Print Page   |   Sign In   |   Register
Notes from the Network
Blog Home All Blogs

Shortlist and Spire: Building Africa’s First Full-Stack Talent Platform

Posted By Administration, Tuesday, February 27, 2018

Shortlist and Spire: Building Africa’s First Full-Stack Talent Platform
By Grace Horwitz 


Last November, Spire Education, one of Blue Haven’s portfolio companies, merged with Shortlist, a talent sourcing and screening business operating across India and Kenya. The merger was a first for the Blue Haven portfolio, but also for the broader human capital industry in East Africa. With complementary offerings, the combined Shortlist-Spire team is now capable of supporting clients across the talent spectrum. As Shortlist CEO, Paul Breloff, put it in his November announcement, “This is a match made in heaven…Shortlist can help companies build their teams, and Spire can help make sure those teams are equipped with the skills needed to succeed.” As we celebrate the three-month anniversary of the Shortlist-Spire union in Nairobi this week with Paul, Jenn (former Spire CEO and now MD of Africa for Shortlist and Spire) and the rest of the Shortlist-Spire team, here’s why we’re excited to have them in the Blue Haven family.

Last year, Lauren and I discussed why human capital is important to us as investors. While our website is littered with the logos of portfolio companies, a more accurate depiction of what we’re betting on might be a photo collage of the teams behind them. Companies are only as good as the people that run them, and that means hiring, training and retaining the best talent. Regardless of the industry, most executives cite people as their most important asset. However, in their quest to retain more “A-players,” very few feel as though they’ve cracked the code to maximize potential across roles, levels, and functional areas.

This problem is particularly challenging for quickly-growing small and medium sized businesses that lack dedicated resources and the staff time to focus on talent. As part of a small organization, I’m familiar with this tension. It took my boss, Lauren, over a year to hire her first Associate (me) because she was juggling days that looked like this. We just hired our second Associate, Sarah, and I’m positive I’ve underdelivered in the onboarding and training category in more ways than one (sorry Sarah!). This makes for a vicious cycle — small and medium sized businesses are painfully constrained for time and resources, making it difficult to invest in hiring, upskilling, and retaining employees, which in turns puts even more pressure on an already overworked team — a so-called talent hamster wheel.

The reality is, sometimes we need help from the outside. But when it comes to hiring and developing your employees, it can be hard to find the right partner. The traditional mode of outsourcing HR activities tends to be of the transactional, hit-and-run nature — hire a head hunter to track down a bunch of CVs ASAP, and they do it, but without understanding culture, the business itself, or what soft skills a candidate will require. Or management brings someone in to conduct a half-day training for junior staff, and while you may feel pretty good after a couple of trust falls, three months down the road you realize that the exercise had no real impact on your employees’ performance. And when these talent service providers are all separate companies, you spend a lot of time re-explaining exactly what you’re looking for in an ideal team member — wouldn’t it be nice if the same people who hired your new sales team were the ones who trained them too?

Point solutions that claim to offer “just-in-time” support are not always the best approach, especially in the context of building an effective team that is capable of achieving its full potential over time — weeks, months and years. Most firms (unless you’re Google) don’t have the privileges of skimming the best candidates from the top of a stagnant talent pool. That means employers have to start taking a more integrated and proactive approach across the talent life cycle to truly optimize investment in talent. They will need to leverage a combination of technology and human touch to test the competencies of candidates rather than taking resumes at face value and spend time with employees to teach the soft skills and attitudes that drive success in management roles.

Having seen our portfolio companies struggle with talent issues of all flavors and varieties, we are pumped about what Shortlist-Spire is bringing to market in Kenya. Spire and Shortlist focus on different pieces of the talent value chain, but long-term results will be mutually dependent. While Shortlist screens candidates on the basis of competency (not just CV and connections!), Spire helps those candidates reach their full potential through end-to-end talent development and training. In an ideal world, this makes for a seamless bump-set-spike model of maximizing human potential. Though I think both Paul and Jenn would agree that there is still lots to figure out, the Blue Haven Team is excited to be along for the ride!

Originally published on Medium.

Tags:  East Africa  talent 

PermalinkComments (0)
 

Collaborate to make green mainstream

Posted By Leanne Feris, Fetola, Monday, February 26, 2018
Updated: Monday, February 26, 2018

Collaborate to make green mainstream

Dear friends and colleagues!

Are you keen to participate in our ecosystem, working to create a cleaner, more efficient and sustainable way of living, and doing business?

Have you heard of GROUNDSWELL Africa – Fetola’s new initiative to help solve environmental and social challenges by supporting viable business and social enterprise solutions? Targeting  water scarcity, resource efficiency and waste management, phase one of the drive to ‘make green mainstream’ is supported by seed funding from J.P.Morgan. It will take 30 entrepreneurs through an intensive growth program, and assist hundreds of others through the GROUNDSWELL helpdesk.

Fetola’s reputation is built on growing the economy and creating jobs, by building businesses that last. We invite your help to make sure this happens in the ‘green sector’.

How you fit in

Are you one of the skilled and passionate organisations or individuals in industry, government and research agencies that already work in the water scarcity, resource efficiency and waste management sector? Would you like to collaborate with like-minded people for mutual benefit, stimulating engagement and tangible results?

GROUNDSWELL is an opportunity:

·       to identify potential providers for your business;

·       to give back by helping young entrepreneurs (and to test the waters as a mentor if you haven’t done this before);

·       to talk to young entrepreneurs with innovative ideas and offerings;

·       to showcase your business offering;

·       to spot potential partnerships; and

·       to create corporate enterprise and supplier development sponsorship packages.

 

Four ways to engage

Please let us know if you are keen to engage in the ecosystem as:

1.     Programme Advisory:  As external sounding board on an ad-hoc basis, when sector-specific needs and challenges arise. 

2.     Support to entrepreneurs: Providing sector-specific knowledge to the training and group mentoring taking place over the next 18 months. For example procurement opportunities, industry challenges and technical / legislative roadblocks.

3.     Volunteer mentoring:  Sector-specific support to supplement the business mentors.

4.     Networking & ecosystem events: Meet the entrepreneurs and engage in broader industry forums.

To register your interest in any of the opportunities, click here, or read more about it here. If you’d like to apply to the GROUNDSWELL programme, click here.

Alternatively, please pass on this opportunity to those in your network who might benefit.

Tags:  Acceleration  entrepreneurship  Environment  mentoring  Scale  sustainability  water 

PermalinkComments (0)
 

BCtA Webinar Series: Women’s Economic Empowerment and Inclusive Business

Posted By Nazila Vali, Business Call to Action at UNDP, Wednesday, January 17, 2018
Updated: Thursday, January 18, 2018

WHAT CAN BUSINESS DO FOR WOMEN AND WHAT CAN WOMEN DO FOR BUSINESS:

A Perspective from and for the Base of the Pyramid to Enhance Economic Opportunities for Women and Accelerate the Realization of the SDGs.

 
1st Webinar: Tuesday 30th Jan 2018, 4:00-5:00 pm (GMT+3)
2nd Webinar: Tuesday 6th Feb 2018, 4:00-5:00 pm (GMT+3)
3rd Webinar: Tuesday 13th Feb 2018, 4:00-5:00 pm (GMT+3)

We are excited to announce BCtA’s new webinar series featuring presentations and discussions with key experts who have helped to empower women at the Base of the Pyramid (BOP) market through their research, products or services development, policy or advocacy work. This is a unique chance to engage on both conceptual and practical issues around women’s economic empowerment for the BOP market.

The initiative is built on the recognition that there is a documented business case for the private sector to actively engage women as consumers, producers, suppliers, distributors of goods and services or employees. Women’s empowerment is a prerequisite, as much as it is an outcome, for achieving all the SDGs. Our webinars will demonstrate that businesses can be profitable and contribute to a company’s overall objectives while also helping to serve the interests of women at the BOP. 

Webinar discussions will feed into an insight report that will provide a comprehensive knowledge base to better understand the needs of BOP women at the BOP, thus informing and improving future programme and product design.

1ST WEBINAR | Women’s Economic Empowerment: the (Inclusive) Business Case
  • Aditi Mohapatra, Director, Women’s Empowerment at BSR
  • Anna Falth, Global Programme Manager, Empower Women at UN Women
  • Katy Lindquist, Communications Executive at AFRIpads
Moderated by Paula Pelaez, Programme Manager, Business Call to Action
To register and read more click here

2ND WEBINAR | Women's Economic Empowerment: Navigating Enablers and Constraints
  • Georgia Taylor, Technical Director at WISE Development     
  • Mashook Mujib Chowdhury, Deputy Manager, Sustainability, at DBL Group  
  • Nicole Voillat, Group Sustainability Director at Bata Brands
Moderated by Carmen Lopez-Clavero, Programme Manager Specialist, Private Sector and Economic Development at Sida
To register and read more click here

3RD WEBINAR | Women’s Economic Empowerment: Measuring Inclusive Businesses Impact   
  • Dr Catherine Dolan, Reader in Anthropology at SOAS, University of London, Visiting Scholar at Saïd Business School
  • Diana Gutierrez, Global Programme Manager, Gender Equality Seal for Private Sector Global at UNDP     
  • Anuj Mehra, Managing Director at Mahindra Rural Housing Finance Limited, India
  • Vava Angwenyi, Founder, Vava Coffee LTD, Kenya
Moderated by Nazila Vali, Knowledge and Partnerships Lead, Business Call to Action at UNDP
To register and read more click here

You will have the opportunity to share questions and comments when registering, during the webinar itself, and immediately following via a post-event feedback form.

We hope you can join us! Space is limited, so please register via the link below:

REGISTER HERE

Tags:  business  inclusive business  sustainability  wee  women  women's economic empowerment 

PermalinkComments (0)
 

Three Powerful Tools for Fintech Practitioners

Posted By Jane Del Ser, Bankable Frontier Associates, Tuesday, January 16, 2018
Updated: Wednesday, January 17, 2018

By David del Ser

(Watch our video)

Since we launched the Catalyst Fund in 2015, we have helped 15 fintech entrepreneurs deploy novel approaches to bring products and services to their customers. We have distilled the successful patterns and behaviors we have observed into toolkits and posts for those considering fintech methods for their businesses, whether they be startups or established players.


At a high level, successful fintech startups adopt principles of Design, Risk Management and Product Management, and also put modern technologies like smartphones, artificial intelligence and cloud computing at the core of their value propositions. At successful fintech startups Designers, Product Managers, CEOs and Engineers reinforce each other in multidisciplinary teams to explore the overlap between what customers find desirable, what engineers can build, and what the business requires to grow.

Design

The function of Design is to represent the voice of the customer at all times to make sure a company stays centered on what matters most. Design is not a one-off process. In the spirit of customer validation, designers keep tight feedback loops with customers throughout the product development process, from early prototypes to usability testing of new features.


Through user research (UX) techniques like online surveys and one-one-one interviews, designers invest heavily during initial stages in order to know their customers like the back of their hand; what are their problems and pain points, and how can their company help? In fact, designers segment customers into personas to allow the team to constantly keep in mind different user profiles and needs.


Aesthetics matter. Designers work hard to perfect a product’s UI and its look and feel, so it can live up to the high expectations created by WhatsApp or Google. But great design goes beyond just user research and visuals during early product design stages. Successful inclusive fintech startups map out the Customer Journey and Service Blueprint in detail to fully understand the perspective of the user each time they  interact with the company.


Ultimately, great design creates trust, that elusive quality that all startups are chasing and that distinguishes them from their competitors. We’ve captured our lessons for startups to build trust with their customers through their products or services in our Design for Trust Toolkit.


Product Management

But designers can’t work in isolation; they need someone to lead the orchestra - and that’s where a product manager comes in. The PM takes a big picture view and works to ensure that designers, engineers and marketers all work towards the same goal. Crucially, she makes sure the product or service goal is backed by data and evidence. She keeps the whole process nimble through quick agile iterations focused on the activities of users, from initial onboarding to the retention phase. For example, using A/B Testing and usage analytics she captures details of how each users is interacting with every screen to inform engagement.


The effective product manager is very focused on the key metrics for the business, such as customer lifetime value or acquisition costs. She also works hard to explore the best channels to find new customers, including viral referrals and social media. As an example, our portfolio company Destacame has seen lead acquisition costs dropping to less than $3 through these types of digital channels. We explore some of the different tools and frameworks to help startups focus as they chart their journey from idea, to minimum viable product (MVP) and growth in our upcoming product/market fit toolkit.

Modern Technologies

And finally, you can’t have good fintech without the “tech” that is enabling these new approaches.


Most important are the smartphones, which run fintech apps and also act as channels to find and interact with users. For instance, several of our startups use WhatsApp to offer customer support and drive virality, communicating with users in the way they prefer. Smartphones can also be used to generate and capture user data, which is particularly valuable when targeting low-income consumers who traditionally have been anonymous. In that vein, our portfolio company Smile Identity validates and authenticates customer identities using selfies taken on their phones.


In addition machine learning and other artificial intelligence systems can improve customer value propositions and to automate internal processes like credit scoring using data from smartphones and other new sources like satellites. As an example, our portfolio company ToGarantido is exploring chatbots for sales of their insurance policies and customer support. Harvesting is using satellite data to understand credit and insurance risk with just a GPS read. Worldcover doesn’t even need customers to file a claim as their satellite systems award them automatically.


And software engineering helped Escala and Paygo Energy to automate most of their back-office processes to be responsive to their customers. It is easier and more affordable than ever for startups to leverage affordable SaaS solutions to architect their systems. Likewise, cloud computing is also a powerful technology that offers simplicity, lower costs and flexibility. There is no need to commit capital to purchase hardware and the team requires less engineering talent to keep the servers going.

Conclusion

In our experience, companies that harness the powerful combination of design, product management and modern technologies create better and more tailored value propositions. That makes for happier customers, which is what makes businesses thrive. By driving more usage, the fintech triad can create more impact in low-income populations. And digital channels and automated processes can significantly lower costs of serving customers, allowing for expansion to new markets and reducing exclusion.


Learn more by joining us for our webinar on the Catalyst Fund toolkits during the ANDE Sector Update call in January. Register here.


Tags:  Acceleration  accelerator  accelerators  Africa  ANDE Africa  Base of the Pyramid  brazil  Business Models  capacity development  early stage ecosystem  emerging markets  entrepreneurship  finance  financial inclusion  fintech  Grants Rockefeller  impact investing  impact investment  inclusive innovation  India  India; ANDE members  innovation  Kenya  Latin America  mentoring  Mexico  SGBs; accelerators; East Africa  smaholder farmers  smes  social enterprise  social entrepreneurship  social innovation  webinar  West Africa 

PermalinkComments (0)
 

GroFin opens 16th office across Africa and MENA, to invest in SMEs in Senegal

Posted By Nishika Bajaj, GroFin, Thursday, December 14, 2017

GroFin, a pioneering SME development financier, has opened its 16th office in Senegal, furthering its expansion into West Africa’s Francophone belt after Ivory Coast.

With the opening of this office, Senegalese entrepreneurs can expect to benefit from the unique model of appropriate, medium-term finance and specialised, value-added business support that GroFin extends to Small and Growing Businesses (SGBs) across its locations of operation.

Headquartered in Mauritius, GroFin currently has an investment footprint in 14 countries across Africa and the Middle East – straddling key economies in Eastern Africa, Western Africa, Southern Africa and the Middle East and North Africa (MENA) region – with one to two countries expected to be added each year.

GroFin’s latest in-country expansion heralds a new investment horizon for its flagship Small and Growing Businesses Fund (SGB Fund). Launched in September 2014 across nine African countries, the Fund has capital commitments of USD 100 million, making it one of the largest funds specifically targeting SGBs in Africa.

The SGB Fund follows on the fully invested GroFin Africa Fund, marking 13 years during which GroFin has supported over 8,500 entrepreneurs and invested in 640 SGBs, as well as sustained 104,950 jobs, benefitted 524,770 livelihoods and added economic value exceeding USD 700 m per annum through its investees, as at 30th June 2017.

With an evergreen structure, the SGB Fund was created by GroFin together with the Shell Foundation, an independent charity; the German Development Bank, KfW; the Norwegian Investment Fund for Developing Countries, Norfund; and the Dutch government through the Dutch Good Growth Fund (DGGF). 

Tags:  Base of the Pyramid  SGBs; West Africa; Senegal; Africa; MENA; Entrepre 

PermalinkComments (0)
 

Preparing for Scale: Developing and Retaining Talent

Posted By Administration, Wednesday, November 1, 2017

The EY “Preparing for scale” webinar series aims to support impact entrepreneurs and their management teams to overcome barriers to growth. Presented in association with AcumenEchoing GreenANDE and Toniic, the webinar series will provide insightful, practical advice on how to understand and overcome these barriers to growth, as well as tangible examples of how they have been overcome in practice by leading impact entrepreneurs. 

 

ANDE hosted the most recent webinar on this series, with a focus on talent. Click the link below to access the recording and presentations. Please note, you will have to "register" first, and then you will have full access to the recording. 

 

Developing and retaining talent

Tuesday, 24 October 2017, 15:00 GMT

 

Speakers:

  • Antony Maina, ANDE - Antony represented ANDE's work on talent in our East Africa Chapter.
  • Jay Lee, Rippleworks - Jay covered how to enhance the employee value proposition as a means to developing and retaining talent.
  • Caroline Gertsch, Amani Institute - Caroline explained a model for leadership and management development training programs.
  • Glynis Rankin, Creative Metier - Glynis discussed the value of executive coaching in developing and retaining talent.

 

Access the recording here. 

Tags:  Scale  talent 

PermalinkComments (0)
 

From Micro to Small: How an SGB is helping other entrepreneurs grow their businesses in the Philippines

Posted By Stephanie Buck, Aspen Institute, Wednesday, October 11, 2017

The bright oranges, purples, blues, greens, and yellows advertising everything from coffee, to laundry products, to shampoo, to cigarettes are a common sight in the Philippines. These are the colors of the Sari Sari stores. Sari Sari roughly translates to “variety” in Tagalog. The stores often jut off of the owner’s home and can carry as many as 200 different types of products in one small area. And they are more than spaces to buy items for daily use. They are gathering places, an extension of the customer’s own pantry, and usually owned by women. There are upwards of a million Sari Sari stores throughout the country and while they may help their owners scrape by, they tend to remain very small and not hugely profitable.


When Mark Ruiz sees these stores, though, he sees their potential, and a question surges to the front of his mind: how can these micro-businesses grow and better meet the needs of their communities?

This question nagged at him, even while he was moving up the career ladder at Unilever, focusing on sales, customer marketing, and channel strategy. He enjoyed his work, and was grateful for the experience, but he started to feel like something was missing. His desire to help people grew stronger, and still the question would not let him go. He knew that, whatever the answer, he needed to have a business-based solution. And because of his experience and expertise in helping top Unilever clients improve their businesses through customized support in management and retail solutions, he thought, “Why not give that kind of tailored support to the smallest of store clients as well?”

And so, after seven years, Ruiz left his corporate job to co-found a social enterprise with his good friend, Bam Aquino. They eventually created Hapinoy, a play on Tagalog words that means “Happy Filipino.” After extensive research, Ruiz and Aquino determined that the main things these Sari Sari stores would benefit from would be access to capital through micro-financing, training, and new business opportunities. Focusing on these three components could help integrate the stores into the formal economy, and create alternative distribution methods to give marginalized populations better access to essential goods and services. 

Keep reading to learn how Hapinoy is helping these entrepreneurs grow their businesses from micro to small > 

 

 

Tags:  Information and Communication Technology  mobile  Southeast Asia 

PermalinkComments (0)
 

How Mobile Technology is Saving Lives in Nigeria

Posted By Stephanie Buck, Aspen Institute, Wednesday, October 4, 2017
Updated: Wednesday, October 4, 2017

In April 2015, a strange illness began spreading in Ondo State in Nigeria. Dozens of people started experiencing blurry vision, headaches, blindness, and loss of consciousness. Around the same time, people in nearby Rivers State began to suffer the same symptoms, sending communities into a panic, and claiming the lives of 66 people. Rumors of Ebola spread, but proved to be wrong. Instead, the mysterious disease was linked to methanol poisoning as a result of a pesticide-contaminated batch of a locally brewed gin, called Ogogoro. In total, it took more than six weeks to contain the Rivers State outbreak.

But in Ondo State, while 18 people still died tragically, the outbreak was contained in two weeks. Why the difference?

Keep reading > 

 

This excerpt is part of a series of stories ANDE is carrying out in partnership with Qualcomm Wireless Reach, another ANDE member. Read more stories at www.whysgbs.org/globalgoals. If you'd like to submit your own story for consideration on this site, please contact Stephanie Buck

 

Tags:  Information and Communication Technology  mobile  West Africa 

PermalinkComments (0)
 

Explainer: For SMEs, access to finance isn't the problem. Lending is.

Posted By Steven Zausner, Office:FMA, Wednesday, August 16, 2017

This article originally appeared in Devex.

Few people like talking — or reading — about regulation. It's boring.

While frequently mind numbing, if ignored, regulation can often lay waste to the best-laid plans, especially when it comes to accessing financing for small and medium-sized enterprises. As it stands, there are two regulatory challenges that are causing major headwinds for SME lending and capital formation: Basel III regulatory capital requirements and Know Your Client guidelines, which has severely impacted correspondent banking .

Basel III

The Basel Committee on Banking Supervision developed Basel III as a result of the lessons learned after the crash of 2008. The new, more stringent, regulations included changes to capital controls, leverage ratios and liquidity requirements. Compared to Basel II, Basel III requires banks to hold more capital. For SMEs, often twice as much. Basel-compliant countries use the committee’s standards to tailor laws and rules for their specific jurisdictions. For decades, the Basel framework sought to make international banking stronger and better able to withstand exogenous, macro-related shocks. Generally, holding more capital to withstand stress is wise, particularly in the wake of a financial crisis. It is, however, not ideal for SMEs.

Most importantly, or detrimentally, for SMEs, capital adequacy rules assign a risk weighting to each of a bank's assets that is meant to be proportionate to the credit and market risk that the asset in question represents. Under Basel III, loans to SMEs are assigned a relatively high risk rating. As such, banks have to hold more capital against SME loans than against, for example, government securities. In addition, banks struggle to measure the ex-ante riskiness of SMEs, which suffer from higher mortality bankruptcy — rates, lack of credit information and scarce collateral.

Banks exist on leverage. The higher the leverage they can get, the better returns they can generate. As such, the lower the capital requirements for an asset, the more capital they can deploy. This dynamic leads to banks making a choice between two ends of a spectrum: Either holding more capital to sustain the same amount of lending, or keeping the gross amount of capital and reducing risk. Most banks leaned towards reducing risk by cutting loans to riskier assets. SMEs became an easy target: High risk, lots of person-power needed to process loans and, with a higher capital requirement, now a guaranteed lower return.

Pretty simple, right? No? Okay, here's a sample problem.

XYZ Bank in Taxastania has the choice of the following investment options, yielding:

  • Treasuries: 5 percent
  •  Investment Grade Corporates: 10 percent
  •  Unrated SMEs: 15 percent

And assuming that the cost of processing/managing these investments was the same (which it is not), what would be the best investment. Easy, right? The SMEs.

Ah, but here's the rub. Under Basel , each of these instruments has a different capital requirement. Again, somewhat broadly, say they were required to hold the following percentages of capital against each of these investments:

  • Treasuries: 2 percent
  •  Investment Grade Corporates: 5 percent
  •  Unrated SMEs: 10 percent

As such, leverage for each is:

  • Treasuries: 50 times
  •  IG Corporates: 20 times
  •  Unrated SMEs: 10 times

Meaning investment return would be, assuming no defaults and linear payment (two huge assumptions):

  • Treasuries: 50 x 5 percent = 250 percent
  •  IG Corporates: 20 x 8 percent = 160 percent
  •  Unrated SMEs: 10 x 10 percent = 100 percent

So, what looks like a no-brainer, actually, generally, becomes a no-go.

Given their size, SMEs tend to be very dependent on bank credit, as other financing sources, such as wholesale debt or intra-firm funding are not available. As such, Basel III rules disproportionately affect SMEs access to capital.

At the time that the Basel III accords were formulated, contemporary commentators such as the Association of Chartered Certified Accountants , a prominent global accountancy body, anticipated negative consequences for small and medium-sized businesses, noting that: “... the credit crunch and economic slowdown that followed it have hit smaller enterprises hard. Although Basel III is often described as a recipe for mitigating and perhaps even avoiding future financial crises, its effects on lending to small businesses are generally expected to be disproportionately negative.”

The result of Basel III on SME lending has, indeed, been disproportionately negative. In May 2016, the European Banking Authority released a report trying to analyze the effect of Basel III on SME lending. One conclusion: “SME lending remained below its pre-crisis level.” The United States Treasury recently released a report that reached similar conclusions.

The way Basel III categorizes overdrafts also has bad consequences for SMEs. One of the key ways SMEs meet working capital needs is through bank overdrafts, which occur when money is withdrawn from a bank account and the available balance goes below zero. Under Basel III, banks have to consider overdrafts the same as draws on loan facilities. In other words, they have to hold credit risk capital on overdraft facilities, which are typically considered to be simple short-term liquidity products, instead of loans. Structurally, loans and overdrafts are different and should be treated differently under regulatory capital rules. This all means it’s no longer attractive for banks to offer overdrafts.

Know Your Client and the decline of correspondent banking

Through correspondent banking relationships, banks can access financial services in different jurisdictions and provide cross-border payment services to their customers, supporting international trade and financial inclusion.

Large global banks have traditionally maintained broad networks of correspondent banking relationships, but this situation is changing, rapidly. In particular, some banks providing these services are reducing the number of relationships they maintain and are establishing few new ones. As a result, many correspondent banks, especially in emerging markets, are at risk of being cut off from international payment networks. This implies a threat that cross-border payment networks might fragment, and that the range of available options for these transactions could narrow.

Bank of England Governor and Chairman of the G-20 Financial Stability Board Mark Carney recently highlighted the risk, writing: “So-called ‘de-risking’ in correspondent banking relationships has threatened the ability of some emerging market and developing economies to access the international financial system, and it risks driving flows underground.”

Rising costs and uncertainty about how far customer due diligence should go in order to ensure regulatory compliance and to what extent banks need to know their customers’ customers — the so-called Know Your Client — are cited by banks as among the main reasons for cutting back their correspondent relationships. In fact, “90 percent of bank officers surveyed by the International Chamber of Commerce in 2016 cited the cost or complexity of compliance requirements relating to anti-money laundering, Know Your Client and sanctions as a chief barrier to the provision of trade finance.”

A further 77 percent cited Basel III specifically as a significant impediment to trade finance. To avoid penalties and related reputational damage, internationally active banks have developed an increased sensitivity to the risks associated with this business. This sensitivity has particularly hurt SMEs, which encompassed 58 percent of rejected trade-finance proposals, despite forming only 44 percent of submissions.

As a consequence, they have cut back services for correspondent banks that: (i) Do not generate sufficient volumes to overcome compliance costs; (ii) are located in jurisdictions perceived as too risky, i.e., emerging and frontier markets; (iii) provide payment services to customers about which the necessary information for an adequate risk assessment is not available; or (iv) offer products or services or have customers that pose a higher risk for antimoney laundering/combating the financing of terrorism and are, therefore, more difficult to manage. The Middle East is often cited as being particularly vulnerable to this risk.

For first time participants in the financial sector — oftentimes SMEs that are graduating from the “grey economy,” a large segment in emerging markets — the intrusive nature of the expanded due diligence and regulations can be an insurmountable barrier. Most of these firms will not have ready, or sufficiently-prepared access to all of the financial information, historical data and other sources required by their counterpart at a financial institution. Adding the sometimes overlapping and excessive number of touchpoints to provide and recertifying key data can often lead to slow, tedious and inconsistent relationships between financial institutions and SMEs. This increases the opportunity and actual cost to a given financial institution, which can seemingly justify their reticence to lend to SMEs.

A recent WTO report on Trade Finance and SMEs found that superfluous and not harmonized regulatory requirements were seen as a serious impediment to trade finance.

Billy Evans, managing director of operations for Barclays Africa , summed it up nicely in a recent interview on how antimoney laundering, KYC and other regulations in Basel III have proliferated rapidly, with many inconsistencies or even incongruities, which can dramatically increase the time and expense needed to be compliant. Beyond highlighting the general burden of these regulations, he emphasized how most of this must be completed pre-deal: “You cannot do deals or conduct trade finance, for example, without having these things in place,” he said. “The onerous regulations really do lengthen the time between interest and execution on a loan or form of credit, which can hurt SMEs in particular, given their lower levels of free capital.”

This post has not been tagged.

PermalinkComments (0)
 

Crowdsourcing innovations that enhance economic stability. Submit by September 15!

Posted By Phil Psilos, FHI 360, Wednesday, August 16, 2017

Have your organization, investees, or clients created a product, program, or policy that enhances economic stability for poor and vulnerable people?  We'd like to hear about it!

FHI 360 is working with support from The Rockefeller Foundation to surface global innovations that improve economic stability for individuals, communities, local governments and businesses .

The research team is looking for innovations that enhance several dimensions of economic stability: (1) income and asset stability through more consistent employment, wages, and safety nets; (2) specific financial products, skill development approaches, or other means that help people plan for and invest in the future (3) innovations that improve people’s confidence in economic management, regulatory quality, and dispute resolution, or allow them to participate more effectively in shaping these environments in ways that enable better decisions at the household and business levels.  

Top innovations will be featured in an Atlas of Stability Innovation published by FHI 360 in early 2018, in our online media campaigns, and promoted in global media.

Please submit your innovations by September 15, 2017 at at the submission page or visit the project website to learn more. You can also reach us at innovation4stability at gmail dot com          

Tags:  crowdsourcing  emerging markets  Global. Development  inclusive business  inclusive innovation  innovation  Microfinance  social enterprise  social innovation 

PermalinkComments (0)
 
Page 7 of 38
1  |  2  |  3  |  4  |  5  |  6  |  7  |  8  |  9  |  10  |  11  |  12  >   >>   >|