
What are new perspectives or guidance that you find valuable and that should not be lost in any post-consultation amendments?
2. Engage in dialogue
Engage with other stakeholders, including policymakers, regulators, technical assistance providers, financial institutions, and civil society groups. Collective engagement is key to ensuring that the revisions are well-rounded and address the needs of the financial inclusion community. It is also important to foster dialogue around potential gaps or areas where the Guidance could go further in promoting inclusion.
3. Submit feedback
FATF welcomes written comments from stakeholders. The financial inclusion community can provide thoughtful and constructive feedback grounded in practical experience, highlighting areas where the Guidance could better support inclusion initiatives. The consultation is a chance to share real-world examples of how a risk-based approach (e.g., simplified measures) has been successfully implemented in lower-risk scenarios, and to advocate for conditions that would enable its broader application in a financial inclusion context, especially in smaller economies that are still working towards higher levels of compliance with FATF standards.
Reach out to CGAP
Please don’t hesitate to contact CGAP with any questions or concerns about the revisions. CGAP has long supported FATF’s effort to better align integrity requirements with financial inclusion efforts and can provide guidance on navigating the current consultation process. Feel free to reach out to us at [email protected].
In our next blog post, we will take a closer look at the draft guidance, breaking down key changes and what they mean for financial inclusion. Stay tuned for our deep dive coming soon!
To attract business investment, American cities and states offer companies billions of dollars in incentives, such as tax credits. As the theory goes, when governments create a business-friendly environment, it encourages investment, leading to job creation and economic growth.
While this theory may seem logical on its face, it’s a bit of a chicken-and-egg situation. Business investment follows employees, not just the other way around. In fact, our research suggests workers care less about whether a city has business-friendly policies and more about how safe they feel living in it. And interestingly, we found that politics influence people’s risk perceptions more than hard data such as crime statistics.
Our findings have major implications for cities and businesses. If people choose where to live and work based on perceived safety rather than economic incentives, then entrepreneurs and city leaders may need to rethink how they approach growth and investment.
The many faces of risk
We are managementprofessors who surveyed more than 500 employees and entrepreneurs from across the country to better understand how they rate 25 large U.S. cities on various dimensions of risk.
We asked about three different types of risk: risk related to crime, government function and social issues. Risk related to government function includes corruption and instability, while risk related to social issues includes potential infringements on individual rights.
We found that people’s views of risk weren’t driven primarily by objective statistics, such as FBI crime data. Instead, they were shaped by factors such as media representations, word of mouth and geographic stereotypes.
For example, studies suggest that crime in Denver has been rising, and U.S. News and World Report recently ranked it as the 10th most dangerous city based on FBI crime reports. However, the employees and entrepreneurs we surveyed ranked Denver as the safest city in the country.
It’s all politics
We found that political perspectives were the main factor biasing the rankings. For example, conservative-leaning employees and entrepreneurs believed that Portland, Oregon, is dangerous, ranking it as America’s ninth-riskiest city. In contrast, those who are liberal-leaning ranked it as the second-safest city in the country.
Both of these beliefs can’t be accurate. Instead, when basing the ranking on objective crime data from the FBI, U.S. News ranked Portland the 15th most dangerous city in the country.
When assessing risk related to how the government functions, conservatives praised politicians in Nashville, Charlotte and Dallas, while the liberals praised those in Denver, Minneapolis and Portland. Similarly, when considering risk related to social issues, conservatives said New York City, Los Angeles and San Francisco were “risky,” while the liberals said Tampa, Miami and Houston should be avoided.
Our findings also suggest that political perspectives influence the types of risk that employers and employees care about. For example, conservatives tend to care more about crime-related risk than liberals, and liberals care more about risk related to social issues.
Now what?
We’re not advocating that city leaders drop financial incentives altogether, or that employers ignore them. Evidence suggests that financialincentives and other business-friendly policiesmay be effective at attracting businesses and strengthening local economies.
However, our research suggests that when individuals are making important life decisions about where to live, work and invest, a city’s level of risk matters. Importantly, beliefs about risk are subjective and are biased by political perspectives.
In our view, city leaders must recognize and address concerns about crime, governance and social issues while actively working to improve public perceptions of their cities. Likewise, businesses may want to consider investing in cities that are less politically polarized when making investment decisions.
Just like details are lost in a blurry photograph, relying on aggregate financial data for insights provides only a general idea of reality – supply-side gender-disaggregated data (SGDD) can sharpen the picture, exposing financial behaviors and disparities that would otherwise remain hidden. Particularly when collected and analyzed with the help of technology, SGDD is a crucial tool for financial supervisors to enable more inclusive, stable financial systems.
From data to insight: the need for a deeper analysis
The world is complex, and so are people’s financial behaviors. Individual choices are shaped by social, economic, and demographic traits—factors that can only be fully analyzed through a multi-dimensional lens. With the right data, supervisors can examine how these dimensions interact and influence financial patterns across different market segments.
In this context, adopting a gender-informed view by leveraging supply-side gender-disaggregated data (S-GDD) is essential. By including gender as a core dimension in financial analysis, authorities can ensure their policies benefit all consumers and financial systems (see figure below). S-GDD enables a deeper evaluation of disparities in financial inclusion, providing valuable insights for financial authorities, policymakers, and funders working toward inclusion goals. It also helps industry players expand market opportunities and supports other mandates of financial authorities, such as consumer protection and financial stability.
Financial supervisors need to collect and use both granular and aggregate S-GDD actively
S-GDD can take two forms: granular or aggregate. Granular data captures financial behaviors at the individual level, offering the highest analytical potential. It enables supervisors to analyze specific market segments, like age, location, or income. For example, it might be able to answer questions like: how do low-income young rural women access credit? What types of credit do they use, and under what conditions? How much do middle-income urban men save for retirement?
In contrast, aggregate S-GDD is compiled by financial service providers (FSPs) before being reported to supervisors. This means that supervisors receive gender-disaggregated data only at the portfolio level. Aggregate data helps answer broader questions such as: Do women save more than men? Do they hold more or fewer loans on average? Are there disparities in loan amounts, non-performing loan ratios, and interest rates paid? By analyzing these patterns, financial authorities can assess whether—and how—gender influences financial service usage, financial firms’ performance and systemic stability (not just in terms of volume and value but also in terms of conditions), quality, and outcomes such as financial health and resilience.
Yet, gender-based financial analysis is often overlooked by financial sector authorities. For example, gender disparities—both within the customer base and among FSPs and regulatory bodies—are rarely considered, despite growing evidence of the macroeconomic significance of gender diversity and its role in fostering more resilient financial systems. Similarly, gender-blind consumer protection indicators may fail to detect harmful market practices that disproportionately affect women.
Learning from pioneer countries
CGAP is committed to helping change the landscape of S-GDD collection and use. Our research has uncovered key lessons from countries such as Brazil, Chile, Colombia, Malaysia, Mexico, Peru, and Rwanda, which are working to collect and use S-GDD more effectively and systematically. Some key takeaways from that research include:
Data collection doesn’t have to be costly for FSPs and FSAs. When financial service providers already collect granular data, the additional burden of gender disaggregation is minimal.
Strong ID systems are essential. Reliable customer identification systems make it easier to collect and use S-GDD effectively.
Technology is critical in enabling financial authorities to collect, analyze, and act on S-GDD. Digital reporting systems, automated data collection, and advanced analytics can reduce costs and improve accuracy, but most emerging markets still rely on manual reporting and might not be equipped to deal with the privacy concerns such automated systems require, or the technological capabilities needed to put them in place.
Despite these challenges, the value of granular data justifies the investment in solutions to address them. Countries that have successfully done so, often with the help of advanced technological tools, are increasingly demonstrating the value of using this data in shaping policies, designing products, and tracking progress toward a more inclusive and responsible financial sector. The rest of the blogs in this series will explore use cases for financial authorities and other stakeholders, more about how technology can enable effective S-GDD collection and analysis, and critical issues of data governance and privacy. Stay tuned!
When Congress passed a law in 2024 to ban TikTok unless it came under U.S. ownership, lawmakers argued that the app’s Chinese parent company posed national security concerns. The Trump administration, which had granted the viral video app a reprieve shortly after taking office in January 2025, extended that pause again on April 4 after the Chinese government reportedly scuttled a planned deal.
Regardless of how this all shakes out, the TikTok fight underscores deeper concerns about who controls social media in the United States.
Given that worry, it might surprise Americans to learn that nearly every social media giant is controlled by just one or two men. For example, Mark Zuckerberg controls Meta, which owns Facebook, Instagram and WhatsApp, while Larry Page and Sergey Brin control Alphabet, which owns YouTube and Google.
What does “control” mean? These companies are publicly traded – anybody can buy or sell their shares – but a legal mechanism known as dual-class stock gives founders extra votes in shareholder decisions. The dual-class structure crowns these men “corporate royalty,” as one former U.S. Securities and Exchange Commission commissioner has put it, granting them near-absolute control of corporate policy and resources without requiring them to take on commensurate financial risk.
While TikTok is unusual in many respects, the way it vests power in one man is actually quite banal. TikTok’s parent company, ByteDance, is privately held, but it’s reportedly controlled by a co-founder, Chinese national Zhang Yiming, via a dual-class structure.
As a professor of corporate law, I’d urge policymakers and the public to consider the societal risks of a system that allows a single person to wield full control over a major corporation through dual-class stock.
The dual-class effect: Meta as a case study
In a standard single-class structure – where voting power tracks the amount of company equity a shareholder owns – someone seeking total control of a company must ordinarily spend a lot of money buying up shares, which also means assuming a lot of risk. This “skin in the game” requirement limits how much influence a single person can exert on a company.
That safeguard is informal, not mandatory, and dual-class structures do away with it. Ascendant among Silicon Valley firms since Google’s 2004 initial public offering in the U.S. and recently legalized in the U.K., the dual-class model is fiercely debated in corporate governance circles. To date, however, its downsides have been understood only as a problem for shareholders, not society, despite broad and bipartisan concern about the influence of Big Tech.
This setup gives him a lock on corporate policy as a controlling shareholder, even though he only owns a bit over one-eighth of Meta stock by value. He has full control of the company without placing anywhere near an equivalent amount of money at risk.
You don’t have to be the parent of an Instagram-addicted teenager to see that Meta has generated what might be described as social costs. For example, Amnesty International has alleged that Facebook algorithms “substantially contributed to the atrocities perpetrated by the Myanmar military” in 2017. Facebook has also been criticized for promoting misinformation during past U.S. elections and for suppressing embarrassing stories about Hunter Biden.
These examples underscore broader social concerns around content moderation, privacy and tech titans’ outsized political influence. Notably, Zuckerberg – who has been associated with progressive causes in the past – has moved to embrace President Donald Trump strongly in recent months and asked for Trump’s support for Meta in a legal battle with the European Union.
When corporate control meets the Supreme Court
In a 2023 law journal article, I noted that recent Supreme Court decisions expanding corporate constitutional rights stand to give company founders unprecedented power to shape society. While the rise of founder-controlled social media giants with distinct political agendas has gotten a lot of attention, the widening scope of what is deemed protected corporate speech and religious exercise hasn’t been a part of that conversation.
I think there’s a real possibility that these two streams will converge, granting constitutional protection to “founder kings” who wish to leverage company resources for private agendas. Two recent legal developments raise the stakes.
First, the courts – and in particular the Supreme Court under Chief Justice John Roberts – have been expanding corporate constitutional rights, which could allow dual-class founders to carve out exceptions to generally applicable laws.
To get a sense of the potential consequences, suppose the controlling shareholder of a dual-class company were to cause it to defy a federal mandate – for example, a requirement to offer health insurance plans that cover contraception – on the grounds that complying would violate their religious beliefs. The Supreme Court in Hobby Lobby v. Burwell recognized exactly this sort of faith-based exception for a large family-owned but privately held business.
Would it recognize such an exception for a company like Snap? The company, best known for its app Snapchat, is publicly traded, but just two men, Robert Murphy and Evan Spiegel, control 99.5% of the voting power.
We can’t be sure. Hobby Lobby is different from Snap in many ways. Yet what they have in common is the ability of their owners to plausibly claim a unitary speech or religious exercise interest that would not characterize a typical large business. Snap’s public owners have no say at all – zero votes – in the company’s affairs. If the controllers of Snap asserted a religious basis for exempting the company from a regulation – and to be clear, this is a purely hypothetical example – the courts might well indulge the claim.
The judicial system’s expanding view of corporate constitutional rights – seen not just in Hobby Lobby but in Citizens United v. FEC and a number of more recent and ongoing cases in state and lower federal courts – could empower founders to leverage their businesses for private agendas. Whether or not this is likely for Snap in particular, the combination of the dual-class model and changes in the law would seem to leave the door open.
Elon Musk vs. the dual-class model
A fitting contrast might be none other than Twitter – renamed X after Elon Musk acquired it and who recently merged it into xAI, another Musk-led venture.
As a privately held company, xAI is not required to file public investor reports, and much about its ownership structure remains opaque. But let’s assume the company is majority-owned by Musk in a conventional single-class structure – the type Twitter had before he bought it. Given a chance to provoke, Musk has consistently proved eager to raise his hand. Couldn’t he use his control to get X or xAI – we’ll stick with “X” for simplicity – to exercise the same vast control that Murphy and Spiegel could at Snap, or Zuckerberg at Meta?
Yes – but with a subtle yet important difference.
There’s a certain logic to X’s key corporate decisions being vested in Musk. Quite famously, he ponied up US$44 billion to buy the entire company. Legal prohibitions on the deployment of private resources for influence are confined to a small universe of cases – antitrust, bribery, certain types of campaign contributions. Those resources include businesses, which are a form of property, that are owned by wealthy individuals or groups. With limited exceptions, people can use their own property as they wish.
In a dual-class company, though, controllers use other people’s property as they wish. They can get the immense legal, economic and organizational power of the corporate form without having to put much skin in the game.
Beyond TikTok: The conversation the US should be having
Traditionally, questions of rich-guy influence have been seen through the lens of politics, taxes or public regulation. But seeing them as questions about the exercise of private corporate control makes clear the special social challenges posed by dual-class stock.
Wall Street has mostly accepted the bargain: ironclad insulation of Zuckerberg in exchange for rock-solid Meta returns. But this debate is not only of interest for the investment community. Everyone has a stake in its outcome.
It’s fair for the public to question the wisdom of allowing company founders to leverage the resources and newly jumbo-sized constitutional rights of large corporations in service of a special agenda – be it for a foreign government, a political party or a religious faith – that isn’t even connected to classical purposes of the corporation or advantages of the dual-class model.
The distinctive risks posed by TikTok are mostly unrelated to its share structure. But the debate over the ban-or-sell law offers a reminder: The powers created by dual-class stock aren’t unique to Chinese control. America’s homegrown founder kings wield them, too.
Young women are the most underserved market for financial services. A gradual, structured approach to their financial inclusion, starting with savings and complemented by non-financial support – is key. Commercial financial service providers (FSPs) often have limited ability and interest to invest in these services, especially over the timespan required for the hardest-to-reach segments of young women. However, donors can step in by strategically supporting services the market is not likely to provide but are key to putting young women on the path to financial inclusion.
As shared in a previous blog, experience shows a range of commercial viability for financial service delivery across different segments of young women. Compared to “independent” segments, “dependent” segments require more social intermediation and financial capability building. Young women at the start of their productive lives prioritize savings over credit as their tool of choice for building useful lump sums.
But the business case for small savings mobilization is rarely as compelling as for credit – meaning that the private sector is likely to undersupply these services, even though they are critical for young women’s financial inclusion.
Throughout the past twenty years, the Mastercard Foundation has worked to understand how to address market failures and drive economic opportunities for young women across Africa, particularly in rural and low-income peri-urban areas. The Foundation considers young women to be economic agents of change for the African continent; enabling 23 million young women to work by 2030 could add 287 billion USD to Africa’s GDP – an impact that could grow eightfold by 2040. Young women’s ability to access finance will significantly impact their growth – enabling access to the full range of financial tools they need is therefore critical.
Coming up with alternative ways to integrate young women into the financial system, considering their realities, is critical.
Filling market gaps for young women’s financial inclusion
Together with government actors, donors can support investments to make the financial ecosystem accessible to all segments of young women. To financially include underserved segments, we advocate for starting with the non-financial building blocks of financial inclusion, building alternative pathways for financial integration, and breaking down silos.
Build agency, confidence, and trust
Experience shows that overcoming the constraints faced by marginalized young women in the financial ecosystem requires several interventions in non-financial domains. It is key to first build young women’s agency and decision-making capabilities. For example, the Foundation works with BRAC’s Accelerating Impact (AIM) program in Africa to create alternative ways to support young women with information and services to build their confidence and facilitate their integration into the financial system. Donor funding can support organizations with knowledge sharing, resources, and adequate time to build the required level of confidence and agency.
Support alternative pathways to bring young women into the financial system
Building young women’s trust in the financial system requires a step-by-step approach and tailoring services to their needs. Young women who managed to become financially included by age 24 often benefitted from day-to-day teaching and mentoring from financially savvy adults in their lives. Unfortunately, social norms and personal circumstances often mean that many young women lack this type of scaffolding to help them enter the formal financial system.
Donors can bridge this gap by helping FSPs and community-based organizations offer services tailored to young women’s needs. In this way, public investments can yield long-term financial and non-financial returns for both clients and FSPs. For example, public and philanthropic resources have made it more viable for private operators to engage female mobile money/bank agents, who, in some contexts, are better positioned than men to serve young women. Similarly, supporting alternative mechanisms to build young women’s confidence and financial capability, including some types of indigenous financing mechanisms, could eventually ease their transition into the formal financial system should they desire it.
We need to help young women increase their understanding, make them comfortable with savings and lending in their own space, and support their entry into the formal financial system. When there, we should make sure not to lose them again
Break down silos and forge partnerships to reach scale
Achieving the necessary scale requires collaboration among the private, public, and civil society sectors. Policymakers and regulators play a key role in creating an environment where young women can more easily access and benefit from the financial system and donors can support innovation across the financial services landscape, from fintechs to Indigenous financial mechanisms. Collaboration with government entities and civil society is crucial to reach remote and underserved young women. CGAP champions a whole of market approach, advocating for genuine partnerships that foster inclusive financial opportunities.
Considering the potential benefits of financially including young women for themselves, their families, and their communities, there is a clear developmental rationale for donors to bring strategic support services the market is not likely to supply. By investing strategically in non-financial services, alternative financial pathways, and cross-sector partnerships, donors can unlock opportunities that will transform the economic future of young women—and Africa as a whole.
The cacophony and hype around Artificial Intelligence (AI) seems to grow with every month. Whether being heralded as the key to exponential economic gains and human efficiency or the potential downfall of the species, AI is never far from the headlines. Whatever a person might feel about this emerging technology, it is now omnipresent and unavoidable. Could AI be the silver bullet to boost rural women’s agricultural income? No, because silver bullets don’t exist. Could it offer real value to rural women in agriculture? Yes – and here are four areas where we see action and potential.
1. Access to information
AI-powered mobile apps can provide women with valuable information on best farming practices, weather forecasts, and market prices, helping them make informed decisions and improve their yields. Digital Green, in partnership with governments and community organizations, uses an AI-powered platform to boost the cost-effectiveness and efficiency of public extension systems (government-supported services that provide education and technical assistance to farmers and communities to improve agricultural practices). The platform can then quickly deliver this information in local languages (in women’s voices), enabling extension agents to easily provide contextually relevant and timely agriculture advice to local farmers to help improve their productivity and well-being.
2. Credit and insurance risk assessment
By analyzing data, assessing creditworthiness, and even supporting alternative credit scoring, AI can better facilitate access to microloans and insurance, enabling women to invest in better seeds, equipment, and agricultural inputs. Indian digital credit provider Lendingkart aims to improve entrepreneurs’ access to working capital to establish and expand small businesses through unsecured loans – a groundbreaking approach, considering women are less likely to have the assets to guarantee their loans beforehand. By vigilantly training their credit scoring model to remove bias, Lendingkart treats men and women equally, where other models often default to privilege men’s credit history.
Another example that supports financial inclusion is AI-enhanced microinsurance. AI can help design and deliver microinsurance products that protect women farmers against climate-related risks, such as crop failure due to extreme weather, offering affordable premiums and quick payouts. For instance, Pula uses AI to offer parametric insurance tailored to smallholder farmers (with a focus on women), helping them recover quickly from climate-related losses.
3. Precision agriculture
By analyzing vast amounts of data collected from sensors, drones, and satellite imagery, AI can provide insights and recommendations for optimized farming practices in real-time. Amini, a Nairobi-based tech company, uses AI to better monitor, predict, and manage crop health and soil conditions across Africa, analyze soil samples to determine nutrient levels, and recommend appropriate crop choices and fertilization methods. This leads to healthier crops and better yields, improving farmer incomes. Given that women make up 80% of Kenya’s smallholder agricultural labor force, soil insights that better inform their farming can save them precious time and money. Another example is FarmBeats by Microsoft, an AI and Internet of Things (IoT) platform that uses sensors to provide real-time insights, enabling farmers to use data to help optimize their practices.
4. Service aggregation and organization
By using machine learning to understand the underlying drivers of demand for tractor services, Accelerating Business to Empower Rural women in Agriculture (ABERA) cohort member Hello Tractor built a predictive demand model for tractor utilization in Kenya and Nigeria, enabling the company to accurately forecast usage throughout the year. Hello Tractor is then able to better predict demand and supply of tractor owners, proactively recruit tractor owners in locations where there is likely to be a shortfall, and plan informed decisions around growth.
However, for all the promise of AI, it is crucial to stay grounded in reality. In 2024, women are still less likely to have a mobile phone, mobile internet, or bank account, and have lower levels of digital literacy. In low-income countries, only 20% of women are using the internet. This is even more pronounced in rural areas. This reality limits women’s engagement with these life-enhancing technologies: both their ability to inform them, and use them to save time, money, and mental efforts. As one of ABERA’s Advisory Committee members, Nicoline de Haan, said – if we want technology to improve rural women’s lives, before AI, we need to increase women’s digital inclusion.
Furthermore, the use of AI, with all of its possibilities, requires a level of competence and trust in digital services. Physical interaction with real, live humans remains crucial in onboarding previously unconnected, less empowered women. While there is an argument that initiatives such as AI-powered chatbots can leapfrog digital literacy challenges, getting to the point of using a chatbot requires a degree of ability in itself – a lack of which could result in confusion and dissuasion to persevere with the technology.
Beyond access, it is also important to note that AI is often designed in a way that excludes women – for new adopters or low-literacy people, some technologies can be complex to understand, training datasets used exclude low-income and vulnerable women, and algorithms are largely biased and do not take women’s needs into consideration. It is crucial to pay close attention to the gender data biases that have been built into this technology so that when AI is used it doesn’t exacerbate existing biases such as misrepresentation and stereotyping. The Such inbuilt prejudices can automatically result in women being excluded and further exacerbate issues of exclusion.
Throughout several inclusive business analyses the ABERA team has undertaken to date, the same enablers emerge that support a climate-smart, gender-transformative business case, with women’s groups and phygital approaches amongst them. For ABERA, this suggests that for low-income women, much of the time there may be a requisite baseline level of digital and financial literacy needed before they can benefit from these new technologies.
When U.S. President Donald Trump imposed sweeping new tariffs on imported goods on April 2, 2025 – upending global trade and sending markets into a tailspin – he presented the move as a response to a crisis. In an executive order released the same day, the White House said the move was necessary to address “the national emergency posed by the large and persistent trade deficit.”
A trade deficit – when a country imports more than it exports – is often viewed as a problem. And yes, the U.S. trade deficit is both large and persistent. Yet, as an economist who has taught international finance at Boston University, the University of Chicago and Harvard, I maintain that far from a national emergency, this persistent deficit is actually a sign of America’s financial and technological dominance.
The trade deficit is the flip side of an investment magnet
A trade deficit sounds bad, but it is neither good nor bad.
It doesn’t mean the U.S. is losing money. It simply means foreigners are sending the U.S. more goods than the U.S. is sending them. America is getting more cheap goods, and in return it is giving foreigners financial assets: dollars issued by the Federal Reserve, bonds from the U.S. government and American corporations, and stocks in newly created firms.
That is, a trade deficit can only arise if foreigners invest more in the U.S. than Americans invest abroad. In other words, a country can only have a trade deficit if it also has an equally sized investment surplus. The U.S. is able to sustain a large trade deficit because so many foreigners are eager to invest here.
Because the dollar is so attractive, the Federal Reserve gets to mint extra cash for use abroad, and the U.S. government and American employers and families can borrow money at lower interest rates. Foreigners eagerly buy these U.S. financial assets, which enables Americans to consume and invest more than they ordinarily could. In return for our financial assets, we buy more German machines, Scotch whiskey, Chinese smartphones, Mexican steel and so on.
Blaming foreigners for the trade deficit, therefore, is like blaming the bank for charging a low interest rate. We have a trade deficit because foreigners willingly charge us low interest rates – and we choose to spend that credit.
US entrepreneurship attracts global capital – and fuels the deficit
Another reason for foreigners’ steady demand for U.S. assets is American technological dominance: When aspiring entrepreneurs from around the world start new companies, they often decide to do so in Silicon Valley. Foreigners want to buy stocks and bonds in these new companies, again adding to the U.S. investment surplus.
This strong demand for U.S. assets also explains why Trump’s last trade war in 2018 did little to close the trade deficit: Tariffs, by themselves, do nothing to reduce foreigners’ demand for U.S. dollars, stocks and bonds. If the investment surplus doesn’t change, the trade deficit cannot change. Instead, the U.S. dollar just appreciates, so that imports get cheaper, undoing the effect of the tariff on the size of the trade deficit. This is basic economics: You can’t have an investment surplus and a trade surplus at the same time, which is why it’s silly to call for both.
That doesn’t mean all tariffs are bad or all trade is automatically good. But it does mean that the U.S. trade deficit, poorly named though it is, does not signify failure. It is, instead, the consequence – and the privilege – of outsized American global influence.
The president’s frenzied attacks on the nation’s trade deficit show he’s misreading a sign of American economic strength as a weakness. If the president really wants to eliminate the trade deficit, his best option is to rein in the federal budget deficit, which would naturally reduce capital inflows by raising domestic savings.
Rather than reviving U.S. manufacturing, Trump’s extreme tariffs and erratic foreign policy are likely to instead scare off foreign investors altogether and undercut the dollar’s global role. That would indeed shrink the trade deficit – but only by eroding the very pillars of the country’s economic dominance, at a steep cost to American firms and families.
A bold regulatory push led by Dr. Margarita Hernandez, former head of Ecuador’s cooperative financial market authority (Superintendencia de Economía Popular y Solidaria or SEPS), is transforming the financial inclusion landscape. Its 2021 Regulation for the protection of the rights of members, clients, and financial users through financial inclusion with a gender perspective establishes measures to promote financial inclusion, ensuring equitable access to financial services through access to information, tailored financial products, and education. It also enhances transparency, encourages women’s participation in leadership roles, and designs financial products with a gender perspective to further advance gender-inclusive financial access.
This regulation applies to all community-based financial institutions regulated by SEPS—including cooperatives, mutual savings groups, and credit institutions. Over the past decade, these institutions have played a fundamental role in financial inclusion, with a notable increase in their memberships. In 2023, nearly 49% of these memberships were held by women, highlighting the importance of community-based financial institutions as a key link to the country’s financial system, in which 4.4 million women participate.
Ecuador’s journey highlights that the building blocks of gender-intentional regulation are the right institutional incentives and capacities, combined with a deep understanding of the barriers—including gender norms—that affect women’s access to financial services.
Outlined below are five steps from Dr. Margarita that financial authorities can take to embed a gender-perspective in their organizations and those they regulate.
Step 1: Create a strategic roadmap
Dr. Margarita’s first step was creating a strategic roadmap to embed gender inclusion within SEPS and the critical sector it regulates: “It’s on us to make sure the promise of equity in cooperativism becomes a reality.”
“It’s on us to make sure the promise of equity in cooperativism becomes a reality.”
Step 2: Build out government capacity
To implement this roadmap, Dr. Margarita established the National Directorate of Financial Inclusion with a specialized technical team: “Our technical team is gradually ensuring that our strategy’s principles are integrated into each regulation through phased reviews that are supported by continuous training. This strengthens SEPS’ institutional capabilities to ensure the inclusion of a gender lens lasts beyond my term.”
SEPS has also significantly promoted gender diversity within its own workforce. During Dr. Margarita’s tenure, women represented 60% of the staff and more than 70% of the executive team, surpassing global averages for central banks. Additionally, SEPS has been certified by Ecuador’s Labor Ministry and the German Agency for International Cooperation (GIZ) as a “Safe Institution Free of Violence Against Women”, a designation recognizing its commitment to equipping public officials with tools to combat gender-based violence in the workplace.
With a solid strategy and organizational structure, Dr. Margarita and her team partnered with the Development Bank of Latin America (CAF) and AFI for a thorough diagnostic to uncover the unique challenges Ecuadorian women face in accessing credit. The results revealed that factors such as economic participation, property rights, access to education, along with entrepreneurial skills, significantly influence women’s financial inclusion.
Step 3: Drive inclusion in financial service providers
The regulation mandates that financial service providers (FSPs) regulated by SEPS adopt gender strategies with measurable goals, and that they implement inclusive policies aimed at closing gender gaps across all organizational levels: “Among the identified barriers on the diagnostic, are processes and requirements that could be addressed through regulation. Other obstacles, stemming for example, from gender norms, were also identified and are more challenging to manage. For this reason, it is essential to engage different stakeholders who support regulatory changes through inclusive policies.”
The regulation also requires these FSPs to establish internal financial education programs with a gender perspective, targeting everyone from frontline staff to senior management, to ensure fair and inclusive treatment of all users.
Under Dr. Margarita’s leadership, SEPS has also taken a collaborative approach to financial education. The regulation states that FSPs regulated by SEPS must take steps to address gender-based exclusion in access to financial knowledge by implementing training programs to equip individuals with the skills and understanding needed to use financial services responsibly and efficiently. Each institution must submit a biannual report to SEPS outlining their initiatives. The regulation is supported by other regulatory measures, such as those on Financial Education and Good Governance, which have also been mainstreamed with a gender perspective with the support of CAF and the IDB.
In its first year of implementation, bolstered by initiatives such as Global Money Week, capacity-building efforts successfully reached over 270,000 Ecuadorians. Notably, women represented more than half of the participants and, in certain instances, accounted for up to 75% of those engaged: “These initiatives have become part of their regulatory compliance, which fosters a win-win environment that strengthens sector-wide trust.”
Step 5: Enable data-driven decision-making to catalyze market awareness
Dr. Margarita recognized the power of data transparency to drive meaningful change. To support the gender-focused strategy, SEPS, with the help of CAF, launched a groundbreaking public data portal showcasing gender-disaggregated statistics, including 62 indicators—marking a first in Ecuador’s history. These metrics cover a range of topics, from access to deposit and credit products to representation and financial education: “By showing the number of underserved women, financial service providers are starting to see the potential of targeting groups like female entrepreneurs. The data shows them they’re missing opportunities, creating an unspoken pressure to serve more women.”
Regulated entities are required to report quarterly on financial education programs, segmented by factors such as gender, education level, marital status, and economic activity. They must also publish gender-related indicators on their websites, spanning a wide range—from the average loan amount granted by gender to the percentage of internal promotions by gender.
“By showing the number of underserved women, financial service providers are starting to see the potential of targeting groups like female entrepreneurs. The data shows them they’re missing opportunities, creating an unspoken pressure to serve more women.”
The legacy of Dr. Margarita and the future of financial inclusion in Ecuador
Dr. Margarita’s term at SEPS was extended beyond its original timeline due to her outstanding contributions to Ecuador’s financial landscape. As a result of the effective management of this roadmap and the subsequent implementation of the regulation; over six years, the gap in the credit amount granted by cooperatives and mutual societies to men and women narrowed by 7.8 percentage points (from 20.8% to 13%). Additionally, the share of credit granted to women in the total loan portfolio increased by 2.8 percentage points (from 38.8% to 41.6%).
To ensure regulations work for everyone—especially in contexts with highly gendered norms—regulators must place gender at the center of their approach. This means identifying the interplay between existing norms and gender-blind regulation that could result in disparate outcomes, guided by institutional incentives to act and the capacity to implement and monitor compliance effectively. By drawing inspiration from SEPS Ecuador, regulators and policymakers worldwide can chart their own path toward a more equitable and empowering financial future.
Trade figures are known in detail because almost every government carefully tracks the contents of all shipping containers, cargo flights and bulk deliveries that legally leave and enter their borders. These figures are published online and broken down into very fine detail using a system called the Harmonized Tariff Schedule, or HTS. The HTS shows the tax or duty that must be paid for each kind of item and from every kind of country.
In 2024, the U.S. exported US$1.7 trillion worth of goods to the world. Since few of us can conceptualize trillions, that is about $5,000 for every man, woman and child in the U.S.
Not surprisingly, Taiwan’s biggest exports to the U.S. are computers, chips and other electronic hardware such as power supplies. These computer chips are so important that they were specifically excluded from the new tariffs.
But while high-technology equipment often gets the headlines, imports from Taiwan are far broader – and the U.S. would face several economic shocks if Taiwan suddenly stopped exporting.
First, the U.S. building industry could grind to a halt because Taiwan is a major producer of drywall screws. Though small and cheap, that’s a very significant product, given the prominence of drywall in the interior walls of almost every house, office and factory.
Beyond screws, Taiwan is a major producer of tools. For example, approximately two-thirds of all socket wrenches, band saws, blowtorches, air compressors and grinders imported into the U.S. come from that island. Losing access to tools is not as crucial as losing access to the screws because many tools last a long time. But finding new suppliers is not trivial.
The other basket of imports
Finally, Taiwan is also a big U.S. supplier of sports goods.
Moreover, Taiwan controls a few key parts of the bike market. For example, over half of all bicycle crank sets, derailleurs and brake parts came from Taiwan. Without these products it is impossible to pedal, shift and even stop a bike.
Taiwan is also one of the world’s leading suppliers of golf clubs, with the U.S. in 2024 importing about a quarter of a billion dollars’ worth of clubs from the island. To go along with the clubs, Taiwan also sent half a billion golf balls. Given that about 25 million people play on golf courses in the U.S. each year, that works out to 20 balls per player in just 2024.
All together, the data shows that not just Silicon Valley should be worried about geopolitical factors that disrupt imports from Taiwan. Taiwan might be a small island, but as the story of David and Goliath reminds us, size and impact are not related.
Since the mid-2000s, the Medicare system has dramatically transformed. Enrollment in Medicare Advantage – the private alternative to the traditional Medicare program administered by the government – has more than quadrupled. It now accounts for the majority of Medicare enrollment.
Employers, including state government agencies, are helping drive this growth in Medicare Advantage sign-ups. The increase in people on Medicare Advantage plans burdens taxpayers and means more patients can be denied doctor-ordered care.
At the same time, many private and state employers have shifted their retirement plans so that the health benefit employees have earned counts only toward Medicare Advantage plans that replace traditional Medicare.
We are health carepolicy experts who study Medicare, including what’s driving the changes in employer health care subsidies and why health care choices may be difficult for many people.
Vanishing choices
As of early 2025, health care subsidies for retired state employees in 13 states don’t include traditional Medicare supplement plans. The subsidies apply only to Medicare Advantage plans.
In the private sector, just over half of large employers that offer Medicare Advantage have used it to replace traditional Medicare instead of offering their employees a choice.
When private and state employers drop the option for the Medigap insurance that supplements rather than replaces traditional Medicare, retirees must choose a fully privatized Medicare Advantage plan or pay the full cost of a supplemental Medigap plan on their own. Medigap lowers or removes traditional Medicare’s co-pays and deductibles.
Today, a person signing up for Medicare also has, on average, more than 30 Medicare Advantage plan options – privately run alternatives to traditional Medicare and Medigap. The two largest providers, UnitedHealthcare and Humana, administered nearly half of all Medicare Advantage plans in 2024.
Navigating the current Medicare system can be overwhelming, and the Medicare Advantage option is expensive for taxpayers. As policymakers continue to weigh potential reforms, it’s important to understand why Medicare Advantage has become so popular, who is enrolling in Medicare Advantage, and what aspects of Medicare Advantage plans may be important to them.
Switching into Medicare Advantage
The bulk of Medicare Advantage’s rapid growth has come from people switching from traditional Medicare into Medicare Advantage: In 2021 alone, over 7% of Americans covered by traditional Medicare switched to Medicare Advantage, but only 1.2% of those with Medicare Advantage coverage switched to traditional Medicare.
But for Medicare, the privatization trend is not so simple.
Compared with traditional Medicare, Medicare Advantage plans are, on average, paid more by the taxpayer-funded Medicare system for covering each enrollee. Advantage plans also have more flexibility to limit their medical costs by restricting provider networks and requiring prior authorization.
The extra benefits of Medicare Advantage
Some of these extra funds result in higher profits for insurers, but they also partially finance benefits that are not part of regular Medicare.
In the past decade, lawmakers have introducedseveral bills to add this coverage, but Congress has not passed any of them.
Medicare beneficiaries give many reasons for choosing their health plan. The most common reasons are different for people covered by traditional Medicare versus Medicare Advantage. Of people who have traditional Medicare coverage, 40% prefer to have more doctors and hospitals to choose from. A similar percentage of those with Medicare Advantage cite extra benefits or limits on out-of-pocket costs.
Economic insecurity and advertising
These financial protections and extra benefits are important for some older adults, given high rates of poverty and economic insecurity among people who are 65 or older. Though these supplemental benefits may not be very accessible, a quarter of surveyed beneficiaries said they were a primary reason for enrolling in Medicare Advantage. An additional fifth cited lower out-of-pocket costs.
Medicare Advantage plans also typically include a low-cost drug plan that people who opt for traditional Medicare pay for separately as Part D.
Compared with a traditional Medicare plan that doesn’t include a supplemental Medigap plan to limit premiums and co-pays, Medicare Advantage’s premiums and co-pays contribute to an estimated 18% to 24% lower out-of-pocket spending.
Brokers, agents and advertisements also play an important role in which plans people choose. In a survey of people who have Medicare coverage, one-third said they used an agent or broker to choose a plan. Of those living below the federal poverty line, 12% said they relied on advertising.
While these sources can inform beneficiaries about the many options, many policymakers have raised concerns aboutmisleading marketing steering people into plans that don’t serve their needs. Brokers and agents may have more incentive to guide patients to Medicare Advantage because they are paid more for enrolling people in fully privatized plans than in the Medigap and Part D plans that supplement traditional Medicare.
Retirement benefits shifted to Medicare Advantage
Changes in retirement benefits are also contributing to the growth in Medicare Advantage.
A majority of state employee health care retirement benefits include Medicare Advantage plans. And in 13 states, the health care benefit for retired state employees does not include a choice of Medigap: Alabama, Arizona, Colorado, Connecticut, Georgia, Illinois, Kentucky, Maine, Michigan, Missouri, New Hampshire, Pennsylvania and West Virginia.
In the private sector, the share of employers offering retirement health care benefits to their employees has declined since the 1990s: Only 21% of large employers offer those benefits today compared with 66% in 1988. But among private employers that still offer retirement health care benefits, those offering Medicare Advantage more than doubled between 2017 and 2024, from 26% to 56%.
Just over half of large employers that offer Medicare Advantage have used it to replace regular Medicare instead of offering their employees a choice. This means that to remain in traditional Medicare, retirees would have to give up an employer subsidy that covers all or part of the Medicare Advantage premium and pay the full Medigap premium.
Employers cite the shift as a necessary response to rising health care costs, though many retirees have protested the trend. Medicare Advantage premiums are generally cheaper than Medigap premiums, saving employers money, in exchange for retirees potentially being denied care more often. New York City employees successfully prevented the switch.
Stuck in Medicare Advantage
For many Medicare beneficiaries, switching to Medicare Advantage is a one-way street because most states don’t offer switchers the guaranteed issue and community rating protections for Medigap supplemental coverage plans that people get when initially signing up for Medicare. These protections prevent people from being denied coverage or charged a higher price for preexisting conditions.
This increased cost in most states of switching back to regular Medicare after age 66½ – especially for people with serious health conditions – may reduce the number of people who do so. But some switch despite the cost.
Meanwhile, 5% of people who used Medicare Advantage plans in 2024 had to find a new one in 2025 because of a plan being discontinued. There is a silver lining, however: For the first 63 days after their coverage ends, people in failed plans can choose traditional Medicare plus a Medigap supplement with the guaranteed issue protection that in most states applies only during the first year of Medicare eligibility.
Thirteen states and more than half of employers who offer a retiree health benefit have narrowed their benefit subsidy and only offer Medicare Advantage. This replaces traditional Medicare with a privately administered plan, removing the choice of Medigap, a supplement to traditional Medicare. SDI Productions/E+ via Getty images
While the share of Americans enrolled in Medicare Advantage plans has grown nationwide, the program’s popularity still varies geographically. Today, the share of Medicare beneficiaries enrolled in Medicare Advantage ranges from 2% in Alaska to 63% in Alabama, Connecticut and Michigan.
Although an increasing share of people in rural regions have enrolled in Medicare Advantage, they are still less likely to enroll in Medicare Advantage and more likely to return from Medicare Advantage to traditional Medicare than their urban counterparts.
Switching from traditional Medicare to Medicare Advantage is more common among relatively healthy people who use less health care than expected. This trend, known as “favorable selection,” means the Medicare Advantage companies are enrolling healthier people. The Medicare system pays Medicare Advantage plans based on the expected rather than actual medical costs. This contributes to the overpayment of Medicare Advantage plans.
These switching patterns suggest that among people who have illnesses such as diabetes, Medicare Advantage is potentially more appealing if they already face barriers to health care access or are in better health. These barriers are particularly common among racial and ethnic minorities in both traditional Medicare and Medicare Advantage.
In some ways, this resembles the tiered or “topped-up” health care system advocated for by some economists, where people receive a baseline plan, and those who want more coverage and can afford it pay for a more generous “topped-up” plan. Given the size and differing needs of the Medicare population, such a system can potentially be a cost-effective way to ensure health care access and financial protections.
But it also creates inequalities in access, especially if the baseline plan is much worse than the “topped-up” plan.
In addition, taxpayers pay more rather than less for someone enrolled in Medicare Advantage – the less expensive baseline plan that provides less health care. They pay less for someone enrolled in traditional Medicare plus additional supplemental insurance plans – the “topped-up” option.
We believe it’s important that, throughout any reform, people have access to an affordable plan that ensures access to health care. Projections show that under the current payment system, reductions in payments from the Medicare system to Medicare Advantage providers would likely lead to only modest decreases in plan generosity, though given the vulnerability of many who use Medicare Advantage, this would have to be monitored carefully.
It’s also important for policymakers to consider improving traditional Medicare, whether that be allowing for an out-of-pocket maximum or covering at least the same degree of dental, vision or other benefits currently offered only under Medicare Advantage.
This article is part of an occasional series examining the U.S. Medicare system.
