News

BRINGING ENTREPRENEURS AND FINANCIERS TOGETHER

The use of financial leverage to the business isn’t an easy job because it means to provide entrepreneurs with what they really need and doing it on a sustainable basis at an affordable price. Meantime the borrower has to present a sound project.

The job to bring together both actors requires experience and expertise above the ground. Our Practice has a daily exposure to evaluate the risk and to find out a meeting point to finance valid, viable and sustainable projects.

 

GIVE PEOPLE A JOB, NOT A LOAN

So, they may or may not buy a WhatsApp in freedom and independence. The electronic devices should empower people; if not there could be Provider’s disillusion, Client’s illusion and likely Community’ financial implosion.  Financial inclusion isn’t the objective, but a tool to achieve inclusive growth’s goal.

The problem is to manage the field operations in a way to make it financial inclusion happens: sustainability, affordability, transparency and accessibility of the use of the financial leverage to the economy, which will continue to have a casting position, but mitigated by the community-based economy. Sustainable microfinance creates jobs. And having in mind that financial inclusion is a tool to achieve the objective countries’ inclusive growth.

This month last year, ING, Economic Division produced a report on “creating a job at the bottom of the pyramid” …  “in the developing world has to grow by a third to provide these jobs, from 400 million enterprises currently towards 537 million. Half of the required jobs are needed in Asia, followed by Africa (45%). Financial constraints are the largest obstacle for MSMEs to grow and thus provide jobs for the poor. The loan portfolio to MSMEs has to grow by 80% from $6.9 trillion to $12.4 trillion to finance the creation of so many jobs. This huge credit gap will not be closed through the traditional relationship banking model since physical branches are costly to operate, especially in remote rural areas”. And it added three questions: … But is FinTech the game changer for the traditional bricks and mortar bank model that excludes so many enterprises? How can FinTech improve access to MSME finance and lower its cost? And what technologies look most promising?

Six months before (May 2016) we provided the answers and proposed a Paradigm. Taking from the international financial establishment recommendations, the main message we detected is to move from CREDIT-BASED ECONOMY to COMMUNITY-BASED ECONOMY, thus re-designing the entire architecture of the approach in favor of poor people and small business as well, and shift the paradigm of the financial interventions from over-indebted economy at micro and macro level to a real people’s empowerment via jobs creation and promote opportunities via Bottom-up.  https://www.linkedin.com/pulse/from-mdgs-sdgs-technologists-new-populists-ascanio-graziosi/ .

How to position before the Poverty matters? The answer is provided by the below-market segmentation by Empowering people in four big market segments. We  do say that while studying a new paradigm for solidarity, (Why capitalism is broken, https://www.linkedin.com/pulse/why-capitalism-broken-ascanio-graziosi/) the suitable way to go is to elaborate on what has been recommended by the international financial establishment:

  1. a) People in need of basic services
  2. b) People who aim at improving family budget
  3. c) People who aim at start-up business
  4. d) People who aim at growth-up business 

In the first one, the financial provider is in the presence of poverty tout-court and food aid, while the second comprises income generating activities; in the third and fourth segment the provider is in the presence of enterprise development and, in such a case, there is accumulation, which should be correctly evaluated.

Referring to Basel III’s terminology we may say that the point (a), (b), and (c), (d) indicate, respectively unserved and underserved customers. 

The features of above segments make it the difference among lender, developer and philanthropist. For financial inclusion purpose, the segments ask for an accurate investigation, to understand which kind of service may be added to an electronic device.

In line with the President Obama Initiative for Africa, Mr.Elumelu – Nigerian tycoon and banker – in an interview spelt out his vision on what to do to promote African entrepreneurial spirit: “There are some areas — flood disasters, for instance — where you must give charity. But I think the charity approach to solving other issues must be reassessed. It’s all about sustainability; it’s all about self-reliance. It’s catalytic philanthropy”. (https://www.devex.com/news/tony-elumelu-s-new-africapitalism-82590).

In a Post, Graham Wright urged for a revisit the design and delivery of digital credit: https://www.linkedin.com/pulse/digital-credit-have-we-been-here-before-microfinance-graham-wrighthttps://www.linkedin.com/pulse/we-really-financially-excluding-27-million-digital-credit-wright.

Summing up, digital providers may benefit a lot cooperating with financial providers, when it comes to design a model that has to match-up finance and technology, which asks for expertise and experience in financial services above the ground. For more: https://www.linkedin.com/pulse/open-letter-fintech-ascanio-graziosi/ 

A proposal on how to ground field operations, the Exhibit (https://ascaniograziosi.net/2017/06/15/investment-proposal-fundraising/ ) highlights the logic of the approach and the avenues to achieve inclusive growth via business at macro and micro level because sustainable finance is the backbone of the countries’ economies.

HOW TO DEAL WITH FINANCIAL INCLUSION MATTERS.

Our own data indicate that four out five MFIs aren’t sustainable. Under the circumstances is it sensible to get into financial inclusion activities? It is believed that it is just a matter to provide people with a smart electronic device to sort out from the situation. This is decidedly wrong, as it has come out from a Conversation on the matter https://www.linkedin.com/in/ascanio-graziosi-968ba43/detail/recent-activity/shares/.

Financial inclusion aims at inclusive growth throughout empowering people; so it is a good step to look into, among others:

  • How to manage financial inclusion at micro and macro level?
  • Which credit model to use?
  • How to approach the market and design new products?
  • How to campaign new products?
  • How to negotiate and link with digital providers?
  • How to approach poverty matters?
  • How to deal with Start-up and Growth-up business?
  • How to link with financial providers?

Going through “FINANCIAL INCLUSION – Give people a job, not a loan” you can find out how to provide an answer to above questions: it is just a matter to click  https://www.amazon.com/kindle/dp/B01ENJP37S/ref=rdr_kindle_ext_eos_detail . We have elaborated a paradigm matching up experience and expertise accumulated in more than three decades’ field activities with the recent recommendations issued by the international financial establishment. Good reading.

APPLYING FINANCIAL INCLUSION 

Forward

There is a movement of re-thinking on development finance issues in the context of new orientations provided by the recent international financial establishment’s Documents and Papers; in particular, the focus of attention is on financial inclusion.

To properly apply financial inclusion, the first step is to investigate on micro finance trend, on the grounds that Grassroots organizations and retail banks are the main vehicles to implement in the related field activities, their network being closer to the potential beneficiaries.  In so doing, we have to provide an answer to two basic questions: * Microfinance has been proposed as a new idea, but it was genuinely a new idea?  • When, how and why was micro finance recommended as a tool to fight poverty? What’s your position?

Since 06/2011 with the publication of” Suggestions for designing a credit model” http://www.microfinancegateway.org/p/site/m/template.rc/1.9.51017/ (Rated among the first five most read documents in 2011) we spelled out our position and then, with articles and Papers; recently, we have released a Post https://www.linkedin.com/pulse/methodological-approach-ground-work-achieving-sggs-ascanio-graziosi?trk=v-feed, inspired by our research book “FINANCIAL INCLUSION, Give people a job, not a loan”.

Re-thinking on micro finance began after the industry’s implosions in Bangladesh, Bosnia, Cambodia, India, Morocco, Pakistan and Nicaragua, where some micro financial institutions (MFI) have been beset with financial problems. The microfinance’s collapse in the southern Indian state of Andhra Pradesh led to mass suicides and had a worldwide echo. The poignancy of the moment created by this dark side of microfinance has been the origin of review and revision of the whole industry. Before this tragedy, few commentators argued about the fundamentals of this appealing way of doing credit and everybody jumped on the bandwagon playing an unreliable piano score “everybody deserves a loan”. Currently, in our insight position of the financial inclusion business, we came to the conclusion that there is the risk that history could repeat itself: everybody is rushing to provide people with a WhatsApp. Why? Because it is a lucrative business, but it could be short-sighted; moreover, the imitation factor: everybody does it; again, the misunderstanding between means and objectives: financial inclusion isn’t the objective to achieve but a means to get countries’ inclusive growth within UN 2030 Agenda for SDGs. And much more.

Continue). We have provided a comprehensive answer to above basic questions and actually contributed with three specific pages to the matter (https://itunes.apple.com/us/book/id1116912686 ), besides the § “Microfinance as a product of the capitalism” in a wider picture of MICROFINANCE AND CAPITALISM. And much more, as thousands of the iBook’s readers are aware: What is the meaning of the terms finance and credit’?
What are the features of the credit market?
Are all human beings innately entrepreneurs?
Have microcredit basic notions been missed out?
Does demand have to be met at any cost?
Do human rights mean equal credit opportunity?

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Microfinance re-thinking can be seen in the picture of the most recent revisions of capitalism like Creating Shared Value (Michael E. Porter, Mark R. Kramer, Harvard Business Review – CSV) and Mass Capitalism.

Porter and M. Kramer (Harvard Business School) have proposed (a couple of decades ago) the concept of Creating Shared Value (CSV). The authors have criticized capitalism as a major cause of social, environmental, and economic problems. Companies are widely thought to be prospering at the expense of their communities.http://hbr.org/2011/01/the-big-idea-creating-shared-value/

Harper analysed Grameen and Self Help Group systems and, among other things, concluded, “there is little direct evidence as to whether SHG or Grameen system is more effective at reaching the poorest people”. This was written down beginning year 2000; currently above statement can be supported by more facts and figures.

As a matter of statement, a re-thinking on financial inclusion as a new approach to development finance started between end 2015 and beginning 2016.

There are four basic Documents/Papers to  catch what has been going on development finance issues : Basel III Committee (http://www.bis.org,), CGAP (http://www.cgap.org/publications/new-funder-guidelines-market-systems-approach-financial-inclusion), UN 2030 Agenda on SDGs ( www.un.org.) and Financial Services for all , known as CSFI Banana Skins (http://www.aboutmicrofinance.com/wp-content/uploads/2016/07/Banana+Skins_07-16_v8.pdf).

With particular reference to Africa, it is worthwhile to note the activities carried out by Financial Sector Development Africa- FSDA ( http://www.fsdafrica.org/about-fsd-africa/), which aims to reduce poverty across sub-Saharan Africa by building financial markets that are efficient, robust and inclusive. In 2013 the US President Barak Obama while visiting Africa, announced a US $ 2.5 billion Programme, which renewed the interest for the Continent.

In line with the President Obama Initiative, a year later, Mr.Elumelu – Nigerian tycoon and banker – in an interview spelled out his vision on what to do to promote African entrepreneurial spirit: “There are some areas — flood disasters, for instance — where you must give charity. But I think the charity approach to solving other issues must be reassessed. It’s all about sustainability; it’s all about self-reliance. It’s catalytic philanthropy”.

From Elumelu’s interview we quote: “But we have come to realize that there are better ways of impacting a huge number of people through business practices, not necessarily philanthropy”.
 We do support the idea to have a demarcation line among food aid, income generating activities and enterprise development and apply a different approach while dealing with the credit matters, which seems to be quite in line with above reasoning (https://www.devex.com/news/tony-elumelu-s-new-africapitalism-82590).

We have found interesting parallelisms of above approach with Creating Shared Value (CSV) concept that M. Porter and M. Kramer (Harvard Business School) proposed a couple of decades ago. The authors have criticized capitalism as a major cause of social, environmental, and economic problems. “   Companies are widely thought to be prospering at the expense of their communities …(20) Above-mentioned authors have analyzed   Grameen and Self Help Group systems and, among other things, concluded, “there is little direct evidence as to whether SHG or Grameen system is more effective at reaching the poorest people”. This statement has been written twenty years ago; currently, it can be supported by more facts and figures, besides the “move” of the international financial establishment.

To widen the reasoning on microfinance market at the Continent level, there is a need to make the microfinance transparent, competitive and accessible, provided that the MFI will apply rules and procedures of the country legislative framework.
To make it happen is not easy, but central banks in Africa have issued regulations and supervisory systems following the recommendation of Basel III Committee.

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What’s the microfinance market looks like? From a recent field research (http://nextbillion.net/yes-microcredit-requires-subsidies-and-thats-great-news/)  “only 20 percent of MFI are truly sustainable. The other 80 percent could not maintain their current operations without social investors providing the market-rate capital. And it’s not a question of subsidy flowing to new MFIs who are scaling up. Three-quarters of subsidy in the industry flow to MFIs which are 10 years old or older”.

We don’t share the idea that micro-credit requires subsidy because it could mean going back to three decades of past mistakes, besides being not in line with SDGs.

We do think that the segment of the market (70-80% MFIs poor performing) could be restructured via mergers & acquisition and another way of pooling resources, on the likely perspective that the near future microfinance market shall go through economy of scale. Hence, the need to assist the restructuration of the sector.

Our own data confirmed above field research results at Regional level: four out five MFI in Africa micro financial market is non-performing. Here the question is: what to do? In our opinion, MFI, NGO, Rural Banks, People Banks, SACCO, Retail Banks, which deserve attention and accept the challenges – namely ready to innovate way of doing business and style of management – should be assisted with advice and resources, the former without the latter doesn’t work.

On the matter, we have a field Project that we launched some time ago “COLLOQUIUM WITH DECISION MAKERS”(https://www.linkedin.com/pulse/project-decisions-makers-africa-ascanio-graziosi?trk=mp-reader-card , which is neither training nor course of lessons, but a Colloquium on strategic issues with micro-finance top Executives in their own hub; so they don’t need to travel to Rome, London and Paris. Upon request, they will receive the Document and the Budget. This is a very important Colloquium for those who like to step in the digitalisation of the financial services, based on informed decisions.

French version “COLLOQUE SUR L’INCLUSION FINANCIERE” https://www.linkedin.com/pulse/colloque-sur-linclusion-financiere-ascanio-graziosi?trk=mp-reader-card

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It has been argued (Milford Bateman) that changes produced by the above-mentioned documents have been made to change anything; worse, above author and Phil Mader, Maren Duvendack, Lamia Karim, Jessica Gordon Nembhard, Marcus Taylor and others argued that microfinance phenomenon is all about the politics, not the economics and financial inclusion “seduced and betrayed”.

In our opinion the problem isn’t whether or not believe the establishment, but to manage the field operations in a way to make it inclusive growth happens: sustainability, affordability, transparency and accessibility of the use of the financial leverage to the economy, which will continue to have a casting position, but mitigated by the community-based economy. Sustainable micro finance creates jobs. Moreover, it could be very important that the establishment disseminate and promote what they said.

What’s wrong with microfinance? One thing, only: it has been proposed by Populists and not Economists and then manipulated by low profile politicians, by purpose. Does microfinance alleviate poverty?

We do think that a basic mistake has been the lack of a paradigm; the Populists said: distribute credit, they will pay back, which is a dogma. At this point, the question could be: why the international financial establishment allowed them to promote it? We have shared with Members and Followers of our Group the answer (FINANCIAL AND ECONOMIC INCLUSION: https://www.linkedin.com/groups/4682884 .

To have a more comprehensive explanation we have dedicated many pages to the matters (two paragraphs and two chapters of our iBook) matter and here there isn’t enough room explain, the question being a little complicated and interconnected with the financial capitalism   :https://www.amazon.com/Financial-Inclusion-Give-people-loan-ebook/dp/B01ENJP37S/ref=sr_1_1?ie=UTF8&qid=1489340682&sr=8-1&keywords=financial+inclusion+ascanio (Continue).

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As we said over the past decades we started elaborating on how to design a credit model, taking from our field experience in leadership position in the emerging economies. Eventually, in 2010 Basel III Committee released a document on microfinance activities, which provided us with a reference to place the credit model in the picture of the countries’ institutional and organisation framework, central banks having adopted Basel III’s recommendations. A further step has been done a couple of years ago when above cited Basel III issued a document on financial inclusion, which we read in conjunction with UN 2030 Agenda for SDGs, CGAP Papers and others documents.

Taking from the desk research in aggregation with the consultancy activities, we published FINANCIAL INCLUSION, Give people a job, not a loan”  https://www.linkedin.com/pulse/methodological-approach-ground-work-achieving-sggs-ascanio-graziosi?trk=v-feed, which sub-title synthesized the proposed new approach to development finance interventions.

The main message we detected is to move from CREDIT-BASED ECONOMY to COMMUNITY-BASED ECONOMY, thus re-designing the entire architecture of the approach in favour of poor people and small business as well, and shift the paradigm of the financial interventions from over-indebted economy at micro and macro level to a real people’s empowerment via jobs creation and promote opportunities via Bottom-up.

We don’t say that there should be a restoration of the Keynesian theory, we do say that the role of finance in the economy has been dominant at macro and micro level, to detriment of the real economy, on the wrong assumption that poverty is a lender task instead of a government duty; moreover, we haven’t assumed interventions from the public sector, but the private sector taking the lead and get really involved.

The financial leverage to business is important and even vital, of course, and its sustainable use creates jobs and promotes opportunities, government providing an enabling environment and related services. With a salary people may or may not apply for a loan and buy a mobile phone; in so doing the meaning of credit – confidence – will be re-established. Regards to the digitalization of the financial services the real question isn’t to provide people with a WhatsApp but to have them eligible for its use.

In this understanding we have elaborated a model in a way to put finance providers in the picture of the guidelines provided by the international financial establishment, to find out a suitable solution and facilitate the access of the entrepreneurs to the capital. The Exhibit (https://ascaniograziosi.net/2017/06/15/investment-proposal-fundraising/ ) highlights the logic of the approach and the avenues to achieve inclusive growth via business at macro and micro level because sustainable finance is the backbone of the countries’ economies.

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HOW TO DESIGN NEW CREDIT MODEL/SERVICE We proposed four steps to design a new Credit Model/Service:1)      Position the MFI/Organisation in the financial market (slide page 27)

1)      Position the MFI/Organisation in the financial market (slide page 27)

2)      Place the Business within the country institutional & organisational framework (87)

3)      Design a credit model/service within the regulatory framework, as per Basel III (93)

4)      Find out your market’s niche via the proposed market segmentation. (204).

We took the slides from the iBook “FINANCIAL INCLUSION, Give people a job, not a loan”. Although we would like to provide you with more, there isn’t room enough. Besides, the practical problem, we can’t do it because it will be unfair competition with our professional colleagues. However, you can download it (https://www.amazon.com/Financial-Inclusion-Give-people-loan-ebook/dp/B01ENJP37S/ref=sr_1_1?ie=UTF8&qid=1489340682&sr=8-1&keywords=financial+inclusion+ascanio ) for a very cheap price and benefit much more beyond and above the slides, in a comprehensive understanding.

(Continue) Last week we introduced the works and quoted M.E. Porter and M.R. Kramer (Harvard Business School), Mr Mr Elumelu, Milford Bateman, Kate Maclean, James K. Galbraith and others, who argued that microfinance phenomenon is all about the politics (“seduced and betrayed”). Here we would like to add: Does microfinance alleviate poverty? https://www.linkedin.com/pulse/does-microfinance-alleviate-poverty-frithjof-arp-phd-sfhea. And quote Graham Wright’s Posts, who urged for a revisit the design and delivery of digital credit: https://www.linkedin.com/pulse/digital-credit-have-we-been-here-before-microfinance-graham-wright. https://www.linkedin.com/pulse/we-really-financially-excluding-27-million-digital-credit-wright.

A very recent Paper released by CGAP on Consumer credit “raises serious consumer protection concerns”. 

http://www.cgap.org/publications/consumer-protection-digital-credit#.WaQ2MWN2voc.linkedinWith a particular reference to digitalisation we wrote the OPEN LETTER TO FINTECH https://www.linkedin.com/pulse/open-letter-fintech-ascanio-graziosi and suggested to review the approach to digitalisation in a way to shift from PRODUCT INNOVATION to PROCESS INNOVATION: https://www.linkedin.com/pulse/open-letter-fintech-ascanio-graziosi 

We do think that a thousand followers of the Conversation https://www.linkedin.com/in/ascanio-graziosi-968ba43/detail/recent-activity/shares/ deserve consideration and in our Moderator position, we have decided to make available the iBook “FINANCIAL INCLUSION – Give people a job, not a loan” at a very cheap price for the weekend only, starting Sept. 2 at 8h AM and ending Sept. 3 at 12h. https://www.amazon.com/kindle/dp/B01ENJP37S/ref=rdr_kindle_ext_eos_detail

SPORTELLO OPPORTUNITA’

Riteniamo possa essere utile e d’interesse per le PMI Italiane la possibilità di poter accedere a finanziamenti per programmi di espansione e innovazione a partire da un milione di US $ tramite FACILITY WINDOW reso disponibile da un Fondo Privato del Golfo. Per informazioni sulle modalità di accesso e condizioni: graziosiascanio@aol.com

The FACILITY has almost consumed the budget and in fact there is a residual amount for funding till the end of the year.

FUNDRAISER WANTED

The Fundraiser will assist the Fund Promoter to make contacts with high profile Investors. This is a unique opportunity that besides a ROI above the market rate does guarantee a MARKETING RETURN improving the Investors’ Image acting as a DEVELOPMENT’S ACTORS.

The FUND should have no more than five Founders who initially subscribe $ one million to start operations in selected African Countries from where there are already funding requests amounting at $ half million from Tanzania, Kenya, Côte d’Ivoire, Ghana, Nigeria and Benin; besides, requests are from Morocco and Tunisia.

Two trips to the Continent have been planned for round-up meetings with existing high-level contacts.