Even though some individuals would rationally prefer to invest little to nothing in financial literacy, the models suggest it may still be socially optimal to promote financial knowledge to all at an early age, such as through mandatory financial education in secondary schools. Moreover, better human development and literacy levels increase awareness of, and participation of, the larger portion of low-income populations in financial systems, thereby decreasing poverty rates in developing countries (Atkinson and Messy 2013). Affordable access and utilization of financial services helps families and small-business owners to earn income, manage uneven cash flows, invest in opportunities, and escape poverty.
Development partners can sustain and accelerate financial innovation in smaller countries by supporting external, internal, and diaspora capital mobilization. An example is the Green Climate Funds (GCF) Subnational Climate Fund, a leveraged equity fund that seeks to catalyze public and private investments over long periods in mitigation and adaptation projects at the subnational level across developing countries, about one-third of which are LDCs and SIDS. In the absence of substantial global investor interest, smaller countries need to try to tap into local capital pools to invest — whether via pension funds, insurers, or high-net-worth individuals.
This is especially challenging because these countries lack the crucial funding for supporting climate-resilient measures and infrastructure, as well as heavily relying for revenue on marine-based sectors, especially in Small Island Developing States (SIDS). While some smaller countries have succeeded in providing their populations with prosperity, many remain underdeveloped.
Often more friendly to businesses than larger jurisdictions, smaller countries can potentially offer good quality of life in order to attract the type of talent base investors are looking for, particularly important for global VCs. Small countries may enjoy competitive advantages in efforts to attract global capital given their increased reform speeds and capacity to digitize public services, and their highly networked political and business elites. Yet, large corporate, stock, and institutional investors generally overlook small economies (countries of under 15 million people), discounting them on the basis of their smaller market sizes.
Many people in countries operating on what is commonly called American Model of capitalism have seen the Nordic model as an attractive alternative to the winner-takes-all brand of capitalism which has led to poverty, a lack of accessible and quality healthcare and education, deteriorating social security, a lack of pension security, widespread scandals in financial markets, and enormous income inequality. Many wonder whether the Nordic model provides a template for smaller countries, where citizens are more homogeneous in terms of opinion and experience, but who are living in poverty or repression due to Marxist governmental policies.
Many smaller economies are dependent on global remittances, with cash transfers reaching double-digits of GDP in countries like Georgia (13.3%), Kosovo (18.9%), and Lesotho (23.5%). In adapting the UNPD Global Model to the Low Fertility Recoveries, the UNPD excluded countries that experience persistently low fertility, such as Thailand, South Korea, Canada, and Greece. UNPD fitted a model for a selected group of countries with low fertility which had experienced an increase in fertility toward replacement levels. This produced a model which predicted a convergence in fertility toward 1*75. Their statistical efforts in fitting the global low fertility recovery model excluded several countries with low fertility which had shown no evidence of an increase, such as Thailand, Greece, South Korea, and Canada.