Democratizing Development in Yemen: Beyond Food Aid

Despite more than USD 20 billion in humanitarian aid since 2015, conflict and deprivation in Yemen continue. More than half of all Yemenis still go hungry.  Of five million internally displaced people, 80 percent are women and children. The conflict has cost Yemen between USD 170 and 200 billion in lost GDP from 2015 to 2022 and aid has covered less than 10 to 12 percent of this gap.  

A new approach to Yemen’s crisis is overdue. Arabia Brain Trust went directly to Yemenis to understand the problems they face and derive innovative solutions. 

In 2021, ABT surveyed 1041 Yemeni men and women of various backgrounds covering 214 districts across 17 governorates about their daily practices, aspirations, and needs in four key areas: food consumption, sources of energy, access to the internet, and finances. 

The results we found were interesting, depressing, and promising all at the same time.  

Food and energy  

We found that the majority of Yemenis spend two-thirds of their income on food, while the number of unskilled labor hours required to cover the monthly cost of the minimum food basket for a family of seven almost doubled between 2014 and 2021. This is extremely significant considering that Yemen imports 90 percent of its basic food needs. The increase in fuel prices globally and the fact that Yemen relies on Russia and Ukraine for around 40 percent of its wheat exasperates the country’s food insecurity problem. 

But the survey also told us that 90 percent of Yemenis are interested in engaging in local food production, with 81 percent very interested. In fact, 45 percent of surveyed Yemenis said that they are already growing food locally. The main challenge they face is, understandably, access to finances. These are remarkable findings that show great opportunities to improve the country’s food security as well as generating income. 

In terms of access to electricity, our research found that most Yemenis endure power outages 12 to 23 hours a day and more than a third have no access to electricity at all. Approximately 35 percent of the population has never been connected to the national grid and has no access to electricity. This is the case despite the fact that Yemen spends over USD 3 million a day importing fuel for electricity generation. 

The good news is that ABT’s research found that 44 percent of Yemenis already access electricity through renewable energy sources – mainly solar, with those in rural areas using renewable energy significantly more than those in urban areas. The implications of this finding are huge, not only in terms of addressing the global fuel crisis, but also in addressing climate change impacts. 

Connectivity and finance 

With regard to connectivity, Yemenis told ABT that the internet connection is fleeting and unreliable, and only 6 percent connect via their place of work for productivity purposes. The majority, at 42 percent, connect using their mobile phones at very high cost, given that inadequate infrastructure make Yemen one of the most expensive internet markets worldwide. This is withstanding the fact that prior to 2015, poor infrastructure supporting 3G/4G ICT networks left 40 percent of the population without any access to mobile services and more than 70 percent of the population without regular access to internet services. 

But what the survey also told us was that 85 percent of Yemenis have had at least one form of access to the internet, even if it was unreliable or poor quality. This shows interest and buy-in. The advancement in internet technology and Yemen being a large market for telecom companies both present an opportunity to utilize this interest. 

And finally, with only 6 percent of Yemenis having bank accounts (2 percent for women), Yemen’s financial inclusion is one of the lowest in the world.

And finally, with only 6 percent of Yemenis having bank accounts (2 percent for women), Yemen’s financial inclusion is one of the lowest in the world. Yemenis told us that 72 percent of them use a cash transaction system to earn their salaries or income, and 60 percent prefer cash as their method of payment. They don’t trust the financial system, and the currency devaluation makes storing money a high risk.  

However, the survey showed that 4 percent of Yemenis already use mobile phones to carry out financial transactions and around a quarter of the sample said they are interested in using a digital financial system if provided. If adopted, this means that women and those with limited mobility would be better integrated in the financial system and potentially have access to microcredits or even new sources of income.  

ABT’s model for democratizing development in Yemen 

We took all these findings to our experts and asked them to run the numbers, do economic modelling and come back with recommendations for all stakeholders. They came back with an integrated model where the convergence of internet connectivity, financial inclusion, food security and renewable energy would create a synergy of economic resilience and empower Yemenis. 

For instance, strengthening the local renewable energy system will lower the cost of local food production. More generally, it would reduce reliance on fuel imports, in turn reducing pressure on exchange rates and opening opportunities for downstream food processing, packaging, and marketing. 

Since the lack of access to financing is the major inhibitor to growing food locally, enhancing rural finance will provide both crucial access to investment funding and a store of value apart from distrusted Yemeni institutions. Moreover, mobile money and cryptocurrency platforms can provide women and marginalized communities with access to financial resources and opportunities despite mobility and social constraints. 

The dependency on fossil fuels jeopardized the food security system as well as the national electricity grid. Yemen imports USD 3.3 million worth of fossil fuels a day to generate 1 gigawatt of power. The estimated total demand is 14 gigawatts.  

Even pre-crisis, Yemen’s electricity sector only covered 40 percent of demand and served mainly urban areas. As a result of the high cost of electricity, about 15 million Yemenis in rural areas have never been connected to the grid. 

ABT’s own research finds that investing in renewable energy solutions in Yemen is technically, commercially, and politically feasible, and could provide effective, self-managed and sustainable energy systems as soon as 2030.

Today, Yemenis on the grid endure blackouts on average 14 hours a day. In addition, most Yemenis generate electricity through decentralized, standalone solar units. Therefore, systemizing this local-led, renewable energy solution will connect people to clean microgrids and will insulate most Yemeni communities from political deadlock and disruptions to global fuel supply chains. ABT’s own research finds that investing in renewable energy solutions in Yemen is technically, commercially, and politically feasible, and could provide effective, self-managed and sustainable energy systems as soon as 2030.  Democratizing energy in Yemen will also raise the exchange value of the YER considerably by reducing the demand for foreign currency to pay for food and create tens of thousands of sustainable local jobs in the energy sector alone. 

Connectivity for growth 

Historically, Yemenis have maintained deep connections with their region and actively participated in global trade networks. However, today, even though 10 percent of global shipping passes Yemen’s shores, Yemenis find themselves by and large out of touch with the rest of the world. 

In addition to conflict, Yemen is further isolated by the worst internet connectivity in the Middle East and the fourth-worst globally. Little more than one-quarter of Yemenis, largely within a few urban centers, can access one of the world’s slowest internet services. 

Poor internet connectivity has a massive impact on the ability to engage locally, regionally, and globally. It prevents Yemeni businesses from integrating with trade and supply networks at national, regional, and global levels. Yemen’s diaspora struggles to leverage the opportunities its homeland presents. 

Consequently, providing internet connectivity across Yemen, beginning with a localized pilot using contemporary and innovative ‘plug and play’ options will generate social and economic benefits and enhance the financial viability of investing in the rollout. This can be achieved at a cost of around USD 1.4 billion over five years according to ABT’s economic modelling. 

In addition to innovative food, energy, and internet solutions, mobile money is an important enabler for the desired empowerment. The lack of reliable regular internet and mobile networks is the principal inhibitor to availability of mobile money services. 

Supporting smart approaches that combine digital finance with traditional methods will enable access to financial services for the 94 percent of Yemenis without a bank account

Over half of all businesses operate informally, and Yemen ranked last among Arab countries in the 2017 Global Financial Inclusion Index. Supporting smart approaches that combine digital finance with traditional methods will enable access to financial services for the 94 percent of Yemenis without a bank account. It will also engage financially disconnected women and rural inhabitants and connect Yemenis to opportunities in the region. 

There are many options to democratize finance. With digital money comes options for payments of salaries, taxes, and transactions directly between parties—cutting out middlemen and inefficiencies caused by redundant paperwork, counterfeiting and corruption. The move away from insecure cash transactions and towards efficient and convenient online transactions will boost trading volumes and GDP significantly.  

Pathways to democratizing development 

Based on the above, ABT calls for investment in the drivers of development in Yemen through bottom-up, locally led initiatives and effective approaches focusing on these four key sectors. 

Linkages between these and other drivers synergize to propel development. Electricity boosts agricultural productivity. It powers the internet. The internet in turn enables new ways of doing finance. It provides access to information and markets for agricultural produce. Food production generates an income to pay for connectivity and electricity, and so on.  

At the current stage, transitioning to renewable energy and connecting Yemenis to reliable and affordable internet will lower food prices significantly, raise the exchange value of the Yemeni Riyal, boost GDP per capita and create tens of thousands of quality sustainable jobs. 

The international response has paid insufficient attention to the economic aspects of the crisis perpetuating conflict. Instead, it has driven the narrative that Yemen, but for sustained and massive food aid, is on the brink of famine, and pushes short-term food aid as the default response modality. 

An alternative approach to the crisis in Yemen is overdue. An approach that puts the key building blocks of social and economic development directly into the hands of local Yemeni communities while assuring integration and interoperability. We are on a mission to change the narrative on Yemen as a country with the potential to regain its development path.

The views expressed in these articles are those of the author and do not reflect an official position of the Wilson Center.