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Capital Finance International

Summer 2019

£9.95 // €14.95 // $15.95


President of the World Bank Group, David Malpass:


Mercedes-AMG G 63, 585 HP (430 kW), 13.6 l/100 km, 311 g CO2/km (average of all new models sold: 133 g CO2/km), CO2 emissions

Stronger than Time. The new Mercedes-AMG G 63. An exceptional vehicle for exceptional people.

from fuel and/or electricity consumption: 72 g/km, energy efficiency category: G.


Some go to heaven, others go everywhere


Illustrated Models: Levante S - engine: V6 60° 2979 cm3 - max power: 430 HP at 5750 rpm - max torque: 580 Nm at 5000 rpm - max speed: 164 mph (264 km/h) 0 - 62 mph acceleration: 5.2 secs - fuel consumption (combined cycle): 10.9 l/100 km - CO2 emissions (combined cycle): 253 g/km. The data may not refer to the model represented. The Greenhouse gas CO2 is main responsible for the global warming; the average CO2 emission of all offered vehicles in Switzerland is of 133 g/km.

Levante. The Maserati of SUVs. Yours. From CHF 80’600.–* Maserati Levante Diesel: Fuel consumption (combined cycle): 7,2 l/100 km Gasoline equivalent 8,2 l/100 km – CO2 emissions (combined cycle): 189 g/km** – Efficiency class G CO2 emissions from fuel combustion and/or power supply: 32 g/km.


Editor’s Column SDGs as Drivers of Value Creation

There is money to be made in sustainable development — $12tn in new market value by 2030, to be precise. The number, roughly corresponding to the GDP of China, is cited in the landmark Better Business Better World report — a roadmap to riches for companies determined to help meet the 17 sustainable developments goals (SDGs) as defined and adopted by the United Nations in 2015.

Editor’s Column

The report was compiled by the Business & Sustainable Development Commission, a sincedisbanded collective of corporate leaders who, in 2016, set out to prove that the pursuit of global happiness need not conflict with the pursuit of profit. The commission reached out to thousands of businesses and other stakeholders to map progress, identify bottlenecks, record experiences, and gauge expectations. After tabulating and processing the field data, the commission concluded that businesses can thrive once they understand and embrace economic, social, and environmental challenges as future value drivers. These findings are not just another set of open doors through which those more politically correct than astute are invited to enter tomorrow’s brave new world. The commission’s report actually provides a detailed and practical roadmap that corporations can use to plot a profitable course in an environment that may seem increasingly complex and adverse, if not openly hostile, but actually harbours a wealth of opportunities to anyone willing to let go of cynicism and scepticism — notions that, given the present state of affairs in our global village, are outdated anyway, and thus have no role to play in modern business practices. Ernst & Young (EY) agrees, and in a recent comment the firm points to the 380 million jobs that the SDGs are set to create. EY argues that the SDGs provide a hedge against the long-term erosion of companies’ ability to create capital. EY 8

sees each individual SDG as a tool to address a particular risk. The effects of climate change, the depletion of natural resources, and geopolitical instability conspire against the smooth running of supply chains. Underdevelopment stops markets from emerging, or slows that process to a socially unacceptable crawl, thereby depriving private business of opportunities for growth. While the UN estimates that the successful completion of its SDG agenda requires a combined private and public investment outlay bordering on $4.5tn annually, the long-term global profit potential is a multiple of that sum. However, that’s not the point of sustainable growth and development. SDGs are more akin to a do-or-die proposition: companies that, for whatever reason, fail or refuse to adapt will go extinct. Investors and consumers — socially aware and environmentally conscious — are already now turning their backs on corporate dinosaurs. Add increased stakeholder engagement to the narrative and the conclusion becomes selfevident: corporates must reach out to wider society, explain the rationale that drives their processes, and justify the outcomes — intended and otherwise. What Jack Ma, Paul Polman, Daniel Pinto, Gavin Wilson (see Winter 2016-2017 cover story and exclusive interview), and the other members of the Business & Sustainable Development Commission showed with hard data is that SDGs are good for corporates: these 17 goals create markets and value. Business as usual is no longer an option, and may, in fact, be in breach of the fiduciary responsibility carried by management to maximise shareholder value. Wim Romeijn Editor | Capital Finance International

Editor’s Column

> Letters to the Editor

“ “ “

Congratulations on your Spring 2019 Special on Empowerment and Entrepreneurship, featuring high-profile Emirati women. As a woman running an SME (in Belgium), I often feel that I and my contemporaries are excluded from the “business buzz” when it comes to profiles in industry publications. The importance, and lack of, gender equality is nowadays pressing, and more visible than it once was – perhaps even more so in Europe than in the UAE, where the issue appears to have at least captured the attention of the “captains of industry”. How inspiring for me to read the stories of strong, go-ahead women like Dr Amina Al Rustamani, her dedication to her country’s prosperity, and her message: Enjoy what you do, and success is sure to follow. Exactly, Amina! Keep up the good work! SANDRA VAN DEN BROEKE (Antwerp, Belgium) It is always a pleasure to read your magazine, and one write, in particular, always manages to hit the nail on the head. Whereas many commentators feel the need to describe China in boom or bust terms, Otaviano Canuto’s nuanced piece describing how the world’s most populous country is rebalancing its economy as it moves from low-income to middleincome was fascinating. Its insight into the structural changes that are taking place, and seemingly inevitable commercial collision course with Trump’s America, was informative and objective. It certainly answered a lot of my questions about China´s place in the world order, in what has been described as its century. RACHELE MONTINI (Forlí, Italy)

While I understand that pension reform in Latin America’s largest country is a big topic, it seemed at best questionable that you decided to decorate your front cover (Spring 2019) with Jair Bolsonaro — especially as the following pages featured a profile of his finance minister. Given his comments about women, race, homosexuality, socialism, torture, rape and sex tourism — and the fact that many Brazilians feel that they have to flee the country to avoid being killed — should have shown better judgement than to promote this purveyor of odium. I am close to cancelling my subscription. LUIZ B OLIVIERA (Miami, United States)


Summer 2019 Issue

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I felt very happy and proud of my Senegalese heritage, and for my compatriots, when I read the article about Air Senegal in your last issue. This is David and Goliath, no? I hope that this is the start of great things, and big changes, in the air transport world. I am also happy to hear that Senegal’s president [Macky Sall] has taken a personal interest in backing this company. His initiative of PSE [the Emerging Senegal Plan, or Plan Sénégal Émergent] is a sign commitment, and personal attention, to his country’s needs. Our other leaders need to follow in his example to get recognition for efforts made often far from popular international view. SARA DIOP (Paris, France)

It was interesting to read Joseph Stiglitz´s thoughts on the zeitgeist of the turbulent times in which we live, and the almost revolutionary fervour to overthrow the establishment. With many of the old certainties now gone, growing insecurity in the job market and climate change thrown into the mix, is it any wonder that there is such mistrust of governments, who appear to be there to serve multinationals and make the rich richer? It is all similar to the imbalances caused by the Agrarian and Industrial Revolutions of the 18th Century, when technology concentrated wealth in fewer hands and led to much civil unrest. I confess to being a part-time Luddite HERNANDO TANAKA QUISPE (Callao, Perú)

I was depressed by the direction your reporters took with a story in your magazine, Rental Trends Adjusting With the Times. While I and my wife have managed (by overstretching ourselves and our resources) to finally buy a property in the UK, our two adult children have not. They both have jobs (I hesitate to say good jobs), and they both have young families. They live in the West Country and the Midlands respectively, not in London or the south-east. Their rents are lower than in major cities, but theirs is an unenviable situation, always scrabbling to make ends meet. Your story seemed to take the angle that rising rents are good for investors — and well they might be. But please, before looking at the positives for rich landlords, look first at the effects of extortionate rental prices on the young people of Britain. MICHAEL PROCTOR (Basildon, UK)


Editor Wim Romeijn


Assistant Editor Sarah Worthington


Executive Editor George Kingsley Production Editor Jackie Chapman

Editorial Brendan Filipovski Tony Lennox Kate Stanton John Marinus Ellen Langford

Columnists Otaviano Canuto Evan Harvey Tor Svensson Lord Waverley Ian Fletcher

Distribution Manager William Adam

Subscriptions Maggie Arts

Commercial Director John Mann

UNCDF A Paradigm for Financing SMEs in the ‘Last Mile’ (22 – 23)

Ian Fletcher Fourth Industrial Revolution: Immersive Transportation and the IoT (26 – 29)

Cover Story Growth for Every Borrower (32 – 33)

MSCI and OECD Delivering Impact at Scale as SDG Deadline Looms Larger


(34 – 35)

Director, Operations Marten Mark

World Federation of Exchanges

Publisher Anthony Michael

(54 – 55)

Capital Finance International Meridien House 69 - 71 Clarendon Road Watford WD17 1DS United Kingdom T: +44 203 137 3679 F: +44 203 137 5872 E: W: Editorial on p18-21, 24-25, 156-157, 164-165, 182 © Project Syndicate 2019

Printed in the UK by The Magazine Printing Company using only paper from FSC/PEFC suppliers


Financial Stability and Growth Through Regulatory Coherence

PwC's Strategy& How the C-suite Needs to Approach Lower Growth in African Markets


US Department of State

Combat El Salvador Corruption by Enabling Lawfulness: Study (146 – 148)

A Joint Discussion Paper from MSCI and the OECD | Capital Finance International

Meggin Thwing Eastman, Paul Horrocks, Tansher Singh, Nee

Summer 2019 Issue


As World Economies Converge

Otaviano Canuto

Nouriel Roubini

Joseph Stiglitz


Ian Fletcher

Tor Svensson


Lord Waverley

Anand Rathi

40 – 47

Summer 2019 Special: Healthcare

48 – 79


Co-op Legal Services

12 Hay Hill

World Federation of Exchanges (WFE)


B2B Gaming Services

Pillsbury Winthrop Shaw Pittman

Women’s Brain Project

Athelney Trust

Deutsche Oppenheim Family Office AG


Masthaven Bank

Euro Exim Bank

80 – 93 Awards

Rewarding Global Excellence

94 – 119


Yofi Grant

Private Client Holdings


PwC Strategy&


Suez Industrial Development Company

Tandem & Stark

SBM Securities

La Société Centrale de Réassurance

Abu Dhabi Global Market



120 – 127

Middle East

Richard Teng

Etihad Airways Technical Training

128 – 135

Editor’s Heroes Men and Women Who are Making a Real Difference

136 – 157

Latin America

Claudio Melandri

Banco Santander Chile


Ann Low

US Department of State


Kenneth Rogoff

Banco Ganadero

Central Bank of the Dominican Republic

158 – 167

North America

Mohamed A El-Erian

Randy Oostra


Community & Workers of Jamaica Co-operative Credit Union (C&WJ)

168 – 181

Asia Pacific

Asian Development Bank

IHDpay Group

Anand Rathi

Nalin Perera

eChanelling PLC

Wing (Cambodia) Limited Specialised Bank


Final Thought | Capital Finance International


> Otaviano Canuto, Center for Macroeconomics and Development:

Is There a Middle-Income Trap?

The “middle-income trap” has become a broad designation trying to capture the many cases of developing countries that succeeded in evolving from low- to middle-levels of per capita income, but then appeared to stall, losing momentum along the route toward the higher income levels of advanced economies.


uch a trap may well characterise the experience of most of Latin America since the 1980s, and in recent years middle-income countries elsewhere have expressed fears of following a similar path. Underlying these views is a more general feeling that moving up on the income ladder gets harder the higher one climbs. This article outlines two different ways in which the concept has been approached since its first use 12 years ago by Gill and Kharas (2007). One has been empirical, where search is made to identify — or deny — breaks or turning points in time-series data exhibiting growth traps for middle-income economies. The other, closer to the way it was originally suggested, refers to the need of policy and institutional change for a country to keep climbing the income ladder after a transition from low levels. Traps are seen as shortcomings resulting from the absence of any of those policy and institutional changes considered key to gearing up the transition from middle- to upper-income levels. Columnist

IS THERE A MIDDLE-INCOME TRAP? THE EMPIRICAL APPROACH Some authors have taken up the task of checking whether one can empirically detect, using either econometric techniques or other criteria, features that can be considered as common — or frequent — among middle-income economies. One way to define the middle-income trap is in absolute terms, as a productivity and growth slowdown impeding hitherto fast-growing economies to graduate into the ranks of highincome countries. Since the 1950s, rapid growth has allowed a significant number of countries to reach middle-income status; yet, very few have made the additional leap needed to become high-income economies. Rather, many developing countries have become caught by a sharp deceleration in growth and in the pace of productivity increases. Chart 1 depicts several countries as staying in a narrow income band over the period from 14

"Traps are seen as shortcomings resulting from the absence of any of those policy and institutional changes considered key to gearing up the transition from middle- to upperincome levels." 1960 to 2014. The question then becomes whether middle-income countries are more likely than others to experience a growth slowdown or whether they face a greater frequency of slowdowns than either advanced or low-income countries. The middle-income trap can also be defined in relative terms, as a lack of convergence to some benchmark high-income country. Chart 2 displays the stagnation, in relative terms, of some Latin American countries (Mexico, Brazil, Ecuador and Guatemala), while Hong Kong, Spain, Ireland and Taiwan have managed to move up the scale toward high-income levels. The question then becomes whether middle-income countries are more likely to experience a slowdown of their catching-up with upper-income countries than it is the case at lower stages of the income ladder. Overall, the evidence on the supposed middle-income trap is mixed. While Spence, Eichengreen, Park, and Shin, Aiyar et al find evidence that countries are more likely to slow down at middle income than at high or low income, others — Im and Rosenblatt, Felipe et al and Han and Wei — do not find growth patterns conforming to one clear pattern that can be characterised as a trap. Bulman et al distinguish between “escapees” and “non-escapees”. Escapees grow rapidly at all income levels (and all income ranges), whereas non-escapees tend to grow slowly at any development stage (not only within the | Capital Finance International

income range). Felipe et al remark that the small number of former middle-income economies that became high-income economies relatively quickly were outliers from a historic perspective, whereas the rest of the middle-income economies have exhibited a weaker growth performance. They conclude: “(W)e reject the existence of a middle-income trap as a generalised phenomenon. Instead, we argue that what distinguishes economies in their transition from middle to high income is the speed of these transitions, fast versus slow, a standard growth question.” Such attempts to identify turning points or any other empirical regularities across middle-income countries are inevitably riddled with challenges (Glawe & Wagner, Agenor). Thresholds — which often vary among studies — reflect some arbitrariness; results are data-sensitive. Empirical definitions have no theoretical underpinning that may lead someone to expect the observed phenomena to be independent of space and time of observation. They also differ from the way Gill & Kharas approached the possibility — not as a matter of destiny — of middle-income traps as the result of lack of requisite policy and institutional changes to underpin the transition from middle- to upper-income levels, as policy and institutional requirements tend to be different from those of the evolution from low- to middle-income. As the authors remarked later, they referred to complacency risks — taking past successes as a guarantee of future ones, rather than updating policies and institutions (Gill & Kharas). This approach leads to assessing economies as individual cases. Furthermore, Gill & Kharas also call attention to the need of theoretical developments on growth and productivity appropriate to inform policies in middle-income economies as such. There is a gap between the classic poverty trap arguments used as references regarding the departure from lowincome levels. On the other hand, there is the Solow growth model, where technological

Summer 2019 Issue

Chart 1: Absolute approach. Source: ADB, Asian Development Outlook 2017: transcending the middle-income challenge.

learning is absent and endogenous growth models mainly applicable to frontier advanced countries. Implications of being in the middle of the trajectory between low- and upper-income levels are also uncovered in North-South growth models (Krugman, Ocampo). In what follows, we summarise a possible narrative about policy and institutional changes expected to be faced by middle-income countries to climb up the income ladder.

Reaping the gains from such low-hanging fruit, in terms of growth opportunities, sooner or later faces limits, after which growth may slow, and the economy may get trapped in middle-income levels. The turning point in this transition occurs either when the pool of transferrable unskilled labour is exhausted, or in some cases, when the

sophisticated capabilities of deep-sea oil drilling and aircraft design in Brazil).

Beyond this point, raising total factor productivity and maintaining a fast growth pace becomes dependent on the economy’s domestic ability to move upward in manufacturing, service or agriculture value chains, toward activities characterised by technological sophistication. Also, there are high requirements in terms of human capital and intangible assets such as design and organisational capabilities. The path from low- to middle- and then to high-income per capita corresponds to increasing the shares of population moved from subsistence activities to simple modern tasks, and then to sophisticated ones. Within-sector productivity gains and “moving up value chains” rise in weight relative to productivity-lifting cross-sector structural change (Gill & Kharas).

By contrast, fast-growth Asian economies have relied extensively on international trade to scaleup their labour transfer through insertion into the unskilled labour-intensive segments of global value chains. This has been facilitated by advances in information and communication technologies, combined with decreasing transport costs and lower international trade barriers. Taken together, these factors made possible the unbundling of production lines in chains of tasks with different degrees of sophistication requirements that can be geographically dispersed (Canuto).

An institutional setting supportive of innovations and complex chains of market transactions is of the essence. Instead of mastering existing standardised technologies, the challenge becomes the local creation of domestic capabilities and institutions, which cannot be simply brought or copied from abroad. Provision of education to labour and of appropriate infrastructure becomes a minimum condition.

Chart 3 shows the structure of wealth for economies by income group and they illustrate the path of evolution that a country is expected to cross on the way up the ladder. It displays averages and individual countries will differ because of different levels of natural wealth (Canuto & Cavallari). However, three broad features may be highlighted: the high and increasing weight of human capital (World Bank); the weight of produced capital — physical capital — stabilises in relative terms after the ascent from low-income levels; and, regardless of country-specific natural resource richness, its weight decreases relatively along the ascent.

Current middle-income countries in Latin America decelerated their labour-transfer process from subsistence before exhausting labour surpluses, as macro-economic mismanagement and inward orientation until the 1990s established early limits to that process. Nevertheless, some enclaves up on the ladder of value chains have been established (for instance, the technology-intensive agriculture, and

Natural resource-rich middle-income countries face a road of their own. Unlike manufacturing, natural resource use is to a large extent idiosyncratic, in the sense that each concrete experience is unique. That creates a privileged scope for local creation of capabilities in sophisticated upstream and downstream activities, with the corresponding challenge to do so in a sustainable fashion. Nevertheless, an | Capital Finance International

15 Columnist

MIDDLE INCOME AS A STAGE OF GROWTH AND DEVELOPMENT In most cases of successful evolution from lowto middle-income per capita in recent history, the underlying development process has been broadly similar. Typically, there is a large pool of unskilled labour that is transferred from subsistence-level occupations to more modern manufacturing or service activities that do not require much skill upgrade from those workers, but nonetheless employ higher levels of capital and embedded technology. The associated technology is available from richer countries and easy to adapt to local circumstances. The gross effect of such a transfer — usually happening in tandem with urbanisation — is a substantial increase in “total factor productivity”. an expansion of the value of GDP that goes beyond what can be explained by the expansion of labour, capital and other physical factors of production to the economy.

expansion of labour-absorbing modern activities peaks before that exhaustion happens.

Chart 2: GDP per capita relative to the US. Source: Federal Reserve Bank of St. Louis, “Relative income traps”, first quarter, 2016.

Chart 3: Composition of wealth by country income levels, 2014.

Source: World Bank, The Changing Wealth of Nations 2018: Building a Sustainable Future, 2018. Columnist

institutional setting supportive of innovations and complex chains of market transactions, highlevel education and local building of intangible assets are also preconditions. Although not included in the data displayed in Chart 3, one may expect a strong correlation between the human capital accumulation and local development of intangible assets (capabilities to adapt technologies and innovate; managerial and organizational capabilities; rules and institutions that do not impose costs and waste on chains of transactions which tend to become dense and complex as the economy climbs the ladder). One may expect the return from these assets to underlie what Moses Abramovitz called our “measured ignorance” – namely, total factor productivity increases not explained by the accumulation of production factors in exercises of production function-based GDP and productivity decomposition. Local development of capabilities of imitation and creative adaptation of existing technologies, followed by or in tandem with capabilities to innovate, is a requisite to raise productivity, upgrade occupation and move up the income ladder. Any application of technology needs locally specific content that cannot be acquired or transferred by means of textbooks or other codifiable forms of knowledge transmission. This knowledge cannot be made explicit, simply 16

transmissible in blueprints, and thus cannot be perfectly diffused as public information or private property. It must be developed locally. Production, technology adoption, and invention requires a relatively high level of such idiosyncratic knowledge and local capabilities (Canuto). While technology originators tend to follow a sequence reverse to latecomers, it is typical for the latter to start from production and technological adoption and only then move on to invention. That has been the case in South Korea and China (Canuto). These countries have developed innovation capabilities after intense learning through using and adapting existing technologies. Simple interconnectedness does not automatically spark productivity increases and local innovation. Success depends on the presence of a broad set of complementary factors: access to finance, infrastructure, skilled labour, and good managerial and organisational practices. In the absence of these factors, returns from investing in the development of capabilities are likely to be low (Canuto, Dutz & Reis; Cirera & Maloney). Solutions must be found to market failures that generate disincentives to the accumulation of knowledge, but the private and public sector | Capital Finance International

interaction cannot be unfriendly to the rising density and complexity of chains of transactions accompanying progression. Transaction costs associated with doing business” — trading across borders, hiring and enforcing contracts — cannot be too high, whereas other dimensions of the investment climate —policy uncertainty, macroeconomic instability, corruption, losses due to crime, infrastructure and others — must be favourable so as to not disincentivise investment in the acquisition of capabilities. In a broad sense, the structure of incentives for economic agents must be such as to favour the search for efficiency rather than seeking “rents” (Canuto & Ribeiro dos Santos). International trade and technology transfer have proven to be important boosters to such a journey, but institutional change, high-level education and local building of intangible assets are also essential for sustaining this over the long run. South Korea is a prime example of a country that exploited these opportunities to move all the way up the ladder. It is worth remarking that, particularly in the case of large economies, heterogeneity and diversity of states is to be expected. Brazil’s per-capita income, classified as upper-middle by the World Bank, is associated with an economic structure where one locates both high- and low-income types of activities and jobs. Overcoming middleincome traps in such a case means upgrading a substantial share of overall employment, including by rescuing low-income agents left behind as such by the previous transition. Traps may take place in situations when upgrading faces high obstacles to gain competitiveness because of incumbents in global markets. Gill & Kharas used “middle-income

Summer 2019 Issue

trap” to designate economies that were being squeezed between the low-wage poor country competitors that dominate in mature industries, and the rich-country innovators that dominate in industries undergoing rapid technological change. Manufacturing in Latin America was relatively squeezed by the large addition of cheaper labour to the global economy, resulting from the downfall of the Soviet Union as well as China’s economic integration. Ultimately, however, one may point to local insufficiency or appropriateness of some of the policies and institutions necessary to underpin the transition upward as potential causes of middle-income traps. Agenor & Canuto developed analytical models of multiple equilibria in which distorted incentives and misallocation of talent, weak contract enforcement and protection of intellectual property rights, lack of access to advanced infrastructure, and lack of access to finance create the possibility of a middle-income economy to settle on a “bad” low-growth path. In turn, Aiyar et al and Han & Wei approach the negative implications for growth of a high frequency of macroeconomic booms-and-busts. | Capital Finance International

an environment conducive to innovative entrepreneurship by promoting investment in education and infrastructure. 8. An environment conducive to growth needs macro-economic stability. When a country reaches middle income, its growth rate tends to become more vulnerable to indicators affecting macroeconomic stability — given hysteresis effects of banking and currency crises, the exposure to capital inflow fluctuations, and the legacy of macroeconomic instability. The qualitatively distinctive nature of the middleincome stage of development differentiates it from both high- and low-income phases, demanding an effort to go beyond generalisations about growth and productivity. In our view, the relevance of the concept of middle-income traps stems not from being a hypothesis about deterministic trends in growth, but rather as a warning shot about complacency risks of casting forward past transition successes instead of updating policies and institutions to new requirements. Individual middle-income country experiences of falling into a trap may be approached as cases of lack of or failing performance in footing the bill in terms of appropriate policies and institutions. i ABOUT THE AUTHOR Otaviano Canuto is principal at the Center for Macroeconomics and Development, a senior fellow at the Policy Centre for the New South and a non-resident senior fellow at Brookings Institution. He is a former vice-president and a former executive director at the World Bank, a former executive director at the International Monetary Fund, and a former vice-president at the Inter-American Development Bank. Otaviano has been a regular columnist for for the past seven years. Follow him on Twitter: @ocanuto 17 Columnist

POLICIES AND INSTITUTIONS NEEDED TO CLIMB THE LADDER ADB offers a summary of the morphing set of policy priorities if an economy is to move beyond the track from low- to middle-income stages: 1. As economies evolve from low- to middleincome, so do their growth drivers. While accumulating physical (produced) capital remains important for growth in middle-income economies, human capital accumulation and total factor productivity improvement — or growth in production not derived from higher use of inputs — acquire larger weight in growth

determination. Productivity-centred growth is needed to reach high income. 2. Innovation matters more as economies approach the technological frontier and entrepreneurship turns new ideas or technology into innovation-based growth. Opportunitydriven entrepreneurship, which is often built on new ideas or technology, increasingly outweighs necessity-driven entrepreneurship, which responds to existing market needs. 3. Risk-taking entrepreneurs take the lead in fostering innovation, and these individuals respond to incentives that are either strengthened or weakened by economic policies and institutions. Governments can promote innovative entrepreneurship through stronger intellectual property protection and rule of law, better access to finance, and allowing privatesector competition to prevail. 4. Graduation to high income requires a diverse and sophisticated product mix. In addition to producing a wider range of goods, middleincome economies must aim to produce more complex goods and services, which support higher productivity and better wages. 5. Human capital accumulation rises in relevance and the emphasis must be on ramping-up the quality of education. Economies with relatively high cognitive skills benefit from having a critical mass of students likely to become innovators. As economies move closer to the technological frontier, the returns on research-oriented innovation increases. 6. Infrastructure needs to shift as an economy becomes more complex and sophisticated. There is a nexus between advanced infrastructure, highly developed skills, and innovation. 7. The role of the government necessarily evolves as an economy progresses, becoming more of a supportive type as the private sector is fully fledged. The government must shape

> Nouriel Roubini:

The Coming Sino-American Bust-Up


he nascent Sino-American cold war is the key source of uncertainty in today’s global economy. How the conflict plays out will affect consumer and asset markets of all kinds, as well as the trajectory of inflation, monetary policy, and fiscal conditions around the world. Escalation of the tensions between the world’s two largest economies could well produce a global recession and subsequent financial crisis by 2020, even if the US Federal Reserve and other major central banks pursue aggressive monetary easing. Much, therefore, depends on whether the dispute does indeed evolve into a persistent state of economic and political conflict. In the short term, a planned meeting between US President Donald Trump and his Chinese counterpart, Xi Jinping, at the G20 Summit in Osaka on June 28-29 is a key event to watch. A truce could leave tariffs frozen at the current level, while sparing the Chinese technology giant Huawei from the crippling sanctions that Trump has put forward; failure to reach an agreement could set off a progressive escalation, ultimately leading to the balkanisation of the entire global economy. JAW-JAW OR WAR-WAR? Viewed broadly, there are three scenarios for how the situation might develop between now and the end of 2020, when the United States will hold its next presidential election. One possibility is that Trump and Xi will find a truce or modus vivendi in Osaka, paving the way for a negotiated settlement toward the end of this year. On the trade front, the US wants China to buy more American goods, reduce tariff and non-tariff barriers, open more financial and service sectors to foreign direct investment, and commit to maintaining currency stability and transparency with respect to foreign-exchange data. On technology, the US is demanding that China strengthen intellectual-property protections, cease making the transfer of technology to Chinese firms a condition of market entry for US (and other) companies, and crack down on corporate cyber espionage and theft. A temporary deal could include any of the above, with the US offering medium-term (through the end of 2020, and possibly longer) exemptions to Chinese tech firms that use US components, semiconductors, and software. This would leave Huawei severely constrained, but not dead in the water. The second possibility is a full-scale trade, tech, and cold war within the next 6-12 months. In this 18

scenario, the US and China would adopt rapidly diverging positions after failing to successfully restart negotiations (with or without a truce). The US would follow through with import tariffs – starting at 10% but increasing to 25% – on the remaining $300 billion worth of Chinese goods that have so far been spared. And the Trump administration would pull the trigger on Huawei and other Chinese tech firms, barring them from purchasing components and software from US companies. China, meanwhile, would take steps to protect its economy through macro-level stimulus, while retaliating against the US through measures that go beyond tariffs (such as expelling American firms). Huawei might survive within the Chinese market, but its growing global business would effectively be crippled, at least for the time being. Beyond trade and technology, this scenario also implies increased geopolitical and military tensions. The possibility of some type of conflict over the East and South China Seas, Taiwan, North Korea, Xinjiang, Iran, or Hong Kong could not be ruled out. Finally, in the third scenario, China and the US would fail to reach a deal on trade and technology, but they would forego rapid escalation. Instead of plunging into a total trade and technology war, the two powers might ratchet up their conflict more gradually. The US would impose new tariffs, but keep them at 10%, while renewing only temporarily exemptions that allow Huawei and other Chinese firms to continue purchasing key US-made inputs, while retaining the option of pulling the plug on Huawei at its discretion. Negotiations could continue, but the US would essentially hold a veto over Huawei’s bid to develop 5G and other key technologies of the global economy. Given that Trump could suddenly pull the plug on the company whenever it suits him, China’s leaders would probably abstain from blatant full-scale retaliation, but would still intervene to minimise the economic damage. THE GOLDILOCKS OPTION… The third scenario is the most likely for now, because China is playing a waiting game until November 2020, to see if the US elects a more even-keeled president. Even with a truce, therefore, any negotiations that are relaunched after the G20 summit will probably drag on indefinitely, with no real signs of progress. In the | Capital Finance International

Summer 2019 Issue

meantime, the Trump administration will want to apply additional pressure on China, while keeping its options open. Better, then, to start with a 10% tariff on that remaining $300 billion worth of exports. The US could always hike the rate to 25%, but at the risk of raising the costs of goods that many of Trump’s own lower-income voters rely on. In the absence of a trade deal, the same modulated escalation is likely on the tech front. With Chinese firms already on a tight leash, the US could convince European countries and other allies not to grant Huawei tenders or licenses relating to 5G and consumer products such as smartphones, thereby undercutting Huawei’s current advantage in this market. That would buy the US a couple of years to cultivate its own national champions in 5G and related technologies, and to get a head start on 6G. Moreover, a managed escalation has potential political advantages for Trump, and even for Xi. Trump will not be exposed to charges from Democrats that he got suckered or went soft on China. At the same time, the lingering uncertainty from an unresolved conflict will probably prompt the Fed to start cutting its policy rate in July – or September at the latest. Those cuts could reach 150 basis points if the slow rise in tensions starts to take a toll on business confidence. In fact, if the conflict is managed well, the US could avoid a recession altogether, albeit with a deceleration of annual growth from 2% toward the 1-1.5% range. Whether the stock market would suffer a correction (a decline of 10% or more) or merely a sideways shift in the third scenario would depend on a variety of factors, such as investor confidence, growth trends, and monetary-policy measures. One also cannot rule out some type of fiscal stimulus in the US and other advanced economies. For example, Trump could try to broker a partial infrastructure-spending deal with congressional Democrats or seek to rebate tariff revenues to politically sensitive constituencies such as farmers and low- and middle-income households in the Rust Belt. Though Democrats would balk at granting Trump such favors, they would block rebates for the “losers” of the trade war at their peril. The “managed-warfare” scenario also has advantages for Xi. The Chinese economy, after all, can be backstopped with monetary, fiscal, and credit stimulus, not to mention a weakening of the renminbi (above CN¥7 to the dollar). The government could also make a modest show of retaliation, such as by threatening to restrict (but not ban) exports of rare-earth metals, which are used in a wide range of high-tech products. At the same time, the authorities could make life harder for the hundreds of US firms with business and investments in China, not with a full boycott, but through a thousand small cuts and abuses. | Capital Finance International

… ISN’T REALLY AN OPTION Because China and the US both know that they are in for a decades-long rivalry, they may well conclude that it is better not to risk a fullscale conflict and global recession in the short run. Only through proper preparation over the medium term can the two powers manage a longterm cold war and the de-globalisation that will be necessary to protect their respective supply chains. But this scenario is not particularly stable, and could easily morph into the first or the second after a few months. If China and the US are both motivated by concerns about growth and financial-market stability, they could overcome their immediate differences, which would allow for a temporary agreement that postpones the question of how to manage a larger cold-war rivalry. In principle, both countries would be better off with a deal, which is why markets had priced in the first scenario up until this past May, when negotiations collapsed. For the US, an agreement on good terms would boost consumer and business confidence, and thus growth, while reducing inflationary risks from the tariffs. The sequencing of a potential deal also matters. As matters stand, persistent uncertainty will lead the Fed to loosen its monetary policy one way or another. Suppose that Trump and Xi restart negotiations that then drag on until late fall or early winter of this year. The Fed would have to cut its policy rate by at least 50 basis points, after which point the Trump administration may agree to a deal. Because the impact of monetary easing takes time, the Fed would have to remain on hold until November 2020. (Even if the economy and inflation were to rebound, monetary policymakers would be hesitant to reverse course before the election, lest they appear to be acting politically.) In this sequence, Trump’s re-election prospects would be doubly improved. The Fed would have locked in rate cuts as insurance, and a new agreement would have bolstered investor confidence and the stock market. But, of course, this could happen only by chance. Trump’s “art of the deal” does not involve such multistep, multidimensional thinking, after all. As for China, an agreement would, at a minimum, prevent further damage to its economy, and particularly its tech sector. The government would secure a few more years with which to prepare for a longer-term conflict over trade, investment, artificial intelligence, 5G, and geopolitical dominance in Asia and beyond. The Chinese tend to think long term, and they are well aware of the “Thucydides trap” – a selffulfilling prophecy in which a hegemon and an emerging power end up at war. Still, they clearly need more time to prepare. A major shortterm shock today would be hard for China to 19

absorb, especially if it knocks the country’s national champions offline for the medium to long term. And indeed, Trump now appears to be opening the door to a truce at the G20, tweeting that critical preparatory work for an extensive meeting with Xi will now begin. But that meeting may still fail, even if both sides pretend that a truce was reached. If there is no substance to the terms of an agreement at the G20 – only painted smiles and stiff handshakes – the subsequent negotiations may quickly fail and lead to a gradual escalation of the trade and tech war. THUCYDIDES RETURNS Unfortunately, an even more likely course of events is that the third scenario – a managed trade and tech war, which is my baseline of how the rivalry will evolve over the next few months – would then devolve into the second (a full-scale confrontation). A SinoAmerican trade and tech deal in the coming months is far from assured. The negotiations broke down in May as a result of substantial differences between the two sides. And now, the complex preparations needed to stage a successful Trump-Xi summit in Osaka are being rushed at the last moment, after six weeks were wasted with no contact. Even if the Americans and Chinese can overcome differences in their negotiating style, the US will still want legislative commitments from China, and China will still view such demands as a violation of its national sovereignty. The Chinese are highly sensitive to anything resembling the imperial interference that weakened China in the nineteenth century. Like Trump, Xi cannot afford to lose face. Moreover, as the war of words has escalated over the last month, the spillover of trade frictions into the technology domain has intensified. Once kept formally separate, the two issues are now inextricably intertwined, which will make a resolution even harder to achieve. The Chinese cannot agree to any deal that does not rescue Huawei, but now that Huawei has become a bargaining chip, national-security hawks in the Trump administration and Congress will force Trump to take a hard line on the company. Each side seems to think that the other will blink first. For example, the US assumes it can inflict more economic pain on China than China is capable of returning, because US exports to China ($130 billion) are a fraction of China’s exports to the US ($560 billion). Hence, when it comes to tariffs, China seems to have more to lose. Yet, as we have seen, the conflict is about much more than tariffs, and China can retaliate in a number of ways. In addition to imposing new non-tariff barriers, it can strike a blow against major US firms that rely on Chinese supply chains and consumer markets, while allowing the renminbi to weaken. And if tensions escalate too far, China could even resort to the nuclear option of dumping its massive holdings of US Treasuries; it has already started to reduce its holdings of such US assets. Moreover, US leaders may be underestimating the costs of the conflict. According to the prevailing narrative, the tariffs now in place have had only a modest impact on US growth and inflation. But the 20

latest economic data suggest otherwise, as the US and global economy are slowing. In fact, one reason why the Fed has started considering preemptive insurance rate cuts – likely to start in July – may be that it is worried that tariffs are hurting the US economy more than was initially anticipated. Making matters worse, the US has nowhere near as many tools to respond to macroeconomic shocks as China does. In addition to massive stimulus and currency depreciation, China’s government can bail out private and public enterprises at will. The US, by contrast, must rely on traditional monetary and fiscal tools, all of which are already severely constrained. And while Trump must worry about reelection, Xi has abolished presidential term limits, faces few constraints on his power, and presides over a sprawling apparatus of social control, including the Great Firewall of online censorship. THE ART OF “NO DEAL” Politically, then, it is much easier for China to take the long view, which is what Xi has done by announcing a “new Long March” – a reference to the People’s Liberation Army’s long, painful retreat in the 1930s to a new stronghold in Shaanxi province, from which it broke out and took over all of China, under Mao Zedong, in 1949. By wrapping himself in the Chinese flag and fomenting nationalism at home, Xi is preparing Chinese society for a protracted struggle. If a full-scale cold war ensues, he will be able to remind the Chinese of the need to suffer today to achieve glory tomorrow. In fact, it is possible that Xi actually wants a full-scale economic war as a means of damaging Trump’s reelection chances. A new Democratic president – even one who accepts the reality of a more contentious Sino-American rivalry – would almost certainly be a more constructive and honest broker for China to deal with. In the parlance of the foreign-policy establishment, Xi may see de facto escalation as the quickest route to regime change in the US. Moreover, Xi is not an absolute ruler. While he controls most of the levers of power, there are still factions within the Communist Party of China (CPC) that could turn on him if he does not mount a sufficiently aggressive response to the US. He is not in a position to accept a deal in which he – or China – loses face or power. If America’s medium- to long-term goal is to contain China, as the Trump administration’s National Security Strategy clearly suggests, Xi cannot agree to anything in the short term that advances that agenda. In the grand scheme of things, it might be better to start a full-scale conflict now than to grant the US a tactical advantage for the next two years. The danger is that Trump, too, would prefer a partial or full-scale trade and technology war to a weak deal. If Trump makes any notable concessions, he will be accused by both Democrats and right-wing pundits of appeasing China and betraying American blue-collar workers. Even if he can’t secure a favorable deal, at least he can say he remained tough. Among those who have Trump’s ear are national-security hawks – some of them modern-day Dr. Strangeloves – who believe that China is so fragile that an economic shock could | Capital Finance International

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precipitate a political collapse, and even regime change. This is a dangerous game to play, because it could lead to actions that turn a cold war into a hot war. The mere presence of such extreme voices in Trump’s orbit suggests that the administration’s intent is to contain China at any cost. Worse, these hawks have the upper hand now that the “adults in the room” have long since departed. Secretary of State Mike Pompeo, National Security Adviser John Bolton, acting Secretary of Defense Patrick Shanahan, and Vice President Mike Pence all appear to be China hawks. And the situation is no better with respect to trade and economic advisers, where Secretary of Commerce Wilbur Ross, White House Trade Representative Robert Lighthizer, and Peter Navarro, Director of Trade and Manufacturing Policy, have sidelined moderates such as Secretary of the Treasury Steve Mnuchin (who is unwilling to stand up to the president anyway). SUMMIT SIGNALS Where does that leave us? If both Xi and Trump find the third scenario attractive, neither will be willing to meet halfway on a deal. That makes the second scenario – a full-scale trade and technology war – the most likely outcome, given that a controlled escalation is inherently unstable. As matters stand, the probability of a deal eventually being reached is low (my colleagues and I put it at just 25%). Still, we will know more after the G20 summit later this month. If Trump and Xi fail to broker a truce or a temporary agreement regarding Huawei, the US will probably follow through with 10% tariffs on the remaining $300 billion worth of Chinese exports. We will then be in the initial stages of the third scenario. On the other hand, if Trump and Xi hold a friendly meeting and agree to a truce, the US will probably withhold new tariffs, and we will be in the early stages of the first scenario. This would make the probability of the two sides reaching a deal slightly higher. But a lurch to the third scenario – a precipitous escalation of the current confrontation – would still be more likely, followed eventually by a descent into a fullscale conflict. Where it will end is anyone’s guess, but an escalating trade and tech war is, in my view, more likely than an eventual deal. i ABOUT THE AUTHOR Nouriel Roubini, a professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, was Senior Economist for International Affairs in the White House's Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank. 21


A Paradigm for Financing SMEs in the Last Mile By Fabrizio Cometto, Charulata Singal, and Abdul-Rahman Lediju


he 2030 Agenda for Sustainable Development, largely known as the Sustainable Development Goals or SDGs, provides one verbatim reference to small-and-medium sized enterprises (SMEs). SDG 8 explicates the promotion of “development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalisation and growth of micro-, small- and medium-sized enterprises” as a target for sustainable growth. Out of the SDGs 17 goals, 169 targets and 230-plus indicators, this is the only verbatim reference to SMEs. But to extrapolate this into a larger point that SMEs are not critical to achieving the sustainable development goals, specifically in the world’s poorest markets, would be a remarkable error. The daily work of the United Nations Capital Development Fund (UNCDF) offers resounding evidence of the critical role SMEs play in advancing SDG achievement in least-developed countries, or LDCs. SMEs are a powerful engine for integrating economically underserved populations into the economic mainstream (9 out of 10 formal jobs are tied to SMEs in low-income countries according to the World Bank Group). By deploying innovative finance approaches to create the demonstration effects that can support SME development, we are also creating an ecosystem that will lead to greater financial inclusion and economic empowerment, impacting SDG 1 (No Poverty) and SDG 17 (Partnerships for the Goals). One of our flagship efforts involves providing seed capital to promising clean energy SMEs that offer solutions like solar home systems and biogas cookstoves, leading to contributions in SDG 7 (Affordable and Clean Energy); SDG 10 (Reduced Inequalities); and SDG 13 (Climate Action). And by leveraging gender-responsive SMEs to provide opportunities for women, those SMEs are contributing to gender equality or SDG 5. To be sure, examples of small-and-medium sized enterprises contributing to the SDGs extend beyond UNCDF’s work. But, ultimately, the relationship between small-and-medium sized enterprises and SDG achievement represents more than merely a single target of one SDG. SMEs are a driver of much of the SDG agenda, and an irreplaceable driver of SDG achievement in the world’s least-developed countries. That is precisely the reason why the challenge of small-and-medium sized enterprises in LDCs 22

Growth potential VCs

PE funds

(Equity, > $2m @ 25-35%)

(Equity, > $5m @ 25-35%)

DFIs (Debt + Equity, > $5m @ 15-25%)

Impact Investors (Debt + Equity, > $1m @ 10-20%)

Commercial Banks (Debt, > $500k @ 18-21%)

The “missing middle”

Microfinance (Debt, < $50k @ 25-40%)

Revenue size/Absolute profitability acquiring capital is such a serious one. As an indicator of this challenge, data from our newly launched report, Blended Finance in the LDCs 2019, showed that only 6% of private capital mobilised by official development finance went to LDCs between 2012 and 2017—just $9.3 billion. That is compared to $66.4 billion for upper middle-income countries and $43.9 billion for lower-middle income countries. Also consider that, according to a separate study, the need for SDGpositive investments in LDCs is estimated at $240 billion per year, yet only $40 billion was deployed in 2014. And of that $40 billion, only $16 billion came from the private sector. Understanding the structural nature of this challenge will mean the difference between achieving the promise of the SDGs—of truly leaving no one behind—and coming painfully short. THE PURGATORY OF THE MISSING MIDDLE For SMEs in LDCs, the area of the business cycle where they face their steepest climb is not in the start-up phase, but rather in the phase leading to scale. The capital needs for SMEs in these countries in order to scale ranges from $50,000 to $1,000,000, yet this range of investment size is still proving elusive for SMEs in LDC markets. These SMEs are frozen out of micro-finance institutions because their investment needs are beyond these institutions’ lending range. These | Capital Finance International

transactions would also be considered too risky by domestic banks in the LDC markets where the SMEs operate, banks that are typically not capitalised or stable enough to take these investments onto their balance sheets. (This is an objective of our work, to mobilise domestic banks’ resources.) Ultimately, they are either risk averse and would prefer to invest in government bonds or they simply do not have the expertise to work with SME finance. As for larger international institutions— whether institutional investors, financial firms or development finance institutions—these investments are simply too small for their normal portfolio and are harder to substantiate from a business standpoint. Unable to acquire the capital to grow and scale, these SMEs are lost in the “missing middle.” They are stuck in the purgatory between start-up and scale, with little prospect of elevating themselves out of it. More to the point, the transformative power that SMEs possess to be engines of growth and economic inclusion for their communities, and by extension their ability to drive SDG achievement, are stuck in that missing middle purgatory as well. But the adverse effects hardly stop there. When SMEs are stuck in the missing middle, they are

Summer 2019 Issue

also denied the opportunity to demonstrate their larger “investability” potential, not to mention the opportunity to demonstrate the viability of the markets these SMEs operate in. Instead of generating demonstration effects that can provide a more accurate depiction of risk to investors, the loss of those demonstration effects can reinforce inaccurately negative risk perceptions, preventing the unlocking of additional capital. Ultimately, the missing middle speaks to a broader challenge: that traditional capital providers are simply not playing a substantive role in financing SMEs in the real sectors of local economies. Separate from the business impact, this means that the countries where the development needs are greatest are the same countries where capital finance flows are the scarcest. Reversing this trend is the key to ensuring that SMEs can play their role in transforming local economies and driving SDG achievement. A PARADIGM FOR THE FUTURE An agency that would “assist developing countries in the development of their economies by supplementing existing sources of capital assistance by means of grants and loans,” was the UN’s vision for UNCDF when it came into existence in 1966. With the enormity of importance attached to achieving the SDGs in the least-developed countries (or “the Last Mile” as we refer to it), and the stubborn challenge of getting capital to SMEs in these markets, UNCDF’s strategic framework has had to evolve—both in terms of the tools we utilise and the services we offer. As a result of that evolution, we can provide a paradigm that can be replicated among other actors in the global financial space and the finance-for-development space—from development institutions to institutional and impact investors—to catalyse capital providers to finance SMEs in LDCs. First, there is deploying a wide array of financial tools designed to crowd-in investors. UNCDF’s current toolbox has evolved beyond grants to include concessional loans and guarantees, which can be deployed leveraging its own balance sheet. UNCDF also intends to work through off balance sheet blended finance investment vehicles, which

Author: Fabrizio Cometto

Author: Charulata Singal

will be able to deploy equity and quasi-equity, as well as commercial and semi-commercial loans. These are the tools for the paradigm we propose. Each of these tools works to crowd-in investors into projects that would otherwise be overlooked, while utilising investment criteria to target specific sectors, geographies and SMEs to drive SDG achievement. The broader the toolbox and the more diverse the tools, the wider the pool of capital providers that can support SMEs and SDG-achievement: from national governments and development financial institutions to capital markets, depositors, corporations, and third-party fund managers. But mobilising private capital is only part of the solution. The model we propose also includes advisory services. Local governments in LDCs have tremendous potential to support projects that can create opportunities for SMEs, but may lack the capacity to serve this function. Providing that support in the form of technical assistance and policy guidance can help officials understand the importance of, and the ways to, mainstream SDG achievement and SME support into their planning and budgeting. Business advisory services to SMEs is also a tool. While SMEs can be promising outlets for investment, they may very well lack the business advisory services they need to be investable. Working directly with these businesses to ensure they get to that point is critical to enhancing their competitiveness. Finally, there is market research, an area of serious deficit when it comes to both SDGpositive and LDC investments. Investors who do have the appetite for these investments are hindered by the lack of an accurate assessment of risk, specifically in the case of projects in LDC markets, or a lack of knowledge about investments that deliver both return-on-investment and positive achievement of the SDGs. High quality market research, particularly of more challenging markets, can offer critical information on such matters as savings and spending patterns, the strength of digital infrastructure and where supply and demand side challenges are located in given markets. Ultimately, the SDGs are an opportunity map, they can provide visibility for where investable projects are, but that requires market research to guide the investor journey.

Author: Abdul-Rahman Lediju | Capital Finance International

SMEs AND THE PATH TO SDG ACHIEVEMENT With the collective of these tools, the result is a paradigm that can drive two important impacts: the mobilising of private capital to create the potential to scale up commercial financing, and the creation of demonstration effects by helping companies grow their businesses while unlocking follow-on finance. In short, this is a paradigm that can trigger a shift in global capital flows to the markets and SMEs that will bring sustainable development to the last mile. SMEs do not represent the only path to sustainable development. But there is no path to sustainable development, notably where it is needed the most, without SMEs. Recognising this reality, in addition to the challenges to be faced, is critical to transforming the 2030 agenda into a new paradigm for global development and global markets. i ABOUT THE AUTHORS Fabrizio Cometto is Investment Specialist with the Least Developed Country Investment Platform of UNCDF. His previous positions include Portfolio Manager with MCE Social Capital; General Manager-Iberian Peninsula with Ariston Thermo Group; Marketing Manager China with Michelin and Credit Analyst for BNP Paribas. Charulata Singal is Investment Specialist with the Least Developed Country Investment Platform of UNCDF. She previously worked as Senior Investment Fellow with Capria Ventures; Senior Investment Officer with responsAbility Investments AG; India Representative with BlueOrchard Finance SA and Assistant Vice President of Corporate Banking with ING Vysya Bank. Abdul-Rahman Lediju Abdul-Rahman Lediju is currently an Investment Specialist for the United Nations Capital Development Fund, where he has transaction advisory and risk management responsibilities for catalytic investments to small and medium enterprises (SMEs), financial service providers, and small-scale infrastructure projects primarily located in the world's Least Developed Countries (LDCs). Prior to joining UNCDF, Abdul-Rahman was an Assistant Vice President for Deutsche Asset Management's Sustainable Investments team, where had geographic responsibility for financial inclusion and clean energy debt investments in the SubSaharan Africa region, and co-managed two blended finance investment vehicles. ABOUT UNCDF The UN Capital Development Fund makes public and private finance work for the poor in the world’s 47 least developed countries. UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development. UNCDF pursues innovative financing solutions through financial inclusion, local development finance, and a least developed countries investment platform. 23

> Joseph Stiglitz:

Thumbs Down to Facebookâ&#x20AC;&#x2122;s Cryptocurrency


acebook and some of its corporate allies have decided that what the world really needs is another cryptocurrency, and that launching one is the best way to use the vast talents at their disposal. The fact that Facebook thinks so reveals much about what is wrong with twenty-first-century American capitalism. 24

In some ways, itâ&#x20AC;&#x2122;s a curious time to be launching an alternative currency. In the past, the main complaint about traditional currencies was their instability, with rapid and uncertain inflation making them a poor store of value. But the dollar, the euro, the yen, and the renminbi have all been remarkably stable. If anything, the worry today is about deflation, not inflation. | Capital Finance International

The world has also made progress on financial transparency, making it more difficult for the banking system to be used to launder money and for other nefarious activities. And technology has enabled us to complete transactions efficiently, moving money from customersâ&#x20AC;&#x2122; accounts into those of retailers in nanoseconds, with remarkably good fraud protection. The last thing

Summer 2019 Issue

lack of competition among and regulation of the companies that control transactions. As a result, consumers – especially in the United States – pay a multiple of what payments should cost, lining the pockets of Visa, Mastercard, American Express, and banks with tens of billions of dollars of “rents” – excessive profits – every year. The Durbin Amendment to the 2010 Dodd-Frank financial-reform legislation curbs the excessive fees charged for debit cards only to a very limited extent, and it did nothing about the much bigger problem of excessive fees associated with credit cards. Other countries, like Australia, have done a much better job, including by forbidding credit card companies from using contractual provisions to restrain competition, whereas the US Supreme Court, in another of its 5-4 decisions, seemed to turn a blind eye to such provisions’ anti-competitive effects. But even if the US decides to have a non-competitive second-rate financial system, Europe and the rest of the world should say no: it is not anti-American to be pro-competition, as Trump seems to have recently suggested in his criticism of European Commissioner for Competition Margrethe Vestager. One might well ask: What is Facebook’s business model, and why do so many seem so interested in its new venture? It could be that they want a cut of the rents accruing to the platforms through which transactions are processed. The fact that they believe that more competition won’t drive down profits to near zero attests to the corporate sector’s confidence in its ability to wield market power – and in its political power to ensure that government won’t intervene to curb these excesses. With the US Supreme Court’s renewed commitment to undermining American democracy, Facebook and its friends might think they have little to fear. But regulators, entrusted not just with maintaining stability, but also with ensuring competition in the financial sector, should step in. And elsewhere in the world, there is less enthusiasm for America’s tech dominance with its anticompetitive practices.

we need is a new vehicle for nurturing illicit activities and laundering the proceeds, which another cryptocurrency will almost certainly turn out to be. The real problem with our existing currencies and financial arrangements, which serve as a means of payment as well as a store of value, is the

Supposedly, the new Libra currency’s value will be fixed in terms of a global basket of currencies and 100% backed – presumably by a mix of government treasuries. So here’s another possible source of revenue: paying no interest on “deposits” (traditional currencies exchanged for Libra), Facebook can reap an arbitrage profit from the interest it receives on those “deposits.” But why would anyone give Facebook a zero-interest deposit, when they could put their money in an even safer US Treasury bill, or in a money-market fund? (The recording of capital gains and losses each time a transaction occurs, as the Libra is | Capital Finance International

converted back into local currency, and the taxes due seem to be an important impediment, unless Facebook believes it can ride roughshod over our tax system, as it has over privacy and competition concerns.) There are two obvious answers to the question of the business model: one is that people who engage in nefarious activities (possibly including America’s current president) are willing to pay a pretty penny to have their nefarious activities – corruption, tax avoidance, drug dealing, or terrorism – go undetected. But, having made so much progress in impeding the use of the financial system to facilitate crime, why would anyone – let alone the government or financial regulators – condone such a tool simply because it bears the label “tech”? If this is Libra’s business model, governments should shut it down immediately. At the very least, Libra should be subject to the same transparency regulations that apply to the rest of the financial sector. But then it wouldn’t be a cryptocurrency. Alternatively, the data Libra transactions provide could be mined, like all the other data that’s come into Facebook’s possession – reinforcing its market power and profits, and further undermining our security and privacy. Facebook (or Libra) might promise not to do that, but who would believe it? Then there is the broader question of trust. Every currency is based on confidence that the hard-earned dollars “deposited” into it will be redeemable on demand. The private banking sector has long shown that it is untrustworthy in this respect, which is why new prudential regulations have been necessary. But, in just a few short years, Facebook has earned a level of distrust that took the banking sector much longer to achieve. Time and again, Facebook’s leaders, faced with a choice between money and honoring their promises, have grabbed the money. And nothing could be more about money than creating a new currency. Only a fool would trust Facebook with his or her financial wellbeing. But maybe that’s the point: with so much personal data on some 2.4 billion monthly active users, who knows better than Facebook just how many suckers are born every minute? i ABOUT THE AUTHOR Joseph E Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute. He is the author, most recently, of People, Power, and Profits: Progressive Capitalism for an Age of Discontent (WW Norton and Allen Lane). 25

Fourth Industrial Revolution Immersive Transportation and the Internet of Everything by Ian Fletcher, Director IBM IBV

As we enter the Fourth Industrial Revolution, we may come to the stark realisation that nothing will ever remain the same. We are being exposed to continuous change, exciting new areas of innovation and groundbreaking technologies that are transforming the fabric of our world. While we may accept the inevitability of change, we also do so with some reticence and trepidation as we try to visualise what the future will look like and what our role in it will be. What is more certain is that we will be living in a completely interconnected world, where many decisions are either influenced or made for us through Artificial Intelligence (AI) linked with smart devices to produce data-driven insights. The outcome is the same: We will be fully connected to and integrated with future technology, developing an interdependency and reliance on its outcomes.

26 | Capital Finance International

Summer 2019 Issue | Capital Finance International



his article is the fourth in a series about the Fourth Industrial Revolution (4IR). Here I explore the phenomenon of how the ‘Internet of Everything' is enabling an immersive transportation experience. In doing so, I will also explore some of the challenges to do with trust, transparency and accountability. To fully understand the growing impact of 4IR, we must first cast our minds back to the end of the Third Industrial Revolution, now cresting, which was made up of three eras of computing – Counting, Programmable and Cognitive. The current Cognitive Era – built upon the capabilities of AI – is as much a cultural phenomenon as an advance in technology. Artificial intelligence is one of the most important technical developments in our lifetimes - flowing like electricity through everything, fueled intelligently by our personal data which generates the current, and becoming the “modern day competitive edge”. When combined with other transformative technologies like the Internet of Things (IoT), 5G mobile networks, edge computing, cloud, quantum and neuromorphic chips that mimic the synapses of the human brain, we create a landscape full of potential for exponential change. With billions of smart sensors connected to every device imaginable and all communicating simultaneously, we start to perceive a real-time immersive world unfolding before our eyes. TRANSPORTATION-AS-A-SERVICE Over the next few years, our transportation ecosystem will change beyond all recognition, becoming more economically and environmentally viable. Manufacturers are keenly aware of the big issues on the global agenda: Climate change and carbon emissions, energy optimisation, sustainability, city overcrowding and central government initiatives to reduce the number of vehicles on the roads. In response, they’re having to look at alternative business models such as Transportation-as-a-Service to address these challenges. Columnist

Transportation-as-a-Service is enabled by the advent of autonomous vehicles, the Sharing Economy and the expansion of on-demand services. It’s also starting to become part of the mainstream. According to the “Future Today Institute Tech Trends” 2019 report, the customers’ mindset is changing with regard to the way that transportation assets are owned, operated and managed. It estimates that car sharing services will serve over 20 million users worldwide by 2020.

Porsche for a recurring monthly fee. With car ride-sharing services already well-established, new platforms are extending into transportation modes including micro-mobility, electric scooters and motorcycles. This paradigm shift is taking place at surprising speed, forcing manufacturers and service providers to become more agile around providing customers with the choice to buy, hire, rent or subscribe. Even the used car market is getting in on the act. With algorithmbased vehicle pricing, potential customers can evaluate dynamic information that accurately describes the state of the vehicle (well beyond its age and miles) as well as a range of financial options that better suit consumers’ needs. CONNECTED CARS The first and most likely transition into the immersive transportation ecosystem will be the connected car. This is where we see technological capabilities like the Internet of Everything, 5G, AI and data-driven insights coming into their own and completely reshaping the foundation of the industry. A connected car is a vehicle containing devices that connect and exchange data with networks and services inside and outside the vehicle. The connected car market is estimated to be worth in excess of USD 200 bn by 2025, according to a recent study by IBM’s Institute for Business Value – “Securing privacy for the future of connected cars”. There are three categories of connected cars: 1. Connected-only vehicles: Equipped with integrated systems such as internet access and a local area network that controls basic systems across the vehicle. At its most basic, the software runs an integrated entertainment and communication system. 2. Semi-autonomous vehicles: More advanced features such as convoy cruise control, automatic brakes and parking assistance. 3. Fully-autonomous vehicles: Capable of sensing the external environment and navigating without any human input. It may include embedded AI and real-time data connectivity.

With the potential global reduction in car ownership threating traditional business models, manufacturers are experimenting with consumption-based, pay-per-use structures such as a ride-sharing model in Dubai called Udrive. Even the larger, more established manufacturers are starting to provide rentals by the minute or mile in some urban centres. Manufacturers are also testing out new business models like Audi on demand, Care by Volvo and Porsche Passport, which gives members access to 22 models of 28 | Capital Finance International

Each vehicle can process up to 25 gigabytes of data per hour, which represents new data opportunities for vehicles to communicate with each other (V2V), network (V2N), infrastructure (V2I), pedestrian (V2P) and everything (V2X), all driving an increased demand for an array of interconnected services. IMMERSIVE EXPERIENCES As the connected car world evolves, we will have to accept that many of our traditional driving tasks will instead be done for us using AI. Ultimately the human factor may be completely removed from the control of the vehicle. This provides an opportunity for manufacturers to develop more immersive experiences such as entertainment, intuitive navigation, advanced route planning, weather updates and recommendations about nearby places en route. With technologies like Voice Search Optimisation (VSO), we will soon be talking to a smart speaker, head-up displays, our car’s dashboard or our mobile digital assistant in order to avoid the traditional distraction of modern driving. Vehicles can be integrated with smart home functionalities (V2H) that allow drivers to enable devices (such as lighting, heating, entertainment systems or garage doors) before arriving home. Wearable devices can also be integrated into the functionality of the connected car in order to obtain smarter and safer mobility. Finally, new security capabilities are emerging with advanced facial recognition that uses our biometric data to interface with smart glass to open, start or communicate directly with communication systems. Companies such as Global e-dentity are emerging that use biometric vascular/bone structure matching systems for face or full body recognition, claiming staggering match rate accuracy levels of 1 in 7.5 billion. WIDENING THE NET New connected ecosystems will also develop around remote maintenance, traffic management, driver assistance, vehicle emergency, safety, entertainment and wellbeing that use advanced analytics to diagnose problems like a breakdown in real time. Governments see the potential of the connected car to reduce road accidents and

Summer 2019 Issue

there will be a price to pay for progress; our privacy is seriously at risk.

deaths, limiting a car’s speed using automatic braking and intelligent driver-assistance systems that are designed to strengthen driver safety as well as provide a more comfortable, easier driving experience. Insurance companies could be on to a real winner with the connected car. It will be possible to use IoT sensors, telematics and advanced analytics to measure driver behavior, to analyse how the driver reacts – or equally importantly, how the vehicle reacts – to provide more accurate calculations for premiums and usage. New technologies use radar and video sensors to warn the driver of an imminent crash, in addition to being able to track an accident in real time, understanding the vehicle’s speed, direction, weather conditions and culpability. In the event of an accident, these systems then notify the nearest service capable of providing road and/or medical assistance for automatic dispatch. The connected car market is shaping up to be a major force in the new immersive transportation world and is attracting investment from existing manufacturers as well as new players. Companies like RPMAnetworks (CIOTA-Connected IoT Automobile) in the UAE are starting to emerge, which use hardware and software-based technologies that can be installed into a new or existing vehicle within minutes, instantly converting it into a connected car. This opens up new markets for millions of existing vehicles, accelerating the adoption of the connected car and setting the trend for autonomy. This technology could become widely available as soon as 2020 and may even become mandated if the business case for governments, insurance companies and manufacturers is sufficiently compelling.

LOOKING AHEAD Over the next decade we are likely to witness

LOOK TO THE SKIES While we wait for the race for driverless innovation to unfold on the ground, exciting innovation is happening above us. It is widely recognised that Uber revolutionised the sharing platform for click-and-ride, and now it is expanding its transportation network to aerial ridesharing (planned for 2023). This ambitious vision uses the top of skyscrapers for point-to-point travel between suburbs and cities to avoid traffic congestion, creating a new user experience that is environmentally conscious. For autonomous cars and flying taxis to become a reality and accepted within society, the industry needs to come up with new insurance systems, new legal rules and government legislation. It needs to be clear who bears the cost if an accident happens! CONCLUSION The Internet of Everything is happening all around us and we must accept its inevitability as part of everything we do and connect to. It represents great excitement, new ways of thinking and innovation that will change our lives. We all generate masses of personal data today, both with and without our consent, which represents huge monetisation opportunities for us as well as the companies that mine it. But as we move headlong into this new immersive world of autonomy, Artificial Intelligence and data, we must do so with caution and with the understanding that | Capital Finance International

The views expressed are those of the author and do not necessarily represent those of IBM. ABOUT THE AUTHOR Ian Fletcher was educated in the UK, building a successful career in IBM Global Services. With over 30 years’ experience in technology and business consulting services, Ian leads the IBM IBV C-suite Study for MEA. Ian also runs IBM’s thought leadership programme, advising clients on business transformation and strategy. Ian specializes on the impact of the Fourth Industrial Revolution and, in turn, its impact on the C-suite and society. ABOUT IBM IBM is a leading cloud platform and AI solutions company. It is the largest technology and consulting employer in the world, with more than 380,000 employees, serving clients in 170 countries. ABOUT IBM INSTITUTE FOR BUSINESS VALUE IBM Institute for Business Value, part of IBM Services, develops fact-based strategic insights for senior business executives.

Author: Ian Fletcher, IBM Institute for Business Value Director MEA

29 Columnist

The real market opportunity for this connected ecosystem, however, is the ability to facilitate data monetisation through the collection of vast arrays of data to support the forthcoming autonomous car, healthcare and insurance markets. This data will fuel the autonomous market, providing the source for the necessary artificial intelligence, machine learning and data visualisation capabilities.

the introduction of self-driving cars, autonomous vehicles, drones and even the flying taxi. The Dubai Government’s Self-Driving Strategy expects it to account for 25% of all road transportation by 2030. Recognising its potential to transform economic value, governments around the world are reevaluating and redesigning the urban mobility architecture required to support it. For this to occur, self-driving or driverless cars will need to be at Level 5 autonomy, whereby they are capable of driving themselves anywhere on the planet, sensing the environment, navigating in all weather conditions, without limitations. The reality is that AI and machine learning is not yet advanced enough today or does not have the required volume of data to support Level 5 autonomy in the real world. It’s a bit like a 5-yearold child in a new school, still learning and trying to find their way around. Level 4 (partial autonomy) self-driving cars are much more realistic and could be for sale much sooner.

Technology companies, governments, manufacturers and software developers must all incorporate privacy features into the design and build of everything – before the driver gets behind the wheel or the passenger enters the ride-share. If trust is to be achieved, immersive security must become an integral part of the solution, recognising that this connected world comes with ownership, responsibility and accountability. Organisations must consider how to address and govern potential ethical issues that are inevitable with this new technology. Unchecked, concerns about trust, privacy and transparency will become a barrier to adoption. Governments also play a major role here, enacting legislation covering AI ethics, bias and data transparency. It is our data that is fueling the new world. The purpose of AI is to augment human intelligence and enhance our lives, not the other way around. i

> Tor Svensson, Chairman

Digital Health: Answer to Challenges of UN SDG 3 United Nations’ SDG Goal 3 is to ensure healthy lives and to promote wellbeing for all.


n the modern day, the human body can be broken down to bits and bytes; digitalised, deconstructed and expressed in binary form. Digital doctors can assess patients based on AI. The medicine is in the mail.

The World Health Organisation (WHO) says the aims of SDG 3 includes universal health coverage and financial risk protection, as well as access to quality essential healthcare services and essential medicines and vaccines. SDG 3 involves strengthening the capacity of all countries for early warning, risk-reduction, and management of national and global health risks.

requirement in the EU for pharmacies and hospitals to scan each medicine for verification at the end of the supply chain before dispensing to patients."

The digital health ecosystem provides answers to the challenges of emerging and frontier economies without proper primary care for growing populations, as well as developed economies with increasing costs but without universal healthcare (US) and with aging populations (Europe).

information between manufacturers, packagers, wholesalers, distributors and dispensers is critical. It is now a legal requirement in the EU for pharmacies and hospitals to scan each medicine for verification at the end of the supply chain before dispensing to patients.

Global systems need to be reconfigured for efficiency. Redefining health and wellness through prevention and a holistic approach must be embraced. Commercialising new healthcare technology — including with mobile access to data — become paramount in a person-centred health-ecosystem.

Located in the buzzing technology hub Internet City in the UAE, Verofax has proprietary technology for medicine verification, including an app for claims and tamper substantiation. Verofax solutions are now being integrated with the UAE government’s smart approach to health. Verofax’s plans involve licensing their solutions to enable third party sales of generic medicines through integration with e-prescriptions and international e-pharmacy platforms.

The use of generic drugs must be boosted to lower costs. The preconceived notion that generics are of worse quality can be put to the test by consumers, but the rampant counterfeit drug market is estimated at $200bn. Columnist

"It is now a legal

Medicine verification has become a hot issue. The world has been plagued by fake medicine. New regulations to the rescue… Most prescription medicines in the EU are required to use a unique identifier (QR-type code) and tamper-proof packaging. The EU is advancing mandatory medicine supply chain security systems, including tracking systems. The counterfeit drug problem has also been identified by the US Food and Drug Administration (FDA) which has plans to pilot new technologies, including blockchain, to track and trace pharmaceuticals. The pharmaceutical supply-chain needs to become completely inter-operable. Sharing of 30

The technology Verofax has developed is based on triple verification IP and patent verification and claim (verify patient ID and medicine condition). This allows for delivery of prescription medicines to patients, validated on the blockchain by all stakeholders. Verofax innovative B2B2C solution empowers instant patient verification with the use of their mobile phones. Verofax simplifies the ordering of controlled and prescribed medicines, delivering significant added-value to the healthcare ecosystem and benefit to insurance companies. For all the players — from manufacturer to end-user — the system creates value and risk reduction. The individual parts — think digital medical registry and virtual reality in the clinical setting — play a role. Combined, the benefits of the system are legion. | Capital Finance International

Human AugmentationmHealth

Summer 2019 Issue

Machine Learning Tools

Data Accessibility

AI and machine learning tools assist (augment) medical practitioners but should not replace them. The automated “digital doctors” support human decision-making. Human judgement supporting technologies based on Mixed Reality (augmented reality and virtual reality combined) hold much potential, such as in medical imaging.

Compliance RegTech Primary Care Digital Doctor Universal Healthcare

Medical Registry

Augmented Reality Diagnostics Biometric ID Authentication

Digitized Human Genetics

Remote Clinic

SmartHealth Ecosystem e-Pharmacy Participants SmartHealth Ecosystem Figure 2. Digital Health Ecosystem Tag Cloud e-Pharmacy Participants


Drug consumer/ Patient/Life-long refiller

Drug consumer/ Patient/Life-long refiller

Required Integration of:

Medical Pharmacy/ drug stores practitioner

Government licenses

Medical PaymentPharmacy/ system practitioner drug stores • Biometric ID authentication for live identity proof •

Value Added Support:


AI/ML tools Wholesaler/ Distributor/Importer • Augmented reality diagnostics •

Tamper free protection Wholesaler/ Distributor/Importer • Data security (GDPR)

cation for


Drug manufacturer

Lower transaction cost

Safe (generic) drug delivery

Smaller insurance premium

No insurance abuse with both person and drugs authenticated

Time efficiency

Better patient outcome

Augmented reality diagnostics

Medical registry & Access

Integrated InsurTech

Embracing the Fourth Industrial Revolution can help to fulfil UN SDG Goal 3; the future is datadriven. The epoch of medical digitalisation has arrived. i

Medical registry & Access

Eco-System Benefits: Source:

Lower primary care system cost

AI/ML tools

Blockchain and transparent data empower people to securely manage their wellbeing. They have control over, and access to, their personal healthcare records. The blockchain-powered system also means healthcare providers have improved digital tools.

Lower primary care system cost

Lower transaction cost

Safe (generic) drug delivery

Smaller insurance premium

No insurance abuse with both person and drugs authenticated

Time efficiency

Better patient outcome

Figure 1.Source: e-Pharmacy Figure 1: e-Pharmacy & SmartHealth Ecosystem. & SmartHealth Ecosystem Figure 1. e-Pharmacy & SmartHealth Ecosystem | Capital Finance International

ABOUT THE AUTHOR Tor Svensson, Chairman of Capital Finance International (, is Senior Advisor to a UN recognised NGO. 31 Columnist

Blockchain holds the power to secure the integrity of the overall system. The benefits of the distributed common ledger means the data is accessible to only dedicated users, secure from external interference.

• Integrated InsurTech Drug manufacturer

Compliance RegTech

Eco-System Benefits:

Value Added Support:


To roll out such a system for triple verification requires government licenses and pilot schemes. The success requires the integration of payment solutions, biometric ID authentication, and tamperproof packaging. Compliance means robust regtech and data security (GDPR) solutions.


Well-integrated e-Health promises better patient outcomes with time saved, added convenience and risk-reduction. Other benefits include biometric verification, which enables real-time feedback from the patient and early warnings.

Virtual Reality

Medical Registry

Payment Systems



4th Industrial Revolution

Mobile Clinical App

Patient Empowerment

AI Digital Doctor

Data Accessibility

Data Security (GDPR)

Tamper Free Drug Protection


ration of:

Better Patient Outcome

Deep Learning Algorithms



Some critics see the nomination and election of the new president of the World Bank, David Malpass, as a continuation of the Trump administration’s stance on multilateral institutions and China.


avid Malpass saw President Donald Trump as an agent of change, but Malpass is his own man, shaped by his own experiences in public service, investment banking, and his personal life. His comments as Undersecretary of the Treasury for International Affairs may have indicated a reform agenda for the World Bank, but while Malpass’ head aspires to reforms, his speech and past actions indicate pragmatism. His heart is aligned to helping the world’s poorest countries.

Cover Story

But can critics see past the spectre of Trump? After his nomination and subsequent appointment as president of the World Bank, Malpass was quick to allay the fears of critics. He has highlighted his experience for the job and has presented himself as an independent thinker, committed to increasing the median income of poorer nations. He is supportive of Trump and his general policies, but without blind fealty. He is no Trump creation. 32

"Despite the critics, Malpass has so far shown himself to have the necessary experience and independence to succeed as World Bank president." His criticisms of multilateral organisations and China — made while Undersecretary of the Treasury for International Affairs — were a call to reform, but his speech and actions as World Bank president and nominee so far do not suggest a bold iconoclast. For now, he appears to be more Meltzer than Trump. In the first week at the helm of the World Bank, he was quick to confirm his support for addressing climate change. He has also

expressed his willingness to work with China (the World Bank’s third-biggest shareholder), albeit with greater transparency and conditions. If, and when, his reform agenda emerges, it is likely to represent a re-focusing of the bank, with a greater emphasis on private-sector involvement, and a championing of the dynamism of small business. None of these are revolutionary, and have long been part of the bank’s internal dialogue, one of the main competing visions in a complex and ever-evolving institution. Malpass’ belief in the transformative power of private enterprise is drawn from his childhood. Malpass was born in a small town in north Michigan, where for five generations his family has been running an iron works. The company is no struggling rust-belt dinosaur left behind by globalisation, more a model of private sector dynamism. It services more than 150 countries, with production facilities in eight, a posterchild for how small businesses can transform communities. Malpass mentions it in speeches, and no doubt sees it as an example for businesses and countries around the world. | Capital Finance International

Summer 2019 Issue

After government service, Malpasss worked for investment bank Bear Sterns, eventually becoming its chief economist. This gave him insight into global economics and the workings of private capital markets, and taught him an invaluable lesson on crises and criticism. During his 15-year tenure with Bear Stearns, Malpass won many awards, served on the board of the Council of the Americas, and wrote columns for The Wall Street Journal and Forbes. His analysis of deflationary pressure in 2001, and economic recovery in 2002-03, were well received. However, at the start of the housing-debt crisis in 2007, he urged calm, arguing that the importance of the housing market to the health of the overall economy was overstated. Roughly a year later, Bear Stearns itself collapsed because of exposure to mortgage-backed securities. The great recession was in full force. While his call for calm now appears almost absurd, to single Malpass out for underestimating the housingcrisis ignores the fact that he wasn’t alone in that. Who knows what information access Malpass had to the secretive internal hedge funds behind Bear Stearns’ collapse. No doubt he also saw the importance in trying to inspire calm back in 2017. Eight years later, and after a failed senate run and a successful economic research firm, Malpass reemerged into public life, and was quick to show that while his beliefs on economics and politics are strong, he is a pragmatist. In 2016, he joined Donald Trump’s election campaign as an economic advisor. He saw Trump as an agent for change, with shared views on many issues. When Trump was elected, Malpass was appointed Undersecretary of the Treasury for International Affairs.

Malpass gained valuable budgetary and international development experience from his time working as a top Treasury and State Department official under the Reagan and George HW Bush administrations. After a physics degree, an MBA, a CPA, and graduate studies in international economics at Georgetown, Malpass entered government service with the Treasury, moving on to the State Department.

The DNA of the Brady Plan can clearly be seen in Malpass’ views on helping developing countries today. Under the Brady Plan, some of the debts of developing countries were restructured and repackaged into “Brady Bonds”, which were collateralised with US Treasury 30-year bonds. The bonds proved successful; they harnessed the expertise of the US Treasury, IMF, and World Bank, as well as the liquidity of private capital markets to transform debt positions — a template Malpass may use again. | Capital Finance International

Malpass was nominated for World Bank presidency by Trump on February 6, 2019, after the former World Bank president, Jim Yong Kim, resigned. Malpass was the only nomination. His selection followed the usual process: the election of the US president’s nominee. This is despite media talk of breaking tradition and the nomination and election of someone else. Despite the critics, Malpass has so far shown himself to have the necessary experience and independence to succeed as World Bank president. His past reveals strong views on the private sector and on multilateral organisations, but also a willingness for co-operation. He is his own man and continues to evolve. i 33

Cover Story

With his interest in global economics and politics; his ability to speak Spanish, French, and Russian, and his accounting background, Malpass quickly rose through the ranks. He worked as part of the Senate Budget Committee and Joint Economic Committee, and was head of Treasury’s Developing Country group. He worked on several key projects which have provided him

with invaluable experience for his new position at the World Bank. These include NAFTA, the Savings and Loan bailouts, the 1986 Reagan tax cut, the Gramm-Rudman Acts, and the Brady Plan for indebted developing countries, i.e. Latin America.

In 2018, as undersecretary, Malpass negotiated with the World Bank in its request for a General Capital Increase, the first since 2010. Unsurprisingly, he was initially opposed to the increase, but after negotiations he helped to deliver a $13bn increase, accompanied by a pledge to increase borrowing costs for richer nations — including China. He was willing to work with the World Bank to reach an agreeable outcome.

> MSCI and OECD:

Delivering Impact at Scale as SDG Deadline Looms Larger


e are almost a decade away from the 2030 timeline for delivering the UN Sustainable Development Goals (SDGs). The OECD has determined that there remains a massive gap in funding which governments alone cannot close. By using development finance to “de-risk” projects, Blended Finance allows the private sector to contribute to the sustainable development of sectors and markets in developing countries, bringing additional finance, innovation and technology. Blended Finance may also demonstrate feasibility to the private sector by addressing real and perceived risks, but OECD research indicates that it is not sufficient to close the funding gap. The scale of the challenge requires the international financial system to be part of the solution. In December 2018, the OECD collaborated with MSCI Inc, a leading provider of critical decision support tools and services for the global investment community, to produce a joint discussion paper entitled Institutional Investing for the SDGs. The goal was to shed further light on opportunities presented by the SDGs and the potential for corporations to play a significant role in sustainable development, while also identifying key challenges for institutional investors seeking to direct capital toward the SDGs. The goals present significant business and investment opportunities — up to $12tn, according to the Business Commission — in four economic systems: food and agriculture, cities, energy and materials, and health and well-being. These represent around 60 percent of the real economy.


At the same time, pension holders and other retail actors place increasing demands on investment committees to invest in ways that have a positive impact on the world. This has yet to translate into a significant mainstream financial mobilisation towards the SDGs. We believe this is at least partly because of the associated challenges, including institutions’ investment constraints and a relative lack of investment tools to help the process. In Institutional Investing for the SDGs, a joint Discussion Paper from MSCI and OECD, there is a framework to help institutional investors influence behaviour through public equity markets. The aim is to drive capital toward companies that are net contributors to sustainable development, and away from those that are misaligned with the SDGs. The paper also proposes methods for investors to target developing countries without limiting investments to companies domiciled in those markets — recognising that companies domiciled in developed markets often make substantial investments in developing countries and may also have significant revenue exposure there. It simulates the construction of an index based on this framework, and test variations to develop a proof-of-concept as to whether a well-designed index could help inform investors about contributing to the SDGs. A series of workshops tested the appetite of various market participants and stakeholders for tools to better inform investment decisions toward the SDGs. The feedback was that an index solution had potential, though a wider group of actors would need to be engaged. | Capital Finance International

Summer 2019 Issue

Participants suggested the development of minimum standards, which would allow for a clear approach by relevant market participants and avoid “SDG washing”. Following this collaboration, MSCI and the OECD have each continued to pursue discussions with a variety of market participants, as institutions’ interest in investing for the SDGs continues to grow. i ABOUT THE AUTHORS Paul Horrocks is the head of the Private Finance for Sustainable Development Unit in the OECD. He is working on a number of initiatives encouraging greater private sector investment into developing countries. He focuses on the policies and approaches that governments can adopt to scale-up and mainstream Blended Finance. The Blended Finance Principles he was instrumental in developing were adopted by the G7 in 2018. Prior to this, Horrocks was a senior executive in the Australian Federal Treasury, working on a range of policy topics, including the domestic PPPs market but also providing policy advice during Australia’s G20 presidency, and, more broadly, on infrastructure. He has over a decade in senior leadership experience at European Institutions in Brussels, working in particular on European Infrastructure policy and projects with the European Investment Bank. Prior to joining the European Commission, Horrocks spent

a number of years working in the European aerospace sector. He has degrees from the University of Wales, a master’s from the University of Liverpool, and an Executive MBA from Vlerick Business School in Belgium. Meggin Thwing Eastman is head of Impact and Screening Research for MSCI ESG Research, which includes business alignment with the UN Sustainable Development Goals, controversies, global norms, and involvement in controversial business activities such as tobacco, weapons, and fossil fuel extraction. She has authored numerous research insights and guidance for asset owner and asset managers seeking to incorporate ESG considerations into their investment process. Corporate gender diversity is an area of particular focus. Recent publications include The Right Stuff: Talent Management and Innovation, Institutional Investing for the SDGs (with the OECD), Women on Boards and the Human Capital Connection, Bitter Pills: The US Opioid Crisis and Potential Impact on Healthcare Companies, Investor Responses to Gun Violence in the US, The State of Investing For SDG Impact Through Public Equities, and Has Gender Pay Parity Arrived in the Executive Suite?. Eastman has worked in the ESG field since joining KLD Research & Analytics in 1998. She holds a BA from Williams College and an MA from the University of California, Berkeley.

INSTITUTI INVESTIN SDGS A Joint Discussion Paper from

Meggin Thwing Eastman, Paul Horr

December 2018

Author: Paul Horrocks | Capital Finance International

Author: Meggin Thwing Eastman


> Blockchain:

New Way of Doing Business in a Changing World By Lord Waverley

Blockchain is little understood, but it will simplify transactions, improve reliability and reduce costs.


ocusing on blockchain technology today will ensure being relevant tomorrow.

To better understand the potential of blockchain, it is necessary to follow the current, future and practical applications of its technology. In an increasingly interconnected world, and as we move into the era of big data, mobile communications and online services, we need assurance that our personal information is secure. Businesses are expected to know who their clients are, and must be able to verify that transactions are legitimate. There was a time that, when buying a book, you went to the bookshop, picked the book from a shelf, paid in cash, and left. Today you need only make a verbal command to Alexa, Amazon’s voice service, and ask it to send the book directly to your home. To complete the transaction, add information about who you are, your voice profile, your financial details and address. Columnist

Various parts of that information will be used for practical reasons, to inform suppliers, dispatchers, accounts teams, and couriers. More importantly, however, your personal information is now a valuable commodity which — in a worstcase scenario — could be misused for fraud, or used to generate information on your behaviours. This, in turn, can be processed to sell you more services in the future. Data protection laws such as GDPR, antimoney laundering regulations and the general requirement to Know Your Client (KYC) have put great pressure on businesses to alter their practices to protect customers. All of this must be underpinned by a technology that provides absolute security and transparency that, when required, reduces rather than increases the transaction costs. In a world were customer journeys are no longer linear events, businesses will require the technology that can deliver a digital experience whereby customer value is derived in more meaningful ways. THE INTERNET OF VALUE Businesses today operate using disparate sources and versions of data with inefficiencies, waste, poor customer experiences and, often, fraud. Blockchain is transforming the world by providing businesses with an opportunity to 36

restructure their data into a single database that can be shared across their entire supply chain. It can provide companies with the opportunity to achieve meaningful digital transformation that has been termed Decentralised Digital Business Transformation. Using blockchain, businesses will be able to take what are typically seen as “back-office” processes and move them front and centre as a means of creating a more meaningful digital experience for the internal and external customers across all industries and sectors. We still find ourselves living in a digital world with analogue features, a world where you can e-mail your bank, but due to the complex nature of old banking architectures we must wait three to five working days for disparate ledgers to confirm that the payment has been received. Meanwhile, although the payment has been made, suppliers will not provide goods or services until it has cleared. In a digital era, you can “send value”, with blockchain ensuring that business transactions are secure, with necessary records attached, and can work where information needs to be simultaneously distributed between transacting parties. Blockchain offers a single, distributed ledger shared through the network, with every single transaction captured via a series of blocks that are cryptographically hashed and stored, preventing double-spending and instantly settling transfers of value in a matter of minutes, or even seconds. BITCOIN IS NOT BLOCKCHAIN… The popular press has ensured that Bitcoin is high in the public consciousness. It could be said that Bitcoin is an application of blockchain technology in the same way that Facebook, Google and Amazon are applications of the Internet. Blockchain provides an underlying mechanism for the data that flows through these applications; decentralised and distributed, rather than using the centralised architecture of the internet today. Many believe that Bitcoin and blockchain are no different to one another. Many businesses leaders are thought to base their blockchain strategies on the perceived limitations of Bitcoin. Forwardthinking competitors have, however, recognised the transformative impact that blockchain | Capital Finance International

Summer 2019 Issue

"The development of blockchain may be in its infancy, but the technology is here to stay. The numbers speak for themselves. Forecasting a mere $38bn valuation by 2021, the global research group Gartner is predicting an explosion of market growth beyond that date: $360bn by 2026, and $3,16tn by 2030." technology can have across multiple areas of their businesses, such as to their supply chain and how they manage international payments. Certain CEOs of the world’s biggest brands believe the hype around Bitcoin — to the extent they have not pursued a meaningful blockchain strategy. The links to financial crime, or other referencing to Bitcoin over the last decade, have had a negative impact on the speed of adoption of blockchain. This is unhelpful misinterpretation. THE POTENTIAL OF BLOCKCHAIN TECHNOLOGY Thanks to another application of blockchain, Ethereum, business leaders recognised that this technology can transform more than just payments. Ethereum allows for the transfer of value once pre-defined rules have been met. This has opened-up a world of possibilities for blockchain, and over the past three years there has been a myriad of applications being built for businesses across multiple industries and sectors. Examples of blockchain are already making real difference to the way the business and management of information is conducted. RECORD-KEEPING — LAND REGISTRY Registering property titles is well suited to using blockchain technology. Accurate, tamper-proof records underpin the smooth working of realestate markets. Transfers of ownership of the asset should be indisputable, and reductions in transaction time and cost would be welcomed by all involved. Many countries, including the UK and Brazil, are progressing with projects to put records of land title into the blockchain.

Blockchain-enabled technology is being developed to allow the tracking of oil, ensuring

HEALTHCARE RECORDS There is a huge potential to find operating efficiencies in the management of healthcare information. Public health in the developed world is suffering from resourcing constraints. The complexity of managing data that multiple users can have access to, and the sensitivity of health data, has led to continued dependence on paper-based systems. There are even examples of the continued use of fax machines to transfer information in a supposedly secure manner. Blockchain based record management is perfectly suited to management of records, particularly those needing to comply with onerous data protection rules. FINANCIAL SERVICES The financial services sector is experimenting, using multiple blockchain technologies across multiple areas of business and financial instruments. One of the first is “tokenised security” being initiated for a large conglomerate in Asia (SGH Global) using the EOSIO blockchain built by Smarter Contracts. The token will be issued using a London-based, FCA-licensed platform: London Derivatives Exchange (LDX). LDX recognised blockchain could be applied to streamline middle- and back-office processes and procedures, reducing costs, friction and risks associated with the industry. Banks are also able to transform the way they run KYC and AML processes and procedures, with investors able to track their investments in real-time and with ease. They can ensure payments on the achievement of milestones, or triggers. Cross-border settlements are also particularly suited to blockchain-enabled solutions. Less mature markets in emerging economies can now benefit from the speed and security of | Capital Finance International

DISTRIBUTION OF AID Governments, NGOs and development banks have often struggled to ensure that money reaches its target, with the constant fear that the funds may be misappropriated. The World Food Programme, for example, has been using blockchain to deliver money directly to Syrian refugees so that they can buy food. No cash, no intermediaries. MAJOR PROJECTS Major construction and infrastructure projects have multiple contracting parties, complex staged payments, and are sensitive to delay. Contracts subject to dispute and delayed payment can spiral into delay and cost over-run. Blockchain will simplify the process, ensure that contractors are paid what is due on-time, and reduce project overheads. Many large infrastructure projects sponsored with aid, or via development banks, will also benefit from the removal of intermediaries and ensure that payment reaches its target. This lessens the likelihood of financial leakage, and improves the prospect of contracts being competed to-time and on-budget. CREDIT PASSPORTS Despite the vast amounts of financial information available, the emergence of digital banking and the globalisation of work, many of us find it hard to prove that we are financially sound. Even when having a good credit score with one of the agencies it is hard to verify its basis, and unlikely that it would be of practical use in another country. Blockchain will ensure that your credit score will be an open book, enabling you to travel with your “credit passport”. A CHANCE TO LEAD The development of blockchain may be in its infancy, but the technology is here to stay. The numbers speak for themselves. Forecasting a mere $38bn valuation by 2021, the global research group Gartner is predicting an explosion of market growth beyond that date: $360bn by 2026, and $3,16tn by 2030. Conclusion: become a leader in this space before forward-thinking competitors force you to follow their lead. i ABOUT THE AUTHOR Lord (JD) Waverley Member House of Lords, London Columnist

PROVENANCE OF RAW MATERIALS, FOOD, AND GOODS It can be challenging for businesses to demonstrate that their products are ethically sourced, authentic and safe, due to the complexity of global supply chains and disparate sources of data. Blockchain makes this manageable at low cost. Manufacturers in the food industry, for example, are now able to verify the country of origin of raw food products and confidently certify that produce is organic.

that customers do not inadvertently purchase embargoed or substandard produce. Materials can now be tracked to source. The aerospace and automotive industries can now guard also against the use of fake components. Increasingly, manufacturers need to know that metals and rare earth products are coming from environmentally sound and ethical sources.

blockchain-enabled transaction-management based in the main financial centres. This will reduce the cost of finance in places where money has previously been hard to reach.

Founder Strategic Advisor 37

38 | Capital Finance International

Summer 2019 Issue

Anand Rathi:

Wealth and the Culture of Success Stepping into the Mumbai office of Anand Rathi Wealth Services Limited is like walking into a family get together!


hile most of the people would have met each other just yesterday, the exuberance of meeting each other every day creates a jubilant vibe in the office. Such a simple act of greeting each other, reflects the profound impact of the vibrant culture of Anand Rathi! FOUR TENETS OF WEALTH MANAGEMENT First, the family-owned Anand Rathi Wealth Services Limited is run by professionals with little intervention from the Managing Director Mr Amit Rathi. The company provides objective driven wealth management services to over 3,700 families globally. Mr Rathi has set the foundation of wealth advisory with four simple principles. Fearless Advisory, any wealth advice must be based on what is needed in the portfolio rather than what the clients want to hear or likes. Data-driven recommendation, letting the numbers do the convincing instead of a smart sales pitch has proven successful for the organisation. Uncomplicating financial jargons with the aim to create investor awareness has turned clients into involved investors. Transparency, bringing clarity on investment decisions, and implementation, a financial solution offered to the client must also be applicable to each and every employee. The value addition through these tenets has created many long-term relations with clients. PRACTICE OF SERVANT LEADERSHIP Second, a CEO who has steered the company to a $20 billion business is humble despite reaching the peak of success. Mr Rakesh Rawal endorses humility across all levels of management. Since his 12 year association with the organisation, Mr Rawal has always ensured that the company treats its employees as human beings rather than replaceable commodities. Being serious about work does not have to include hostile environment, shouting matches, disrespectful attitude and bureaucracy. The organisation recommends an entrepreneurial approach â&#x20AC;&#x201C; every task is | Capital Finance International

treated like a business of the assigned person and executing it to the right end is part of the responsibility. For unit heads and team leaders, Servant Leadership becomes an integral part of their accountability. The concept of Servant Leadership has effectively shut down unhealthy competition and replaced it with a sense of togetherness in the organisation. FOLLOWING THE CONCEPT OF LEGG Third, the Deputy CEO Mr Feroze Azeez who has contributed to the growing business propagates four principles of humanity, known as LEGG. Low-Ego, with great responsibility also comes bigger ego and any employee whose attitude is egoistic gets discouraged immediately. Empathy, putting yourself in otherâ&#x20AC;&#x2122;s shoe gives not only another perspective but also gives a glimpse of what the other person is going through. Gratitude, anybody who helps must be appreciated for the effort, because that person has taken out time to help. Generosity, taking the effort to help others even after being flooded with work is showing generosity. These four principles are followed by the Managing Director, the CEO and the Deputy CEO. Consequentially, every employee is treated with respect and without discrimination. A CULTURE NOT ON PAPER, BUT IN PRACTICE While the cynics will never believe that such a culture exists because it sounds too good to be true, the reality mirrors the happiness that is witnessed through a handshake, healthy camaraderie and the dedication of all the intermediate level employees to follow the footsteps of their respective Team Leads to become successful. It echoes in the behaviour of all new employees, who have completed a year in the organisation. And, it reverberates in the humble behaviour of every employee in the organisation. Interestingly, Anand Rathi Wealth Services Limited has a regret attrition of less than 1% in the last 10 years. i 39

> Summer 2019 Special

Healthcare Heads For the Future, With Some Wisdom From the Past


he healthcare industry is ripe for a major overhaul. Despite the technological advances in diagnosis and treatment, most healthcare systems around the world remain largely unchanged.

Most hospitals are still brick-and-mortar establishments, many plagued by staff shortages, outdated equipment and increasing cases of chronic diseases. Consumer demand for tech-enhanced lives has provoked disruption and encouraged innovation across many industries, but the healthcare sector has been slower to embrace the change. A surge of patient empowerment is well under way, though, with a host of healthcare visionaries leading the charge to improve individual outcomes — and scale their successes. The momentum is gaining steam, fuelled by advances in digital healthcare and growing discontent among medical practitioners and patients. Research by Harvard Business Review found that a majority of doctors and hospital administrators in Germany, France, the UK, and Italy wouldn’t recommend their hospital to family or friends — for care or employment. Understaffed and ill-equipped hospitals lead to less-than-ideal patient care, and growing levels of frustration on both sides. The most innovative healthcare leaders share a common goal: to create a more equitable, efficient, and sustainable healthcare system. The mindset is shifting from reactive treatment to proactive prevention as populations worldwide begin to understand the correlation between lifestyle and wellbeing. “Holistic healthcare” are the buzzwords of the industry’s lexicon at the moment, considering the whole spectrum of patient needs: physical, emotional, social, economic and spiritual. It’s a system that has been in practice for centuries in Eastern medicine, and the time is right to blend Eastern and Western philosophies to deliver a comprehensive package of natural remedies, modern medical advances and AI-powered health-tech. This is helping to put the patient back at the centre of healthcare. Industry stakeholders — from Big Pharma and insurance providers to clinical researchers and medical doctors — are looking to health-tech to streamline processes, improve outcomes and reduce costs. The potential for positive change and


impact has never been greater. Artificial intelligence is being used to automate many labour-intensive administrative tasks, freeing-up doctors and nurses to focus on patient care. Tele-medicine is enabling doctors to remotely treat patients — and even to perform remote operations, with the help of robotics. Consumers are tracking their own health with wearable devices — or even ingestible ones — and creating vast pools of relevant information. Advanced data analysis has paved the way for the precision treatment of individuals, as well as valuable health insights into larger populations. As the volume of health data increases — by 48 percent annually, according to some accounts — the industry anticipates big data to become one of the cornerstones of modern healthcare. Research from McKinsey & Company has shown strong recent growth in the industry. Despite its complexity and cost, McKinsey predicts favourable winds for “players that can deliver value-creating solutions and thrive under uncertainty”. While previous industrial revolutions brought about technologies that have shaped the Earth and our lives — from steam engines and mass production to personal computers — the Fourth Industrial Revolution is expected to completely redefine the human experience. Artificial intelligence, augmented reality, 3D printing, and genetic manipulation are blurring the boundaries between the physical, digital, and biological worlds in the new digital technology era. UN Sustainable Development Goal #3 aims to “Ensure healthy lives and promote well-being for all at all ages.” Governments and healthcare providers worldwide are preparing to face the challenges — and opportunities — of a system changing at an exponential speed. The future of healthcare is likely to be high-tech… with an increasingly personal touch. i

The following 5 health action and thought leaders are all making great contributions to SDG goal 3. In addition, a strong case has been made for each for an additional SDG goal where their personal impact also has been outstanding. | Capital Finance International

Summer 2019 Issue | Capital Finance International


> ACHARYA BALKRISHNA MD & CO-FOUNDER OF PATANJALI AYURVED LTD Billionaire Monk Makes Modesty and Empathy Watchwords for Progress Acharya Balkrishna projects an aura of modesty, often clad in a traditional India dhoti, the simple garment of the people — which is fitting for someone who is a billionaire monk. Balkrishna’s journey to wisdom and wealth began with a chance encounter with Baba Ramdev, a charismatic and yoga disciple in the Gangotri caves in the Himalaya. Decades later, the business the two men cofounded, Patanjali Ayurved Limited, has catapulted Ramdev to international fame as a yoga guru, and has landed Balkrishna on the Forbes rich list. With at estimated net worth of $5.2b, Balkrishna ranks as the 25th wealthiest person in India. Patanjali Ayurved has a reported annual revenue of $1.6bn — selling everything from clove and turmeric toothpaste to cowurine floor cleaner — and Balkrishna owns 98.6 percent of it. The principle of Ayurveda is “the belief that health and wellness depend on a delicate balance between the mind, body, and spirit”. The company abides by that philosophy, and specialises in herbal and mineral preparations to provide natural solutions for every health and household need. Patanjali formulas may be crafted according to ancient traditions, but they offer prevention and treatment options for many modern ailments. Thousands of farmers form part of Patanjali’s agricultural network to produce the herbs and plants — some of which are rare or endangered — for its products. Patanjali research centres fuel Ayurvedic development as a viable branch of modern medical science, with a mission to establish a model for the rest of the world. Patients suffering from chronic maladies have been successfully treated at Patanjali hospitals and clinics with a regime of yoga, Ayurveda, and science. Co-founder and managing director Balkrishna has documented these cases in books he’s authored. National pride and concern for people’s wellbeing govern Patanjali’s daily operations, but diversification has always been a clear business focus for Balkrishna. Under his leadership, Patanjali has given multinational heavyweights a run for their money, offering fast-moving consumer goods that celebrate India’s revered traditions while embracing sustainability standards. Balkrishna is driven by the desire to tap India’s rich consumer market — with the Patanjali perspective. “We consider our consumers as family,” he says, “and our sensitivity is towards achieving their welfare.” Patanjali aims to “nurture and develop the science that is present in our tradition, and

spread it to the benefit of the masses”, says Balkrishna. “We want to use this wealth to serve others and not ourselves.” Ayurvedic products appeal to India’s sense of tradition, as well as to the growing global interest in natural and holistic trends. Its products have begun to have an impact in international markets, and Patanjali exports to 10 strategic countries and boasts a global reach. Registration with the US FDA and alliances with international trade organisations have further greased the wheels for Patanjali’s expansion. The company’s steady growth — with revenues rising from Rs500 crore ($72m) and Rs 10,000 crore ($1.44 bn) by 2016 —

has slowed recently. Balkrishna attributes the unexpected lag to demonetisation policies and new tax requirements that cut into profits — just as product demand began to outpace production capabilities. He has corrected the company’s course, with strategic investments to strengthen its supply and distribution infrastructure. Freshly inked agreements with several e-commerce giants, including Amazon and Flipkart, should boost Patanjali’s online product sales. Balkrishna is a Sanskrit scholar who has been pushing the boundaries of alternative medicine, while combining a scientific approach with pragmatic planning — an enlightened entrepreneur.

Patanjali aims to “nurture and develop the science that is present in our tradition, and spread it to the benefit of the masses”, says Balkrishna. “We want to use this wealth to serve others and not ourselves.” 42 | Capital Finance International

Summer 2019 Issue

> ANTONELLA SANTUCCIONE CHADHA CO-FOUNDER & CEO OF WBP Gender Specifics of Brain Function: a Path to Improved Health Balance In terms of structure, female and male brains differ only marginally. But new studies on brain function — and pathology — are challenging the medical community to take a closer look at the gender specifics. Switzerland-based doctor Antonella Santuccione Chadha, along with three colleagues, co-founded the Women’s Brain Project (WBP) with a mission to drive scientific research in mental health. Since its launch in 2016, the WBP has led a campaign of awareness and collaboration, contributing to the growing body of research and advocating for positive change across all levels of patient care. “Several brain and mental diseases disproportionally affect women,” said Santuccione Chadha, citing research from the World Health Organisation and the latest epidemiological studies. “This is the case for Alzheimer’s disease, depression, anxiety, anti-NMDA receptors encephalitis, migraine, multiple sclerosis, and many more.” Her passion project is Alzheimer’s, a puzzle she’s determined to crack. The disease affects nearly 50 million people worldwide, two-thirds of whom are women. The medical community has many theories on the reasons behind the prevalence, but the topic requires further study. “Most likely, both biological and social factors contribute to this phenomenon,” Santuccione Chadha said in an interview with the European Academy of Neurology. “The WBP is engaging with the entire ecosystem — scientists, policy makers, drug developers, regulators, funding agencies, health care professionals and, more importantly, patients — so that these differences are studied and understood. While a global approach is fundamental in neuroscience, WBP believes that sex and gender differences might hold the key for several disease mechanisms — and therefore, potential treatments.” Santuccione Chadha and her fellow WBP co-founders — chief scientific officer Maria Teresa Ferretti, president Annemarie Schumacher Dimech, and chemist and public affairs leader Gautam Maitra — are leading the discussion, and the charge, to better understand gender differences in brain disease and mental disorders. Funding discrepancies contribute to the challenge, with pence on the pound spent on dementia research compared to cancer. According to an Oxford University study, for every £10 spent caring for those with dementia, only 8p has been spent on researching new treatments — whereas £1.08 goes to cancer. Compounding the situation, the few clinical trials that find funding often lack accurate or balanced gender representation. Whether the

trials call for human volunteers or lab rats, the overwhelming tendency has been to rely on male-only test groups. The Women’s Brain Project aims to rectify the imbalance through a social awareness campaign and strategic regulatory pressure. Santuccione Chadha believes the campaign has the power “to positively impact the society on a large scale”. “The lesson learned was derived from the cardiovascular field, where a massive preventive campaign during the last decades, mainly targeted to the male population, highly reduced the number of cardiovascular events,” she explained. Precision medicine is another avenue for improvement the WBP is targeting. Santuccione Chadha recommends that the next generation of neurologists carefully consider the sex and gender differences in brain and mental disease when conducting scientific research and providing patient care. Experience has shown that neither medicine nor medical care is a onesize-fits-all solution. “We should put the patient at the centre, rather than the disease,” she said. “It is time to do precision medicine also in neurology and invest resources in identifying patients’ subgroups with specific needs — such as

women at different pathophysiological states of their life.” At a TEDx Talk last year on gender differences in brain disease, Santuccione Chadha opened the session with some observations on Sophia — the first social humanoid robot to ever be granted citizenship or bestowed a United Nations title. The robot “understands” that it technically has no gender, but identifies as being feminine and doesn’t mind being perceived as a woman. Santuccione Chadha questions the wisdom of Sophia’s stance, given the health statistics. This year Santuccione Chadha invited Sophia to the second annual International Forum of the Women’s Brain Project to discuss topics ranging from artificial intelligence and machine learning to the evolution of robotics. Decades of experience in the medical field have made Santuccione Chadha a global expert of clinical pathology, neuroscience, and psychiatric disorder — now she hopes to leverage the power of AI to reduce gender bias and deliver better, more personalised solutions. “Our main objective is to improve the way science is designed, and to optimise its final outcome (drugs, AI-based solutions, social care, policy) to benefit the end-consumers: the patients.”

"Our main objective is to improve the way science is designed, and to optimise its final outcome to benefit the end-consumers: the patients." | Capital Finance International


> AMEET NATHWANI CHIEF MEDICAL OFFICER, EXECUTIVE VP MEDICAL, AND CHIEF DIGITAL OFFICER AT SANOFI Big Pharma, Big Changes to Traditional Ways of Thinking Big Pharma might not be the obvious choice for tech talent looking for a new home or project — but Ameet Nathwani is hoping to change that. Over his career, UK citizen Nathwani, who is based in Paris, has gained a comprehensive understanding of the healthcare industry. His experience ranges from providing individual patient care and pharmaceutical research to managing global health initiatives. He rose through the ranks at Novartis, one of the world’s largest pharmaceutical companies, and was a driving force behind the company’s digital health strategies. In 2016, Nathwani was appointed as the chief medical officer and executive vicepresident of medical at Sanofi, the global life-sciences company pushing innovation for improved healthcare solutions. In addition to his other roles and responsibilities, Nathwani was recently appointed Sanofi’s chief digital officer. In the latter role, Nathwani networks with promising tech companies — large and small — to pose the question: “What would you do differently to address our problems?” He’s reframed the company’s challenges as an open-call for collaborative partnerships. Nathwani makes the pitch at tech conferences such as the CES international consumer electronics show in Las Vegas, the annual VivaTech in Paris, StartUp Health in San Francisco, and Stanford University’s LIGHT Forum (Leaders in Global Healthcare and Technology). He says the conferences are one of the most uplifting and energising aspects of his new role, presenting him with an ideal opportunity to immerse himself in the health-tech “ecosystem of innovation”. Nathwani is taking the company from analogue past to digital future, and conference participation is a crucial tactic for the recruitment of top tech talent. “It’s very hard to attract entrepreneurial, techie individuals and data people into big pharma,” Nathwani said in an interview at StartUp Health last year, “because nobody wants to work for an analogue-based company.” Sanofi employs more than 100,000 people, providing healthcare solutions in 170 countries. The company has put together a 20-strong team, with Nathwani at the helm, to usher-in the digital health era. Nathwani believes data will be key factor in the transformation of the company’s organisational structure — and the industry as a whole. “I think that healthcare is changing very rapidly,” he said, citing the increased

accessibility of genomics, proteomics, and transcriptomics. “The data are getting cheaper, and in the healthcare environment, data are the new healthcare currency.” Nathwani hopes to see patients own their personal health data — and reap the benefits. He envisions a world where patients armed with health data from wearables can share them with their doctors or commoditise them through voluntary participation in scientific research or clinical trials. Privacy concerns present a possible challenge, but blockchain technology could be used to protect users’ personal information. The shift has already begun, he says, citing more than 40 “virtual hospitals” in the US and 150 “cloud hospitals” in China. “Our problem is that our industry hasn’t necessarily rapidly adapted to it, because there are lots of regulatory constraints, people are worried about privacy, and the regulations. But I think all of that’s changing.”

As regulators scramble to play catch-up to consumer demand for health-tech, Nathwani challenges the industry to push for digital healthcare as the new standard. The industry’s lingering attachment to the analogue system, particularly in expensive and extensive clinical trials, baffles him. Nathwani says it takes about $1.6bn, and around eight years, to develop a drug — and it’s rare that the finished product will ever pay-back that investment in full. Traditional clinical trials also require that the test subjects make numerous physical visits to the clinical facility. Nathwani proposes a complete and fundamental shift, where AI and telehealth can slash the cost, time and effort required to research and develop new treatments. “I think the more the patient gets empowered and demands a different level of care, a level of individualisation, and a participation in the innovation, that will force industry anyway, to change.”

"I think that healthcare is changing very rapidly." 44 | Capital Finance International

Summer 2019 Issue

> IDA TIN ENTREPRENEUR, AUTHOR & CEO OF CLUE Ida, Data and Women’s Health: It’s Win-Win with the Clue app From investment opportunities to the pursuit and provision of venture capital, the purse strings of financial dealings are very often controlled by men. Very often, but — as Ida Tin has proved — not always. Convincing male-dominated boardrooms of the disruptive potential of period-tracking or pelvis-strengthening apps was a struggle back in 2013, when Tin sought support for her start-up, Clue. She founded the company to address the unmet health and wellness needs of women. Her app now helps more than 11 million women in 190 countries to better understand their bodies, and manage their reproductive health. In honour of International Women’s Day, Tin published an op-ed in The Guardian in which she reflected on the UN’s theme for this year: “Think equal, build smart, innovate for change.” For Tin, that means leveraging technology to advance gender equality. “We live in a world where I can be guided across the planet with just a few taps on the phone in my pocket,” she marvels, “and yet we still struggle to understand what is going on with our bodies”. The data collected and analysed by Clue helps women make informed family planning decisions, affording them greater educational opportunities and financial freedom. “For too long, technology has sorely lacked women’s voices,” she writes. “But a powerful technological change is happening, led by big data and of all that it is capable. With more data comes more insight, and with more knowledge comes more space to act.” Clue has collected a dizzying amount of data over a short period, and Tin is dedicated to ensuring that the information is used for the common good. There market is crowded with “free” health-tracking apps that commoditise the most personal and private aspects of a person’s life. Tin finds that invasive. She urges people to read the small print before giving apps access to their lives. In clear terms and simple language, Clue promises to safeguard users’ sensitive personal data. Quick corporate profits from shady third-party agreements don’t tempt Tin, and Clue has been partnered with carefully vetted educational institutions to use the data for academic research. In mutually beneficial, demonetised partnerships, Clue provides universities such as Oxford, Stanford and Columbia with anonymous data to deliver benefits for society. “We have done it very cautiously because we want to make sure that when we share anonymised parts of our data set, it is truly to the

benefit of users,” she said in an interview with Forbes. “Fundamentally, we want to do things that users consent with, and that they get value out of.” She knows at first-hand the challenge of trying to get everything exactly right. “We have to try to restore faith that there can be good technology companies working with data — intimate private data — for the benefit of the users and not to make billions,” she says. “It can be done.” Clue has grown rapidly since its inception. The Berlin-based company secured $30m in funding, which has given it the freedom to explore different business models — without being too hard-pressed to turn a profit.

Tin says Clue’s aim is “not necessarily (to) maximise profits”, because “we are in a long game here. “And for us, it’s crucial that we find ways to make money that feels super-aligned with our vision and our values.” Tin has laid a strong foundation, a business which has attracted millions of users. They can choose to download the free app — without an account, and with data stored only on the device, not on the cloud —or pay a monthly fee of a $1 for deeper analysis. That foundation could be very handy in a market that is expected to boom, with some claiming it has the potential to reach $50bn a year by 2025.

"For too long, technology has sorely lacked women’s voices. But a powerful technological change is happening, led by big data and of all that it is capable. With more data comes more insight, and with more knowledge comes more space to act." | Capital Finance International


> HUZAIFA KHORAKIWALA FOUNDER, TRUSTEE AND CEO OF THE WOCKHARDT FOUNDATION Joy to the World — Founding Father of Indian Company with Mission for Health “When you spread joy, it returns to you multiplied,” says Huzaifa Khorakiwala, more commonly known as “Sir Dr Huz”. Wise words from the good doctor, who has wasted no time in putting his own principles to practice. Khorakiwala serves as the Executive Director of Wockhardt Limited, the global pharmaceutical and biotechnology organisation based in India. He founded the Wockhardt Foundation, a national, not-for-profit organisation, to act as the company’s CSR arm in 2008. As the Wockhardt Foundation Trustee and CEO, Khorakiwala runs the organisation with the simple philosophy "where every smile counts". The foundation is more than a simple nonprofit — it’s a movement for human values, social awareness, and social development. The medical and social initiatives launched by the Wockhardt Foundation help India’s disadvantaged communities, and have touched nearly 300 million lives. "Wockhardt Foundation operates its social programmes based on the 3 B's — Big, Best, and Bold," says Khorakiwala. The Big ensures scale, the Best ensures quality, and the Bold ensures need. He sees healthcare as one of three national building blocks to enhance quality of life; education and hygiene complete the list. The poorest communities suffer from lack of basic healthcare services, but the Wockhardt Foundation seeks to break any correlation between wealth and health. Khorakiwala realised that communities in rural India were suffering from a shortage of medical professionals: 75 percent of medical graduates opt to live in urban areas — serving only a third of the country’s population. And in urban areas, large segments of the population, from the slums to the shanties, lack safe sanitation. “Basic healthcare treatment is a right of every individual,” Khorakiwala insists. “I am glad that our initiatives are providing healthcare services to the unprivileged and rural areas, sufficing basic healthcare needs.” One of the initiatives with real movement is the Wockhardt Foundation’s Mobile 1000 programme, a fleet of over 200 vans that canvas the hard-to-reach rural interior of India to provide basic healthcare such as vaccinations, screenings, and the distribution of free medicines. Khorakiwala took a four-pillar approach to implementing the programme — hardware, software, track and trace, and community. Hardware encompasses all the physically tangible objects in the programme. Fully equipped mobile health vans have a comprehensive suite of firstresponder necessities — equipment, medicines,

and consumables. GPS tracking systems are another vital part of installed hardware. Software represents the programme’s manpower, with detailed steps for personnel selection, development, and accountability. Track and trace refers to the programme’s revolutionary microfleet management system, which pairs scientific route planning and real-time locations to monitor and implement the mobile healthcare service. With a mission to “win the hearts” of India’s rural community, the last pillar represents “professional healthcare delivery through sensitivity and love”. Since its launch, more than 23 million patients have been treated through the Mobile 1000 programme. The foundation has applied the same ambition to India’s education system, implementing a highly successful e-learning programme in over 600 schools to date. It has transformed dusty schoolrooms into interactive audio-visual educational centres. The Wockhardt Foundation provides the equipment and teachertraining, monitors the project and maintains quality. One of the first schools in the programme had a pass rate of less than half when it joined in 2012. After the first year in the e-learning

programme, that rate jumped to 80 percent; within three years it had reached 100 percent. An estimated 2.4 million Indian children die before the age of five each year due to improper sanitation. The foundation has launched an initiative to combat the problem, constructing toilet facilities and contributing nearly 5,000 safe sanitation systems to disadvantaged communities. The second phase of the programme focuses on eco-friendly facilities. Nearly 500 bio-toilets have already been installed — systems that require little space and no maintenance, using anaerobic bacteria to break down solid waste and convert it into energy. The foundation has a host of other initiatives, ranging from toy libraries to free heart surgery for children with congenital illness. All of this aims to fulfil the same belief; social and economic prosperity starts with healthy communities. Khorakiwala has launched the $19m Health Passion Fund to invest in Indian health-tech start-ups. He is also the founder of the World Peacekeepers Movement, a global grassroots organisation to promote the intellectual depth, emotional appeal, and practical realism of world peace.

"Since its launch, more than 23 million patients have been treated through the Mobile 1000 programme." 46 | Capital Finance International

Summer 2019 Issue

Successful traders don't follow the pack, they time their trades perfectly and possess strong trading psychology. Do you have what it takes?

Risk Warning: Trading CFDs involves significant risk of loss. FxPro UK Limited is authorised and regulated by the Financial Conduct Authority (registration no. 509956). FxPro Financial Services Limited is authorised and regulated by the Cyprus Securities and Exchange Commission (licence no. 078/07) and authorised by the Financial Services Board (â&#x20AC;&#x2DC;FSBâ&#x20AC;&#x2122;) (authorisation no. 45052) | Capital Finance International


> Europe

Less Room for Vroom: Vehicle Companies Are Feeling the Pinch in Modern Europe Car manufacture on the continent sometimes seems headed for a dead-end.

48 | Capital Finance International

Summer 2019 Issue | Capital Finance International



emember the good old days when the biggest challenges the European car industry faced were the oil crisis, the rise of Japanese carmakers, and disgruntled unions? Today, the car industry is fighting for its very survival as the mobility sector is transformed by new technologies. One can forgive European carmakers for being a bit distracted by shorter-term concerns like the threat of US tariffs, slumping Chinese demand, and stricter emission standards. Europe and its car industry are already dealing with US steel and aluminium tariffs imposed in 2018. In May 2019, the US Department of Commerce announced that foreign cars and car parts were a threat to US national security. Tariffs of up to 25 percent could be imposed, with a decision to be made within 180 days of the announcement. Negotiations behind closed doors must be frantic. EU governments are sitting down to agree on a unified, post-European elections approach. German car executives have already been to the US to try to reason with President Donald Trump. An escalating trade war would be disastrous not just because of the direct impact on demand, but also because the European car industry is a global supply chain. Cars and parts are made around the world and assembled in various countries. Tariffs will drive up costs, and may cause carmakers to relocate their production centres. Brexit is a similar problem but on a smaller scale — and with less certainty. Already several carmakers have closed or reduced production in Britain. Honda is closing its Swindon plant, Nissan is moving some future production back to Japan, and even Dyson has moved its electric car subsidiary to Singapore. European car makers are also reeling from a slump in car sales in China, recording 11 months of de-creasing sales by this May. Many carmakers are desperate for an improvement in the second half of the year, but there is little optimism for a quick turnaround. China became the biggest car market in 2010, and in 2017 had 35 percent of the passenger car market; the EU was the nextbiggest at 21 percent, with the US following at nine percent. The slump is a major cause for concern. To take advantage of the growing market and to meet Chinese government requirements, many Europe-an carmakers have set-up production in China, mostly with joint ventures. Volkswagen produces close to 40 percent of its total production in China, Peugeot (PSA) close to 20 percent. European carmakers have bet big on China — and now they are facing the costly prospect of stricter emission regulations as well. In the wake 50

"Another big technological disruptor to European carmakers is electrification. Electric cars are not new, but recent improvements in batteries, drivetrains and public charging infrastructure have started to make electric cars a viable alternative. China is the leader here, with 400 electric car options on the market; in Europe there are six." of the 2015 “Dieselgate” scandal, European policymakers are determined to cut emissions from motor vehicles. They are proposing a 15 percent cut in average CO2 emissions for cars produced in Europe by 2025, and 35 percent by 2030. Many cities have announced future bans and restrictions on diesel vehicles, including Paris, Hamburg, Berlin, and London. This is forcing a costly transition on European carmakers — but in forcing them from diesel to electric, it may be a strategic blessing in disguise. All these pressing concerns represent serious challenges, but European carmakers must also look ahead to other existential challenges. By 2030, 30 percent of a car’s value will be in its software, but Europe is lacking the relevant expertise. The biggest software advances are being made in Autonomous Vehicles (AV), followed by increased connectivity. Self-driving cars will communicate with others to manage traffic, while passengers benefit from a range of new services and entertainment. High-end cars already have around four times more lines of code than a F-35 fighter jet — twice that of the CERN Large Hadron Collider. The leaders in AV are US tech firms, notably Google and Apple, as well as Tesla and the Chinese firm Baidu. European carmakers are behind the pack, but attempting to catch-up through acquisitions and strategic alliances. Ford and Volkswagen have made an agreement to share AV technology; Fiat-Chrysler have aligned themselves to Google; Audi, BMW and Daimler (Mercedes-Benz) have bought a digital mapping company. Daimler has also been working with Uber; BMW with Intel and Israeli firm Mobileye, and Renault-Nissan has partnered with Microsoft. Technology is changing how cars are used. Ridesharing will challenge the concept of the private car — and Europe is trailing here also. In 2017 it was estimated that 338 million people used ridesharing ser-vices like Uber, Lyft and China’s Didi Chuxin. That growth could become | Capital Finance International

exponential when companies introduce AVs dedicated to ridesharing. By 2030 it is estimated that one in 10 cars will be shared. Euro-pean carmakers are scrambling to join forces with former competitors and ridesharing platforms to make up for lost ground: BMW and Daimler have merged their ride-sharing divisions, and Volvo is working with Uber. Another big technological disruptor to European carmakers is electrification. Electric cars are not new, but recent improvements in batteries, drivetrains and public charging infrastructure have started to make electric cars a viable alternative. China is the leader here, with 400 electric car options on the market; in Europe there are six. The biggest electric carmaker in the world is China’s BYD. China, Japan, and South Korea are leaders in battery production. Tesla has a Gigafactory in Nevada, and one under construction near Shanghai. Europe is currently at the mercy of Asian suppliers. Volkswagen and BMW have announced plans to produce their own batteries, in co-operation with Goldman Sachs, Ikea, and a small Swedish battery pro-ducer Northvolt — but the first examples will not be ready until 2022. The transition to electric cars will also have an impact on the workforce. Electric cars are less complicat-ed, requiring fewer workers. A typical electric engine has just 200 components; a diesel engine has 1400. By 2030, as a result, it is estimated that 300,000 manufacturing jobs will be lost in Europe. More will be lost indirectly. The industry currently employs 13.3 million people, 3.4 million of them in manufacturing. European carmakers are feeling the pressure. The CEO of Volkswagen, Herbert Diess, recently said that the European car industry could mirror the demise of that in Detroit. That seems an extreme scenario, as European carmakers are now making swift, bold decisions. The industry has a long history, and is de-termined to have a bright future. i

Summer 2019 Issue

Deutsche Oppenheim Family Office AG:

Three Pillars that Ensure Solid Support at Leading Family Office Deutsche Oppenheim Family Office AG is one of the leading Multi Family Offices in the German market.


ith roughly 80 experienced and qualified experts it offers comprehensive services around the organisation and management of complex private wealth situations. Created in 2013 through a merger of Wilhelm von Finck AG, Oppenheim Vermögenstreuhand and Deutsche Family Office GmbH, Deutsche Oppenheim builds on more than 30 years of experience in the family office business. Deutsche Oppenheim is 100% owned by Deutsche Bank, forms part of its Wealth Management business and today has offices in Grasbrunn near Munich, Frankfurt, Cologne and Hamburg. Deutsche Oppenheim works with wealthy families, single family offices, foundations and smaller institutional clients. It is a multi-family office with an integrated portfolio management function, which gives all client advisors and relationship managers first hand access to capital markets expertise while at the same time guaranteeing independent and neutral advice regarding investment decisions and the selection of suitable asset managers. The offering of Deutsche Oppenheim consists of three pillars: Wealth Strategy and Structuring; Capital Markets Solutions; and Real Estate and other Alternative Assets. Basis for this comprehensive offering is a state of the art reporting and controlling proposition which provides transparency across the entire wealth of a family including all asset classes, be it in the liquid as well as the illiquid space. The Wealth Strategy and Structuring proposition consists of different components: strategic asset allocation advice, succession planning and the execution of the last will, asset-protection advice, the selection of platforms, advice around the creation and the set-up of foundations as well as office services. With regards to strategic asset allocation, we develop the investment strategy in close cooperation with our clients, determining the ideal risk-return profile while also taking into consideration the family's liquidity needs, resulting in a target allocation of the wealth across all asset classes, such as equities, fixed income, real estate, private equity, hedge funds, infrastructure, gold or cash. Our succession planning services develop a framework for wealth transfer to the next generations. | Capital Finance International

Asset protection comprises of different risk management tools to ensure that assets are safely organized to withstand emergency situations, fraud or other attempts from the outside to damage family wealth. We select the ideal platform as a vehicle for the family assets considering the family’s specific situation, determine the preferred asset class mix or the best suited governance structure, and provide independent advice and a neutral process for the selection of the best service offer. Some families consider the creation of a foundation, for example in cases when there are no descendants or when the family has identified a charitable cause to pursue. Deutsche Oppenheim supports such efforts by providing advice about the foundation’s creation and organisational setup as well as by supporting the ongoing activities of such an undertaking. If a family is looking for administrative support by delegating ongoing paperwork, Deutsche Oppenheim provides office services. The second pillar of Deutsche Oppenheim´s proposition, Capital Markets Solutions, consists of an in-house portfolio management as well as three F.O.S. funds. Mandates are offered in a highly individualised composition, taking into consideration the specific expectations and investment ideas of a family. For over 10 years, Deutsche Oppenheim manages a large fraction of their client accounts based on ESG criteria and, with the ‘F.O.S. Rendite und Nachhaltigkeit’ fund, offers one of the leading ESG based public vehicles for foundations and similar investors. Recently the asset management proposition was extended to include an ETF based portfolio, which is increasingly attracting clients who seek an alternative to the traditional actively managed investment strategies. As a family office, Deutsche Oppenheim provides neutral advice regarding the selection of the best asset managers for the highly individual investment strategy of each family. Manager selection forms an integral part of its offering, whereby the most suited asset managers are selected employing a well-structured and disciplined 'beauty contest'. The ongoing supervision of the selected asset managers is ensured by creating an adequate governance structure and verifying that investment guidelines are respected. 51

The third pillar, Real Estate and other Alternative Assets, complements the other two pillars and allows Deutsche Oppenheim to provide a truly comprehensive offering across all relevant asset classes. Given the low interest rate environment, illiquid asset classes have gained more importance in the asset allocation of wealthy families in recent years. By far the most important asset class for wealthy German families is German direct real estate. Often, a family prefers to own a single building on its own rather than sharing its ownership with others through fund structures. For this reason Deutsche Oppenheim has its own team of real estate experts covering the German market. For investment opportunities outside of Germany, Deutsche Oppenheim works with selected partners with specific expertise. For all other illiquid alternative asset classes Deutsche Oppenheim works with a network of specialised partners who can provide interesting investment opportunities for its client base. Areas of priority include private equity (through direct investments or fund structure), venture capital, infrastructure and impact investments - the latter growing in importance, particularly with the next generation of investors. Each family is different and therefore has very specific needs, which are best addressed by a tailor-made combination of individualised services. Some families have their own single family office structure providing services inhouse. In such situations, we can complement the capabilities of the single family office through the above mentioned services. Wealthy families expect to be offered solutions at a very high quality standard. Our ambition for excellence drives us to offer the best solutions available in the market. i

Head of Investment Consulting & Risk-Management: Jakob von Ganske, Ph.D.

Jakob von Ganske, Ph.D.:

Taking Strategic Steps — and Keeping a Close Eye on Risks Jakob is Head of Investment Consulting and Risk Management, and a member of the Extended Management Board at Deutsche Oppenheim Family Office AG.


e has been working in the area of Strategic Asset Allocation and Risk Management as well as Manager Selection and Umbrella Funds Management for more than ten years and heads a team of four Quants with statistical and economic backgrounds. 52

He has extensive experience in consulting institutional clients and foundations as well as high net worth individuals at Deutsche Oppenheim Family Office with, by now, several hundred individual consulting projects of varying complexity and wealth concerned. Jakob holds a PhD. in Finance from EDHEC | Capital Finance International

Risk Institute, where he conducted research in the field of regime switching and big data algorithms. “My life’s passion is financial markets, I work in financial markets all day long and when I come home, I spend most of my free time reading about market structures, economic history or econometrics,” he says. As such, his work in strategic asset allocation and fund of fund management is largely based on quantitative techniques and rooted in academic research. “The biggest part of investing is about how to deal with uncertainty. Fortunately, there have been a lot of very smart people over the last five decades who have set up lots of best practice principles on how to deal with not knowing almost anything about the future.” PassivePlus, as he calls his investment approach, combines academic best practice with a decade of practical expertise and it is all about risk and uncertainty management. Before any investments are made, every client has to undergo an extensive decision making process, during which his required return and his risk tolerance are contrasted in order to find the

Summer 2019 Issue

CEO: Thomas Rüschen, Ph.D.

"At the end, the PassivePlus proposition is to produce a portfolio which is as well diversified as possible, taking into account economic and financial risks as well as manager and style risks — while at the same time producing a small but consistent Alpha." strategic asset allocation that fits his preferences the very best. This includes liquid assets like stocks and bonds as well as illiquid assets such as real estate, private equity or venture capital, the empirical stylized facts of which are modelled with the help of sophisticated statistical models. “This is the step where only the client decides, while our function is to support him by developing quantitative expressions of his investment targets, risk aversion and loss tolerance. Strategic asset allocation is by far the most important step in the investment process, because it will determine more than 90% of the long term performance and the losses incurred if markets fall into some kind of crisis.” Once this strategic asset allocation step is performed, Jakob invests in the allocation

derived using either ETFs and passive funds or active funds. Most of the asset classes are invested using passive investments because in many markets, from an academic perspective, there is no evidence whatsoever, that passive investments can be outperformed. The best example is the US stock market. “There are, however, some few markets where Alpha is possible and managers can be found that have generated persistent value added, such as in emerging or European stock markets. We put a lot of resources and effort in differentiating whether markets provide Alpha potential or not.” Once Jakob and his team have identified markets where positive expected Alpha is realistic, their focus becomes diversification of the risks incurred when investing actively – most of which can be brought down to manager investment styles. | Capital Finance International

“There are many reasons why funds outperform, but only few are replicable. Diversification of managers is key, because it means that we don’t need to be right about all the funds we chose, only about some, which statistically makes a very big difference. Diversification of managers also reduces cluster risks, avoids implicit style bets, and produces an attractive risk-return-profile relative to the strategic benchmark.” At the end, the PassivePlus proposition is to produce a portfolio which is as well diversified as possible, taking into account economic and financial risks as well as manager and style risks, while at the same time producing a small but consistent Alpha. “I believe that one has to invest a giant amount of work and sophistication in order to extract only minimal Alpha – that might not sound easy and fun, but it is realistic.” i 53

> World Federation of Exchanges (WFE):

Importance of Promoting Financial Stability and Growth Through Regulatory Coherence By Nandini Sukumar, CEO, World Federation of Exchanges

One of the strategic priorities of the World Federation of Exchanges (WFE) in 2019 is regulatory coherence. The WFE and its members have witnessed how the implementation of G20 post-crisis regulatory reform has sometimes resulted in an unnecessary fragmentation of financial markets, and liquidity, on a crossjurisdictional basis.


chieving international regulatory coherence is important because financial markets are critical for economic growth and sustainable development. Cross-border regulatory co-ordination and deference to comparable standards improves supervision and reduces systemic risk. Fragmentation, on the other hand, adds costs, slows innovation, impedes competition, and reduces choice and risk diversification for investors. It entails cliff-edge effects in liquidity which could give rise to market dislocations. It may also lessen the resilience of financial markets, by isolating them from a more diverse array of participants which allows for risk diversification. The global frameworks put in place by international standard-setting bodies (ISSBs) should be capable of meeting the needs of different jurisdictions while upholding robust, politically agreed norms. While it is right that jurisdictions manage risks through rules tailored to the specificities of the local financial system, the means of doing this should be consistent with agreed global frameworks. Even so, there is sometimes a lack of coherence in the implementation of internationally agreed policy at national level — including instances of proscribing foreign access because of line-byline comparisons of legislation, rather than an appropriate outcomes-focused approach. It was pleasing to see that market fragmentation formed a key part of the agenda at the G20 meeting of Finance Ministers and Central Bank Governors (Fukuoka, Japan, June 8-9). We believe the G20’s priority to address unwarranted financial market fragmentation is complementary to, and supportive of, post-crisis reforms. As part of our advocacy efforts on this businesscritical topic, we recently published a position 54

"It was pleasing to see that market fragmentation formed a key part of the agenda at the G20 meeting of Finance Ministers and Central Bank Governors in Japan. We believe the G20’s priority to address unwarranted financial market fragmentation is complementary to, and supportive of, post-crisis reforms." paper on cross-border fragmentation arising from unjustified dissonance between jurisdictions’ financial services regimes. In our paper, we called on G20 members to enhance transparency, engagement, and accountability via international standard setting bodies as a means of creating more robust mechanisms to achieve international regulatory coherence. We proposed that the G20 takes the following actions: • Enshrine transparency and due process in an international agreement with a commitment to overcome international regulatory divergence, avoid regulatory competition, and censure politically motivated dissonance; • Create flexible new mechanisms for the escalation and resolution of regulatory dissonance; • Embed international regulatory coherence in the mandates of national authorities; • ISSBs to report on addressing financial market fragmentation; • Enhance dialogue between international standard-setters, national policymakers, stakeholder groups and civil society through a structured framework. | Capital Finance International

The WFE believes that global regulatory coherence can, and should, be improved in substantive and procedural terms. It remains vital to the effectiveness not only of exchanges and clearinghouses, but financial services more generally, and the wider economy that they support. A significant role can, and should, be played by ISSBs, which already provide an outstanding forum for consensus on issues of customer protection, market integrity and systemic stability, all of which provide the bedrock for economic growth. These bodies are well placed to address emerging trends, such as digital assets, as well as issues arising from traditional markets. i ABOUT THE WORLD FEDERATION OF EXCHANGES (WFE) Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents over 250 market infrastructure providers, including standalone CCPs that are not part of exchange groups. Of our members, 37% are in Asia-Pacific, 43% in EMEA and 20% in the Americas. WFE exchanges are home to nearly 48,000 listed companies, and the market capitalisation of these entities is over $70.2 trillion; around $95 trillion (EOB) in trading annually passes through the infrastructures WFE members safeguard (at end 2018). The WFE is the definitive source for exchangetraded statistics, and publishes over 350 market data indicators. Its free statistics database stretches back more than 40 years, and provides information and insight into developments on global exchanges. The WFE works with standardsetters, policy makers, regulators and government organisations around the world to support and promote the development of fair, transparent, stable and efficient markets. The WFE shares regulatory authorities’ goals of ensuring the

Summer 2019 Issue

safety and soundness of the global financial system. With extensive experience of developing and enforcing high standards of conduct, the WFE and its members support an orderly, secure, fair and transparent environment for investors; for companies that raise capital; and for all who deal with financial risk. We seek outcomes that maximise the common good, consumer confidence and economic growth. And we engage with policy makers and regulators in an open, collaborative way, reflecting the central, public role that exchanges and CCPs play in a globally integrated financial system. ABOUT THE AUTHOR Nandini Sukumar is the Chief Executive Officer of the World Federation of Exchanges (WFE), the global association for exchanges and CCPs. The WFE represents more than 250 exchanges and clearing houses globally, educating stakeholders on the vital role played by market infrastructures in the real economy, and as a standard setter, finding the consensus on issues among the global membership. Sukumar is Vice Chair of IOSCOâ&#x20AC;&#x2122;s Affiliate Members Consultative Committee and Chair of the AMCCâ&#x20AC;&#x2122;s DLT Workstream. Sukumar has been CEO of the WFE since March 2015. Prior to this, she served as Acting Chief Executive Officer from November 2014, having been recruited by the WFE Board as Chief Administrative Officer in May 2014 to run the Federation on a daily basis and work with its global network of members as a proponent of the benefits of fair, orderly, public markets. Sukumar came to the WFE after a 14-year career at Bloomberg where she created, grew and ran their coverage of market structure, exchanges and UK regulation.

Author: Nandini Sukumar


> 12 Hay Hill and Club-Working:

Mayfair Members’ Club Steps Into the Future 12 Hay Hill, conceived as a private members’ club for business, is set in an imposing building at the heart of the most coveted postcode in Britain: W1, Mayfair.


t was founded four years ago and has firmly established itself as a modern members’ club that caters to the demands of the 21st century. At 12 Hay Hill, members can base their business at an exclusive club with serviced offices and the finest facilities. This is a place where professional relationships and friendships can be nurtured in the traditional London club style, a home-away-from-home



for businesses without front-ofhouse or entertainment facilities. It caters to all needs. It is the first of its kind in London to provide “c-suite” businesspeople with a carefully curated, luxury environment to conduct their affairs or relax in premium leisure space with five-star service. 12 Hay Hill has coined the term “club-working”, and prides itself on pioneering a new way to do business in style.

Mayfair: 12 Hay Hill

Summer 2019 Issue

While many other London clubs shun business activities, 12 Hay Hill’s director Stephanos Issaias feels that club-working offers the exclusivity, leisure space and social networking of the Mayfair clubs of old. His club provides an unashamedly work-friendly environment: laptops and phones are welcome here. Club-working recognises that office life has changed beyond all recognition over the past couple of decades. Connected technology and the post-industrial economy means businesspeople can work anywhere, at any time. Many are on-call 24/7. That has brought benefits and challenges – not least when it comes to maintaining a healthy work-life balance. With the definition between the two increasingly indistinct, there’s even a (rather ugly) word for this blurring: ‘weisure’. The club’s spaces are designed to allow its members to move seamlessly between their work and leisure time, or to blend the two. The club’s restaurant offers fine dining, while a basement bar provides the perfect place to unwind with friends and colleagues. It curates an everchanging backdrop of artwork, much of which is for sale. Nine meeting rooms offer private space for board meetings, confidential conversations, or private dining. Each offers a distinctive style, allowing members to fine-tune the environment for any client meeting. The club has been described as a place where one can “work, meet, dine, drink, relax and impress”. MEMBERSHIP Membership comprises a diverse community of industry leaders, influencers and innovators. From finance to fashion, the club is a hub where ideas are born and nurtured, deals are signed and business flourishes. Members can find focus in their study, conduct meetings in one of the business lounges, and enjoy a cocktail at the club’s bar to finish the day. Serviced private offices are accessible 24 hours a day, seven days a week. Facilities include highspeed internet access, a fully staffed reception, 57

audio-visual and conference call facilities, optional call answering, access to a range of boardrooms and meeting rooms, cleaning and postal services. 12 Hay Hill’s offices are designed to cater all members’ needs, allowing them to focus on what really matters: their businesses. The club offer a variety of membership options catering to the needs of members, whether they live abroad or next door. 58

EVENTS Events — featuring some of Britain’s foremost thought-leaders — range from talks by captains of industry and politicians to insights from the heads of leading brands and lively discussion about cultural developments. The club’s space lends itself to an array of events, whether one is interested in business briefings and panel discussions or looking to host a private dinner or celebration. | Capital Finance International

12 Hay Hill hosted its second Davos event, in partnership with The Financial Times, in January. Top journalists covering the World Economic Forum’s annual meeting were present, and topics covered include geopolitics, global economics and markets, finance and business. This is one of the many events with high profile guests, but members can also enjoy regular supper clubs, tequila masterclasses, monthly members drinks and even games’ nights. i For more information, visit

Summer 2019 Issue

> A Baptism of Fire:

Turning £9m Losses Into £6m Profits With Dedication and Teamwork Co-op Legal Services managing director Caoilionn Hurley joined the firm in 2014 and took on her new leading role in December last year — the latest development in her diverse career history.


aving studied law, followed by a postgraduate degree in business, and then going on to qualify as an accountant, Hurley was selected for roles as chief financial, chief marketing and chief operating officer — as well as leading technology and people teams. Her career started with Irish brewing company Guinness; she then moved to computer giant IBM, where she developed an abiding interest in technology. Further career steps included positions with the ExCel Exhibition Centre, Thompsons Solicitors, South Square Chambers and Slater and Gordon. Hurley then moved to Co-op Legal Services to take on a role that was “the perfect blend of opportunities” for her: a commercial role in a business with a powerful brand. Her task was to turn the legal business around following annual losses of £9 million in 2013. Hurley led from the front, putting together a highly skilled and capable team of legal and technology experts. Together they reviewed and re-engineered business processes, invested in technology and streamlined service delivery. Their efforts paid off; the Co-op is on-track to deliver a profit of £6 million for 2019. A double coup for the team was the acquisition and integration of Collective Legal Solutions in 2016 and Simplify Probate last year — making Co-op Legal Services the UK’s largest probate provider. Managing Director: Caoilionn Hurley

One of Hurley’s key measures of success for the integration of these businesses was retaining almost all the existing team members. Her ethos is “people first”, and she admits to being obsessive about continuous improvement, technology and re-engineering working methods to meet client needs. “Everyone should be heard, everyone has something new to teach me,” is her view. This mindset, shared by her leadership team, enables the retention and development of

talented individuals and means the business now operates from five UK locations: London, Bristol, Manchester, Sheffield, and StratfordUpon-Avon. “We are a unified and aligned leadership team at Co-op Legal Services,” she says. “Sharing the same values and ambitions as a team makes it very easy to succeed together — we are proud of our track record of success, and we hope to build further on it.” | Capital Finance International

Caoilionn Hurley’s team continues to grow, leading a 600-strong workforce. They remain committed to building opportunities and rewarding careers for their teams, while relentlessly delivering expert, best-in-class client service. The team recognises that Co-op Legal Services is only as good as the people who turn up every day and commit to working together, supporting each other through change, and delivering excellent service. i 59

> Co-op Legal Services:

Say You Want a Revolution? Fairness and Transparency Will Get You There


o-op Legal Servicesâ&#x20AC;&#x2122; history is one of innovation and driving change.

The business was founded in 1844 by 28 Rochdale pioneers, who opened a co-operative food store selling good food at fair prices. The founders believed in championing a better way of doing business. It was the start of 60

a national movement that never lost that drive for improvement. This was social enterprise in action, a chance for people to become equal members in what was to become a global revolution. Roll forward 175 years, and the UKâ&#x20AC;&#x2122;s largest co-operative, the Co-op Group, is a thriving food | Capital Finance International

retailer, funeral services provider, insurer, and an award-winning provider of legal services. Co-op entered the legal services market in 2006, providing personal injury and legal advice services to its members before going on to offer wills, probate, family, and conveyancing services. Co-op Legal Services became the first Alternative

Summer 2019 Issue

Business Structure (ABS) legal services provider in 2012. In recent years the business has sharpened its focus, improving the way it delivers legal services by understanding the changing needs of clients and their unmet needs. The Co-op has been working with business and consumer user-groups to improve existing services and develop new ones. As a result of recent research, Co-op Legal Services has launched innovative services such as online will-writing and digital divorce. It has built an end-to-end software solution to support instruction-taking for estate administration (probate) through to fulfilment and final payment to beneficiaries. Clients value a personal service when they are dealing with a bereavement, the Co-op’s software helps them give that service in an accessible, cost-effective way. “We comb over every step in the probate process again and again looking to simplify and automate for consistency and speed,” says legal services managing director Caoilionn Hurley. “We want to innovate through every step of service delivery to make our services accessible and value-formoney for clients. Service quality and expertise are core to our success.”

"The strategy seems to be working: the organisation is set to make a £6 million profit this year — a long way from losses of £9m in 2013."

The time it takes to process probate and administer the estate is one of the biggest challenges for legal service providers and clients. “Through innovating, our clients are benefitting from faster distribution of estate proceeds,” says Hurley. “We have improved our overall case durations by two months, on average, in the last two years, by taking advantage of the opportunities provided by technology.

“We are growing our client-base, which is fantastic. It makes the effort of completely reengineering our business processes and using new technologies in innovative ways very worthwhile.” The need for speed and accuracy is critical, which is why Co-op Legal Services continues to invest in technology solutions to remove delays. Co-op Legal Services has also built an end-to-end software solution for estate planning. The software runs checks on client profiles and services purchased to highlight any sales at-odds with the profile. This allows the legal team to conduct additional checks and reviews. The software includes links to new training notes or case updates, creating an integrated knowledge base. “We are regulated by the Solicitors Regulation Authority,” says Hurley, “and this is important in maintaining consumer trust in us and the high professional standards we hold ourselves accountable to. But we want to go beyond these standards, delivering a totally transparent service that is exceptional, innovative and cost-effective, built on a solid understanding of client needs.” An increasing number of clients are choosing Coop Legal Services, including business partners such as major banks and financial institutions which are attracted to the Co-op’s technical capabilities and transparent client service. The strategy seems to be working: the organisation is set to make a £6 million profit this year — a long way from losses of £9m in 2013. “We’ve embraced the opportunities that advancing technology brings,” says Hurley. “As a Co-op, innovation is part of our DNA. We’re open to new opportunities — there’s more to come.” i 61

> Dr Manny Pohl:

A Survivor With a Cool Head and a Knack for Long-Term Investment

As a survivor of the 1987 stock market crash and the 2008 Global Financial Crisis, Manny Pohl has learned the importance of courage and staying true to core values.


hen times get tough, the line between facts and feelings becomes blurred; personal conviction based on a core philosophy can help in these turbulent and traumatic moments. “I have found that when the dust settles, and we look back on these events,” Pohl says, “there is quite a thrilling tale — but only for those who stood by their convictions.” At the core of his own values is the belief that the underlying economics of a business drives its long-term returns. In a nutshell, companies that are profitably growing their economic footprint generally represent better investment opportunities than those that aren't. His preference is to invest in fewer companies which are well understood, rather than to take a chance on a large number of companies of which there is only a cursory understanding. As custodians of other people’s money, fund managers owe it to their clients — who have invested alongside them — to find opportunities in the best interests of all stakeholders. “It is better to sleep well than to eat well,” he says. Athelney shareholders can be assured that returns will not be generated by speculation, and are made for the long-term, not for trading. Portfolios should be concentrated, as excessive 62

diversification can be an excuse for poor due diligence. The small-cap space continues to be a prodigious hunting ground for investors seeking attractive long-term returns. Athelney recognises this, with a stated intent of providing shareholders with prospects of long-term capital growth in quality small-cap companies, while maintaining a progressive dividend record. This is no easy task and Manny Pohl has been leading the charge with his team at ECP Asset Management to Redefine Active Investing. While the active-versus-passive debate continues, and the focus of the industry has been on the fees paid rather than on the returns generated, the key issue to be addressed is manager skill. Picking quality investments trumps a broad portfolio and replicating an index. The acid test is longer-term investment performance — and the only way to sustainable growth is careful, considered and committed investment. Active investing requires forensic research. Many factors need to line-up before a decision is made to invest in a business. A sound business strategy that is contextually relevant to the markets is vital, as is a durable business model with a Sustainable Competitive Advantage (SCA). Also important is management with demonstrated competence.

Summer 2019 Issue

MD: Dr Manny Pohl

Potential, not just performance, must be evaluated. It’s important to understand the “narrative” of an investment and the numbers that support it. Investing on the narrative alone ignores reality, and investing in numbers alone ignores potential. The combination of these factors is needed to best capture long-term potential while ensuring a fair price. To make long-term investment decisions with conviction requires deep understanding and a lot of unhurried attention. This means thinking as an owner, and not as a share trader. Time should be devoted to only the best ideas, which then need to be monitored and assessed through collaborative and discursive practices. Investment management is more than just generating performance in excess of a benchmark. That is the core part of a mandate, but other qualitative issues are central to what should be done. One should recognise, for example, that capital allocation is a vehicle through which to drive change. “I have had the opportunity to demand specific standards of corporate governance,” Pohl says, “decide whether specific social and ethical issues are acceptable and, if they are not, to vote with my feet. “For me, the integrity and credibility of any management team is a founding principle to

our investment process. I need to trust that management has the best interests for all stakeholders at heart, and I need to have faith that they will make sound strategic decisions, and have strong experience and capabilities. “As custodians of shareholders’ capital, we have an obligation to ensure that we are doing whatever we can to preserve that capital and grow it over time... Finding trustworthy, values-based management that align with my core values and beliefs will ensure above-average economic portfolio returns.” As a champion for active investment, Dr Manny Pohl believes that it is important for him and others to outline some of the things that are crucial to good active investing.

Athelney Trust is a closed-ended equity mutual fund listed on the London Stock Exchange with investments in small and midsized companies across diversified sectors in the public equity markets of Britain. Dr Manny Pohl, as the Athelney Trust managing director, is responsible for managing the Athelney Trust investment portfolio. He is also Chairman of ECP Asset Management, the investment firm that has ranked among the top four fund managers in Australia over the past decade — often securing top place. i 63


Global Investors Seek Stable Income Returns Over Growth in Capital Value By David Casas Alarcón, CBRE Property Management Accounting Lead

The 2019 edition of the CBRE Global Investors Survey provides insights from client investment plans for this year — globally, and across a wide range of investor types.


here has been a decline in investor risk-appetite this year, leading to a reduction in purchasing and spending plans. The 2019 results of the investors’ intentions survey follow a five-year trend of adopting a more risk-averse position. Most see asset pricing as the biggest obstacle to investment and are concerned about a property market bubble. While 42 percent of investors with a higher risk-appetite also are most concerned about asset pricing, another 32 percent cite “limited asset availability” as their primary concern. The percentage of investors planning to purchase fewer assets rose to 36 percent in 2019 from 12 percent in 2018 — the highest level since the survey began in 2014. Planned selling activity is also at its highest level in five years, with 44 percent of investors planning to sell more. PRICING THE MAIN OBSTACLE Continued strong real estate fundamentals, combined with historically deep and liquid debt and equity capital markets, are encouraging for 2019. Investors are reducing risk and protecting income streams through diversification. Pricing is at, or near, the previous peak for most asset types in prime locations, so investors are seeking yield in secondary markets and alternative asset types. For almost two-thirds of investors, pricing is the main obstacle to acquiring real estate assets. Another 24 percent of investors see limited availability of assets as the most significant obstacle, rising to 37 percent among EMEA investors. Availability of assets is a higher concern for the 33 percent of investors targeting prime product. Given the stock market slump at the end of the 2018 and a slowdown in China’s economic growth, investors’ concern about a potential 64

"For global investors — and particularly those who view a global economic shock as the main threat to property markets — asset-class diversification is a primary driver for investing." global economic shock comes as no surprise. Expectations of faster-than-expected interest rate rises have abated somewhat, even though this still ranks as the second-highest concern. Concerns about global issues, including political instability and economic shocks, have risen over recent years. This trend reflects the conditions in 2016, when local politics were in focus: the US was in the throes of presidential election season and the UK was debating Brexit. Now, investors are focused more on the global economy and the outcome of US trade negotiations. FEWER INVESTORS EXPECT CAPITAL VALUE GROWTH As in 2018, the primary reason for investing in real estate in 2019 is stability of income. Only 12 percent of investors expect capital value growth this year, compared with 37 percent in 2016.

stable income stream and view diversification into property as an alternative asset class. Coreplus or good secondary assets attract investors looking for a higher yield than other asset classes. For the third consecutive year, industrial and logistics (I&L) is the most attractive sector for investment, but the intensity of pursuit is easing. Global yields for I&L assets fell to 4.73 percent in Q4 2018, 30 percent lower than the cyclical high of 6.14 percent in 2007. The sector has seen more yield compression than both office and retail over the same period. Investors probably expect less yield compression in the coming year. It is also possible that the deceleration in global trade growth is weighing on investors’ minds. The surge in online shopping has certainly contributed to investor appetite for I&L assets, especially on top of current GDP growth figures. There also are opportunities of scale with major portfolios that have been assembled by smart aggregators. Investors appreciate the healthy cash-on-cash returns, given the relatively low operating and re-tenanting costs versus other asset classes.

There are some distinct differences in investment strategies between local and regional investors, who are more comfortable with a value-add or opportunistic approach, and globally focused investors, who tend to target prime or core assets.

Investor interest in real estate alternatives remains strong: 52 percent of investors globally are pursuing one or more alternative sectors. In EMEA, student housing is the most popular alternative sector by a substantial margin. This is especially the case for multi-client investment managers. The student housing sector has seen record growth in recent years. CBRE’s recent report on Global Student Housing shows how markets across Europe and Asia are slowly becoming more investable. As the private student housing sector in Europe matures, the sector should attract more capital.

This difference also shows up in investment objectives. Investors pursuing value-add or opportunistic assets are chasing capital gain, while prime or core investors are pursuing a

There is a strong correlation between investors’ home countries and their preferred countries for investment. This “home bias” varies across countries. More than 90 percent of respondents

For global investors — and particularly those who view a global economic shock as the main threat to property markets — asset-class diversification is a primary driver for investing. | Capital Finance International

Summer 2019 Issue

"Investors are reducing risk and protecting income streams through diversification. Elevated pricing levels and limited availability of assets, especially in Europe, are the main concerns." from the US favour their home country, compared with just 17 percent of investors from Hong Kong. Investors from Canada, Hong Kong, the UK and Singapore are much more likely to invest crossborder than investors from the US, Australia, Japan and Germany. The Global Investor Intentions Survey is a clear reflection of current economic uncertainty and the perceived late stage of the real estate cycle. Investors are reducing risk and protecting income streams through diversification. Elevated pricing levels and limited availability of assets, especially in Europe, are the main concerns. However, interest in I&L and alternative asset classes remains strong. The state of the global economy is sharply in focus as investors prepare for slower economic growth in 2019. i ABOUT THE AUTHOR David Casas Alarcón is an economist at the university of Malaga, Spain, with more than 10 years of experience in the real estate and finance industries. In 2012, he took over the role of Outsourcing Analyst for Capgemini Consulting, where he advised the company’s real estate clients on the most efficient solutions for financial process externalisation. Since 2016, Alarcón has been part of the CBRE Corporate Outsourcing Hub in Warsaw, which drives the finance process transformation for property management and other CBRE business lines across Europe, Middle East and Africa (EMEA) region, delivering efficiencies and compliance.

and direct investments that it manages. As of September 30, 2018, the division had US$104.5 billion in assets under management. The Trammell Crow Company subsidiary is the largest commercial real estate developer in the United States, according to Commercial Property Executive's annual ranking. ABOUT CBRE PROPERTY MANAGEMENT With a network across the Americas, Europe, Africa, the Middle East and Asia Pacific (EMEA), CBRE leverages global best practices and realtime data to improve Real Estate operational performance. Their team collaborates across a complete spectrum of integrated services to help investors achieve optimal asset and portfolio management.They strategically position assets in the most diverse markets, through the most challenging market conditions - making significant investments each year in their service platform to deliver cutting-edge solutions. This includes employment of the highest industry standards in all of their processes to ensure regulatory compliance, consistency and service excellence.

ABOUT CBRE CBRE Group, Inc is a commercial real estate services and investment firm. It is the largest company of its kind in the world. It is based in Los Angeles, California and operates more than 450 offices worldwide and serves clients in more than 100 countries. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. The CBRE Global Investors subsidiary sponsors real estate investments via investment funds | Capital Finance International

Author: David Casas Alarcón



12 Hay Hill, Mayfair, London W1J 8NR T: +44 (0) 7952 6000 E: 66 | Capital Finance International

Summer 2019 Issue

B2B GAMING SERVICES: WINNER Best Online Gaming Platform Solution – Europe 2019

> An Exclusive Interview with Gabriel Chaleplis, Founder:

The Leader That Makes Leaders WHAT HELPS TO DIFFERENTIATE YOU FROM THE COMPETITION? Gabriel Chaleplis: Since the beginning of the internet, platform-providers around the globe faced a crucial challenge: Online betting and gaming can be a market of minute margins. In the last 20-plus years, very few companies managed to stay in the business, fewer still managed to maintain leading positions. The majority were spacedout and marginalised along the way.

upon the ends of a subject. It is not technology for technology’s sake. We believe in data for good. HOW ARE YOU PROTECTING VULNERABLE GAMBLERS? GC: The key challenge with vulnerable players is to be able to help them effectively. First you have to be able to identify the incident through systems architecture in our platform. Next, you need to complete your assistance through customer services.

The key learning from this, is that we are in this one technology-intensive market, where the margin is not the objective. The objective is not that more people will lose their money, for companies in the business to increase their profits. We are in this one market that the margin may only be the result of an optimal operational architecture that places people and compliance first.

Our platform ensures locating the incidents early, through a 360-degrees preventive model, employed so that each identified case does not escalate or get out of control. This approach to compliance, responsible gambling and risk-management is a developing systems architecture which originated more than 20 years ago. Then, getting the customer information was passive, and problem gamblers were eliminated from the platform.

This being our philosophy, we never offered a unidimensional solution to our clients. Rather, we focused on excelling an agile and intelligent business model. WHAT ARE THE KEY REASONS FOR THE B2B GAMING SERVICES Founder: Gabriel Chaleplis SUCCESS? GC: Clients need to make important decisions on players. Products will further embrace trends to the genre of fantasy sports. The worlds of unknown factors. No platform can serve future “online” and “offline” will keep coming together needs on past ingredients. In my mind, the in tighter enterprise solutions under the single game of leadership is a sprint and a marathon drive of customer engagement. at the same time. I understand the key reason for our success to be that we research more and “do” less, in the traditional sense of trial-and-error. When clients get our solution, they are confident of a leading and sustainable matrix which triggers player fascination, is commerciallywise and socially-minded, but also empowered to inspire customers by transforming data into intelligence. WHAT TO YOUR MIND WILL BE THE KEY MARKET DEVELOPMENTS OVER THE NEXT THREE YEARS? GC: We live in the age of continuous connection. Hence, the experience offering will continue to be the battleground of our sector which will keep on witnessing exponential growth. We will see more of a personalised experience in real time, the rise of social gaming, as players will be more apt to share experiences with other

INNOVATION IS SAID TO BE THE KEY TO FUTURE SUCCESS; HOW DO YOU ENCOURAGE AN INNOVATIVE CULTURE? GC: The company taps the maximum of the potential in our people, our clients and partners worldwide. We are a powerhouse for effectuating possibilities and carving new business standards. Innovation for us is not just about “doing things differently”. It is about cultivating the valid pathways for development, evangelising for positive change. As a group, we have found it more important to focus on the means, instead of focusing just

"We earn our leadership everyday." | Capital Finance International

This model then progressed to an active paradigm, an equivalent to development of an immune system. Detectors were developed to lessen threat exposure and reciprocate with sustainable loops. Later we evolved into the pro-active architecture, which may best be described as the stage of data robots and multiple shields developed to address responsible gambling on various levels. Currently, the architecture is progressing towards its intelligent future. What this means, practically, is that the system is able to utilise sheer volumes of data history and minimise the human intervention for detecting or addressing non-responsible gambling effectively, as well as minimising security risks to almost zero. IF YOU HAD TO BE AWAY FROM YOUR TEAM AND COULD ONLY LEAVE THEM WITH A PIECE OF GUIDANCE, WHAT WOULD THIS BE? GC: With my team we have progressed from a dream, to a team, to the Dream Team. The one piece of guidance I have often shared with them is to keep on with their profound focus on excellence-in-action. We earn our leadership every day. And it’s all in the platform. i Find out more at: 67

> B2B GAMING SERVICES: WINNER Best Online Gaming Platform Solution Europe 2019

Gabriel Chaleplis Leads the Way Into the Intelligent Future of Betting and Gaming


2B Gaming Services (Malta) Ltd is an industry leading provider of comprehensive platform solutions to sports betting, casino and games in regulated markets.

Its best-of-breed platform, world-class sportsbook, award-winning in-play betting, omni-channel offering fully managed service packages have made the company the partner 68

of choice for top-tier clients for more than two decades. The operation was initiated in 1997 in London by world-leading entrepreneur, Gabriel Chaleplis, who pioneered initiatives fostering the future in the fledgling online betting and gaming sector in Cyprus, Germany, Greece, Italy, Romania, South Africa, Spain, and the UK. | Capital Finance International

Chaleplis, configuring and capping ahead strategic initiatives for ROI intensive solutions, foresaw the demarcation of boundaries between business providers, aggregators and operators. Since 1997, he centred the operation to span of the entire spectrum. The footprint of B2B Gaming Services includes several milestones which have kept the company at the forefront of the market. An agile and

Summer 2019 Issue

"An agile and intelligent operational model makes the company a powerhouse of possibilities, offering modular and scalable solutions for flexible and sustainable growth within different regulatory frameworks and jurisdictions." company anticipates a rise in social gaming, with overlapping online and offline worlds. “It is not the economic offering, not even the service per se that makes the matrix work,” says Chaleplis. “It is the experience offering, the next battleground for our business. The challenge for us is actually to stage these experiences and implement an intelligent future.” The operation was initiated in London, UK in 1997. A year later, the company acquired sports betting and casino license in the UK. By 2005, was the first European operator to be granted AAMS betting license from the Italian Government, operating also in Germany, Romania and Cyprus. In 2006, became a Public Company at AIM, The London Stock Exchange. In 2007, was licensed by the Malta Gaming Authority and in 2008 became the third biggest land-based sports betting operator in Europe with 1800 betting shops. In 2012, was licensed to operate in Greece and by 2015, reached the leading position of the online betting market, having turned the tide of an entirely monopolistic industry until then. Gabriel Chaleplis and B2B GAMING SERVICES have also scooped the most prestigious awards and distinctions in the US, Europe and Greece, earning a leading position among tech giants, thought leaders and decision makers in the land and online betting and gaming sector, sharing wisdom with this fast-track community. Accepting to showcase the habitat of an intelligent future, Gabriel Chaleplis is never ceasing to offer an in-depth perspective which places people and compliance first.

B2B GAMING SERVICES Founder: Gabriel Chaleplis

intelligent operational model makes the company a powerhouse of possibilities, offering modular and scalable solutions for flexible and sustainable growth within different regulatory frameworks and jurisdictions. To Chaleplis, operational compliance is essential when implementing innovation. B2B approaches corporate and social responsibility under a 360-degree preventative and pro-active model

to encourage responsible gambling. Technology has allowed the cultivation of valid pathways for effecting positive change, detecting and addressing irresponsible gambling and minimising security risks. Seamless, round-the-clock service is the new challenge for technology. B2B technologies are getting smarter, achieving breakthroughs in customer protection and experience, as well as ROI potential. The | Capital Finance International

Emboldened by scooping the most prestigious awards and distinctions such as the "National Champion for Malta" title and the "Entrepreneur of the Year Award" at European Business Awards 2015/2016 among 33.000 companies in 32 European countries, "The International Entrepreneur Excellence Distinction" granted to him in Greece (2017) and the unique honor to be among the three global finalists for "Compliance Lifetime Achievement" at the Gambling Compliance Global Regulatory Awards (2018), to mention only a few of Company distinctions, Chaleplis is enhancing the extensive footprint of the Company at the forefront of the market, on "a class of its own", future-ready since 1997. i 69

> Women, Science and Robots:

The Gender (R)evolution Ushers-in Precision Medicine By Shahnaz Radjy and Maria Teresa Ferretti

In Germany, a team developing an AI-based human resource tool thought they had found a way to feed their system data while respecting privacy laws: they used information from newspapers dating back to the 1950s.


ut when the team reported back to the project leader, she pointed out that the biases inherent in such data — in particular with regard to gender — made this approach impractical.

This example was recently cited at an international forum on women’s mental health at the University of Zurich. The event brought together more than 100 scientists, policymakers, doctors, patients, and other stakeholders, and focused on the theme Sex and Gender Differences in Brain and Mental Health: The Gateway to Precision Medicine. The world is full of paradoxes. Women have never enjoyed as many rights, and yet more and more instances of systems being designed by-and-for men — due to unintentional biases — abound. From crash test dummies to police and military equipment, things are designed for an average Caucasian male’s height and weight. Even the safety mechanisms on tractors, where the engine comes to a stop if the weight on the driver’s seat suddenly drops, are often not calibrated to women’s slighter stature. Within brain and mental health, similar challenges can be found. The result is “shallow medicine”, a one-size-fits-all type of approach that no longer fits with our knowledge and technology. Eric Topol, in his book Deep Medicine: How Artificial Intelligence Can Make Healthcare Human Again, puts it thus: “This is where we are today: patients exist in a world of insufficient data, insufficient time, insufficient context, and insufficient presence. Or, as I say, a world of shallow medicine.” In basic neuroscience, female mice tend to be set aside in favour of males for preclinical research — initially because female hormonal cycles may have affected the research results, and then from force of habit. Researchers often do not specify the gender of the animals used in research, making it impossible to know whether the results can be extrapolated to apply to male and female systems. At the next level of research, Phase I and Phase II clinical trials, women tend to be highly under70

For full visual, refer to Nature article “Personalized medicine: Time for one-person trials” by Nicholas J Schork

represented. By Phase III trials, there is no stratification of the patient population by gender. The majority of those suffering from mental health issues are women, and not just Alzheimer’s. They are twice as likely to be affected by depression, migraines, PTSD, multiple sclerosis, anxiety disorder, and some brain tumours.

for the average person, with less consideration for the differences between individuals,” the museum notes.

And that’s not all.

Socioeconomic risk factors have an impact on gender differences in brain and mental health, too. Aside from education being a co-variable for every human disease in history (quote from Roberta Brinton, University of Arizona, at the Swiss forum), women can be exposed to a risk factor more than men, or the same situation can be experienced differently by men or women.

Women’s brains are affected differently by diseases, symptoms, and treatment. Women and men may need different preventative strategies, different biomarkers, and even different treatments. In 2013, the Food and Drug Administration (FDA) in the US had to change the labels on Zolpidem, a sleep-disorder medication, to halve the dosage for women. They were suffering from more severe side-effects — in some cases fatal ones. Prescribing aspirin to women can reduce the risk of stroke, while prescribing the same drug to men will reduce their risk of cardiovascular disease. Enter precision medicine, defined by the US National Library of Medicine as: “an emerging approach for disease treatment and prevention that takes into account individual variability in genes, environment, and lifestyle for each person”. This approach will allow doctors and researchers to predict more accurately which treatment and prevention strategies for a particular disease will work in which groups of people. “It is in contrast to a one-size-fits-all approach, in which disease treatment and prevention strategies are developed | Capital Finance International

Incorporating gender as a variable is a work in progress, at different stages of implementation in different countries.

Just like the AI system described in the opening paragraph, having the right data is a necessary stepping-stone to address gender bias in health and illness. This is why, in 2016, a group of scientists, artists, healthcare professionals, and technologists founded the Women’s Brain Project (WBP), the organisation behind the forum. The WBP is a non-profit that advocates for women’s mental health, and is pushing for differential research based on gender, a first step towards precision and personalised medicine. Having precision medicine will eventually lead to more efficient drug discovery and early diagnosis, saving healthcare systems money, so the arguments are financial, too.

Summer 2019 Issue

ABOUT THE AUTHORS // FORUM-WBP.COM Shahnaz Radjy is a member of the Women’s Brain Project Executive Committee and holds an MBA in Healthcare Management from the EHESP as well as a Bachelor of Arts in Biology from the University of Pennsylvania. She worked for ten years in chronic disease prevention and workplace health both at the World Economic Forum in Geneva, and the Vitality Institute in New York, USA. She is now based in rural Portugal. Follow @sradjy on Twitter. Maria Teresa Ferretti is a neuro-immunologist with over a decade of international experience in the field of Alzheimer’s disease. She is the co-founder and Chief Scientific Officer of the Women’s Brain Project. She holds a Masters in Pharmaceutical Chemistry, a PhD in Pharmacology and Therapeutics at McGill University, Canada). She is a group leader in the Nitsch’s lab (University of Zurich). In her research, she aims to identify novel biomarkers for improved individual level prediction of cognitive decline and Alzheimer’s.

Forum snapshot: Sophia the Humanoid Robot being interviewed by Global Forum Ambassador Fagun Thrakar. Photo Credit: WBP

"The work being done here is so important, we have to share it with the broader public. Everyone has a brain, and almost everyone I know has a parent, grandparent, friend, or relative suffering from brain or mental health issues." With a patient-centric and multi-stakeholder approach, the forum in Switzerland was the first time patients, the FDA, drug developers, regulators, the World Health Organisation, Google, and the OECD came together to discuss hurdles and potential solutions to the pervasive gender bias. Position papers and calls to action will be some of the tangible results of the forum, to engage policymakers and regulatory authorities in the goal of better science and data. This non-profit organisation and its annual event are supported by a mix of entities that reflect how relevant these issues are – from Lobnek Wealth Management to Alzheimer Research UK, Eli Lilly, Microsoft, Roche, and the Wyss Centre, to name but a few. The mother of Emilia Clark (Daenerys in Game of Thrones) attended; Sophia, the former queen of Spain, sent her regrets at not being able to attend, but added encouraging words about the importance of the WBP mission. The global ambassador for the event was actress, activist and film director Fagun Thrakar. Sophia the

Humanoid Robot closed the last session of the forum, rounding-off an impressive array of speakers.

Author: Shahnaz Radjy

As Fagun put it, “The work being done here is so important, we have to share it with the broader public. Everyone has a brain, and almost everyone I know has a parent, grandparent, friend, or relative suffering from brain or mental health issues.” This is a clear example of female leadership in health. “Achieving precision medicine— starting from sex and gender and then including any other type of diversity, to move from shallow medicine to precision medicine — will impact the cost of health as well as our collective ability to provide better, more adequate treatment across the board” says WBP co-founder and CEO, Antonella Santuccione Chadha. The vision of the organisation is to create a sex and gender precision medicine research institute, because whether you credit Abraham Lincoln, Peter Drucker, or another source, the wisdom of the words, “the best way to predict the future is to create it” is indisputable. i | Capital Finance International

Author: Maria Teresa Ferretti


What you do not see can often be of immense value. Like the right word at the right time. An appropriate silence. A listening ear. Itâ&#x20AC;&#x2122;s our attention to both the essentials and the details that makes a difference, and reveals the spirit of our bank.

Summer 2019 Issue

> Pillsbury Winthrop Shaw Pittman:

Are We There Yet? The Transition from LIBOR to Risk Free Rates By Trevor Wood Partner and Daniel Welch Associate

Much has been written on the transition from LIBOR to alternative reference rates since July 2017, when Andrew Bailey, CEO of the UK Financial Conduct Authority, gave the speech which triggered debate and focus on the issue.


is speech was the starting gun for market participants to focus on the key issues of moving away from LIBOR (London Inter-bank Offered Rate). It is a well-established, but somewhat flawed, benchmark rate. There are many who believe there should be a move to a more robust and sustainable benchmark, based upon actual market data from a deeper market pool.

The calls for such a transition can be traced back further still, to the G20’s request to the Financial Stability Board (FSB) to undertake a fundamental review of major interest rate benchmarks. The FSB's published a subsequent report — Reforming Major Interest Rate Benchmarks — in July 2014. A flurry of activity following the FCA announcement, with much speculation as to the best way forward. The London Loan Market Association (LMA) held seminars for its members to highlight some of the more important issues which would need to be overcome. These included: • The (then-) lack of benchmark rates for some major currencies • The fact that the risk-free rates (RFRs) are backward-looking overnight rates and fundamentally different to forward-looking LIBOR, which is set in advance across different hard currencies and different tenors • The time-zone issues for the publication of RFRs, which are published according to the time zone of the market to which they relate • The interdependence of the different markets and products using LIBOR, which need to be transitioned using common principles • The huge operational task of the transition which, once the new benchmark and methodologies are settled, requires contract terms to be updated (in new and legacy contracts), and payment systems to be changed in order to handle the new benchmark rates.

"There is much wider degree of awareness of the termination of LIBOR than there was at the beginning of the process but, as the days go by, we edge closer to the end2021 cut-off date." The LMA rightly warned that the task in front of the markets and market participants could not be underestimated, and that action should begin right away to begin to address the transition. Working groups were established; work began. THE PRESSURE IS NOW ON… Progress has been made. Certainly, there is much wider degree of awareness of the termination of LIBOR than there was at the beginning of the process but, as the days go by, we edge closer to the end-2021 cut-off date. In a recent statement, the Working Group on Sterling Risk-Free Reference Rates (RFRWG) gave an update on the adoption of RFRs in sterling markets . As expected with a move to new benchmark rates, the pace of transition has been faster in the non-cash product market. The RFRWG reports that the share of swaps traded using SONIA (Sterling Overnight Index Average), is already broadly equivalent to that linked to LIBOR. In the cash markets, some products have been quicker to adopt SONIA than others. The RFRWG stated for instance, that SONIA-linked Floating Rate Notes (FRNs) have "rapidly become the market norm, with around £25bn issued since | Capital Finance International

June 2018, and LIBOR-linked sterling FRN issuance beyond 2021 has all but ceased". The same cannot be said for the loan markets, with LIBOR routinely used in loan contracts which extend past the 2021 deadline. The messaging emanating from the regulators is now starting to become louder and more urgent. On June 3, the vice-chairman of the US Federal Reserve, Randal Quarles, sent a message to the Alternative Reference Rates Committee (ARRC) roundtable meeting stating that "[t]he Federal Reserve will expect to see an appropriate level of preparedness at the banks we supervise, and that level must increase as the end of 2021 grows closer. Our supervisory approach will continue to be tailored to the size of institution and the complexity of LIBOR exposure, but the largest firms should be prepared to see our expectations for them increase". In his message, Quarles noted that the ARRC had provided the market with tools that would be needed for a transition from LIBOR: "An alternative rate that did not share the same structural instabilities that have led LIBOR to this point, a plan to develop liquidity in the derivatives market for this new rate so that cash users could hedge their interest rate risk, and models of better contract language that helped limit the risk from a LIBOR disruption." He told the roundtable meeting that "[t]he ARRC has provided these tools. Now it is up to you to begin using them. With only two and a half years of further guaranteed stability for LIBOR, the transition should begin happening in earnest". In a similar fashion, the Bank of England has also been making noises with David Ramsden, the Deputy Governor, saying, "the time for last orders is now” for LIBOR, with "firms [needing] to be focused on what they need to do to be able to transact SONIA-based products, and stop adding to their post-2021 Libor exposures". 73

"In the first instance, any actions should begin with a comprehensive assessment of how LIBOR interacts with a firm’s business." Given the progress which has been made in the non-cash market and in new FRN issuance, and the clear desire of the regulators for all markets to move to the new benchmark rates as soon as possible, why has the loan market been seemingly dragging its heels? The short answer is that it has not. Both the ARRC and the LMA (key entities in the US and UK loan markets), for example, have been actively engaged in the working groups dealing with the new benchmark rates, advertising the fact that LIBOR is ending in the near future and providing guidance to their respective markets. The ARRC has gone further than the LMA by issuing ARRC Recommendations Regarding More Robust Fallback Language for New Originations of LIBOR Syndicated Loans in April 2019 , and subsequent to this, similar recommendations for FRNs , bilateral business loans and LIBOR securitisations. Under these recommendations, the ARRC has provided specimen fallback terms to be incorporated in loan documentation, either by way of a "hardwired approach" — whereby the actual specimen new benchmark provisions can be added — or an "amendment approach" – whereby the parties to the loan can agree to amend the loan agreement at the time the new benchmark rate is adopted by the loan market. The missing link for both approaches is that the new Secured Overnight Financing Rate (SOFR) is still a backward-looking overnight rate and, until the market adopts a market-wide approach (be it a term RFR, or a compounded daily average for each interest period or something else), the problem for transition persists.

adopt a compounded average SONIA rate paid after a delay or lag in the interest period. Such an approach has not been accepted by the loan market (presumably because of the upheaval that this would cause in the back-office of lenders rather than the treasury function of borrowers, given the concept's acceptance in the FRN market) which is holding out for a term SONIA rate to be developed. The RFRWG mentioned in its May 2019 statement that three administrators (FTSE Russell, ICE Benchmark Administration and Refinitiv) have confirmed that they are working on this and the Working Group expected this to continue throughout 2019. Some (including, it would appear, the LMA) are still holding out hope for a last-minute reprieve for LIBOR citing among other things the massive upheaval in back office systems as reason enough to maintain the status quo. WHAT CAN BE DONE IN THE MEANTIME? The amount of preparation which loan market participants have undertaken appears to vary. In September 2018 the FCA and the UK Prudential Regulation Authority (PRA) wrote to CEOs of major banks and insurers supervised in the UK asking for details of the preparations and actions they are taking to manage the transition, the purpose of which "was to seek assurance that firms’ senior managers and relevant governance committee(s) understand the risks associated with this transition and are taking appropriate action now so that firms have transitioned to alternative rates by the end of 2021". The FCA

and the PRA have just published a number of observations, which provide useful guidance as to the steps that should now be undertaken. Although the FCA/PRA point out that in the paper that not all findings will be relevant for all firms, they do give one overriding message at the beginning, which should be noted by all: "In the first instance, any actions should begin with a comprehensive assessment of how LIBOR interacts with a firm’s business." This is helpful advice which should be noted by everyone involved in the loan market — where it would appear things are not quite as progressed as they should be given the 2021 deadline. Undertaking an audit of where LIBOR is used should be undertaken by corporates and financial institutions alike and may prove enlightening. For financial institutions (and perhaps others), this is merely the first step and the other steps noted in the FCA/PRA paper, such as identification of exposure and reliance on benchmarks, quantification of LIBOR exposures, transition planning and management of prudential risks, also need to be fully considered. What is for certain is that the supervisory involvement of the regulators is sure to increase the closer we get to the end of 2021. There is still time to get things done to ensure a smooth transition, but the size of the task ahead should not be underestimated. i

The LMA (by contrast to the ARRC), has taken a different approach in its Recommended [Revised] Form of Replacement Screen Rate Clause and User Guide (updated on October 16, 2018), its members (according to the LMA) being adamantly against a "hardwired approach", favouring an “agreement to agree” once the new SONIA benchmark is settled. This just kicks the can along the road, in that the loan parties will need to amend the loan documentation at a later date, but the LMA approach does at least attempt to smooth the way by simplifying the consents required. Either way, a great deal remains to be undertaken, including the continuing development of the RFRs (and most importantly the term RFR). Or, if this is not forthcoming, the adoption by the loan market of a methodology by which interest can be calculated on an interest period basis as is the case for LIBOR. The FRN market has readily accepted SONIA-linked FRNs, which generally 74

Author: Daniel Welch | Capital Finance International

Author: Trevor Wood

Summer 2019 Issue

> BAWAG Group:

One of the Most Efficient and Profitable Banks in Europe With 2.5 million customers, BAWAG Group is one of Austria’s largest banks.

Increased profitability: Pre-tax profit (€ millions). *Targets


AWAG Group applies a low risk, efficient business model focused on Austria, Germany and developed markets. The bank serves retail, small business and corporate customers offering comprehensive savings, payment, lending, leasing, investment, building society, factoring and insurance products and services via online and offline channels. Delivering simple, transparent and best-in-class products and services that meet customers’ needs is the consistent strategy across all business units. BAWAG Group’s business model is based on four strategic pillars. Growth in core markets is the group’s main focus. It continues to assess M&A opportunities in DACH region (Germany, Austria and Switzerland), but remains disciplined in its underwriting guidelines on strategic fit and value. The bank believes superior customer experience is a key brand differentiator. It has relationships built on trust, with skilled advisors in the branches and convenience from its digital services. Customer care is vital.

"The focus on efficiency and operational excellence is part of BAWAG Group’s DNA. The bank believes this is one of the few things it truly controls, and is

RECENT DEVELOPMENTS BAWAG Group delivered strong results in the first half 2019, with profit before tax of €287m, up six percent versus the first half 2018. It delivered a return on tangible common equity of 13.8 percent, a costincome ratio of 42.9 percent and a CET1 ratio of 15.1 percent. The bank is on track to deliver on all of its targets in 2019 as it continues to adapt to the changing operating environment, and focuses on the things that it controls.

The focus on efficiency and operational excellence is part of BAWAG Group’s DNA. The bank believes this is one of the few things it truly controls, and is therefore non-negotiable. Striving for excellence is continuous.

BAWAG Group closed on its leasing and factoring acquisitions from 2018 and continued to make progress across various operational and strategic initiatives. The recently closed acquisitions complement its retail & SME business in Germany, and emphasise the focus on building out the retail & SME business across the DACH region.

The bank is run in a safe and secure manner, and primarily focuses on developed markets. It believes in doing business in countries with stable legal systems and sound macroeconomic fundamentals. BAWAG Group values a conservative risk profile, focused on high asset quality and disciplined underwriting.

BAWAG Group AG is the listed holding company of BAWAG P.S.K., which is headquartered in Vienna. It has subsidiaries including easybank, easyleasing and start:bausparkasse in Austria, Südwestbank, BFL Leasing GmbH, Health Coevo AG and start:bausparkasse in Germany, and Zahnärztekasse AG in Switzerland. i

therefore non-negotiable." | Capital Finance International


> Humble Beginnings Followed by Rocketship Ride to Success:

Andrew Bloom & Jon Hall After being named Best Digital Bank in the UK for the second consecutive year, Masthaven Bank’s founder and CEO Andrew Bloom and managing director Jon Hall are in an optimistic and reflective mood.


ptimistic because the specialist bank is about to move into new offices in London’s Covent Garden as its expansion plans take shape, and reflective because Masthaven is about to embark on another major development phase. Masthaven doesn’t forget its past — a meeting room at the new premises will be called Soho in honour of the bank’s old home off Oxford Street — but has a keen eye on the future, too. “They say a week is a long time in politics,” says Bloom, “and the same is true in finance. Since we last spoke, it’s been a milestone year for us — but we mustn’t rest on our laurels. It’s easy to say, 'Great, what an achievement', then take your foot off the pedal and relax. We mustn't think like that." So where to start? Of all the developments, perhaps the most important is the £60m investment secured last year from the alternative investment house Värde Partners. This will allow the bank to expand its lending line, and strengthen its position in the UK’s mortgage arena. Värde identified Masthaven as an “exciting” brand in the UK challenger bank space, and recognised it as a force in the market thanks to its dedication to serving those borrowers lockedout by traditional high street banks. “It’s time for us to further enhance our propositions for our existing customers and intermediary partners as well as future clients,” Bloom says of the Värde injection. “Masthaven will use the investment to bring more capacity to the UK market and enable us to innovate in our savings and lending propositions.” That means adhering to its philosophy of putting the “personal” back into personal finance by satisfying customer needs — whether on flexible savings, valued mortgage solutions or bridging and development finance. The move to Covent Garden is testament to the bank’s growth and maturity in terms of colleagues, products and assets. 76

CEO: Andrew Bloom

MD: Jon Hall

Last year, Masthaven had around 150 employees; today, there are more than 180, and that figure is set to grow: the bank now has £750m in assets. And by revamping its short-term and buy-to-let propositions and launching its savings proposition on the Flagstone platform, Masthaven continues to offer modern, flexible lending and savings, with customer needs at heart.

mortgages. In late 2014, Hall joined him, and together they turned Masthaven into a retail bank.

"It would have been pointless to bring a new bank to market that's just like everyone else out there," explains Hall. "We're about something very simple yet rarely done: finding out what customers actually need, and delivering that to them – not just words, but actions." As the bank heads to pastures new, Hall and Bloom will ensure that one thing is transported from old office to the new: a poster featuring a quote from US president Franklin D Roosevelt which reads: “Happiness lies in the joy of achievement and the thrill of creative effort.” THE MASTHAVEN STORY Andrew Bloom founded Masthaven Finance in the early 2000s, working in a serviced office with a team of four. He launched Masthaven Finance in 2004, initially specialising in bridging loans and development finance before expanding into | Capital Finance International

Hall has a strong financial background, starting his career with PricewaterhouseCoopers before joining Aviva, then becoming CEO of Saffron Building Society. At Saffron, Hall’s entrepreneurial skills, digital edge and focus bloomed. Saffron was named one of the most digitally mature building societies, and was nominated for a clutch of other awards. The desire to push boundaries has defined Bloom’s trajectory. After leaving university, he joined KPMG where he qualified as a chartered accountant. He moved to transaction services before working in the investment division of what is now Strand Hanson. Success was never far away, and the lender was listed in 2015’s Sunday Times Virgin Fast Track 100 as the 81st fastest-growing private company in the UK. In 2016 Masthaven was launched as a retail bank, becoming the first “challenger” bank to be regulated that year. In 2017, Masthaven was in the Financial Times’ Fast Track 1,000, the 240th fastest-growing private company in Europe. i

Summer 2019 Issue

> Masthaven Bank:

Challenging the Conventions of Traditional Banking Winner of’s Most Innovative Digital Retail Bank in the UK for 2018 and 2019, Masthaven is a bank that does things differently. Blending digital services with the vital human touch, the bank challenges high-street monoliths with simple, useful savings products and clever, innovative features that meet people’s needs.

Masthaven Bank: The Team


asthaven launched as a retail bank in 2016. It offers award-winning saving and lending products and is unique in allowing savers to choose when they would like their account to mature.

The bank applies its specialist lending knowledge to the needs of underserved borrowers and their intermediaries, enabling it to give excellent and responsive customer service combined with technology for speed and simplicity. Masthaven’s focus for its customers is to build trust by offering a first-class service, ease of access, and consistently good rates. The bank’s knowledgeable and experienced specialists are committed to providing customers with flexible and fixed term savings accounts, first and second charge mortgages, bridging loans, and development finance. Masthaven eschews the one-size-fits-all approach, adopting a human-digital philosophy

to give customers a banking service they value. Behind this is the recognition that technology is great at streamlining things, but not so good at making lending decisions. Technology cannot be warmly human and empathetic – real people are needed for that. So Masthaven use technology to make things simpler, quicker and easier, and employs friendly, clever people to do everything else. This ethos is borne out by the judging panel, who praised Masthaven for “redefining online-only banking” by “rescuing and celebrating the human dimension”. “Online retail banks realise full well that advances in technology may wow customers, but it is the human touch that begets business. Masthaven Bank, on the leading edge of a second wave of disruptor banks seeking to challenge established convention, has put its customers in charge.” The bank is authorised by the Prudential | Capital Finance International

Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Register no. 719354). Deposits are protected up to £85,000 by the Financial Services Compensation Scheme. Masthaven was named Best Bridging Lender in the Coreco Awards (2017); Most Innovative Savings Provider in the Moneynet Personal Finance Awards (2017 and 2018); and Best Specialist Lender in the Moneynet Personal Finance Awards (2018). Masthaven Finance featured in 2015’s The Sunday Times’ Virgin Fast Track 100, the annual awards designed to recognise Britain’s top 100 private companies with the fastest growing sales over their latest three years. Masthaven Finance, the bridging division of Masthaven Finance Group, was listed as number 81 in the list of 100 companies. Masthaven Bank was ranked 240 in Financial Times’ FT1000 list (2017). i 77

> Euro Exim Bank:

From Caribbean to World Stage, with Pride, Love, and Blockchain For further information, please visit


uro Exim Bank, headquartered in St. Lucia with a representative office in London, is an international financial institution serving corporate businesses around the globe, facilitating trade finance.

The company has made great strides in implementing blockchain-based technology into its trade finance platform, and has become an active participant with Ripple technology for real-time payments and reduced liquidity requirements. It has been expanding its international teams and agent-partner network, and is establishing a representative office in India. The bank is 78

also looking at supporting emerging market opportunities across the African continent, which is experiencing significant trade growth.

difficult and costly access to liquidity, and new fintech participants challenging traditional banks.

NEW TECHNOLOGIES Trade finance, with its multiple documents, extended ecosystem, non-standard and diverse instructions, remains the best current use-case for distributed ledger technology. Euro Exim is on the case, refining its Simplex trade finance platform with underlying blockchain capability.

Market-focused IT resources and a tech-savvy management team have guided the development of the bankâ&#x20AC;&#x2122;s platform, supporting smart contracts and increased automation, assisting clients safely and effectively in markets where they were previously excluded or restricted.

From a commercial perspective, key issues for trading nations remain. There are constant changes in regulation and compliance, lack of trust for emerging countries and companies, | Capital Finance International

Euro Exim partnered with Ripple, market leader in digital asset technology and providers of XRP cryptocurrency. The union began with xCurrent real-time payments, then the xRapid service was brought in, in record time.

Summer 2019 Issue

The partnership has been beneficial. For many buyers, access to fiat currencies is costly and restrictive. With xRapid a buyer or seller in Africa can pay or receive funds in local currency with lower liquidity requirements. For buyers, local currency is exchanged into the XRP digital asset and remitted to their counterparty — who is paid in local currency. And all in real-time, with full audit and a guarantee of zero rate-change through the transaction, changing the dynamics of trade and providing competitive market inclusion. The next step is to investigate the possibility of Ripple message formats to carry complex details of trade instruments, such as Letters of Credit and associated payment instructions, and facilitate guarantee-of-settlement and immutability for financial instructions. TYPICAL CLIENTS Euro Exim clients buy goods from China, India, UAE, Africa, South America, the Caribbean region and the Far East. Its supported deal values range from $100,000 to $5M, with clients importing goods such as garments, plastics, cars, nonperishable foodstuffs and machinery. DUE DILIGENCE Risk mitigation and compliance with regulatory obligations remains a priority, and the bank is mindful of constant changes in fianncial crime, sanctions, cyberthreat, PEPs and KYC/AML requirements, along with identity assurance to safeguard all parties in global transactions. CONFERENCES AND ASSOCIATIONS On the international stage, Euro Exim provides keynote speakers and panellists at major international financial conferences, and thoughtleadership articles. Events this year include GTR Conferences and Gulf Trade Finance. Euro Exim is a member of the ICC, and an associate member of the CAB (Caribbean Association of Banks).

"The company has made great strides in implementing blockchain-based technology into its trade finance platform, and has become an active participant with Ripple technology for realtime payments and reduced liquidity requirements."

THE TEAM Kaushik Punjani CEO & Director Euro Exim CEO and director Kaushik Punjani has a unique understanding of technical and business requirements. He holds a BSc in Chemistry, and Pharmacy qualifications. Punjani has extensive experience in finance, with previous roles covering management and delivery of financial solutions at UK businesses. As chairman, Punjani manages the board and regulatory administration, and oversees strategy and liaison with external auditors and regulatory agencies. He is the president of the Rajyapurohit Association of Brahmins UK. He has an active role in charity organisations in the UK and India, supporting the Asian Blind Association in London, and performs at concerts raising money for Great Ormond Street Hospital, a local Downs Syndrome Charity, the Cerebral Palsy Association of St Lucia, | Capital Finance International

and the Montgomery Heights Children’s Foundation in Zimbabwe. Graham Bright Head of Compliance and Operations Graham Bright is head of compliance and operations, an experienced industry professional from a financial services and system-vending background. His extensive career of 35 years (including 20 years at SWIFT), covers industry utilities, regulators and specialist financial institutions in sales, support and consulting. He is a serving UK Justice of the Peace. Formerly director of FSI solutions and strategy at storage leader EMC, he was subject matter expert on banking and investment management. Prior to that, he was the principal consultant with The Realization Group, and business development manager at Actuare, a FIX/EMX/SWIFT/ISO messaging company for investment managers, corporates and the funds industry. He is former managing director at Financial Tradeware Plc, leading integrated portfolio and trading system sales and consultancy requirements for discretionary fund managers and alternative investments markets (hedge and mutual funds). Graham is a regular contributor to trade journals including Forbes, American Banker and has published articles in Financial Technology Press, CEO Insight, and The Financial Times. He is a regular panellist and keynote speaker at international trade industry conferences and will be a speaker at GTR in Singapore and TXF in Hong Kong. Georgette Adonis-Roberts International Legal Counsel International Legal Counsel Georgette Adonis-Roberts is responsible for leading legal strategy and structure in the EMEA and Caribbean regions, and providing oversight for the bank’s regulatory, compliance and cross-border functions. She is a dual-qualified barrister with experience in the services industry, banking and trade finance sectors. She specialises in drafting legal documents, negotiating terms and conditions, assisting in the progression of commercial transactions and corporate governance. She holds an LL.B (Hons) and has been called to the Bar of England and Wales, and subsequently St Lucia. Prior to joining Euro Exim Bank, she worked in private practice in St. Lucia with a cohesive team at Du Boulay Anthony & Co. She is also an Accredited Mediator in Civil and Commercial training and is adept in dispute resolution. i 79


AWARDS 2019 SUMMER HIGHLIGHTS Once again brings you reports of individuals and organisations that our readers and the judging panel consider worthy of special recognition. We hope you find our short profiles interesting and informative. All the winners announced below were nominated by audiences and


then shortlisted for further consideration by the panel. Our research team gathered additional information to help reach a final decision. In many cases, senior members of nominee management teams provided the judges with a personal view of what sets their companies and institutions apart from the competition. | Capital Finance International

As world economies converge we are coming across many inspirational individuals and organisations from developing as well as developed markets - and everyone can learn something from them. If you have been particularly impressed by an individual or organisationâ&#x20AC;&#x2122;s performance please visit our award pages at and nominate.

Summer 2019 Issue


As a subsidiary of Credit Suisse AG, one of the “Bulge Bracket” banks (the eight largest multinational investment banks in the world), Credit Suisse Securities is backed by a global network of vast reach and resources. The Tokyo-based company can trace its origins back to 1959, as the sole underwriter of Japan’s first post-war government-issued bond. Now the company operates under the Credit Suisse umbrella, tailoring securities and investment banking solutions to meet the needs of Japanese customers. Credit Suisse Securities offers a range of services — from stocks and bonds to

corporate advisory and alternative financing — to fit any client’s investment strategy. To make the most informed decisions, the company relies on a crack team of researchers to provide quantitative analyses of Japanese economics and equities. Fintech continues to revolutionise financial markets, and Credit Suisse Securities is leading the charge with tech-driven market research. Machine learning, artificial intelligence, and text mining provide powerful tools to eliminate the shortcomings inherent in financial forecasting, thus enabling Credit Suisse Securities to “nowcast” highly accurate

index estimates. The company provides economic research coverage on structural issues and longer-term subjects based on an AI-driven high-level quantitative analysis of large caches of raw data, including review of macroeconomics and policies. The judging panel applauds Credit Suisse Securities ability to maneuverer aptly in a field where the goal posts are moving swiftly — and even up the pace. The judges declare Credit Suisse Securities as the lightning-fast and data-deft winners of the 2019 award for Best Investment Research Team (Japan).


Short-term solutions and hasty strategies are of little interest to the Abu Dhabi Global Market (ADGM) — it has far-reaching vision. Situated on Al Maryah Island of the Emirates’ capital city, ADGM has transformed the financial ecosystem and capital markets in the region with new market-driven initiatives and financial innovations in its three years of inception. ADGM has established an internationally recognised and well-regulated business environment that continues to unlock liquidity, accelerate FinTech practice, and encourage local and global trade and financial collaborations. ADGM is a key pillar of Abu Dhabi’s 2030 Economic Vision Plan: a financial free zone that serves as a catalyst of

growth and progress. It’s a nurturing ground that fosters long-term partnerships, inspires tech innovation, and bolsters competitiveness. Three authorities ensure that operations run smoothly at ADGM. The Registration Authority is the first point of contact for businesses seeking to enter ADGM, boasting a straightforward and simple online registration process and attentive customer service. The Financial Services Regulatory Authority has developed a best-inclass regulatory framework to create a financial system with efficient infrastructure, fair market access, and high levels of transparency. A robust system of safeguards, including Anti-Money Laundering and Counter-Terrorism Financing

guidelines, provides a safe environment to protect the free flow of commerce. ADGM Courts serve as an independent judicial system to adjudicate civil and corporate disputes. ADGM adheres to a policy of fiscal responsibility that drives innovative advancements, supports business formulation, and spurs economic growth in both the region and abroad. The judging panel points to the financial free zone’s enviable location — at the gateway of Europe, the Middle East, Africa, and Central Asia — as the final tipping point in the awards decision. The judges declare Abu Dhabi Global Market as the 2019 winner of the Best International Financial Centre (EMEA) award.


Caring has always been the cornerstone of Assupol operations. The South African insurance company was born more than a century ago, with a mission to provide funeral services for civil servants. Now it’s a household name for customer commitment and market-tailored insurance and savings offerings. Superior client service is a priority focus at Assupol, fuelling product innovation and positive market change. The company drives for sustainable growth, with exemplary leadership in equality and financial inclusion. From ownership and leadership to workforce and client base, Assupol stakeholders are

diverse and well-represented. The group has empowerment at heart, from Assupol Life CEO Bridget Mokwena-Halala onwards: 38 percent of ownership, 55 percent of staff, 57 percent of financial advisors, and 62 percent of its client base are African women. The company is a steadfast community partner, investing in the country’s economic growth and social progress. Assupol sponsors Early Childhood Development (ECD) programmes, last year investing more than R30m (£1.62m) in more than 100 ECD centres, providing thousands of children with nutritious meals, and training some 80 ECD practitioners. Over the next five | Capital Finance International

years, Assupol plans to equip 100 rural primary schools with improved sanitation — including the harvesting of rainwater for sustainability — with more programmes to follow. Its outreach initiatives protect consumers with information about debt dangers, recourse availability, and predatory lending practices. The CFI. co judging panel has followed the company’s growth over the years, and is delighted by its customer focus, community commitment, and financial performance. For the fifth year running, the judges declare Assupol a winner, this year for the 2019 award for the Best Life Assurer (Southern Africa). 81


Etihad Airways Technical Training (EYTT) part of Etihad Aviation Training (EAT) is at the forefront of using the world’s leading training systems in Abu Dhabi. The company is part of the Etihad Aviation Group, a global aviation and travel organisation divided into seven business divisions: operations, commercial, MRO, human resources, finance, support services, and transformation. Its position adjacent to the Abu Dhabi International

Airport puts it at the centre of key aviation markets, and has allowed it to expand its capabilities and establish strategic partnerships with other industry leaders. Etihad has had a pioneering spirit since its inception, achieving many regional firsts. Boeing 787 training is carried out on Boeing’s state-of-the-art Desk Top Simulator (DTS) and A380 training uses the Airbus A380 Competency Trainer (ACT) system. EYTT can leverage from the group’s access to

real aircraft via Etihad Engineering and Full Flight Simulators within EAT. All this combines to make EYTT the ideal training ground for tomorrow’s aviation engineers and experts. The judging panel believes the company’s comprehensive knowledge and experience within aviation training make it an ideal educator. Etihad Airways Technical Training is the 2019 winner of the award for Best Aviation Technical Training (Middle East).


The small-cap space continues to be a prodigious hunting ground for investors seeking attractive long-term returns. UK firm Athelney Trust provides shareholders with prospects of longterm capital growth, focusing on high-quality small companies. Dr Manny Pohl, as the Athelney Trust Managing Director, is responsible for managing the investment portfolio. He is also Chairman of ECP Asset Management, the powerhouse investment firm that has ranked among the top four fund managers in Australia — often securing top place — over the past decade. Athelney serves as a UK investment vehicle for the ECP group of companies,

fortified by a team of fund managers with a shared ethos that starts with a long-term vision and responsible stock selection. As a closed-ended equity mutual fund, Athelney Trust invests in companies across diversified sectors in the public equity markets of Britain. Athelney’s stock portfolio includes small-cap companies with a market capitalisation of less than £300m and a listing on the London Stock Exchange or an AIM or ISDX trading facility. The stock portfolio is benchmarked against the FTSE Small Cap Index. The firm’s investment strategy focuses on finding quality companies which have a proven track

record of earnings and dividend growth over time, while trading at an attractive valuation. Active investing is a key focus at Athelney and ECP and the entire team is encouraged to contribute to the local community. The judging panel notes that Athelney executives lead by example, with Managing Director Dr Manny Pohl recently awarded The Order of Australia, which is the Queen's Australian Honours list for contribution to the financial industry and his philanthropic efforts to the community. The judges are pleased to present Athelney Trust with the 2019 award for Best Small-Cap Equity Investor (United Kingdom).


Since its foundation in 1994, Banco Ganadero has been strongly attached to the agricultural sector in Bolivia, in particular to the many SMEs represented there. To deliver the highest level of service to its clients, it places paramount importance on in-house teamwork and co-operation, the setting of ambitious but attainable goals, and perseverance in achieving its objectives. These qualities are instantly recognisable to its clients working the land. While always embracing its corporate social responsibility, the bank has developed an innovative range of products, from savings to financing to insurance. The aim is to make life easier for customers, and to contribute to national economic growth. Banco Ganadero has shown great awareness of the need to 82

preserve and protect the environment, and promotes the careful use of natural resources. It is the first financial institution in Bolivia to develop an environmental and social management system ¨SARAS¨ (Environmental and Social Management System by its acronym in Spanish), which focuses on credit loan processes, promoting high standards and responsible practices to SMEs that receive bank financing, achieving relevant results for environmental and social sustainability. The system is the mainstay of the Corporate Social Responsibility (CSR). In addition, the bank has changed the energy matrix in its offices, using led lightbulbs and installing solar panels to | Capital Finance International

generate clean electricity and reduce energy consumption. Banco Ganadero was the first financial institution in Bolivia to introduce bicycle parking spaces for staff and clients, and it closely monitors the use of water, electricity and paper. Ever the pioneer, the bank has embraced digitalisation; its GanaNet and GanaMóvil virtual banking services are available around the clock, which saves farmers and those living in rural areas time and fuel. The digital service means these citizens can carry out transactions — wherever they are —. Having evaluated these trailblazing initiatives, the CFI. co judging panel considers Banco Ganadero entirely deserving of the 2019 award for Best Green Bank (Bolivia).

Summer 2019 Issue

> DAMMAM WEST INDEPENDENT SEWAGE TREATMENT PLANT: BEST WATER CLEANTECH PPP EMERGING MARKETS 2019 The Dammam West independent sewage treatment plant (ISTP), the first ISTP project in the Kingdom of Saudi Arabia (KSA), has earned the interest and admiration of the judging panel this year as the Best Water CleanTech PPP Emerging Markets 2019. The Build Own Operate Transfer (BOOT) project is hailed for its exemplary alignment of ideology and operation with the UN Sustainable Development Goal of Universal Access to Safe Drinking Water. The project was awarded to the consortium led by Metito and also comprising Mowah, and Orascom Construction. The primary purpose for the project is to provide critically needed sewage treatment capacity for the growing urban area of Greater Dammam area including Ad Dammam, Al Khobar and Dhahran. The plant will serve one million inhabitants and has a designed capacity of 350,000 cubic meters per day and an initial capacity of 200,000 cubic meters per day. Contributing to a greener environmental footprint the project is being developed on smallest land

area required for a plant of its capacity and utilises the most advanced MBBR technologies in the treatment process, reducing power consumption to a significant minimum. Turning waste to wealth, the quality of the treated effluent is one of the highest in KSA and the sludge quality is a EPA Class A, which can be used for landscaping and irrigation. The plant is equipped with a Biological Scrubber odour control system keeping the surrounding area odourless. With the project being the first ISTP in KSA, it led the way for the Kingdom to realize multiple similar projects, and set the tone for a more engaging dialogue about PPPs and the importance of engaging private capital to realize lifeline, mega scale projects in a collaborative framework. Such projects also make best use of private sector experience in the environment, water and agricultural sectors, in line with the Kingdom’s "Vision 2030" and the wider initiatives approved by the Cabinet of Ministers to further encourage private sector participation in economic development initiatives.

> NORDEA LIFE ASSURANCE FINLAND: MOST SUSTAINABLE ASSURANCE NORDICS 2019 The Nordea Group derives its name from the words “Nordic ideas”, underscoring its mission to develop superior solutions that reflect the Nordic values of openness, equality, and environmental responsibility. As a subsidiary of the group, Nordea Life Assurance Finland upholds the same corporate ethos, where respect and care for people and the planet are guiding principles. The company has made strategic investments in long-term employee engagement and wellbeing programmes, shoring up its status as one of the best workplaces in Finland — jumping 10 places in the overall list, and maintaining its top position in the Finnish financial sector. Open lines of communication ensure Nordea Life keeps a pulse on the needs of its workforce as well as those of its client base. The consensus from clients: simplicity is key. This is an area where Nordea Life excels, with a streamlined single core insurance system that improves agility and gives a competitive market edge. The system

is a result of Nordea Life’s continued digitalisation goals to simplify processes, enhance efficiency, and improve quality. Nordea Life private and corporate clients can access insurance products and investment services through the online system or at any Nordea Bank branch. The company factors sustainability into its saving and investment decisions, and it offers a range of options, including the recently launched Nordea Globe Baskets. The baskets offer customers a chance to make a positive contribution to environmental, social, and governance (ESG) issues — without compromising long-term return targets. The judging panel is no stranger to Nordea Life, and is pleased to see the company continue with shrewd investment strategies that mitigate risks through careful ESG consideration. For the second consecutive year, the judges declare Nordea Life Assurance Finland as a winner, this time for the Most Sustainable Assurance award (Nordics) 2019.

> PETRO RIO: BEST ENERGY ACQUISITIONS TEAM LATIN AMERICA & CARIBBEAN 2019 When Petro Rio acquired the Chevron Brasil Upstream Frade in March 2019, it also acquired a nearly 52 percent stake in the Frade Field, which added to the 18 percent it has agreed to purchase from the Japanese companies Inpex and Sojitz Corporation five months earlier. The takeover represented a considerable step in the execution of the company´s growth strategy, which is to acquire and redevelop oil fields that are already producing. Petro Rio´s output, now that it has successfully completed this transaction, will rise by 11,000 barrels a day and an impressive 43 million barrels will be added to 2P (Proven and Probable) reserves. Economies of scale inevitably means that costs will come down and that will enable the company to plan for the redevelopment of Frade, including drilling campaigns and water injections; it has proved particularly successful in

drilling activity over the last 15 months with 66% of its drilling bearing fruit (the average rate in the oil industry being between 35 and 40). Petro Rio has a preference for producing fields that generate cash and maintains a healthy balance sheet . The company is now the largest Brazilbased independent oil producer in the country and fully expects to replicate the success of the neighbouring Polvo Field, extending its economic life by more than ten years. This investment means that Petro Rio is now a participant in the Brazilian pre-salt oil region and the company already has new drilling initiatives planned for 2020. The judging panel applauds Petro Rio´s growth strategy and its implementation and is delighted to present the company with the award for Best Energy Acquisitions Team – Latin America & Caribbean 2019 | Capital Finance International




Since the Liechtenstein Bankers Association (LBA) developed a new strategy in 2010 — Roadmap 2015 — it has repositioned itself to be more closely aligned to the day-to-day needs of its members and their customers. The LBA is characterised by strong leadership and cooperation, combined with a future-oriented and innovative approach. It was instrumental in shaping the tax conformity strategy of the country and in implementing so-called Government Declaration on tax compliance. The LBA shows a clear commitment to the automatic exchange of information, and in 2016 the LBA

formulated the next stage of this pioneering strategy: Roadmap 2020. This strategy defined the key pillars for the principality to function as a major financial hub: sustainability, stability, and quality of services and products. Through constant analysis of the environment, market situation, and international developments, the LBA has been able to chart the steps that needed to be taken. It identified sustainability and digitalisation as the primary issues in moving forward. As a result, the organisation has become the financial centre´s main voice, and Liechtenstein´s most significant trade

association. The LBA takes a pro-active role in the development of the financial centre and in this spirit is currently assessing its banks in terms of where they stand on sustainable finance and sustainable products. It has built a day-care centre for employees´ children, just one example of the association’s forwardlooking approach. Its instinctive understanding of shaping the future of a financial centre has impressed the CFI judging panel, which confers on Liechtenstein Bankers Association the 2019 award for Outstanding Contribution to Good Bank Governance (Liechtenstein).


Multi-regulated XM understands the fundamental elements important to all Investors when it comes to online Trading. From blazing fast execution derived from innovation in technology, to a commitment on providing the best customer experience in the industry, XM has definitely changed the game. Serving over 2.5 Million Clients from 196 Countries, XM boasts a professional and highly technical Customer Support Department that can cater to more than 30 Languages, through various channels such as Live Chat, Phone, E-mail and other local communication means in different regions. XM’s Customer Support Department is available 24/7, to resolve any issues or queries swiftly and thoroughly, providing individual focus for each client, regardless of portfolio size. The Company prides itself on one of it’s Key Performance Indicators, being FCR (First Contact Resolution) which is essentially the percentage of clients that

manage to resolve their issues/queries from first contact, which is reportedly as high as 90%. It has managed to achieve this number, by still heavily investing in Human Resources, enabling it to provide all clients with real human assistance, rather than relying on Bots which is a rising trend adopted by other Brokers. Apart from being exceptionally technical in all areas of Trading, ranging from Trading Platform queries to more technical trading questions, XM have managed to crack the code and offer a very humane approach when assisting clients. This is one of the fundamentals the Company was built on, forming part of it’s aspiration to be a Big, Fair and above all Human Broker. XM also devotes immense resources to provide the ability for its Clients to have access to Market Research as well as Education. A successful foray into Forex Trading starts with an understanding of the market and the trends that affect it. XM

disseminates a wealth of knowledge each year, publishing daily market and forex previews, special reports, and technical analyses, including insights into Indices, Commodities, and Cryptocurrencies. The XM Site is a repository of trading knowhow, with crash courses for new traders and in-depth programmes for seasoned pros. There are multiple hosted seminars and workshops available worldwide to equip clients with the most up-to-date data for informed decision-making. The judging panel has recognized XM on previous occasions, and once again the Company has managed to excel and warrant global recognition on the Customer Service it provides as well as the Market Research & Education available to all clients worldwide. Congratulations to XM, for winning the 2019 Global Awards for Best Customer Service, and Best Market Research & Education.


Social determinants of health (SDOH) — where, and how, people live, work, and play — have a major effect on a person’s health and wellbeing. ProMedica president and CEO Randy Oostra has implemented a comprehensive SDOH risk-identification and intervention model 84

to take healthcare beyond hospitals. Mr Oostra joined the ProMedica team more than 20 years ago, and has headed the nonprofit organisation since 2008. He has led the company through a successful series of acquisitions and partnerships, devising | Capital Finance International

synergies and savings strategies for sustainable growth. The judging panel is impressed with the transformational progress Mr Oostra has overseen, and declares Randy Oostra of ProMedica as the winner of the 2019 award for Best Regional Impact Healthcare System (US).

Summer 2019 Issue

> INVEST DURBAN (DIPA): BEST CITY INVESTMENT PROMOTION TEAM AFRICA 2019 The South African coastal city of Durban has that “wow” factor. It has received accolades for its infrastructure, low cost of living, and high quality of life — and Invest Durban has played a crucial role in that success. The company, previously known as the Durban Investment Promotion Authority (DIPA), was founded in 2002 to stimulate economic growth and attract investment. Invest Durban is the perfect first step for those considering the city as an investment destination. The company provides free advisory services, as well as investment marketing and project management, inline with its goal of attracting new — and retaining existing — foreign investors. The free services range from local market analysis and sector-specific research to networking introductions and assistance in establishing businesses. Invest Durban

liaises with consulting firms to outsource certain services, such as accommodation assistance, immigration visas, third-party billing and expatriate taxation. Clients receive up to 20 work-hours, free-ofcharge, to get them started. The company is geared for growth, and serves the private and public sectors with passion, pride, and speed. Invest Durban builds relationships with all investment stakeholders, and forges alliances with a long-term view and a value-added edge. Challenges are willingly met at Invest Durban, because the company has full confidence in its adaptable and dedicated team, which has a proven record of turning problems into progress. The judging panel is delighted to present Invest Durban (DIPA) with the 2019 award for Best City Investment Promotion Team (Africa).

> fair-finance: MOST SOCIALLY RESPONSIBLE PENSION FUND CENTRAL EUROPE 2019 Ethical finance principles are a welcome trend in financial markets, but for one company this has been both moniker and ethos since its inception: the Austrian holdings and securities company, fair-finance. Founded in 2008, fairfinance balances investment decisions based on sustainability, the economic dimension of security, earning capacity and investment liquidity, as well as the ecological and social. is no stranger to fair-finance and its responsible stewardship of client assets, having recognised this winner in earlier years. The past year has delivered exciting developments including the best annual performance results within its group of peers. The company released a Fairness Report (an integrated sustainability and performance statement) for 2018, that combines financial and nonfinancial key indicators in a highly transparent manner and in full compliance with the Global

Reporting Standard (GRI). Impact investing remains a clear focus for fair-finance, with a diversified portfolio ranging from microfinance and reforestation to energy storage technology, sustainable real estate, and social business. In support of the latter, fair-finance has partnered with Senat der Wirtschaft to establish the country’s first Social Entrepreneurship Fund. fair-finance manages the fund and provides start-up financing for business cases with visible and measurable social impact. These economically successful social enterprises offer innovative solutions for social challenges, and seamlessly align with the company’s vision for a society that is socially just and an environment that is protected and preserved. The judging panel once again concurs: fair-finance is the worthy winner of the award Most Socially Responsible Pension Fund (Central Europe, 2019).

> MOODY'S DE MEXICO SA DE CV: BEST CREDIT RATING AGENCY MEXICO 2019 Moody’s ranks as one of the world’s top three creditrating agencies, and is a household name synonymous with credible investment expertise. Moody’s has continued to strengthen its presence in Mexico, employing a team of dedicated local analysts to monitor market trends and gather actionable investment data. Moody’s De Mexico prepares and publishes ratings on the country’s corporate sector, financial institutions, insurance and investment companies, public projects, and structured finance providers. With more than 500 published ratings available, Moody's De Mexico provides local insights that investors worldwide rely on to make informed investing decisions. The regional subsidiary operates under the giant umbrella of the Moody’s Corporation, a global enterprise with a revenue of $4.4bn and a presence in 42 countries. Moody’s derives its commanding market presence

in large part from the thoroughness of its research and the transparency of its operations. Worldwide, the company monitors financial instruments worth trillions — a status it plans to use to advocate for better ESG standards throughout all industry assessments. Understanding and measuring ESG factors is crucial for conscientious investing, and recent acquisitions at Moody’s underscore its commitment to the industry. Moody’s has moved closer to the global ESG standards goal with a majority stake in Vigeo Eiris, a company specialising in ESG research and assessments and sustainable, ethical investments. For the second year running, the judging panel felt that the company deserves recognition. The panel declares Moody's De Mexico SA De CV as the winner of the 2019 award for Best Credit Rating Agency (Mexico). | Capital Finance International



Navigating the investment market is a strategic endeavour, where advanced, quantitative analysis trumps emotion — and few firms are as skilled at the game as the multi-family office and asset manager Deutsche Oppenheim Family Office. The German firm views the challenges of complex assets as an opportunity to leverage its market expertise for the long-term benefit of its clients. For more than two decades, Deutsche Oppenheim Family Office has provided partnership-based support to its clients, developing individual investment strategies designed to meet the investment objectives of each one, taking into account return targets, investment horizons, cash flow needs and risk tolerance. Strategic Asset Allocation (SAA) is a crucial first step to creating return

and risk profiles consistent with all the investor’s preferences. Deutsche Oppenheim Family Office quantifies the opportunities and risks of liquid and illiquid assets into a transparent, objective, and reliable basis for decision making. Through its SAA investment approach, Deutsche Oppenheim Family Office processes the data through the framework of each client’s strategy — and the firm’s “PassivePlus” guidelines. “PassivePlus” utilizes, as the name suggests, passive funds and exchange traded funds (ETFs) as its core investments, and pursues active funds only when data deems them worthy. Flashy trends and market fads don’t find their way into investor’s portfolios. All investment strategies are based on academically founded and practically

proven theses. The highly quantitative investment process ensures that subjective assessments are avoided and produces highly diversified portfolios with no cluster risks. The firm has enjoyed strong performance even in poor market phases and has beaten 95% of its comparable peer group since 2014. Especially the year 2018 has been a good one for the “PassivePlus” concept. Remaining close to the benchmark and avoiding costly tactical asset allocation mistakes has once more proven effective during this difficult economic period. The judging panel pegs the firm as a solid partner — in fair weather or foul — and declares Deutsche Oppenheim Family Office as the winner of the 2019 award for Best Strategic Asset Allocation Team (Germany).



Egypt rests at the centre of the ancient world and the crossroads of the new, and Suez Industrial Development Company (SIDC) leverages that situation to support global businesses. SIDC is located on the Suez Canal, with convenient port access and strong infrastructure for ground and air freight. The canal is a transcontinental gateway between Africa, Asia, and Europe, underpinned by 26 international agreements that foster open trade. For more than 20 years, SIDC has been developing its share of the Suez

Canal Economic Zone — over nine million square metres in size — to provide modern infrastructure, services, and support for industry. SIDC has designed a powerhouse of production capacity, from energy and water treatment to security systems and communication networks. Plug-and-play capabilities are right in the SIDC base, with fully equipped turn-key properties starting at 450 square metres in size (it’s equally comfortable with large industrial customisation projects). SIDC markets properties in the zone

as investment opportunities, and top-notch infrastructure and favourable tax policies have attracted more than 65 companies. SIDC offers security and far-reaching maintenance and integration services, including assistance in obtaining government licences and permit approvals. The judging panel applauds the company’s efforts to cut red tape to empower businesses. Congratulations to Suez Industrial Development Company, winner of the 2019 award for Best Industrial Park Operator (MENA).


Trading is the beating heart of Tickmill, a Forex and CFD (contract for difference) services provider with four decades of experience in financial markets from Asia to North America. The company harnesses innovative technology to deliver top-tier trading services boasting low spreads and swift execution. Absolute transparency and zero requotes are solemn promises from Tickmill, not guidelines. Its trading platform was built by traders, for trades, featuring intuitive design and tech tools which allow clients to access the online platform, Web 86

Trader. Clients can also download its customisable MT4 platform to gain a competitive edge and reach their full potential. Tickmill offers clients a portal to the world’s largest market — Forex — with trade in more than 60 currency pairs. Tickmill’s timesaving Forex tools include margin and pip estimates that support risk-management strategies and currency converters to reflect, tothe-moment, market exchange rates. Tickmill’s exceptional trading environment and customer support have attracted retail and institutional | Capital Finance International

clients from around the world. Tickmill trading volume in 2018 surged 84 percent over the previous year, with significant growth across all financial metrics. Authorised and regulated by the UK Financial Conduct Authority, the Cyprus Securities and Exchange Commission and the Seychelles Financial Services Authority, Tickmill ensures a safe and efficient trading experience for a global client base. The judging panel presents Tickmill with the 2019 award for Best Forex Execution Broker.

Summer 2019 Issue

> E-CHANNELLING PLC: BEST HEALTHCARE ICT SERVICES PROVIDER SRI LANKA 2019 Founded in 2001, when the World Wide Web was first gaining momentum, Sri Lanka-based e-Channelling has become a specialist in leveraging the power of the Internet. It pioneered digitally enabled healthcare, beating the US and UK to the punch for widespread implementation. The company has become a digital bridge between doctors, hospitals, and patients in Sri Lanka. Before its launch, patients seeking a medical appointment faced long waits and backed-up queues. With e-Channelling’s streamlined system, patients choose the medical care provider that best suits their needs — via convenient phone, app, or web access. e-Channelling boasts a network of hundreds of hospitals, and thousands of doctors and specialists, for easy and painless scheduling. e-Channelling also

develops ICT solutions for the healthcare industry. It recently designed its own integrated information system for one of the country’s largest private hospitals — and is now marketing it to hospitals, clinics, pharmacies and laboratories across Sri Lanka. e-Channelling develops solutions that facilitate productivity, enhance healthcare services, and contribute to the modernisation of the country’s medical care. e-Channelling PLC is a subsidiary of Sri Lanka`s national mobile phone service provider, Mobitel, and is listed on the Colombo Stock Exchange. For the company’s pivotal role in the transformation of the medical care industry, the judging panel names e-Channelling Plc as winner of the 2019 award for Best Healthcare ICT Services Provider (Sri Lanka).

> PRIVATE CLIENT HOLDINGS: BEST INVESTMENT ADVISORY TEAM SOUTH AFRICA 2019 Looking after clients’ wealth is a point of pleasure and pride at Private Client Holdings, the South African firm that approaches wealth management from a customer-centric, goalbased perspective. The firm aims to outpace its peers and outperform the markets with a conservative yet results-driven approach that has consistently delivered respectable returns over the past 19 years. The firm’s long track record of strong and steady performance is a just one of the factors that elevates it above the competition. The innovative fintech solutions — a result of years of savvy tech investments — is yet another factor. Tech advances have enabled Private Client Holdings to operate at superior levels of efficiency and rapid response, but the firm counts its people as the force that most drives its success. Private Client Holdings employs over

100 highly qualified professionals who are dedicated to the firm’s philosophy: to provide investment advisory services that are tailored to the client and “grounded in independent, rational thinking, in diversification and in long-term value creation”. Private Client Holdings has been lauded as a champion of best practices with investment strategies that deliver consistent outcomes over time — and its track record has inspired confidence amongst investors as well as investment team members. The judging panel believes the firm’s blended and bespoke investment approach provides unparalleled support of the needs of high-net wealth families. The judges have no reservations in naming Private Client Holdings as the winner of the 2019 Best Investment Advisory Team (South Africa) award.

> SOCIÉTÉ CENTRALE DE RÉASSURANCE: BEST REGIONAL REINSURANCE WITH ARAB CAPITAL MIDDLE EAST AND AFRICA 2019 Moroccan insurance company Société Centrale de Réassurance (SCR) has been driving the development and resilience of the region’s insurance and reinsurance markets for almost 60 years. SCR has maintained its position as the foremost reinsurer in Morocco, and a reliable partner in the Middle East and Africa. Two years ago, the company launched a transformation plan that unlocked potential and has proven a sure path to sustainable growth. It focuses on integrating environmental, social, and governance (ESG) issues into the decisionmaking process. Sustainable business strategies enhance performance, deliver better results, and attract new customers — a win-win tactic for confronting challenges, with the bonus of a feel-good competitive edge. Collaboration is crucial to reducing climate-change risks, and SCR aims for long-term relationships

with governments, regulators, and NGOs to incorporate its proactive ESG policies. The transformation plan was designed to strengthen and consolidate the company’s gains, and to focus on value creation. Its four-pillar approach is: future growth and visibility; technical expertise and risk management; operational excellence and customer satisfaction; and an improved corporate culture and management style. SCR recruits committed and experienced team members, and all new employees undergo comprehensive training to ensure awareness and understanding of the corporate ethos. The judging panel applauds the socially responsible bent of the company and its commitment to all stakeholders. The judges announce Société Centrale de Réassurance as the winner of the 2019 award for Best Regional Reinsurance with Arab Capital (Middle East and Africa). | Capital Finance International



Global financial institution Euro Exim Bank Ltd has a focus on facilitating international trade. The bank, headquartered in St Lucia with an office in London, holds a "Class A" international banking license, affording it global reach and authorisation. The bank employs the latest technology and the brightest minds to ensure Euro Exim and its clients are protected from illegal activities. It has earned an enviable reputation for its comprehensive compliance policies, with around 40 percent of staff specialised in Anti-Money Laundering and Know Your Customer processes. Euro Exim

clients include small and medium enterprises as well as larger corporations and private individuals. With its aim of facilitating global trade flows, it offers trade-related banking services from international funds transfers to letters of guarantee. The latest addition to Euro Exim’s financial arsenal comes from a strategic partnership with the XRP cryptocurrency developer Ripple. As the first regulated bank to join the Ripple network, Euro Exim can offer friction-free trade solutions to make money move as information does in the 21st Century — instantly. The partnership strengthens

Euro Exim’s strong compliance process with enhanced authentication capabilities, as well as ramping-up speed and efficiency. The CFI. co judging panel has recognised the bank in the past for its trade-tailored solutions and strong due diligence. This year the judges praise the bank’s bold and savvy partnership move, enabling swift transactions, reduced liquidity and credit risks, and minimised fund transactions. For 2019, and the second year running, the judges name Euro Exim Bank as the winner of the award for Best Global Trade Services Bank.


Malta – based B2B GAMING SERVICES was founded some 20 years ago as betting and gaming migrated to a dynamic new frontier — the world wide web. The impetus was the need to establish a revolutionary business model that would provide end-customers with an entertaining gaming experience and safeguard their interests. The industry-leading company achieved its mission, and now boasts a lengthy and loyal list of top-tier clients, who adopted B2B’s best-of-breed platform, world-class sportsbook, and unparalleled in-play betting. B2B GAMING SERVICES approaches corporate social responsibility from an ethical perspective.

It has developed a 360-degree preventative and proactive model to address responsible gambling and protect players. The system processes large volumes of data history to effectively detect and address irresponsible gambling and minimise security risks. B2B GAMING SERVICES understands the power of big data to deliver relevant insights, and sees technology as a means of cultivating valid pathways for development and effecting positive change. The company is a powerhouse of possibilities, offering modular and scalable solutions for flexible and sustainable business growth. B2B Gaming Services foresaw a shift in the gaming landscape — with the line

between business providers, aggregators, and operators blurring through the years — and it has strategically positioned itself to capitalise upon that evolution. B2B operations are centred across the gaming spectrum as a platform provider, diversified aggregator, and licensed operator in a class of its own. In the future, B2B anticipates a rise in social gaming, with players eager to share experiences in the increasingly overlapping worlds of “online” and “offline”. The judging panel is willing to bet on that future, and declares B2B Gaming Services the winner of the 2019 award for Best Online Gaming Platform Solutions (Europe).


At the Community and Workers of Jamaica (C&WJ) Co-operative Credit Union, the driving modus operandi goes beyond the profit motive to address social inequality, increase financial inclusion and give back to the communities where it operates. C&WJ is currently the largest credit union in Jamaica, with over 20 branch locations serving more than 120,000 members. The Credit Union promotes financial inclusion by extending membership to some of the poorer regions of the island, meeting difficult Know-Your-Customer (KYC) requirements for formal mailing addresses with a flexible, common-sense approach for 88

dwellings that lack street names and numbers. C&WJ has developed underwriting standard that assesses applications’ demonstrated ability to earn rather than their full-time employment status to determine their eligible credit line. The underwriting standards ensure that C&WJ keeps arrears down to acceptable ratios and sets provisions against loan defaults. C&WJ offers its members – who are from a wide cross-section of persons in various industries and professions – a full suite of financial services from savings to specialty loans for homes, autos or education. C&WJ places education at the forefront of its | Capital Finance International

social outreach initiatives. In 2018, C&WJ Cooperative Credit Union awarded over $5 million in scholarships, bursaries and grants at the tertiary and secondary levels: $3 for students pursuing programmes at the tertiary level and 95 scholarship and bursaries valuing over $2 million were granted to children of members throughout the branches of the Credit Union. The judging panel commends the Coop’s educational emphasis and is delighted to recognise C&WJ Co-operative Credit Union as the 2019 winner of the Best Social Impact Financial Solutions (Jamaica) award.

Summer 2019 Issue


The SBM Group has a firm foothold in Mauritius with a growing regional presence through its operations in Madagascar, India, and Kenya, plus a banking licence to operate in the Seychelles. Founded in 1973, SBM has been expanding its product line-up and geographic network to facilitate cross-border trade and investment along the Asia-Africa corridor. The intricacy of international finance means there are seldom one-size-fits-all solutions, and the bank has developed strategic plans for each region. SBM currently operates four branches in India, which it recently consolidated into a Wholly Owned

Subsidiary (WOS) structure — the first foreign WOS bank to be granted a full banking licence. Four more branches are slated for completion this year, and as many as 15 are anticipated by the end of 2020. India can be a tricky market to navigate, but SBM has the experience and expertise to tailor risk profiles by region. SBM has shifted its focus for the massive Indian market, with special emphasis on encouraging the cross-border business activity of SMEs throughout the Indian Ocean Rim. In the booming Kenyan market, SBM Group is a strong player with over 50 branches, focusing

on commercial banking. The global economy may have entered another cycle of slow growth, but SBM operates in regions where GDP growth is forecast to nearly double the average. Trade between Africa and India is booming, and the group is perfectly poised to offer in-house financing solutions for the entire region. The judging panel has recognised SBM in several previous awards programmes, and is happy to see the group never rests on its laurels. The judges declare the SBM Group the winner of the 2019 award for Best Financial Group (Indian Ocean Rim).


Austria-based banking conglomerate BAWAG Group AG – its roots date back to 1883 – has been a major contributor to the stable economy of the DACH region (Switzerland, Austria and Germany). DACH has benefited from good governance and efficient operations — two areas of specialisation for BAWAG Group. It underwent a fundamental bottom-up analysis to pinpoint transformation strategies that would improve customer service, maximise cost efficiency, and strengthen its commitment to corporate social responsibility (CSR). BAWAG Group views CSR as an ethical framework to

support and guide its business pursuits. It has developed a comprehensive plan to unlock organic growth, balanced with economic, environmental and social objectives. BAWAG Group follows a four-pillar growth strategy that focuses on expanding core markets, driving efficiency through operational excellence, maintaining a safe and secure risk profile, and easing the lives of its customers. Throughout the group’s subsidiaries — including one of Austria’s largest banks, with 2.5m customers — the employees abide by the company’s exacting code of conduct and support the

UN’s Global Compact Principles, Women’s Empowerment Principles, and Sustainable Development Goals. The group sets the bar high for corporate governance as well as for performance, and 2018 profit before tax increased by 14 percent compared to 2017. The judging panel believes the group’s focus on efficiency has been crucial to its impressive shareholder returns and customer service, and has benefited the environment. The judges congratulate BAWAG Group AG, winner of the 2019 award for Best Banking Group Governance (DACH).


UnionBank of the Philippines is more than a top-tier financial institution — it’s a universal bank on a mission. Digital innovation drives the company’s transformation strategy and ensures performance targets are met. With an emphasis on bolstering capacity, the bank has a fintech backbone fortified by a network of 45 branches. UnionBank has expanded its customer base by a million over the past 12 months and now reaches five million clients — and anticipates an additional 500,000 by the end of 2019. This surge came without the expected spike in operating expenses thanks to

an energy-efficient infrastructure that embraces AI and promotes eco-friendly initiatives such as paperless branches. UnionBank is a trailblazer of the Asian financial markets as the only bank to enable Filipinos to directly transfer digital funds between accounts. The bank understands that the future of banking is digital, and it is committed to arming today’s workers with tomorrow’s skills. UnionBank recently completed a training programme in which 100 students — most of whom had worked for the bank as tellers, sales staff, or auditors — enhanced their skills | Capital Finance International

in blockchain. The bank will invite 60 students to its Data Science and AI Institute to take advantage of other professional development opportunities. Upcoming developments include blockchain programmes and partnerships with foreign monetary authorities to facilitate digital fund transfers between Singapore and rural banks in the Philippines. The judging panel declares UnionBank of the Philippines — a previous award winner — as the worthy recipient of the 2019 award for Best Universal Bank (Philippines). 89


Belgium-based Delen Private Bank has a reputation as a trailblazer of digital banking, although its roots stretch back 80 years. Delen capitalises on fintech advances to improve operational efficiency and support existing client services. Technology streamlines operations and enables its investment managers and staff to dedicate more time to personal contact with clients. Delen has handled its IT needs in-house since the 1980s, tailor-making client databases and

websites, and introducing a banking app that serves as a pocket-sized private banker and family wealth planner. Continuous improvement of digital services is the Delen way, and ease-ofuse is prioritised in its product line-up. Some of the milestones reached this year include fresh features for the current app, including cameraphone document uploads, and the creation of a new app allowing prospective clients to explore the Delen environment. New clients can set

up an account with Delen’s digital onboarding process, requiring little more than an ID card and a digital signature. To safeguard clients’ personal data, Delen focuses strongly on security to elevate trust with the clients. The judging panel has recognised Delen in the past for its perfect pairing of technology and tailor-made services, and for 2019 Delen Private Bank takes the award for Best Digital Private Bank (Belgium).

Credit Direct pioneered the structured non-bank unsecured lending market in Nigeria, serving a previously neglected segment of the population with loan and investment products. The company entered the market more than a decade ago, providing clients of limited means with microloans for education, emergencies, business start-ups or purchases. Credit Direct introduced the concept of unsecured consumer finance to Nigeria, at the time considered a risky venture, but its success over the years has encouraged others to follow its lead. Credit Direct welcomes the competition; its goal has

always gone beyond the profit motive. It seeks to positively impact the lives of their customers and host communities by filling a huge socioeconomic need. The Company’s values which include CARE distinguish it from others in the field and go to the core of its Corporate Social Responsibility plan. The company’s caring nature distinguishes it from others in the field and goes to the core of its Corporate Social Responsibility plan. Credit Direct upgrades schools and donates educational supplies, provides free health checks and training courses on entrepreneurial skills and service,

and grants scholarships to high-achieving students. It sponsors community events to raise financial literacy, and partners with other organisations to support disabled citizens. Credit Direct sees its team as its greatest asset and is proud that its staff are united behind a common purpose. The judging panel applauds the company’s willingness and ability to ease the struggles of many — and remain profitable. The judges declare Credit Direct Limited the winner of the 2019 award for Best Social Impact Finance Partner (Nigeria).



After solidifying its status as a star of the Indian Ocean Islands’ financial firmament, the SBM Group set its sights on expanding its presence from Mauritius to Asia and Africa. For SBM, East Africa — specifically Kenya — was the obvious choice. Kenya has a booming population, one of the youngest and best-educated on the continent. The market presents unusual opportunities for growth, as an exodus of banks left a financing gap of an estimated $120bn. SBM entered the African financial market in 2017 with the acquisition of a minor bank 90

with major issues; it acquired selected assets and liabilities of a bigger bank the following year – making SBM Group a strong player in the Kenyan market. For SBM’s expansion plans, acquisition trumps merger as the bank prizes its autonomy. SBM Bank is the flagship organisation of the group, which has accumulated nearly five decades of expertise along the way — experience it has used to transform two failing institutions into stable ventures. Since landing in Kenya, SBM has gone from 100 employees to 800, 10 branches | Capital Finance International

to over 50, 5,000 customers to 220,000. Branded under SBM Kenya, the network now comprises 53 branches across the region. SBM aims to establish a Kenyan bank, run by Kenyans, for Kenyans, and underpinned by international best-practice. SBM has been on the radar of the judging panel for several years, having come to the panel’s attention for its resilience, strong liquidity, and unerring vision. This year the judges are delighted to present the SBM Group with the 2019 award for Best Growth Strategy (Kenya).

Summer 2019 Issue

> BEDROCK GROUP: BEST INVESTMENT PORTFOLIO MANAGER UNITED KINGDOM 2019 The Bedrock Group is the brainchild of three very old friends with years of shared experience in the financial sector. The firm was founded in 2004 with the goal of providing a more holistic approach to investing. Relationships anchored in customised services and sound ethical practices form its foundations, and the group has grown through successful strategies and word-of-mouth referrals. The firm serves ultra-high-net-worth families, investment professionals, endowments, foundations, and institutions worldwide via its Geneva headquarters and offices in London and Monaco. It has maintained a sense of comradery and mutual respect that gives clients confidence and stability, fostering a strong team spirit. Open communication encourages team members to formulate innovative solutions to cater for clients’ sometimes complex needs. The firm hires and

retains top talent, and prides itself on its bythe-book policies and principles. The founders and investment advisors at Bedrock have an active interest, investing personal resources along with customer capital. This has earned the group a reputation for keen risk-assessment and exemplary asset management. In an evolving financial environment with constantly changing regulations, families rely on Bedrock’s unbiased financial advice and commitment to preserve and grow their wealth. The CFI. co judging panel acknowledges Bedrock’s consistent efforts to present clients with original investment opportunities — including its own private equity tech funds — its dogged pursuit of investment objectives, and meticulous attention to detail. The judges had no hesitation in declaring the Bedrock Group winner of the 2019 award for Best Investment Portfolio Manager (United Kingdom).

> WING (CAMBODIA) LIMITED SPECIALISED BANK: BEST SOCIAL IMPACT BANK CAMBODIA 2019 Cambodia’s Wing Specialised Bank is challenging the notion that cash is king by putting the power of digital banking in the hands of the people, including — and specifically targeting — the lower levels of the socio-economic pyramid. Wing dominates Cambodia’s mobile money and electronic payment services, with more than 6,000 Wing Cash Xpress outlets nationwide and 30,000 local and global partnerships with companies including Mastercard, Western Union, and MoneyGram. Wing’s payment system is fortified by companies large and small using its payroll and disbursement services. Wing aims to provide all Cambodians with mobile financial services, and to contribute to the sustainable progress of the nation and its people. That drive begins in-house with Wing’s established work culture, where career aspirations are nurtured and hard work is rewarded. With national wages averaging just

$180 per month, Wing agents earn upwards of $600 — and the bank has hired 1,500 new agents since 2018. Mobile money transactions increased from $60m in 2018 to $100m in 2019, and the Wing Wallet app now has more than 1.5m users. Wings facilitates transport throughout Cambodia, providing a tap-and-pay option for bus travel and even participating in the “tuk-tuk” taxi market. Of the country’s 20,000 tuk-tuk drivers, 90 percent have signed up for the system, and process up to 5,000 transactions daily. Wing also operates automatic payroll services for around 240,000 workers, and partners with the Ministry of Health to provide financial assistance for pregnant women. For the second consecutive year, the judging panel declares Wing as a winner: Wing Limited Specialised Bank wins the 2019 award for Best Social Impact Bank (Cambodia).

> UNITED WATERS INTERNATIONAL AG: MOST INNOVATIVE WATER PURIFICATION TECHNOLOGY GLOBAL 2019 Water, water everywhere, and not that many drops to drink… but Swiss-based United Waters International AG is striding towards a solution. The company was founded in 2005 to address the growing global water crisis, with the backing of scientists from the Royal Institute of Technology in Stockholm. Less than one percent of the Earth’s water is potable, making it a luxury item in underdeveloped or water-scarce regions. With headquarters in Switzerland and subsidiaries in China, India and Sweden, United Waters is well positioned to launch its innovative BioGreen water purification system. The system is the result of 40 years of research and development by some of the brightest minds in the business, from academics and scientists to technical experts and water specialists. The BioGreen system is

a sustainable water purification solution that uses no chemicals and creates no harmful byproducts. It consumes just one percent of the energy that conventional systems require, and features a biological process that removes all metals, bacteria, viruses and microbes. It fits in a single shipping container, yet is capable of purifying 2,500 m³ water per day. And, typical of a Swiss-made product, it comes with rapid delivery and a 30-year guarantee. United Waters has registered on the radar for some time for its life-saving efforts. The judging panel is happy to reaffirm its admiration for the company. United Waters International AG, a winner in 2017 and 2018, is now presented with the 2019 award for Most Innovative Water Purification Technology (Global). | Capital Finance International


> LOCKHEED MARTIN: MOST INNOVATIVE NEXT-GEN TECHNOLOGY SOLUTIONS GLOBAL 2019 Lockheed Martin understands missions of critical importance. From unlocking new energy sources to identifying potential threats, the global security and aerospace company is a powerful partner to governments and enterprises around the globe. The company employs a workforce of 105,000 professionals — top tech talent, exceptional engineers, and leaders with long-term vision — all striving to anticipate and meet the future needs of its clients today. Lockheed Martin (NYSE: LMT) is a pioneer of advanced security technology, driven by the belief that complex challenges are opportunities to advance scientific discovery and deliver solutions with global impact. The company has played a pivotal role in the development of the global positioning system (GPS) satellite constellation, contributing more than 60 percent of the satellites that currently orbit the Earth. LMT satellites provide positioning, navigation and timing signals to more than four billion

users worldwide — military, commercial and civil. They connect communication services and support security forces with rapid, reliable intel. They enable early warnings of extreme weather events and gather big data caches for climate-change studies. Lockheed Martin invests in disruptive technology that to helps keep people safe, from outer space to cyberspace. LMT tech protects crucial IT networks — including military, energy, and transportation systems — from hackers by training and arming cyber-protectors with a full-spectrum of tech capabilities. If a hacker or hurricane does manage to knock out the lights, Lockheed Martin has developed a revolutionary, long-lasting energy storage solution that will provide more than 12 hours of emergency power. The judging panel applauds the company’s emphasis on impact, and congratulates Lockheed Martin on winning the 2019 award for Most Innovative Next-Gen Technology Solutions (Global).

> JM FINN & CO LTD: BEST WEALTH MANAGEMENT ADVISORY FIRM UK 2019 UK wealth management advisory firm JM Finn & Co contradicts the “bigger is better” philosophy; it aims to be the best — not the biggest. JM Finn focuses on structuring and managing portfolios to meet each investor’s needs, and delivering solid long-term performance allowing for adaptability and responsiveness. Continuity is a key theme for the firm, and the low turnover and long tenure of staff has enabled it to cultivate client relationships that have endured generations. Even the CEO, who has been with the company since 1997, is considered a newbie in an establishment that has a 70-year-plus history of employee engagement and retention. Each JM Finn investment manager takes personal responsibility for client wealth strategies, soliciting regular feedback

to determine direction and deliver rapid response and execution times. JM Finn has invested in infrastructure and technology over the years to give the firm, and its clients, a stable footing in the world’s constantly evolving financial markets. Its roots lie in private client broking, with expert investment managers delivering superior service and building relationships built on trust. Families have relied on JM Finn over generations to manage investment portfolios. Trust and success invariably translate to good word-of-mouth references, and JM Finn clients have reliably recommended the firm to others. The judging panel cites the firm’s history of stability and expertise, and welcomes JM Finn & Co Ltd as winner of the 2019 award for Best Wealth Management Advisory Firm (UK).

> MASTHAVEN BANK: MOST INNOVATIVE DIGITAL RETAIL BANK UK 2019 Masthaven Bank steers clear of a one-size-fits-all approach to embrace the diversity of the financial ecosystem, from customers to colleagues. The online bank prefers an organic approach to growth, with a mission to deliver what each client needs. Masthaven’s strategy of superior customer service and tailored solutions has proven successful, and its customer base more than doubled from 2017 to 2018. Customer satisfaction at Masthaven is high, with praise for its effective blend of “old and new, innovative and traditional”. Opening a personal or business savings account at Masthaven is a simple and straightforward process with convenient online tools to compare rates and customise terms. The bank has developed an innovative approach to financing, moving beyond tick-box underwriting to consider each lending request on its own merits to provide a more personal service. It offers flexible 92

mortgage options, including first- and secondcharge mortgages for residential and buy-to-let properties. Masthaven is proud to be a different kind of bank, providing financing solutions for even those developers and homeowners blocked from traditional lending avenues. Masthaven offers access to property development loans as well as short-term bridging finance. An influx of funding — a £60 million equity investment by Värde Partners — has enabled Masthaven to increase its customer base and fuel innovative advances. The London-based bank has hired fresh talent to attend to the needs of its growing client list, necessitating a move to new offices in Covent Garden. The judging panel declares Masthaven Bank as the 2019 winner of the award for Most Innovative Digital Retail Bank (UK) — its second consecutive win for the category. | Capital Finance International

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> Africa

Kenyaâ&#x20AC;&#x2122;s Banking System Has Aces Up Its Sleeve for East African Expansion Why do Kenyan banks punch above their weight in cross-border expansion? They have a competitive advantage that comes from several market specific factors. While individual factors may be replicated, putting them all together is no easy task; this reflects well on the industry and regulators. In 2018, Kenyan banks operated 267 branches in East Africa Community (EAC)1 member countries, the most by any member. Now they are beginning to expand beyond the region. In May, Kenya Commercial Bank (KCB), announced plans to buy a bank in the Democratic Republic of Congo (DRC), Africaâ&#x20AC;&#x2122;s fourth most-populous country. It also plans to open its first branch in Ethiopia by 2020. Another leading Kenyan bank, Equity Group, has announced plans to enter Mozambique and Zambia; it already entered DRC two years ago. In total, the foreign subsidiaries of Kenyan banks hold more than $5bn in assets.

Chart 1: Banking System Size in 2016. Source: IMF and World Bank.

94 | Capital Finance International

Summer 2019 Issue | Capital Finance International



wo reasons for Kenyan banks’ success in cross-border expansion: their size, and the country’s banking system. By several measures, Kenya is the regional heavyweight, despite not having the biggest population (chart 1). In banking, size brings economies of scale, and cheaper access to credit — so bigger banks tend to have a competitive advantage. One way to leverage that advantage is to expand further. In Kenya, the market is already crowded with domestic and foreign rivals. Nearby countries with smaller banks, and less competitive banking systems, present enticing opportunities. It is no surprise that organisations such as KCB and Equity Group are leading the way. Competition has sharpened Kenyan banks competitive edge. Kenya has 15 foreign banks, three with part-government ownership, 13 microfinance banks, and some mobile money companies. Such diverse players suggest a high degree of competition.


Outward FDI Exports

Congo DR Egypt Ethiopia Mauritius Rwanda Somalia South Sudan Sudan Tanzania Uganda

USD m.

Zambia 0








Chart 2: Kenyan Exports and Outward FDI. Largest African partners, 2017. Source: UN Comtrade and Kenyan Central Bank.

Another cross-border advantage is that Kenya has been a world leader in the adoption of digital banking channels. In the domestic market, digitalisation has led to strong customer growth, and it promises to do the same in neighbouring countries. According to the 2019 FinAccess Household Survey, between 2006 and 2019, financial inclusion in Kenya increased from 26.7 percent to 82.9 percent, with digital channels (eg M-Pesa) being key drivers. Between 2009 and 2019, users of mobile money services increased from 28 percent to 79 percent. The system did not exist in Kenya in 2006, but has now become the leading channel, with banks partnering with mobile network operators. Traditional banking channels attract just 30 percent of users, and the percentage has decreased from the 2016 level. Adopting digital banking channels has decreased the number of branches and staff. While branches will always remain an important selling channel, particularly for high value transactions, digitalisation has reduced their importance. The growth rate of branches has been slowing in Kenya, with the 2017 results showing a 1.5 percent decrease. Staff numbers hit a local peak in 2014, at 36,923 people, but has been declining since, sitting at 30,903 in 2017. Neighbouring countries are following Kenya’s example with digitalisation, but have much ground to catch up. In terms of access to a digital account, Uganda has 63 percent of users, Tanzania 64 percent, and Kenya 87 percent2. Trade and outward FDI has also helped Kenyan banks to expand, particularly in East Africa. This effect has been called “following your customers”. As a bank’s customers expand into neighbouring countries it makes business sense for their bank to also expand into those countries to provide end-to-end services. Chart 2 shows Kenya’s high level of trade and investment with the East African community in key neighbouring 96

countries. These statistics suggest that Kenyan banks should have also expanded into Egypt, but the Egyptian banking sector has many barriers to entry. Increased economic and regulatory integration among the EAC countries has also helped Kenyan banks. The customs union in 2005, and the common market protocol in 2010, helped to increase trade. The common market protocol also initiated the Financial Sector Development And Regionalisation Project, with the aim of harmonising financial laws, enabling the mutual recognition of supervisory agencies, and the integration of financial market infrastructure. The proposed monetary union (target date 2023) will also be beneficial. Kenyan banks are well regulated in terms of the soundness and depth, as measured by the World Economic Forum’s 2018 Global Competitiveness Report (table 1). This gives a competitive advantage in terms of risk management, which gives banks greater resilience and confidence when entering new markets. In the long term, it should also contribute to greater profitability. Financial system regulation has also been important. As microfinance banks began to develop in the early 1990s, the Kenyan Central Bank was quick to recognise their potential for increasing competition and financial inclusion. Country Kenya Burundi Democratic Republic of Congo Ethiopia Rwanda Tanzania Uganda Zambia

WEF Ranking for Financial System 73 135 133 126 84 116 119 121

Table 1. Source: World Economic Forum Global Competitiveness

Report 2018. Note: ranking 1 is best. | Capital Finance International

It supported their growth with the Microfinance Act 2006, Regulations 2008, and subsequent incremental amendments. The central bank was quick to support the growth of mobile money by deciding to insure M-Pesa deposits under its deposit insurance fund. It also moved to audit M-Pesa once its rapid growth drew criticisms from the banks, giving M-Pesa a vote of confidence. The Kenyan Central Bank has helped increase competition through the Finance Act of 2009, which allowed financial institutions to use agents for services. Kenya’s banking regulations have gradually evolved since independence, shaped by several crises. A 1983 banking crisis led to the start of deposit insurance in 1985. A crisis in 1998-99 (under-capitalisation, non-performing loans, and weak corporate governance) led to enhanced prudential supervision by the central bank. This was further strengthened by compliance with the first Basel capital requirements in 2000, and reforms recommended by a Financial Sector Assessment Programme in 2003 (IMF and World Bank). In contrast, many neighbouring countries began similar regulations later or still lag Kenya. Large numbers of diverse institutions have evolved since independence, with the help of the central bank. At independence in 1963, there were nine foreign banks and several nonbank institutions. Central bank policies in the 1970s encouraged rapid growth in local nonbank institutions, with most becoming banks in the mid-90s as regulations began to favour them. Then, in the mid-2000s, microfinance banks and mobile money began to grow and gain support in terms of regulation. i 1 Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda. 2 The latest available year for Uganda and Tanzania was 2016 while for Kenya it was 2019.

Summer 2019 Issue

> Wide

Experience and Many Talents Make Grant a Ghanaian Treasure Yofi Grant is a renowned Ghanaian investment banker with more than 30 years of experience in banking and finance.


aving served in various capacities in corporate finance, credit, marketing and investment banking, Grant has broad knowledge of African financial markets, and has cultivated strong relationships with international private equity funds, portfolio investment managers and brokerage funds. He was responsible for the development and implementation of AAF SME Fund LLC, one of the largest agriculture funds in Sub-Saharan Africa, and helped it achieve its first close of $30m. Grant is a council member of the Continental Business Network of the African Union, which advises African governments on private sector finance and infrastructure. He has served in directorship roles in Databank Agrifund Manager Ltd, Databank Financial Services Ltd, and Databank Brokerage Services Ltd. In 2009, he was the executive director for Business Development for the entire Databank Group. Grant was a consultant on finance and business for the Africa Asia Business Forum (AABF) organised by the UNDP, which ran workshops in 12 African and six Asian countries in 2002. He is partner and co-founder of a number of companies, including investment advisory firm Grant Dupuis Investment Ltd, and Coldwell Banker Ghana, a company which holds the master franchise license for Coldwell Banker (of the Realogy Group in New Jersey, US, the world’s largest real estate organisation) for Ghana and Nigeria. Grant recently co-founded Praxis Fortune Calibre, a firm that offers business and investment advisory and consulting services across the continent. He holds several supervisory board mandates in private sector companies in the telecommunications, commodities, and education sectors, and has held policy advisory roles for the government, particularly in private sector development. He was chairman of Ghana Telecom (One Touch), the Listing Committee of the Ghana Stock Exchange, and the Venture Capital Association of Africa. Grant was also special advisor to the Minister for Private Sector Development, Ibrahim

CEO: Yofi Grant

Mohammed Awal, between 2002 and 2006. He advised and assisted Awal with policy formulation and implementation, and assisted with achieving financing for private sector development projects. Grant currently serves on the advisory boards of the Ghana Export Promotion Authority, the Ministry of Foreign Affairs and Regional | Capital Finance International

Integration, and is a member of the board of trustees of the ACP Endowment and Trust Fund. As the CEO of the Ghana Investment Promotion Centre, it is Yofi Grant's singular vision to make Ghana the “best place to do business in Africa”. He lives by the guiding principles of honesty, integrity and hard work. He also believes that everything is achievable with faith, will, desire and focus. i 97

> Reforms

Ease Business Process and Bring Investment to Ghana The Ghana Investment Promotion Centre (GIPC) is receiving governmental support in its bid for an improved investment and business climate in Ghana.


n the past year, the GIPC has made efforts to improve the ease of doing business in the country. It embarked on stakeholder engagements in advocacy for reviewing the investment law to benefit investors, the government, and the people of Ghana.

programme in the country’s banking sector. The move was intended to control the movement of capital. It was a critical time to have the recapitalisation policy as it provided solidity and a reliability to the banking sector.

It is expected that the Minimum Equity Capital requirements, among other investment legislation, will become more attractive to foreign and local investors.

Those left in the Ghanaian banking sector are the “real players” who will carry out banking business with solid balance sheets and sound operating principles. This is a crucial requirement for transparent and predictable business enactment.

The government of Ghana recently embarked on tax reforms — including the scrapping of some taxes and the reduction of other tax margins —saving millions of dollars in investment capital.

In March of this year, the vicepresident of the republic, Mahamudu Bawumia, announced 10 new policy measures intended to further improve the country’s business environment.

The government has also implemented the Single Window System, launched in 2002, which has been progressively updated and extended in line with international best-practice. The platform reduces the need for multiple data entry; instead data can be exchanged and reused electronically, achieving faster, more accurate results, and improving the ease of compliance with government requirements.

These new measures are expected to come into effect this summer. They include measures for obtaining building permits, the energy sector, trans-border trades, company creation and the insolvency resolution process.

Transparent and predictable customs procedures are seen as essential for attracting foreign direct investment (FDI). In 2018, the government of Ghana embarked on a consolidation 98

In the framework of those measures, the tax, legal and company creation processes will be digitalised. The government has also launched a platform to simplify registration for prospective business operators in the country. Registration forms for the Ghana Revenue Authority Tax portal, the Business Registration form of

Summer 2019 Issue

the Registrar General’s Department (RGD), and the Business Operation Permit are now fused together to eliminate bottlenecks. At a press conference in Accra, the Registrar General, Jemima Oware, explained that the process had been abbreviated from eight steps over 14 days to three steps over four days. This is a boon to the growing number of small and medium enterprises in the country. By streamlining processes, procedures, and regulations, the business environment will be smoother for start-ups and contribution to direct investment. Oware noted the reform improved the ease of doing business in Ghana, while making the role of ICT essential to efficiency. Since March 25 of this year, new businesses cannot register until the digital address of the business is supplied to enable seamless registration, she said. Early 2019, Forbes ranked Ghana ninth of 47 African countries, and 94th globally (of 161 countries) as the best for doing business. The World Bank 2018 Ease of Doing Business ranking has seen Ghana moved up six notches from 120th to 114th. The Ghana Investment Promotion Centre (GIPC) was in 2018 again adjudged the Best Investment Promotion Agency in West and Central Africa. The centre received the same award in 2015, 2016, and 2017. The centre was also given the Loyalty Award for being consistent in its investment promotion. Both awards were given at this year’s Annual Investment Meeting (AIM) 2019 Investment Awards Gala Dinner held in April at Fort Island, Madinat Jumeirah, in Dubai. presented the centre with the 2019 award for Best Investment Promotion Agency in Africa — for the second year running. At the beginning of 2018, the GIPC projected to register $10bn in FDI, based on the conclusion of discussions with targeted investors on strategic investments under the One-District-One-Factory Programme, and sectors including railways, oil and gas, mining and energy. Discussions are on-going with the prospective investors. Investments recorded by the GIPC, as well as provisional figures provided by some other key institutions for the fiscal year ending December 2018 reached $3.68bn, with the FDI component hitting $3.46bn. At least 18,825 jobs are expected to be generated as a result of these investments. i 99

> Private Client Holdings:

South African Company Leading the Way for the Country’s Multi-Family Offices While the concept of a multi-family office is by no means a new idea in global terms, it is a relatively young concept, and a niche offering, in Southern Africa.


rivate Client Holdings (PCH) is taking the lead in Southern Africa when it comes to providing high-net-worth (HNW) families with an all-inclusive wealth management solution. It is a forward-thinking service that PCH is able to deliver, thanks to a carefully developed, integrated organisational structure. The company was founded as a corporate tax consultancy practice in Cape Town, South Africa, in 1990. Since then it has developed into a full spectrum asset and wealth-management company and multi-family office, an area in which PCH is achieving traction.

In an increasingly complex world, PCH focuses on nurturing the wealth of HNW individuals and their families. It follows a structured and holistic approach to achieve each family’s specific financial goals. Successfully managing wealth involves drawing on a broad range of services. PCH has designed a solution-oriented process based on six specialist divisions: wealth management, portfolio management, financial services, 100

fiduciary services, cash management and risk management. While each unit concentrates on a different aspect of wealth management, together they deliver a cohesive and in-depth solution. “The term ‘family office’ used to conjure-up images of Swiss bankers fawning over royalty and the super-rich,” says PCH director Grant Alexander, “orchestrating obscure investments in exotic locations, often under a veil of secrecy and mystery. Historically, that may have been the case, but in modern South Africa the multifamily office has evolved into a transparent offering which provides a bespoke, complex wealth management service and co-ordinates all financial aspects of a client’s life.” PCH’s specialist skills in the six pillars of wealth management is backed by a professional and dedicated support team of professional wealth managers, accountants, tax experts, attorneys, investment analysts and administrators. The multi-award-winning company is one of only 12 Financial Planning Institute (FPI) practices | Capital Finance International

recognised for their commitment to best practice, corporate governance and strict adherence to regulations. The FPI of Southern Africa is the only institution in the country to offer CFP (certified financial planner) certification. PCH has further enhanced its internal compliance capability by adding skilled professionals to the compliance team which ensures that all internal processes, standard operating procedures and workflows are clearly documented and monitored. PCH focuses on a goal-based approach to wealth management and offers its clients a complete range of professional services. The organisation takes pleasure and pride in nurturing wealth for its clients and families. “Nurturing wealth” provides the foundation of the PCH mission statement and its relationship with all stakeholders — a relationship based on trust, mutual respect, expert knowledge and a genuine interest in clients’ wellbeing. It is a successful working philosophy that is underpinned by principles of service excellence, innovative ideas and adherence to the highest level of ethics. i

Summer 2019 Issue

> Private Client Holdings Management:

Over a Quarter Century of Asset Management in Southern Africa On the cusp of South Africa's move to democratic rule in 1990, Private Client Holdings (PCH) opened its doors in Cape Town, South Africa.


rom humble beginnings as a corporate tax consultancy practice, the company has developed into providing a complex multi-family office offering. This offering spans a range of financial management solutions including asset management, tax and accounting services, as well as full spectrum of wealth and fiduciary management. Owners and directors Grant Alexander and Andrew Ratcliffe saw a bright future for South Africa and founded PCH with the vision of becoming a leading boutique provider of wealth management services to high-net-worth (HNW) individuals and their families. PCH focused on attracting entrepreneurs, high-earning executives and successful ownermanaged businesses. “During our 29-year history we have focused on being recognised as the pre-eminent provider of wealth management and multi-family office services in South Africa,” said Alexander, “and we have achieved this, with a growing client base and increasing assets under management year-on-year. “We are proud to say we were pioneers in the introduction of multi-family office services and advice in the South African arena, which has paved the way for others in the industry to follow. “We have remained focused on nurturing our clients’ wealth and we have solidified our offering based on a clear principle of goals-based wealth management, supported by great FinTech solutions. PCH continues to differentiate itself in terms of long-term relationships, and remains focused on our clients’ interests and goals.”

Owners and Directors: Grant Alexander and Andrew Ratcliffe

Ratcliffe advises that while riding out the volatility in the currency markets, PCH as

“RDR can only be a good thing and PCH is well positioned in the sense that our advisory, asset

a company is prepared for the big changes expected in the next phase of the country’s planned retail distribution review (RDR). “We have had extensive legislation implemented over the years, in-line with global standards, and the industry has raised the bar.

management, financial services and fiduciary entities are all separate companies that work together on demand.” While much of PCH’s success has hinged on the effective implementation of business strategies, the company’s leaders remain mindful that this could not have been achieved without the support and efforts of the PCH teams. i

"We have remained focused on nurturing our clients’ wealth and we have solidified our offering based on a clear principle of goals-based wealth management, supported by great FinTech solutions." | Capital Finance International


> Africa Rising, But Not As Much As Expected:

How the C-suite Needs to Approach Lower Growth in African Markets

By Lullu Krugel Chief Economist PwC Strategy& and Christie Viljoen Economist PwC Strategy&

A few weeks before Christmas 2011, The Economist provided a gift to companies searching for the next frontier of expansion and revenue growth: “After decades of slow growth, Africa has a real chance to follow in the footsteps of Asia,” the magazine announced.


round the same time, the International Monetary Fund (IMF) was forecasting average real economic growth of nearly 5.4 percent per annum in the SubSaharan African region for 2012-2016. This was in-line with pre-global financial crisis levels. Investment interest boomed alongside the Africa Rising narrative. Data from the United Nations Conference on Trade and Development (UNCTAD) indicates that foreign direct investment inflows to the African continent increased from less than $30bn in 2005 to $47bn in 2011, with a peak of $57bn in 2015. Apart from the 2009-2010 period, there was very little downward pressure on African FDI from the global financial crisis. SUB-SAHARAN AFRICAN GROWTH BELOW EXPECTATIONS However, the Africa Rising narrative was not as sunny as anticipated. Average real economic growth was only 3.9 percent from 2012-2016 – 1.5 percentage points below the IMF projection. A correction in global commodity prices during 2015-2016 resulted in real GDP growth of 2.4 percent per annum during the 2016-2018 period. Forecast average growth of around 3.6 percent per annum during 2019-2021 is an

"You’ve got to get out of the prediction game. The thing we are talking to CEOs about is how do you do more scenario planning." PwC International Chairman, Bob Moritz, January 2019

improvement on recent trends, but notably lower than a level of the five-plus percent that was for quite some time thought to be a long-term growth level for Sub-Saharan Africa. Based on the difference between initial growth expectations and reality, the African economy is currently up to 20 percent smaller, in nominal US dollar terms, than had been envisioned

around the time of the Africa Rising publication in 2011. This would have caused some to reconsider their African investment plans. According to the UNCTAD World Investment Report 2019, foreign direct investment inflows declined from the peak of $57bn in 2015 to $41bn in 2017. An uptick to $46bn in 2018 was largely associated with a strong recovery in inflows to South Africa following the ousting of former president Jacob Zuma. STRATEGISING FOR AN UNCERTAIN FUTURE Data released by PwC in September 2019 at the World Economic Forum (WEF) on Africa indicates that 92.8 percent of African CEOs are “somewhat to very confident” about their organisation’s prospects for revenue growth over the next three years — higher than the global average of 85.2 percent. Are these views based on a high-growth, five-percent-plus scenario? What about a low-growth scenario, as seen in recent years? What if long-term economic growth forecasts made this year are again optimistic, and market growth does not keep pace with expectations? Slower growth is a challenge to companies that are already committed to the continent with human, financial and physical capital.

60 50

US$ billion

40 30 20 10 0 2002










Chart 1: FDI inflows to Africa. Source: UNCTAD

102 | Capital Finance International








Summer 2019 Issue

7 5.8

6 5.2 Real GDP growth (%)











4 3

















2 1


0 2011






September 2011

2019f April 2019

Chart 2: then and now - IMF expectations for Sub-Saharan African economic growth. Source: IMF

There are two approaches to find strategic direction. Firstly, a two-pronged scenario planning exercise to understand the possible economic and political futures facing Africa over the next five to 10 years, and the key uncertainty factors facing specific organisations. Secondly, the application of a cost-management review, with a business model to focus on enabling differentiating capabilities, aligning their cost structures accordingly, and organising for growth.



THE IMPORTANCE OF PLANNING FOR DIFFERENT SCENARIOS PwC’s Strategy& developed three scenarios for Sub-Saharan African growth towards 2024. The baseline outlook is similar to that of the IMF, with expectations of real economic growth rising to three percent in 2018, and 3.5 percent in 2019. A resulting recovery should see economic growth rise to four percent from 2023 – a level below that initial “five+” percent range. According to the IMF, macroeconomic policies in the region are reasonably well calibrated in most countries to attain this four percent growth level over the medium term.



The downside scenario sees Sub-Saharan African economic growth meander at or below the three percent level over the medium to long term. This is based on the view that current macroeconomic policies fail to adapt to external shocks. This could include several possible shocks, including a significant slowdown in the global economy (as seen in 2009-2010) or a drop in commodity prices (2015-2016). Sub-Saharan African countries are already at a growing risk of debt distress due to heavy borrowing and wide fiscal deficits, and would not be able to keep up with the baseline economic growth scenario if external shocks deepen their financial challenges.



0.0% Very confident

Somewhat confident

Not very confident Not confident at all Global

Do not know


Chart 3: how confident are CEOs about their organisation’s prospects for revenue growth over the next three years. Source: PwC | Capital Finance International

The upside scenario sees Sub-Saharan African economies resume their five percent growth rate by 2022, a rate last seen in 2014. This scenario is based on growth-supporting reforms in the region’s largest economies (South Africa and Nigeria, specifically) as well as a favourable global growth climate. From a political 103


Real GDP growth (%)






0 2018


2020f Upside

2021f Baseline





Chart 4: growth scenarios for Sub-Saharan Africa. Source: PwC

perspective, this assumes a decline in conflict in some of the region’s hotspots. About a third of African countries have been affected by conflict in recent years, and IMF calculations indicate that real GDP growth is, on average, about 2.5 percentage points lower in those places. Based on these economic scenarios, which would be expanded in much greater detail in client engagements, it is important to understand a company’s key vulnerabilities in a 2x2 matrix. By identifying the two biggest uncertainties with the highest likely impact on the organisation, a 2x2 matrix of these factors create four worlds based on different combinations on these factors. For example, if the two key factors are market growth and political risk, the 2x2 matrix would construct four worlds based on faster or slower economic growth, on the one hand, and increased or decreased conflict, on the other. One such world could unfortunately see more conflict and lower economic growth. How would a company cope with this situation? The alternative would be faster growth and less conflict. It is quite possible that a company’s African operations could face slower economic growth and less conflict. This is possibly better than the fourth option: higher economic growth and greater conflict. An organisation’s risk appetite will be instrumental in determining its market strategy under these four worlds. All four scenarios would need to be investigated and planned-for. If a downside scenario to Africa Rising was crafted in 2011, it would have already materialised. TRANSFORMING ORGANISATIONS TO BE FIT FOR GROWTH Renovating the business model from within to enable growth requires cost-cutting and restructuring. Companies that are fit for growth focus on a few differentiating capabilities, align their cost structure to these capabilities, and organise their workforce to create growth within challenging market conditions., for example, 104

a low-growth scenario in African economies. Strategy&’s global research and experience shows that companies following such a formula generate the highest growth and financial returns. Differentiating capabilities are the combinations of processes, tools, knowledge, skill and organisation that enable an enterprise to outperform. Companies need to know what they are good at, and identify these points to staff. Not only is this clear to insiders, but companies that successfully identify these “lighthouses” and associated strategies also share their identification signal with outsiders.

Companies must also organise their people around these factors. A well-organised organisation model enables fitness and growth in two ways: enabling and sustaining cost reductions, and creating the right conditions for managers to drive growth. Managers — some in small offices spread across large African countries — are empowered to act as partners within the business, with explicit financial and operational targets. They are also given greater control over resources to achieve them.

It is around these lighthouses and strategies that cost structures must be formulated. Expenditure that strengthen a company’s differentiating features are “good” costs. It is even possible to increase these while tightly controlling others. Systematically and objectively evaluating cost structures can release dramatic savings. This, in turn, increases profits in challenging external environments, thereby increasing available funds for re-investing into differentiating capabilities.

TAKING ACTION, TAKING CONTROL Companies that do not adjust their strategies to external scenarios and differentiating capabilities will remain strategically adrift. In the challenging (and distinctive) environments that different Sub-Saharan African economies pose to private enterprise, there is certainly no single scenario exercise or restructuring approach that will yield the best results in each market. Only a thorough strategy planning-and-execution process will move these businesses forward as they explore African opportunities — whatever the growth pace might be over the long term. i

Author: Lullu Krugel

Author: Christie Viljoen | Capital Finance International

Economic Transformation... At the very heart of who we are at Credit Bank is the desire to transform the social-economic welfare of our people by offering innovative financial solutions. Our solutions cut across businesses and individuals empowering you to grow.

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> Suez Industrial Development Company (SIDC): Geographical Position Near Vital Ports in Most Important Economic Zone is Just One of The Advantages of Best Industrial Park Operator - 2019 Award Winner


professionally managed industrial park that won the Industrial Park Awards 2019 - Best Industrial Park Operator - MENA 2019 award.

Suez Industrial Development Company (SIDC) is a pioneer in the Egyptian private sector, managing industrial parks in the country since 1998. SIDC owns, develops, operates and maintains nine million square meters of industrial lands located in the Special Economic Zone at Ain Sokhna, north-west Gulf of Suez, in front of Sokhna DP world Port. SIDC provides a wide range of industrial lands starting from small lands of areas 450 SQM to large areas above 500,000 SQM for all industrial activities. In addition to an impressive Plug & Play Project of a “Readymade Factories” which occupying an area of 250,000 SQM in SIDC Industrial park including 281 Factories as the first Industrial Project specialised in small & medium enterprises (SMEs) in Egypt complies with the international standards of industrial parks. All Factories are equipped with full facilities & infrastructure services that fits a wide range of small and medium projects for SME’s and Entrepreneurs, with a significant planning to attract more companies to the industrial park. Through a worldwide network, SIDC developed a vision to become the leading private industrial parks owner and operator in North Africa and the Red Sea regions. SIDC does not only provide state-of-the-art infrastructure and quality services but also offers all required investment supports: 106

technical, environmental, administrative, financial and legal services. SIDC has completed the flood protection works, roads network, sewage stations, electricity distribution network of medium voltage (including distribution and cable tunnel), Gas Pipeline, a water desalination plant, receiving sewage and industrial treated discharge. There is complete security for the whole park including surveillance cameras, fiber network, telephone and internet service. SIDC provide all the ingredients of success that revolve around location, infrastructure services and management capabilities. Egypt is at the nexus of Africa and Asia, and SIDC’s location in the Suez Canal region gave it the privilege of being in the path of the Silk Road that connects West with East. The First Industrial Park owned by SIDC is located in the Suez Canal Special Economic Zone (SCZone) in Ain Sokhna, just in front of the Sokhna DP World Port. It is at the intersection of Cairo-Sokhna and Suez-Zaafarana highways. It is 140 km from Cairo Airport. Saudi Arabia is 500 km away, Libya a little over 800 km and Sudan 1200 km. Egypt is vast market, with a population of more than 99 million people, and boasts excellent safety conditions (16th of 135 countries in global security ranking). Egypt’s strategic location in North Africa and closeness to the Arab Peninsula make it a transcontinental nation with one of the largest and most diversified economies in the Middle East. Egypt’s GDP is expected to grow 5.5 percent in the 2018-2019 fiscal year, driven | Capital Finance International

mainly by a recovery in tourism and rising natural gas output. SIDC has sold about 80 percent of its land, and is seeking to expand. It has about 29% of market share in Egypt during 20 years of operation. Land is offered at prices around $104 per square metre, or rented at $2 per month per square metre. The SIDC ready-made factories can be rented at $5 per month per square metre. In the SIDC Park and SCZone, investors will be exempt from customs duty on all capital imported equipment. Raw material imported then valueadded can be exported from Egypt in accordance to Law No. 83/2002. Investment incentives by Egyptian Government include a deduction of up to 50 percent of capital investment from taxable income according to Investment Law No. 72/2017. In SCZone there are six ports and five airports, connected by excellent road networks. The new Alamein-Sokhna high-speed train connects Sokhna with the New Capital, 6 October, Alexandria and New Alamein (cargo and passengers). There is an in-house security team as well as an outsourced security firm that guarantees the full safety of the park. SIDC has gained the trust of over 65 major companies in several industrial fields, including petrochemical, fertilizer, iron, steel and building materials, pharmaceutical and food industries as well as eco-friendly industries such as recycling industries. i


Corporate Finance

Fund Management


• • • • • •

• • • • •

• • • •

ECM DCM M&AS Structuring Corporate Valuations Capital Raising

Pension Fund Advisory and Management CIS Management Portfolio and Wealth Management Services Product Engineering Distribution of Financial Products

Trading Local Markets Trading on International Markets Listing Underwriting

SBM Capital Markets Ltd is regulated and licensed by the Financial Services Commission (FSC) Mauritius and holds Investment Banking licence. This document has been prepared from sources SBM Capital Markets Ltd believes to be reliable but we do not guarantee its accuracy or completeness. Any information including facts and opinions is expressed as of the date of writing. The price and value of investments and any income that might accrue could fall or rise or fluctuate. Fixed income securities carry interest rate risk, with bond prices usually falling when interest rates rise and vice versa. This effect is usually more pronounced for longer-term securities. Fixed income securities also carry inflation risk, liquidity risk, call risk, credit risk and default risks for both issuers and counterparties. Mutual Funds are subject to market risks and there is no assurance or guarantee that the objectives of the fund will be achieved. SBM Capital Markets Ltd is in no way guaranteeing the expected returns given in the document. These are only indicative and are subject to changes in market conditions and availability of instruments. The FSC does not vouch for the financial soundness of the products or for the correctness of any statements made or opinions expressed with regard to it.

T: (230) 202 1169 | E: |

Tandem & Stark:

Tech and Expertise to Rein-in Costs — and Benefit African Countries Quantity Surveying and Project Management firm Tandem & Stark takes the guesswork out of Project Management and Project Cost Control, and has been delivering key projects in the African region for more than 20 years.


andem & Stark’s rigorous approach includes the use of state-of-the-art technology and impressive in-house engineering expertise. Its efforts and professionalism have helped to raise the standard of living in Africa via its projects. It works in the public and private sectors, delivering high-level performance with its project and construction management service lines. Complex projects in dynamic markets depend on cost-engineering and consultancy to become reality. Structuring and managing cost is of paramount importance to all of Tandem & Stark’s undertakings. Tandem & Stark has wide experience in the construction industry, and has helped clients throughout East and Central Africa to manage cost on its impressive portfolio of major projects. The company employs its expertise during design and construction phases, and facilitates postdelivery outfitting and maintenance work. It deploys advanced systems and processes which can be tailored to enhance cost-efficiency and ensure adherence to pre-set timelines. Tandem & Stark believes in a holistic approach, and guides its clients through the pre- and postcontract stages: feasibility studies, cash-flow projections, cost planning and control, tendering procedures, project evaluations, financial appraisals and more. Through its project and construction

Wrigley Gum Factory


management business line, Tandem & Stark creates a streamlined experience for clients and partners by effectively managing projects throughout their entire cycle, mitigating risks and maximising return on investments. The company has played a vital role for many local governments and private businesses in Africa, including Blue Chip corporates. With its teams of seasoned professionals, Tandem & Stark has become an integral part of the continent’s construction and real estate development. “In a highly competitive market, Tandem & Stark has managed to stand out from the crowd because of its systems, processes and people,” says company founder and managing director Timothy Manyuira. The successes follow a pattern of analysis of objectives, the careful design of a path towards specific and attainable goals. The firm goes one step further than its competitors with its robust systems and technology. People deliver projects, but its advanced systems and processes give it the ability to successfully initiate, plan, execute, monitor, control and close-out projects. The company’s quantity surveying and project management business lines assure clients of quality service and the highest possible return on investment. i

Almond Grove | Capital Finance International

Nairobi Hospital

Summer 2019 Issue

The Riverinne

Timothy Manyuira:

Manyuira says that along with the personal touch, use of enhanced systems coupled with new methodology and a well trained staff pool has enabled Tandem & Stark to go its own, efficient way. The firm has made it a focus to be flexible and adaptable, and to fully understand the needs of its clients.

The future is bright for Tandem & Stark, an institution that continues to fully adhere to its vision and objectives which have served it so well for the past 15 years.

“The thrust of our strategy is to do things differently and more effectively,” says Manyuira.

Founder’s In-depth Knowledge Combines with Flexibility to Deliver Projects On Budget


& S was founded in Kenya by managing director Timothy Manyuira, and he and his team have a profound understanding of Africa’s construction industry business.

“The firm deploys a full array of advanced systems and processes to offer bespoke solutions that

enhance cost-efficiency and ensure adherence to pre-set timelines,” says Manyuira. The flexibility and adaptability of the firm is seen as key. This is a company which prides itself on being willing and able to develop a full understanding of client needs. | Capital Finance International

Since its inception, the firm has punched above its weight and contributed more than expected of it to improve the quality of life in its operational base in Kenya and in other African countries. Tandem & Stark remains abreast of developments, and aware of the constant challenges presented by the global economy. Challenges which, when tackled correctly, can become opportunities. i 109

> La Société Centrale de Réassurance (SCR):

Assuring the Future of Reassurance with Training, Compliance and Effort


a Société Centrale de Réassurance (SCR), a subsidiary of the Caisse de Dépôt et de Gestion (CDG), holds a leading position in the Moroccan reinsurance market.

YEAR 2018 FIGURES (IN MILLIONS) • ROE = 12.26% • Solvency ratio = 218.81% • Written premium: 210.68 USD • Dedicated Gross Investments: 1,149.19 USD • Total Balance: 1,553.53 USD It acts as an institutional investor by participating in keeping insurance premiums in-country, and mobilising savings in the national economy. The SCR’s profitability is ensured by placing the company at the service of the Moroccan market while simultaneously developing foreign business. The SCR’s long experience and thorough understanding of international reinsurance markets enables it to shelter the Moroccan market from international turbulence regarding reinsurance conditions. SCR is one of the oldest reinsurance companies in Africa and the Middle East. With three contact offices in Rwanda, Egypt and the Ivory Coast, SCR has contributed to the creation and operation of regional organisations such as the Arab General Insurance Union and the African Insurance Organisation. The SCR has also worked towards the creation of regional companies, such as the Arab Reinsurance Company and the African Reinsurance Company, firstly at the studies stage, and then as a founding member and shareholder. SOME KEY FIGURES FROM 2018 SCR has used its experience to assist many Arab and African countries that have created similar companies, welcoming their representatives to its informational and training missions. Main strategic priorities: • Reinsurance support for the Moroccan market • General interest missions: central role in the management of the catastrophic-risk plan • Serving Moroccan insurers and major companies in their international development • Implementation of new products on behalf of Moroccan and African insurance companies (credit and surety, parametric insurance, insurance against political violence) • Underwriting Zone: Africa, Middle East and 110

certain Asian markets (India, China, South Korea, Pakistan et al) SCR is the only Moroccan company with an AAA Rating from Fitch Ratings (local level). Since 2017, the AAA (Mar) grade that Fitch Ratings assigned to SCR reflects its solid institutional framework and the fact that it is adequately capitalised and has healthy governance and financial management. This confirmation by Fitch of the Moroccan reinsurer’s solidity bolsters the strategy SCR has been pursuing in terms of transformation based on the “Strong II” plan, which aims at growing facultative reinsurance assignments in terms of profitability and revenue at national and international levels. In addition to its Fitch rating, SCR has a B++ grade from AM Best, which confirms its underwriting policy and its financial and technical fundamentals. “STRONG II” TRANSFORMATION PLAN The “Strong II” Transformation Plan is considered an essential tool for SCR’s medium- and long-term strategic development, delivered across several projects. The plan was launched in 2016 and works to put in place a global projects portfolio, mobilising and bringing together all associates in service of SCR’s clients. This plan is organised along four developmental axes: • Future growth and visibility • Technical and risk-management expertise • Operational excellence and client satisfaction • Company culture and improvement of management style Through this plan, the SCR will reinforce and consolidate its role in Reinsurance at local and regional levels, while accounting for new development challenges in the Moroccan and international markets. | Capital Finance International

HUMAN CAPITAL The SCR invests in several projects to develop human capital, all of which target the increase and reinforcement of associate skills, as well as the strengthening of management style, team cohesion and company culture. In parallel, the SCR regularly promote internally and recruit externally high potentials for certain job openings. The goal is to offer growth opportunities to its associates and loyalty among its best team members while maintaining mixt promotion internally and externally. Knowing that it must always invest, especially in human resource development, the SCR has continued to pursue its policy of professional development to maintain competence and achieve the expectations of clients and partners. Most SCR associates receive professional development along profession-specific and riskmanagement themes, as well as other crossfunctional and linguistic training. The SCR is in the process of deploying one of the best risk management tools in the world. It is a highly calibrated SAS solution to manage well our appetite of risk. It should be noted that the SCR is the first and only reinsurance company with a high performance ERM tool in the region. DYNAMISM To meet the demands of the Insurance and Reinsurance Markets, the SCR launched its SCR Academy RE foundation, an initiative whose objective is to provide SCR’s technical expertise in various lines to its Moroccan and African partners, as well as to SCR employees. Strong momentum has been gained in the foundation, with a programme covering different insurance lines (fire, engineering, aviation, maritime and liability) as well as pricing, actuarial and prevention. i



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Summer 2019 Issue

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> Tickmill:

Fostering a Best-Execution Regime in the Brokerage Industry


s the retail Forex business matures and grows, the importance of providing high quality execution is more important than it has ever been.

It has become a regulatory mandate to provide transparency and integrity in the financial markets. With the aim of strengthening investor protection, â&#x20AC;&#x153;best executionâ&#x20AC;? is based on the premise of acting in the best interest of the 112

client by ensuring fairness and transparency in the trade execution process. REGULATORY REQUIREMENTS Considering the changes to the financial regulatory landscape and the introduction of MiFID II in 2018, investment firms are expected to focus their attention on providing best execution for their clients by monitoring and thoroughly testing the execution quality. | Capital Finance International

In line with MiFID II, brokerages are also required to provide information on the main execution venues they relied on for each of their products, and outline the methodology used to assess the quality of execution provided. Besides monitoring, the regulation stipulated by the European Securities and Markets Authority (ESMA) requires firms to oversee the appropriateness of their arrangements and policies on a pre- and post-trade basis to

Summer 2019 Issue

"Tickmill believes that adopting best-execution practices generates sustainable value for its clients, and enhances transparency in the wider financial ecosystem." compare the quality of execution available from competing venues — before the trade — against the quality that was actually achieved. Regulatory bodies such as the UK Financial Conduct Authority expect firms to have contingency plans in place for periods of market distress and high volatility. Foreign exchange brokers must rigorously evaluate the factors affecting the quality of execution of client trades, including the client characteristics (whether the order is for a retail or professional client), the size, nature and type of the order, and the speed and likelihood of execution. BEST EXECUTION AND TECHNOLOGY There are many developments aiding the implementation and assessment of best execution. Data, analytics and technology are some of the key elements that firms tap into. Providers of financial services are expected to have robust internal reporting processes and controls, supported by a technological infrastructure that can take in, store and supply data in a timely manner. New data technology such as algorithmic analysis and cloud computing makes it easier for brokers to optimise and evaluate their execution performance. The monitoring process is based on enhanced technologies that can crunch large data sets in real time, and whose analysis can help formulate actions to improve performance.

"New data technology such as algorithmic analysis and cloud computing makes it easier for brokers to optimise and evaluate their execution performance."

UPHOLDING BEST EXECUTION STANDARDS – THE EXAMPLE OF TICKMILL Tickmill, the global provider of Forex and CFD products, takes pride in having an effective monitoring capability in place to measure best-execution performance. The broker takes the evaluation and implementation with professionalism, and in doing so, it strictly adheres to benchmarked policies, systems and controls. The monitoring efforts of the company are based on a variety of metrics, taking into consideration all the relevant factors for attaining the best possible outcome | Capital Finance International

for clients. Tickmill uses sophisticated digital tools that extract data about client transactions and the quality of execution across all relevant asset classes. This procedure is vital in determining the effectiveness of its order execution arrangements, and to correct potential deficiencies in the process and policy. The dealing team monitors pricing on a retrospective basis, conducting regular reviews to ensure consistency in-line with the underlying market. This is primarily achieved by keeping track of data feeds and other pricing mechanisms while also assessing controls, alerts and statistics to identify any inconsistencies. The team closely monitors other significant parameters of trading, such as spreads and slippage, and any discrepancies are swiftly reported and corrected. With a good understanding of the importance of low trading costs and the impact of costs on trade execution, the company sources the best available prices from selected liquidity providers. The company carries out periodic due diligence, and reviews of the liquidity providers and the quality of their service and execution. By following this procedure, the firm ensures clients benefit from the best possible prices, for instance spreads starting from 0.0 pips. The company’s compliance and risk management functions play a key role to ensuring the firm exercises consistent standards and processes when executing trades on behalf of clients — regardless of the type of instrument or client involved in the transaction. Compliance also make sure policies, terms and conditions, and other disclosures about best execution are clearly communicated to improve clients’ understanding of the company’s approach. Tickmill believes that adopting bestexecution practices generates sustainable value for its clients, and enhances transparency in the wider financial ecosystem. It is committed to maintaining its systematic approach to ensuring quality of execution, while at the same time regularly reviewing and streamlining the relevant procedures and policies. i 113

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Summer 2019 Issue


Setting High Standard to Raise the Prospects of All Tunisians

Headquarters: BIAT


ounded in 1976, BIAT is today the bank of reference in Tunisia.

A universal bank, BIAT has developed all the traditional activities of a banking group, with branches in the areas of insurance, asset management, capital investment and stock market mediation. BIAT has developed a solid reputation for its financial performance and corporate governance. BIAT has faithfully followed its development programme, energised by successive strategic plans that have been in place for the past decade. This programme, regularly updated to ensure its relevance, is based on good governance determined by the sharing of power and responsibility and the installation of special committees to assist the board of directors in the execution of its duties: the preparation of strategic decisions and accomplishing its duty of supervision. This has allowed a real transformation to take place in the level of the bank’s commercial organisation, and in the process of its governance. In this way, BIAT has succeeded in augmenting its market share and reinforcing its position as a market leader. The main indicators of activity in 2018 were remarkable: a net banking income of $270m (TND834.5m)— the largest in the sector.

Its outstanding deposits total $3,700m (TND11.513m). In terms of credit, the balance sits at $3,425m (TND10.677m). The net result stands at $81,750m (TND254.8m). The positive evolution of these bank indicators has conveyed financial health and good decisionmaking to the bank’s strategic development. Some examples: • A capacity to manage risks, thanks to the formation of strategies that minimise credit risk and improved recovery processes. • Business development of commercial funds managed by BIAT; it has grown from some 350,000 clients in 2008 to nearly 900,000 in 2018. An increasing number of clients are showing confidence in the bank. Also, in the implementation of a new, client-centred business strategy, BIAT offers specific products which differentiate it from competition, by market share and by sector, and allow it to respond swiftly to client needs. This has been accompanied by an improvement of the customer journey through the multiple areas of free-service banking. It is reinforced by competent staff, trained and able to offer a complete, high quality service. The year 2018 also marks the first concretisations of the digital transformation of the bank, through the implementation of a new governance of information systems and an | Capital Finance International

operational model allowing to support its future development through a better agility. This allows the implementation of new features. The social dimension is of great importance in BIAT's strategy. Beyond its involvement in the economic and financial development of Tunisia, BIAT has engaged for several years in the social development of the country, with internal or via its foundation programmes in the fields of education, culture and entrepreneurship for Tunisian youth. The biggest competition for entrepreneurs in Tunisia was launched by the foundation and federated 700 entrepreneurs and thoughtleaders in 2017. Registration is currently under way for the fourth session for the incubator platform, B@Labs. A new programme to support citizens' initiative in the region was launched by the BIAT Foundation. This programme aims to inspire, support and identify young leaders from across Tunisia to encourage them to realise their community ideas and initiatives. BIAT prides itself on offering excellence to its clients, and that dedication gives it the means to achieve its ambition. Its highly trained and committed staff work with client and customers on a daily basis through a network which is in constant evolution. BIAT is committed to supporting the development of the regional economy. i 115

> SBM Securities:

Major Changes and a Surge in Capabilities SBM Securities Ltd, the stockbroking arm of SBM Group and one of the leading brokers in Mauritius, is undergoing a huge transformation.


ith the various entities operating under the SBM Non-Banking Financial Cluster (SBM NBFC), the SBM Group has embarked on harmonising its structure within the new regulatory framework of the Non-Banking space.

With SBM Capital Markets Ltd established and the first Investment Banking License issued from the Financial Services Commission, the SBM Group will transform into a regional financial force serving the Indian Ocean and the Indian Ocean rim, and a key player in the Asia-Africa corridor. SBM Group is one of the country’s most important banking and financial services institutions. With a market capitalisation of MUR18.2bn ($510m) at end of March 2019, the group’s holding entity, SBM Holdings Ltd, is the third-largest listed company on the Stock Exchange of Mauritius. The SBM Group has been instrumental in laying the foundations of a solid Mauritian economy since its inception in 1973. Over time, as the financial needs of the population have evolved, the Group has introduced fund management, stockbroking, and registry through the creation of different subsidiaries. In 2014, in line with international best-practice, the SBM Group separated its activities under different clusters: banking, non-banking, and non-financial. Building from its strong franchise in Mauritius, SBM Group has started its African foray in May 2017 with the purchase of Fidelity Commercial Bank in Kenya. It further consolidated its Kenyan business in August last year through the acquisition of the carved-out assets and liabilities of Chase Bank Limited (in Receivership). This took SBM Bank Kenya into a strong Tier 2 position in the country. In India, the SBM Group is the first foreign bank to operate under a Wholly Owned Subsidiary mode. The focus is to tap into the growing trade flows and investments within the Asia-Africa corridor. Identified as one of the most promising clusters to bring a positive contribution to the bottom line of the group, the SBM NBFC has evolved 116

and added the services of insurance agency, leasing, and factoring to the existing services: stockbroking, fund management, portfolio management services, registry, fund valuations, structuring and corporate finance advisory. The renewed focus by SBM Management led to the establishment of SBM Capital Markets Ltd. It was the first entity to be granted an investment banking license by the Financial Services Commission. SBM Securities Ltd will amalgamate with SBM Capital Markets Ltd. SBM Mauritius Asset Management Ltd will keep only its CIS funds and become a subsidiary of SBM Capital Markets Ltd while the pension fund management and portfolio management services will move to SBM Capital Markets Ltd. SBM Capital Markets Ltd can operate as an investment bank, serving clients within the | Capital Finance International

various banking entities of SBM Group. It is expected that the increased synergy and crossselling will bring better value-added services to clients while improving the bottom-line. The SBM NBFC cluster is capitalising on some key achievements over the past two years to bring its investment bank to new heights. Key achievements include: • Lead advisor and arranger for listing of Depository Receipts of AfreximBank on the Stock Exchange of Mauritius (fund raising of $166m) • Advisor for set-up of SBM Mauritius Infrastructure Development Company Ltd, structured financing for Government and infrastructure fund (arranging $500m) • 50 percent over-subscription for the capital raise for the SBM US dollar and Mauritian Rupee (MUR) bonds in 2018 • Lead arranger and advisor for issue and listing

Summer 2019 Issue

SBM Group Chairman: K.C. Li

CEO SBM (NBFC) Holdings Ltd: Kris Lutchmenarraidoo

Head SBM Capital Markets Ltd: Anoushka Bhuttoo

"SBM Group is one of the country’s most important banking and financial services institutions. With a market capitalisation of MUR18.2bn ($510m) at end of March 2019, the group’s holding entity, SBM Holdings Ltd, is the third-largest listed company on the Stock Exchange of Mauritius." of SBMH MUR1.5bn and $65M bonds • Lead arranger for MUR1.5bn Secured Notes Programme for Sugar Investment Trust. TRIPLE WHAMMY: THE PEOPLE AT THE TOP OF VIBRANT GROUP Mauritian economist KC Li, the independent non-executive chairman of SBM Holdings, has held several prominent positions in the public sector.

Li was also a member of the Parliament of Mauritius from 2010 to 2014, and sat on its Public Accounts Committee. He sits on the board of directors of several emerging markets and hedge funds, including private equity, infrastructure, and real estate funds in Africa and Asia. He also sits on the board of the State Insurance Company of Mauritius (SICOM) and Afreximbank.

He was advisor to the Minister of Finance and Chairman of the Stock Exchange Commission. He launched the first Unit Trust and the first property fund in Mauritius in 1989. Li was also board member of the State Trading Corporation, the National Remuneration Board, the National Economic and Social Council, and the University of Mauritius.

The CEO of SBM (NBFC) Holdings Ltd is Lakshmana (Kris) Lutchmenarraidoo. He is a seasoned banking professional with over 40 years’ experience across the banking and financial services sectors. During the 13 years (1973 - 1986) he spent at SBM, Lutchmenarraidoo held various positions across the bank, including branch manager, head of Internal Audit, and assistant general manager.

In 1992, Li started his own private consulting firm, and served as consultant to the United Nations Economic Commission for Africa (UNECA) and the UN Industrial Development Organisation (UNIDO). In 1993, he founded the Mauritius International Trust Co (MITCO), one of the first professional firms licensed to provide international tax and investment advisory services in Mauritius.

He then moved to occupy senior positions in prominent entities such as Mauritius Leasing Company, Mauritius Post, Mauritius Post and Co-operative Bank, La Prudence Mauricienne Assurances, and Mauritius Union Assurance Co. More recently, he was the group managing director at Phoenix East Africa Assurance Company based in Kenya, supervising operations there and in Tanzania, Uganda, and Rwanda. | Capital Finance International

Lutchmenarraidoo holds a banking diploma from the FinAfrica Institute in Milan, Italy. The head of SBM Capital Markets Ltd, the investment bank of SBM Group, started out from a sales and marketing background. Reedhee (Anoushka) Bhuttoo joined the stockbroking world in 2006. She is a director of the Stock Exchange of Mauritius (SEM) as well as a director of the Central Depository and Settlement Co (CDS). She was also the president of the Port Louis Stockbroking Association. Bhuttoo holds a BA (Hons) in Economics (First Class) from the MS University of Baroda, India, which she attained following a scholarship from the Indian government. She also studied for the professional Post Graduate Diploma in Marketing from the Chartered Institute of Marketing, and is an Associate Member of the Chartered Institute of Securities and Investment. A key milestone in Anoushka Bhuttoo’s career has been the structuring of, and capital raising for, the Afreximbank depositary receipts issue – a first on the African continent, whereby funds were raised in Africa, for Africa, by Africa. i 117

> Assupol:

supol: Transforming Transforming South Africa’s uth Africa’s Insurance Industry

Insurance Industry



ssupol is a prominent South ssupol is a prominent

and deep-seated that drives our Throughout paid the outyears, in 2013 to those who elected South African but the company ethos is steadily making progress the business has seen insurer providing financial products in penetrating the private sector, including the many changes, the most significant being the African insurer commitment todemographic. serve those who serve. recentnot to keep their shares.2010, andproviding services. The company celebrated middle-income demutualisation. In December 106 years of existence this year, Assupol Life was successfully demutualised and financial products and services. Assupol’s success has always been 2019. Assupol’s story is one of remarkable progress, converted into a public company. This led to the and we arethe a company remains true to our Assupol Holdings Ltd and Assupol company celebrated 106 years of Throughout years,thatthe business has formation dueof to its aim to provide relevant and Assupol registered as a life insurer in 1960. In roots. Our story balances the spirit of innovation Investment Holdings (Pty) Ltd. the 1990s, the company spread its wings seen into and humility of servicethe – a most fundamental and ence this year, 2019. many changes, significant affordable insurance products and the open market, to become a full-fledged life deep-seated ethos that drives our commitment Assupol’s demutualisation is the biggest wealth beingtothe the company remains committed to insurer. Its core market is the government sector, serverecent those whodemutualisation. serve. distribution yet by an unlisted company in

pol registered as a life insurer 118

In December 2010, Assupol Life | Capital Finance International

“serving those who serve”. The compa

60. In the 1990s, the company

was successfully demutualised and

takes pride in pursuing a markedly



company, but could not be individually

employees is the generous time and

We have partnered with the Department


effort they put into making their projects

of Basic Education and have committed

so worthwhile and successful.

to building safer sanitation facilities for

As a result, it was proposed that

Summer 2019 Issue

100 primary schools within a period of

the communities from which these

Some of the community initiatives

5 years.

"Nowfrom in itsshould fifth year of existence, Assupol Cares individuals came benefit that the were implemented in Employee recent years Initiative demonstrates the and it was so approved by the Highand strong The third initiativenot is a only development includes following: genuine compassion spiritthe of Ubuntu that exists within Assupol. Employees

Court. Importantly, it funds, was decided thatoversee the entire initiative, from receiving initiative aimed at addressing provide the they also requests for assistance to graduate’s

CORPORATE deciding on which applicants to benefit, to appointingSOCIAL project managers to run selected projects."

the trust needed to have a specific

unemployment, female graduates in

focus to maximise its impact. The trust’s

Approximately million shares purposeSouth andAfrica. mission is Early 400 Childhood in Assupol Holdings were allocated to qualifying Development (ECD), certainly the policyholders (90% of them one from of previously disadvantaged communities) and staff, and most vital areas of need in our country. nearly R900 million was paid out in 2013 to those who elected not to keep their shares.

The trust owns success 25.2 million Assupol Assupol’s has always been due

to its

aim to provide and affordable shares which wererelevant allocated to it asinsurance part

products and the company remains committed

of the demutualisation. The dividends to “serving those who serve”. The company takes shares pride in have pursuing a markedly proactive from these started to flow

approach in looking out for the interests of

to the trust, enabling it to fund its ECD policyholders. interventions.

COMMITMENT TO COMMUNITY As a highly committed and involved corporate citizen, Assupol maintains the Assupol AssupolCares is excited about rolethe that initiative that the bundles company community projects. Initiated as a direct result the trust will play in improving prospects of its successful demutualisation process, the for children, are the adults of Assupolwho Community Trust was established to make a meaningful contribution to society tomorrow. and the communities in which the company is represented prior to demutualisation. Assupol a certain grouping of policyholders who had Now in had its fifth year of existence, the contributed to the value of the company, but not Employee be individuallyInitiative identified. Assupolcould Cares

demonstrates the genuine As a result, it was proposed compassion that the communities from spirit which these individuals came from should and strong of Ubuntu that exists

INVESTMENT (CSI) AND particular. As part of this initiative, Funded, managed, and monitored by Assupol unfortunate incidents whereby two primary we have established a distribution OTHER staff – with a PROJECTS matching financial contribution school children fell into pit toilets and lost their

of exposed women We of recruited lives inchannel South Africa theonly. poor state initiative has a broad focus and benefits worthy sanitation facilities in some rural schools. and trained graduates with no work Through the Assupollocated community trust, recipients in communities in various parts of South Africa. Assupolexperience, decided to play role inhave addressing wea now 75 qualified we have embarked on programs to these sanitation challenges. We have partnered advisors who through this Ideally, Assupol branches across the provinces Department of graduated Basic Education and support ECD centres by investing on with the are involved in finding suitable beneficiaries in have committed to building safer sanitation program. Through this initiative, we’ve the of children between theirdevelopment local communities. Complementing the facilities for 100 primary schools within a period created jobs for these unemployed financial madeThis by the company’s of 5 years. the agescontributions of 0-5 years. initiative employees is the generous time and effort they graduates and increased the number of started 2017 asprojects we believe that and ECD The third put into in making their so worthwhile initiative is a development initiative women in graduate’s the insurance industry. successful. aimed at addressing unemployment, is a critical foundation in children’s female graduates in particular. As part of this education. Some of the community initiatives that were initiative, we have established a distribution implemented in recent years includes the channelAssupol of women fully only. We recruited and supports thetrained concept of following: graduates with no work experience, we now have givingadvisors 67 minutes back to society in 75 qualified who graduated through The second initiative relates to the CORPORATE SOCIAL INVESTMENT (CSI) AND OTHER this program. Through this initiative, we’ve recognition of what Nelson Mandela did provision PROJECTS of sanitation facilities at created jobs for these unemployed graduates and forthe the country, thein company Early Childhood development - Through the increased number of women the insurance continues primary schools. The unfortunate Assupol community trust, we have embarked on industry. to ensure that it does a lot more than incidents primary school programs towhereby support ECDtwo centres by investing on financial the development of children between ages fullythrough supports regular the concept of givingand staff children fell into pit toilets andthe lost theirAssupolthis of 0-5 years. This initiative started in 2017 as 67 minutes back to society in recognition of volunteering assistance at various lives in South Africa the poor we believe that ECD is aexposed critical foundation in what Nelson Mandela did for the country, the children’s education. company continues to ensure that it does a projects. lot more than this through regular financial The second initiative relates to the provision and staff volunteering assistance at various of sanitation facilities at primary schools. The projects. i from Assupol head office every six months Early Childhood development - – this

benefit and it was so approved by the High

within Assupol. Employees not only Court. Importantly, it was decided that the trust

to havethey a specific to maximise provideneeded the funds, alsofocus oversee the its

impact. The trust’s purpose and mission is Early

entire initiative, from receiving Childhood Development (ECD), requests certainly one of the most vital areas of need in our country.

for assistance to deciding on which

The to trust owns 25.2 million Assupol applicants benefit, to appointing

shares which were allocated to it as part of the project demutualisation. managers to run The selected dividends from these shares have started to flow to the trust, enabling projects. it to fund its ECD interventions. Assupolmeets is excited aboutathe role that the trust A committee once month will play in improving prospects for children,

to evaluate applications and make who are the adults of tomorrow.

financialNow allocations. Funded, managed, in its fifth year of existence, the Assupol Cares Employee Initiative demonstrates and monitored by Assupol staff – with

the genuine compassion and strong spirit of Ubuntu a matching financial that exists within contribution Assupol. Employees not only provide the funds, they every also oversee from Assupol head office six the entire initiative, from receiving requests for assistance monthsto–deciding this initiative a broad on whichhas applicants to benefit, to appointing project managers to run selected focus and benefits worthy recipients in projects.

communities located in various parts of

A committee meets once a month to evaluate and make financial allocations.

South Africa. applications

any | Capital Finance International


> Middle East

Jobs, Education, Poverty, Debt: Familiar Problems â&#x20AC;&#x201D; and Serious Ones for Egypt Egyptâ&#x20AC;&#x2122;s economy has returned to strong growth since 2015, but is the country on a stable footing?


gypt’s growth in recent years has been backed by reforms and international support, but investors were watching closely as the IMF’s three-year programme neared its end in July.


The economy suffered from the Global Financial Crisis in 2008 and the Egyptian Revolution in 2011, but since 2015 the GDP has been increasing and unemployment trending down (chart 1). The growth has been supported by an increase in private consumption and investment spending (gross capital formation). The floating of the exchange rate in 2016 eased pressure on international reserves and should help exports and the trade balance going forward, particularly once inflation adjusts. Foreign Direct investment has also recovered after its collapse in 2011, and the IMF forecasts growth to reach six percent in 2021.


The Egyptian government and international institutions deserve a lot of credit for the recent performance hike, but old concerns remain below the headline figures, and represent future risk. Egypt’s population will more than double over the next 80 years, making more jobs imperative for social stability (table 1). The working age population (15 to 59 years) is expected to peak twice this century: in 2030 and 2065. The recent downward trend in unemployment is welcome, but more needs to be done to keep pace with population growth and to avoid social instability. In addition to creating more jobs, the government also needs to ensure that more jobs are created for those on the margins. The participation rate remains very low (23 percent in 2017), less than half of the average for Sub-Saharan Africa and more developed countries. Youth unemployment (32.6 percent) and informal employment (52.9 percent of non-agricultural employment) remain high. Female unemployment (23.1 percent) is nearly three times higher than the male rate (7.8 percent) based on ILO estimates for 2018. There are also regional disparities with only five percent of jobs in the poorest regions (upper Egypt) while metro areas have over 50. Without more jobs for all Egyptians, future social stability will be a concern. One way to increase jobs is to unleash the dynamism of SMEs, which represent 95 percent of private enterprise and 80 percent of private sector employment. Critics of the Egyptian economy argue that SMEs are stunted by poor business conditions. Egypt has consistently ranked low on the World Banks’s Ease of Doing Business survey. In 2009 Egypt ranked 114th; in 2019 it ranked 120th. For tax compliance it ranked 159th in 2019 and for trade across borders it ranked 171st. Enterprise surveys back these results up, with firms complaining about the complexity of starting a business, of tax compliance, and of obtaining operating licenses. Not only do many SMEs employ their 122



GDP growth

12 10 6 4 2 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Chart 1: Egypt GDP Growth and Unemployment (percent). Source: IMF World Economic Outlook, April 2019.

workers informally, they are themselves operating informally. The purchase of land is also difficult and affected by corruption, which has the further consequence of robbing SMEs of the key source of collateral for loans. While SMEs contribute 25 percent of GDP, they only contribute around 10 percent to investment. Improvements in business conditions would increase SME growth and employment. Improving education and training is also key to ensuring that future jobs can be filled as they are generated. Past reforms have put more children into school for longer (11.1 years on average) but the quality is low (equivalent to 6.3 years by international education standards). Employees complain that school-leavers lack basic skills. Education remains based on rote-learning with few links to the private sector. Entrepreneurship is growing, with the advent of start-up and incubator support, but remains small. The government needs to increase its efforts in education and training to ensure that there is no mismatch in the labour market with regards to quality. Generating more jobs is only half of the equation. Another old problem, closely related to employment and vital for future social stability, is poverty. Despite economic growth through the early 2000s, the percentage of the population below the national poverty line has increased from 16.7 percent in 1999 to 27.8 percent in 2015. Like employment, addressing poverty is key to ensuring long-term stability. Education is part of the solution, but improved social protection is needed. Egypt has a long history of providing social protection. The protection is generous but is often blunt and poorly targeted. Until recently, energy subsidies were enjoyed not just by those below the poverty line but also by the middleclass and the wealthy. With support from Year





Population in millions





Table 1: Forecasted population growth for Egypt.

Source: UN World Population Prospects, 2017 Revision. | Capital Finance International

international institutions, the government has been reducing the energy and other universal subsidies and has instead established new better-targeted cash transfers for the poor (for example, Takaful and Karama transfers). Grant and micro-credit programs are also being established. Better transport infrastructure to rural areas would provide better and cheaper access to markets in the cities, and increase the viability of commuting. Government debt also remains a concern. As a percentage of GDP, it had been decreasing from 2005, with strong economic growth between 2004 and 2008. But since 2008, it has been climbing — and is now at more than 100 percent of GDP. The IMF is forecasting the level of debt to fall, but Egypt’s fiscal position remains vulnerable to external shocks. Since 2013, the government has made several reforms to combat this. The two biggest areas of reform have been the decrease in subsidies, and the introduction of a new VAT in 2016. In 2013, universal subsidies represented 20 percent of Egypt’s fiscal expenditure and seven percent of GDP. Egypt has large natural energy reserves, but its growing population has led to demand outstripping supply. In 2014, as the government reduced energy subsidies, the price of fossil fuels increased by 80 percent and electricity prices by 20 percent. This savings to the budget was estimated to be around $50bn. Despite the decrease in energy subsidies, Egypt’s fiscal position remains vulnerable to increases in the global oil prices and a depreciation of its currency. After the currency was floated in 2016 and then depreciated against the USD by 131 percent (2015 versus 2017 average levels), the government’s budget for fuel subsidies increased from $2bn in 2016-17 to $6.2bn in 2017-18. Egypt is to be commended on its strong return to growth in recent years and its willingness to tackle key challenges. This however is just the start, and growth alone is not enough to transform the economy. Poverty, business conditions and education need to be addressed. Egypt needs to continue with structural reforms to ensure that its growing population is a blessing rather than a curse. i

Summer 2019 Issue

> Financial

Services CEO Puts the Pedal to Metal and ADGM Goes Scorching Ahead Richard Teng is the CEO of the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM), an internationally recognised and award winning financial centre in the United Arab Emirates' Capital.


ince joining ADGM in March 2015, Teng has been at the helm of the FSRA, one of ADGM's three independent authorities. Working closely with ADGM's Registration Authority and ADGM Courts, he played an instrumental role leading up to the launch of ADGM in October 2015. As CEO of the FSRA, he is in charge of the entire spectrum of financial services within ADGM: banking, insurance and capital market sectors with integrated prudential and conduct supervisory responsibilities. To support the growth of ADGM as an international financial centre, Teng fronts and leads several initiatives, including the strategic development of financial services offerings in Abu Dhabi. Within three years of its launch, ADGM was awarded Financial Centre Of The Year (Middle East and North Africa, or MENA) for three consecutive years in 2016, 2017 and 2018 by Euromoney’s Global Investors Group. As a testament to ADGM’s achievements in the FinTech arena, Deloitte and the Global FinTech Hub Federation jointly recognised ADGM as the top fintech hub in MENA in 2017. In 2018, ADGM was named FinTech Regulator of The Year (MENA) by Seamless Middle East and Most Innovative FinTech Regulator of the Year by FinX Awards, lending further endorsement to ADGM’s international standing as a progressive regulator. ADGM is the fastest-growing asset management hub and financial centre in MENA, and recognised as the top regional REIT management hub. Among its many firsts, ADGM introduced the first private REIT regime, the first comprehensive regulatory framework to govern crypto exchanges and ICO issuances, as well as the first regulatory fintech sandbox in the region. To transform the capital formation landscape in MENA, ADGM has partnered with the Shanghai Stock Exchange to develop an International Beltand-Road Exchange. With more than two decades of regulatory leadership and financial sector development experience, Teng is frequently featured on international forums, sharing thought-leadership on financial services, FinTech regulations and Belt and Road developments.

ADGM Financial Services Regulatory Authority CEO: Richard Teng

Prior to taking up the leadership of FSRA in March 2015, Teng was the Chief Regulatory Officer of the Singapore Exchange, and held the position of director of corporate finance at the Monetary Authority of Singapore. Richard Teng holds a Masters degree with Distinction in Applied Finance from the University of Western Sydney, Australia, and graduated with a First. ABOUT ABU DHABI GLOBAL MARKET ADGM an international financial centre (IFC) in the capital city of the United Arab Emirates, opened for business on October 21, 2015. Established by a UAE Federal Decree as a broadbased financial centre, ADGM augments Abu Dhabi’s position as a global hub for business and | Capital Finance International

finance and serves as a strategic link between the growing economies of the Middle East, Africa and South Asia and the rest of the world. ADGM’s strategy is anchored in Abu Dhabi’s key strengths of private banking, wealth management, asset management and financial innovation. It is comprised of three independent authorities: ADGM Courts, the Financial Services Regulatory Authority, and the Registration Authority. ADGM as an IFC governing Al Maryah Island, which is a designated financial free-zone. It enables registered financial institutions, companies and entities to operate, innovate and succeed within an international regulatory framework based on Common Law. i For more information about ADGM, visit or follow @adglobalmarket on Twitter. 123



124 | Capital Finance International

Summer 2019 Issue

> Etihad Airways Technical Training:

Aviation Training Hub Taking Wing, with Backing of Global Travel Group


lobal aviation and travel organisation Etihad Aviation Group is divided into seven business divisions — and in one of these divisions Etihad Aviation Training (EAT) can be found.

EYTT was established in 2014 from the 145 training programme, and has rapidly developed to become a 147 Approved Maintenance Training Organisation with the UAE General Civil Aviation Authority (GCAA) and then with EASA.

EAT is something of a hub for operational training needs. It is committed to developing the skills and experience of upcoming generations of aviation professionals. It recognises the skills of talented and passionate individuals, enhances those skills — and equips them with new ones.

In 2017, the Jordanian Civil Aviation Regulatory Commission (CARC) 147 approval was added to the EAT portfolio, recently recognised by the Hong Kong Civil Aviation Department (HKCAD).

EAT focuses on maintenance and engineering staff and is proud to have Etihad Airways Technical Training (EYTT) as its training provider. European Aviation Safety Agency (EASA) Part 145 approval is a company-level certification to the European Commission Regulation standards of design, production, maintenance and operation of aircraft components.

This on-going drive for top-level qualifications and training demonstrates the company’s relentless commitment to becoming an industry leading provider of a wide range of technical training courses. EYTT is strategically located within the Etihad Engineering facility adjacent to the Abu Dhabi International Airport. Access to the facility has allowed EYTT to expand its capabilities | Capital Finance International

and establish strategic partnerships with other industry leaders. EYTT has diversified, too. Not content with serving the two Etihad 145 organisations of Etihad Airways and Etihad Engineering as well as the Continuing Airworthiness Management Organisation (CAMO), it now delivers aircraft type training to a number of engineers from around the world. New fleets being adopted into global operation provide exciting opportunities in the aviation industry. With the support of EAT and the group as a whole, EYTT is ready to take up the challenge. Its trajectory is one of continuous drive towards a centre of excellence with industry leading courses using state-of-the-art technology. EYTT may still be a fledgling organisation, but it has taken wing — and seems set for future growth. i 125

> Deloitte:

Towards a More Digital Construction Sector The scale of opportunity in the building sector of the Gulf Cooperation Council (GCC) countries is massive, with $2.5tn of projects in the planning stages. However, the industry is under increasing pressure to overcome the challenges that adversely affect project performance.


arket participants should see this as an incentive to improve their delivery capabilities through the adoption of technologies and innovative tools. The potential of implementation is transformative in terms of cost savings and productivity. Regionally and globally, a large percentage of infrastructure projects experience cost overruns, schedule delays, and oftentimes, both. The challenging nature of construction – which is dependent on public sector investment and highly cyclical – and the fact that many industry players struggle to generate a scaled demand, has made technology adoption difficult, resulting in one of the least digitised industries. The industry has traditionally prioritised investment in conventional tools, techniques and process changes, as familiar ways to improve delivery on time and budget. Technological change can seem more uncertain, and as a result, digital initiatives have been less ambitious. DIGITAL MATURITY IN THE CAPITAL PROJECTS SECTOR The approach to delivery performance has to change, and the tools to realise that change are accessible through digital technologies. Digitisation has the potential to add value throughout the project lifecycle and bring benefits


"The rewards include a cheaper, faster and smarter delivery, improved quality, safety and sustainability." from early phase design through to operation. The rewards to be derived include a cheaper, faster and smarter delivery, improved quality, safety and sustainability. These benefits can outweigh the costs if investment is approached consistently and strategically. THE VALUE OF DIGITISATION Technologies such as 3D Printing, Building Information Modeling (BIM) and robotics are readily available. But for a contractor wanting to embrace a digital transformation journey, what would be the most appropriate way to start? At the heart of a construction project is data and developing a digital platform would represent a logical “first step” for most contractors, and this is defined as creating an integrated data system that allows access to real-time information. The volume of engineering and construction data to monitor and control has dramatically increased in recent years, giving the potential to diagnose issues and take corrective action. | Capital Finance International

The traditional methods used to manage time, cost, resources and the overall project delivery can lead to inefficient decision-making and put performance at risk. Access to relevant and accurate data is a prerequisite for effective project delivery, and by moving to a data-centric approach, significant efficiencies can be realised. This ability to take preventive actions that are based on timely information – and to predict future performance and reduce risks – helps optimise the performance of the whole project portfolio, making it a key area to be automated. Whilst analytics represents a prerequisite to effective delivery, there is an array of other technologies that can be leveraged to drive organisational efficiency. The graph below demonstrates Deloitte’s view on the maturity of application and potential impact these technologies will have on infrastructure and capital projects. Modular construction allows assemblies to be built more efficiently than ever before. By using a standardised design inventory and a set number of commonly used components, complex assemblies can be built by robots with minimal human interaction. 3D printing can

Summer 2019 Issue

Figure 1: Construction and mining lag furthest behind regarding digital maturity. However, all these sectors are significantly behind other industries such as technology, media, finance, etc. Data sources: Deloitte, MEED Projects

often be used in parallel to manufacture elements of the design with greatly reduced lead times. Ideally, the construction process can occur offsite in a controlled and hazard-free environment, limiting on-site activities to installation and commissioning. This is fundamentally different to a traditional build and leads to efficiency and faster delivery â&#x20AC;&#x201C; with minimal waste in terms of delays and changes. | Capital Finance International

Digital solutions are no longer theoretical. They offer real-world, tangible results â&#x20AC;&#x201C; achieving cost savings and improving delivery performance. By investing in technological capability, construction companies can build a sustainable competitive advantage across the whole project portfolio. While some are already transforming themselves, many others still need to follow as resisting digitisation is no longer an option. i 127



Beating Life’s Challenges, and the Opposition: True Sports Champions Made of Tough Stuff


t’s all about fighters in this issue: battling, brawling, never-give-an-inch sporting heroes who defy the odds, train to within an inch of their lives… and make it to the top.

Real fighters first. In the left corner, weighing in at a toned 72kg, is Leila Amaria Ali, daughter of Mohammad Ali, the man formerly known as Cassius Clay and still revered as one of the greats of the ring. The Greatest, some — including the boxer himself — would say. Stepping out of that shadow to make a name for yourself is a battle in itself. Leila Ali won that one, and many more besides, remaining undefeated in her career, with IWBF, WIBA, WBC, and IBA titles. And for a long time, her dad didn’t even know she was following in his butterfly/bee footsteps... In the right corner, weighing in at more than you and your best mate and the sofa you’re sitting on, is Britain’s giant of the ring, Tyson Fury. Would you believe the big fella weighed the equivalent of a bag of sugar — one pound — when he was born? And when it came to a real scrap — the one with those inner demons — he emerged victorious. He managed to collar a world title or two along the way. OK, fingers on the buzzer, hands on the bell: what are the seven events in the heptathlon? Jessica Ennis-Hill could not only tell you, she could describe the exquisite agony of training for all of them to become one of the most decorated athletes in Great Britain. From schoolyard champ to international champion, hers has been a life of dedication and grit.

Professional snooker players nearly always earn a nickname if they’re any good, and Ronnie O'Sullivan has garnered a few, including The Rocket and The Snooker Mozart. That, and his five world championship wins, tell you enough about his skills on the baize. But like the boxers featured above, O'Sullivan shows true fighting spirit when backed into a corner. Depression and drugs make formidable enemies, but O'Sullivan vanquished them as well. The professional tennis world’s maestra of the double-hand-backhand, Maria Sharapova, is a legend in her own time — and another who has had to surmount challenges thrown down by life. The first was to be born in Russia a year after the Chernobyl disaster in neighbouring Ukraine reminded the world that nuclear power is perhaps not the best solution to “clean” electricity. The other hurdle that immediately springs to mind is the doping scandal that blighted her career and sullied her name — for a while. Neither of those things did anything to dampen her tenacity or her progress. Her opponents, critics and supporters are united in their appreciation of her battler’s attitude… and that backhand. Last in this list, but seldom on the track, is Lewis Hamilton, our man on the F1 podium. A professional career with Mercedes-AMG Petronas Motorsports made him a household name. Like many champions with innate talent, Hamilton started young, making a name for himself on the world’s circuits at just 22. He has claimed five F1 World Championship titles and holds the record for the most race victories by any British driver.

> LEWIS HAMILTON RACING DRIVER Still He Rises: Always in the Fast Lane

Lewis Hamilton’s name is synonymous with speed and victory. His career with Mercedes-AMG Petronas Motorsports has made him one of the most famous and successful Formula One drivers in history. In 2007, at the age of 22, Hamilton burst onto the professional racing scene with a remarkable rookie year, and he hasn’t slowed down since. He has laid claim to five F1 World Championship titles (breaking the previous record of three, set by his idol, Brazilian star Ayrton Senna). Hamilton holds the record for the most race victories by any British driver — 77 of them — as well as the most career points (3,155). Hamilton’s father, Anthony, introduced him to motorsport via radio-controlled cars and karting. When he was nine, and a mad-keen fan 130

of F1, the young Lewis approached the McLaren Racing Team principal, Ron Dennis, at an awards ceremony. He was after an autograph — but he famously told Dennis: “One day, I want to be racing your cars.” Within three years, Hamilton became the youngest person ever to be signed by an F1 team when he was accepted into the McLaren Mercedes Driver Development Support programme. Always hard on Hamilton’s professional heels was his Mercedes teammate, Nico Rosberg. The two have been teammates, rivals and friends for years. With Hamilton usually pipping Rosberg at the line, fans have become fascinated by the competition between the two. And not just on the track; Hamilton once taught himself to ride a unicycle just because Rosberg was able to. | Capital Finance International

Rosberg finally claimed his own first place in the 2016 World Driver’s Championship — then immediately announced his retirement from the sport. Hamilton is known for challenging people’s expectations of F1 drivers. He refuses to conform to stereotypes of how a racing driver should think, dress or behave. He grew up without privileges, and has earned respect for fighting his way up through the ranks. He has shown concern for his supporters, and recently arranged for an F1 car to be shown to a terminally ill young fan — at the fan’s own home. Hamilton has also lent his voice to characters named after him in Pixar’s Cars 2 and Cars 3 films. Lewis Hamilton has the words “Still I Rise” inscribed on his helmet — and tattooed across his shoulders. In a career as illustrious as his, the words seem particularly well-chosen.

Summer 2019 Issue


It’s not just her deadly two-handed backhand, nor her enviable sense of style, that have made Maria Sharapova a legend in the field of professional tennis. Anyone who has worked with her — or played against her — is likely to reference her grit and never-give-up mentality as the keys to her success. From a most unusual childhood to an athletic career blighted by injury and a doping scandal, Sharapova has shown a spirit that endures in the face of all obstacles. Maria Sharapova was born in 1987 in Nyagan, Russia, just a year after the Chernobyl disaster shook that corner of the world. A family friend noted Sharapova’s exceptional hand-eye coordination with a racket when she was just four years old, and her parents began making plans her future. When Sharapova was seven, she and her father — with just $700 between them — arrived in the US to enrol her in the famous IMG Tennis Academy in Bradenton, Florida. A decade later, at the age of 17, Sharapova became the

youngest person to win the iconic Wimbledon Championships, unseating some of the World’s top players — including the almost-unbeatable Serena Williams — in the process. An illustrious career followed, with Sharapova ranked World Number One in singles on five occasions by the Women’s Tennis Association. She holds 36 singles titles, five Grand Slams, two French Opens, an Australian Open, and a US Open — as well as an Olympic silver. Tennis legend John McEnroe once said that Sharapova might be the best competitor the sport has ever seen. Her career was upended in 2016 when Sharapova announced that she had failed a drug test. The resulting two-year suspension was eventually reduced to 15 months after her case was reviewed and it became clear that she had committed “no significant fault”. The drug she tested positive for — meldonium — had only recently been labelled illegal in sport; she said she was unaware of the ban at the time. Since 2017, she has been playing again, with a heightened enthusiasm. | Capital Finance International

Away from the courts, Sharapova has become known across the world for her many corporate partnerships. She has modelled for Sports Illustrated and appeared in advertisements for Prince, Nike, and Canon. She has been a brand ambassador for Porsche and Head tennis racquets, and has designed items for accessory manufacturer Cole Haan. These partnerships, combined with her tennis income and her own candy company, led to her ranking as the highestpaid female athlete in the World for over a decade. Sharapova also has a big heart, contributing time and money to charitable causes: education for children in Belarus, recovery efforts for victims of Chernobyl, and for those affected by the 2004 hostage tragedy in Beslan. She has acted as a Goodwill Ambassador for the United Nations Development Programme. From unlikely beginnings to her status as an elite athlete, a successful businesswoman, and a philanthropist, Maria Sharapova has led an eventful life so far. Fans across the globe are keen to see what is next for their tennis darling. 131

> TYSON FURY PROFESSIONAL BOXER Fury by Name and Fighter by Nature: Boxer Began Life as a Rank Outsider

Getty Images

Tyson Fury belongs to a family of boxers, and he was a champion even before he set foot in the ring. Fury, born three months premature, weighted just one pound (0.45kg) at birth; his father, John, named him after boxing legend Mike Tyson — because he knew his son would have to fight to survive. Survive the tiny boy did, and he flourished. Tyson Fury now stands a towering 6 feet 9 inches (more than 2m) and weighs 260 pounds (118kg). Fury, of Irish Traveller heritage, is related to “King of the Gypsies” bare-knuckle fighter Bartley Gorman, and gave himself the nickname of “Gypsy King” (as well as “The Furious One”). He has lived up to his King moniker, taking the unified WBA (Super), IBF, WBO, The Ring magazine and “lineal” heavyweight titles. In June this year, he stopped German challenger Tom Schwarz is just two rounds. One of Fury’s most famous victories was against the then-world 132

champion, Ukrainian Wladimir Klitschko. Tyson came into the ring as an underdog, and left it a hero. The triumph earned him Fighter of the Year and Upset of the Year awards. Fury has fought for Ireland (where his parents were born) three times at the international level. He won a bronze at the AIBA Youth World Boxing Championships in 2006, but didn’t get the chance to represent Britain at the Beijing Olympics. He was forced to withdraw from the Irish national Championships, but went on to win the ABA super-heavyweight title in 2008. It hasn’t been a smooth ride for Fury. In 2016, just days before a scheduled rematch against Klitschko, he tested positive for drug use. In 2018, he was stripped of his last title by The Ring magazine. Drugs, depression and alcohol began to take their toll, and Fury gave up his WBA and WBO heavyweight titles to focus on his recovery. In a recent interview with ESPN’s | Capital Finance International

Jeremy Schaap, he opened up about his mental health struggles. The British Boxing Board of Control agreed to lift Fury’s suspension, and late in 2018 he made a return to the ring against Deontay Wilder. Manchester-born Fury reportedly dreams of retiring to Spain, and travelled to the country to train at Marbella’s Lonsdale MTK gym ( while preparing for the bout. He became something of a folk hero with locals as he battled his demons and trained like a wild man before taking on the fearsome American. The Wilder fight resulted in a draw, but in many ways, it was a win for Fury: The Ring conferred on him the Comeback of the Year and Round of the Year awards. In a fan poll conducted by World Boxing News, Tyson Fury was named the Fighter of the Year. He was also awarded Comeback of the Year and the Fight of the Year by the WBC.

Summer 2019 Issue

> JESSICA ENNIS-HILL RETIRED TRACK AND FIELD ATHLETE Heptathlon Champ with an Impressive Track Record Jessica Ennis-Hill, one of the most decorated athletes in Great Britain, was a force to reckon with in the heptathlon event. In heptathlon, each competitor takes part in seven events: 100 metres hurdles, high jump, shot-put, 200 metres, long jump, javelin, and 800 metres. Ennis-Hill joined the athletics world at an early age, and rose to become a star. Born on January 28, 1986, Jessica got a feel for sporting competition in her early schooldays, but her path to glory mainly took shape during school holidays. She and her younger sister, Carmel, attended local athletics camps. At 13 years’ old, at one of these camps, Jessica Ennis-Hill met Toni Minichiello — the man who would coach her throughout her career. After some coaching from Minichiello, Ennis-Hill joined the City of Sheffield Athletics Club, and remained a member until she drew the curtains on her career. She shone at junior and youth contests, with performances that hinted at a promising career. Before the age of 18, she had participated in the European Athletics Junior Championships, the Commonwealth Youth Games, the World Junior Championships, and the World Youth Games. But athletics wasn’t her only focus. After leaving school, Ennis-Hill attended the University of Sheffield to study psychology. She demonstrated the ability to balance her athletics and education careers, graduating shortly after clinching a bronze at the Commonwealth Games in 2015. Jessica Ennis-Hill’s career had some low moments. In the run-up to the 2008 Beijing Olympics, she suffered an injury — fractured bones in her right foot — that forced her to withdraw from the Games and nearly ended her career. She worked relentlessly to get back into condition, and her determination paid off at the 2009 World Championships, where she won the heptathlon gold. That victory marked the beginning of a winning streak at the international level. The gold medal that she won at the 2012 London Olympics helped in creating her lasting legacy. After her victory in London, EnnisHill’s life changed. The title brought her increased media attention, and she was appointed Dame Commander of the Order of the British Empire (DBE) for her services to athletics. Jessica Ennis-Hill is married, with one son. Since retiring from professional sport in 2016, she has been supporting charities and championing a healthy lifestyle. | Capital Finance International


> RONNIE O'SULLIVAN PROFESSIONAL SNOOKER PLAYER 'The Rocket' Rules Supreme - Surpassing 1000th Century Break

Professional snooker player, broadcaster, author, video gamer: these are some of the talents and diversions of “the snooker Mozart”, aka “The Rocket”: Ronnie O'Sullivan. Regarded as one of the greatest snooker players of all time, O'Sullivan is a five-time world champion. He was recognised as “no ordinary genius” after winning the first of those championships back in 2001. In March 2019, he became the World Number One after winning the tour championship — a feat he has achieved no less than four times. But O'Sullivan’s life is not confined to the snooker table. While working as an expert commentator for Eurosport’s snooker coverage, he also worked on the miniseries Ronnie O'Sullivan's American Hustle. Hailed as the most naturally gifted player 134

the game has ever seen, O'Sullivan’s success after turning professional in 1993 has been noteworthy. The trials of his personal life and his extensive travelling to sporting fixtures sometimes created hurdles he battled to clear. His father was sentenced to a long jail term, and O'Sullivan battled with demons of depression and an addictive character. “Looking for perfection is the only way to motivate yourself,” he once said, but that relentless pursuit has not been without its problems. He has been open and frank about his battle with drugs and depression. In a recent interview for the BBC’s Don't Tell Me The Score, O'Sullivan claimed that if he had his time again, he wouldn’t choose snooker as a career because of the toll it had taken on his mental health. “Snooker is a really hard sport,” the world number one told the interviewer. | Capital Finance International

In spite of these hindrances, The Rocket rose to the pinnacle of the game. During the 2012/13 season, he took a respite from the game and began to look after his physical health, running in Epping Forest. This time away from the tables reinforced his love of running, and its place in his life. “Running is what has helped me to fight my demons, win five world snooker championships and cope with all the crap that life has thrown at me,” he said. “My running trainers are the most important things I own.” He got the nickname Rocket for his fast and attacking playing style. It has stood him in good stead: in 2016, he was awarded the Most Excellent Order of the British Empire (OBE) at the New Year Honours.

Summer 2019 Issue


Laila Amaria Ali with her father, the late Muhammad Ali

Former professional boxer Laila Amaria Ali, daughter of the late, legendary heavyweight Muhammad Ali, has managed to step out of her father’s shadow and forge her own path. She is well-known for her own skills in the ring. Throughout her boxing career, she remained undefeated and held IWBF, WIBA, WBC, and IBA titles. She has now retired from the sport, but Laila Ali has been an inspiration to young boxers, especially women, for her champion’s mindset. Rising to become the most accomplished female boxer of her time was not an overnight thing. In her website,, she confessed it was a struggle to find anyone who shared her passion for the sport. Her father, born Cassius Clay, was initially not aware that she had taken up his sport. She battled a lack of confidence and an inability to speak up about her love for boxing,

but didn’t give in to despair. Ali channelled her energy into forging an unbeatable mindset, and that confidence eventually allowed her to openup to her father. The takeaway lesson for Ali was that becoming a champion requires both mental and physical nourishment. She has applied this to all her endeavours, and has worked as a TV host, a wellness and fitness advocate, a wife, a mother, a home chef, and an author. To effectively manage her family and work roles, she continuously monitors her health, mental and physical. Aside from learning how to multitask effectively, Ali has found she can deal with self-doubt or lack of self-confidence by striving to become the best version of herself. Although Laila Ali is out of the fight game, her record is an impressive one. In her debut bout, she faced April Fowler, and knocked her out within the first 31 seconds of the match. | Capital Finance International

Fowler’s career was brief and dismal — two fights which lasted just two rounds in total, both resulting in losses by knockout — but Ali gained confidence and went on to face other opponents, including Jacqui Frazier-Lyde, daughter of another heavyweight champion, Joe Frazier. Joe and Mohammed faced each other three times in their careers, with Ali twice emerging winner. Laila Ali attributes her success to making intentional decisions, particularly those that assisted her in becoming fearless, stronger, and healthier. She has developed a strong sense of discipline, keeps her priorities in check, and incorporates them into her daily routine. Giving priority to her values and her health has allowed Laila Ali to achieve whatever she sets her mind to — even if that means overcoming seemingly insurmountable odds. “Confidence is found at the intersection of loving yourself and preparing yourself,” she says. 135

> Latin America

Reforms Have Helped Chile, but IT Workforce Needed for Future Chile has transformed its economy since the 1970s, but it needs to continue with the process.

Chart 1: Annual GDP Growth and Copper Price (USD, percent). Source: CEPAL, Macrotrends, and World Bank WDI.


he economy has slowed since 2014, and productivity growth has proved elusive. Chile is also over-reliant on copper exports. To ensure future growth, and continuing convergence with the income of more advanced countries, Chile needs to increase productivity, and find new avenues. The digital economy has been long-promised as a saviour, and has grown considerably, but its ascension is not assured.


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Chile is rightly considered an economic success story. Micro- and macroeconomic reforms from the 1970s delivered economic growth and reduced poverty, and propelled Chile to advanced nation status (it joined the OECD in 2010). In 1976, Chile's real GDP per capita was 20 percent of that of the US; in 2017 this had increased to 38 percent. Low growth between 2014 and 2017 has raised fundamental questions about the future for Chile, even after growth improved in 2018 to 3.9 percent. Has Chile exhausted all major gains from micro- and macroeconomic reforms? In the 2018 World Economic Forum's Competitiveness Index, Chile ranked first in macroeconomic stability, 13th in product markets, and 20th in financial systems. Chile already has 26 free trade agreements, covering 64 countries, representing more than 86 percent of world GDP. The marginal benefit from further macroeconomic improvement, trade liberalisation, and microeconomic reforms appears small. The Chilean population is ageing, and the total is expected to fall below 2015 levels by 2060. By 2100, the total working-age population is predicted to fall by 18 percent. Adding to the concern is Chile's reliance on copper exports. It is the largest copper producer in the world, with a 28 percent share of production in 2018. When the price of copper boomed and fell in the 2000s, so did the Chilean economy (chart 1). Chile has reduced its reliance on copper over time, with its share of exports falling from 80 percent in the 1960s to around 50 percent today, but with gains from reforms nearly exhausted, it is still reliant on the mineral. This suggests that growth will be more volatile, and linked to the price of copper. The potential growth of lithium mining may help alleviate this dependence. Increasing Total Factor Productivity (TFP) is one obvious solution. Chile's TFP remains low relative to OECD levels, promising large increases in growth from catch-up (chart 2). TFP is productivity derived from innovation, technical change, and other qualitative factors — as opposed to productivity gains from increasing units of labour and capital or their more efficient allocation. Increasing TFP has proved elusive despite all the reforms and has decreased relative to many other 138


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Chart 2: Total Factor Productivity, National prices, Index 1969 = 100. Source: Federal Reserve of St Louis, FRED.

OECD countries (chart 2). How can Chile close this gap if it has already exhausted macro and micro reforms? Since the late 1990s, the digital economy has promised to increase TFP and diversifying growth. This economic activity, enabled by computers and the internet, has created new markets and expanded existing ones. It has also transformed business and government processes, leading to increased productivity. For a small and remote country, the digital economy is a godsend. Successive Chilean governments have laid the digital foundations by introducing key reforms and goals. In 1987, the state telephone company was privatised. In 1992, Chilean universities connected to the internet. In 1995, a universal access policy set out to provide basic telecommunication access throughout the country. In 1997, the government sold spectrum to two new mobile phone operators, doubling competition. By 2000, mobile phone subscriptions had passed fixed-line subscriptions. In 2000, then-president Ricardo Lagos set Chile the goal of being a leader in information technology. In 2001, two new sets of undersea cables increased Chile’s internet connectivity to the rest of the world. Between 1999 and 2002, electronic signatures were enacted into legislation, digital certificate authorities were created, and online credit card transactions began. In 2002, 3G was introduced. In 2007, a basic bank account was introduced for all taxpayers, providing many with access to the financial system for the first time — a key in enabling e-commerce. By 2009, mobile phone penetration was at 100 percent. In 2011, Startup Chile was formed. In 2013, 4G was introduced. President Sebastián Piñera, has promised to lead Chile into the fourth industrial revolution, creating a new office for productivity and entrepreneurship, and creating a blockchain pilot. Throughout the period, Chile’s many free trade agreements have included provisions to ` cross-border digital trade. | Capital Finance International

So far, the results have been rewarding. Chile leads Latin American countries on a range of measures associated with the digital economy. It ranked 38th in the World Economic Forum’s 2017 Network Readiness Index, and 30th in the 2017 Digital Evolution Index (The Fletcher School and Mastercard). In 2000, only 16.9 percent of the population had a computer, with only 8.3 percent connected to the internet. In 2018, 82 percent of the population has access to the internet with 76 percent of the population connecting to the internet via their mobile phone. In 2017, the digital economy directly contributed three percent to GDP, but a study by Accenture and Oxford Economics estimates that, including the indirect benefit from the provision of technology to other sectors, that figure should be 22.2 percent. According to the Santiago Chamber of Commerce, B2C eCommerce sales reached $4bn in 2018. While the government has laid good foundations, a key challenge is ensuring the supply of skilled workers the digital economy needs. If Chile does not reform its education and vocational training systems, the growth of the digital economy could be capped. According to the Survey of Adult Skill (PIAAC), the skills and proficiencies of Chilean workers are below the OECD average. According to the PISA 2015 results, Chilean 15-year-olds do not score well at reading, maths, and science compared with the rest of the OECD; 28 percent lack basic competency. At the tertiary level, the total number of graduates is high, but only three percent are attaining IT-related degrees. Hopefully educational reforms introduced in 2015 can drive improvements, along with increased recent attention on vocational training. Successful government policies in increasing entrepreneurship in Chile should also be an encouragement. To ensure that the digital economy can become the engine for growth and further income convergence, future Chilean governments must continue to implement reforms — in particular with regard to education and the digital workforce. i

Summer 2019 Issue

> Banco Santander Chile Management:

Chilean Bank Taken Into New Territory by Vibrant Leaders Claudio Melandri is the president of the Board of Directors of Santander Chile, and Santander Group’s country head for Chile.


e began his career in Banco Concepción and in 1990 joined the group, where he has held various roles, including regional manager of the branch network, manager for Human Resources, and manager of the Commercial Bank. Melandri was also executive vice-president of Banco Santander in Venezuela for three years, in charge of the creation of the commercial area in that country. He was CEO of Banco Santander Chile from January 2010 to March 2018, until he assumed the mantle of president of the Board of Directors. Claudio Melandri has a history with Santander going back more than 30 years. He became a leader within the Chilean financial industry and pioneered a series of transformations which enabled Santander to transform its banking methods. One of the most recent projects which embodies the bank’s new method of client interaction is Workcafés, a new format launched in 2016 which combines top financial advisory services, a co-working space and a coffee shop. This 100 percent Chilean innovation has been successfully exported to other countries where Santander Group operates, including Spain, Brazil and Portugal, with plans to include the United Kingdom. Chile has 43 Workcafés and is expecting to finish the year with 60 branches using the format, evidence of the success and positive reception of the Workcafés. This new model implicitly shows the characteristic Melandri methodology: every project must carry the stamp of excellence in its execution. In terms of corporate governance, the board — presided by Melandri — is the bank’s most senior body, and represents the interests of all stakeholders. Each director contributes to the progress of the institution, according to his or her area of specialty. They are part of a number of committees kept abreast of the details of company management. Santander Chile has a solid administration team, with Miguel Mata as CEO. Mata has been with

President of the Board of Banco Santander Chile: Claudio Melandri Hinojosa

the bank since 2002. Under his charge are 12 divisions that make up the bank’s administration, including commercial banking, middle market, Santander corporate and investment banking. | Capital Finance International

The solid management of the Santander Chile team has earned it several accolades, including Best Bank in Chile and Best Managed Bank in Chile. i 139

> Trust, Prudence, Security:

Watchwords that have Paid Off for Santander These are times of caution in the global economy. Beyond specific results, countries still seem to be in a period of extreme prudence with no major signs of growth, and it seems that this will be the general mood in the coming months.


ompanies have had to get used to navigating in these uncertain waters, making use of all the cartography and instruments accumulated over the years. But old recipes are not enough. The best way to keep moving forward is with a firm hand at the helm, a crew tuned as finely as a Swiss watch, and eyes fixed on the horizon. Chile’s Banco Santander has understood that along with the lessons of yesteryear there is a need for transformation, to attract clients who prefer the digital world over physical contact, and need a bank that provides the greatest security in daily operations. In a reversal of the traditional system, it is the bank which adapts to customers’ needs. This is precisely how things work at Santander Chile, where for the past seven years a route of profound transformation has taken place. The bank has set up an exportable model of branches that pull together as a team, leading the transformation of the payment system in Chile. The bank’s team works as the main promoter and ambassador in each space where it operates. The year 2018 was one of outstanding management and positive results in a highly competitive environment. Santander was a leader in profits and other areas, results that have been endorsed and recognised. These accolades have validated the bank’s approach to matters specific to its work, but also in areas that are fundamental to creating a positive environment for employee development, with excellent workplace relationships. There has been a sustained and committed contribution to the development of the country in different public-private collaboration initiatives, with a special focus on education. A banking method has been created which brings value for shareholders and stakeholders. This has been achieved in a dynamic that 140

"The bank has set up an exportable model of branches that pull together as a team, leading the transformation of the payment system in Chile." has benefitted from the search for greater efficiencies, commercial innovation, strategic sense, correct interpretation of environment and the challenge of maintaining a permanent culture of technological innovation. Banco Santander is the largest bank in terms of assets in Chile, and is listed on the Stock Exchanges of Santiago and New York. At the end of 2018, the market capitalisation of the entity amounted to $14.41m, with a book value equity of $4.71m. Chile has slowly begun to recover the dynamism that has characterized its economy, reaching four percent growth, above region averages. Although projections for this year are slightly lower, the country should be growing around three percent. This presents a challenge to offer support that will accompany and stimulate the rhythm of investment. This indicator was precisely the one that had the greatest expansion in 2018. As of the end of last year, Chile has a new regulation for banking that puts it on the same level as the most developed economies. This is the most relevant reform of the past 30 years, which establishes new capital requirements in line with the standards recommended by Basel III, new criteria in terms of secrecy and bank reserve, composition of boards and new | Capital Finance International

Chile: Santiago

Summer 2019 Issue

"Trust has been the main driver. The bank’s shareholders, the trust shared among its collaborators and the trust which clients show." corporate governance for the entity. This will assume the responsibility of supervising the sector with the integration process of banks and financial institutions with the Commission for the Financial Market (CMF). The bank has also adopted a series of measures to strengthen corporate governance, adjusting to the best national and international practices. It increased from three to five the number of independent directors, of a total of nine regular directors and two substitutes. It was an unprecedented way to implement an induction process for new members of the Board to allow more expeditious incorporation to new functions. Along with this, and in line with the above, changes were made to the Board's support committees and it was decided to divide the Human Resources Committee into the Appointments Committee and the Remuneration Committee, adjusting to the recommendations of best international practices. Along with this, the bank has offered preferential treatment for its customers, which has been resulted in improved satisfaction in each of the target service channels and received recognition. The territorial deployment, inside and outside of Chile, of a new branch model, the Workcafé, deserves a special mention. These branches are the best non-traditional export in recent years and they are already present in various countries in Europe. It is perhaps the best expression of Santander Chile’s operation. Santander has been observing the growing decline of people attending a branch, and the constant demand for new digital services. The most obvious option was to turn totally to the digital world, but after long work sessions it was decided to go for the best of both worlds: face-to-face and digital. This begat the Workcafé concept, spaces open for clients and non-clients of the bank. They are places of creation and innovation, in which the bank's employees are advisors for those who want to display their ideas and projects. They provide a meeting space, which values the merit and progress of people, creation and innovation, without leaving sacrificing the company essence: to be a bank at the forefront that has the best commercial offer. Trust has been the main driver. The bank’s shareholders, the trust shared among its collaborators and the trust which clients show. Those clients have come to expect a positive surprise, every step of the way. i 141

> PetroRio:

Strategy is How You Play the Game, but Determination Helps You Win


etroRio, Brazilâ&#x20AC;&#x2122;s largest independent oil and gas company, went from preoperational concession holder to cash-generating oil producer with a clear strategy: to acquire and redevelop mature fields, and generate funds to acquire new assets. PetroRio was established in 2015, and made its largest acquisition in late 2018 and early 2019. It now has a combined 70 percent stake

in the Frade field in the Campos Basin, on the continental shelf of the State of Rio de Janeiro. The Brazilian company took over as operator of the producing field from US giant Chevron, which at the time was the assetâ&#x20AC;&#x2122;s largest shareholder. At its foundation, PetroRio set up a strong business development team of local and foreign professionals with wide international experience in mergers and acquisitions.

CFO & Business Development Officer: Blener Mayhew


Summer 2019 Issue

Led by CFO and business development officer Blener Mayhew, PetroRio had the ambitious goal of increasing total oil production to 100,000 barrels per day. The company was determined to reach Frade’s interest holders to seek a stake in the asset, and negotiated for months with two sellers. PetroRio remained committed and dedicated to the transaction, and succeeded in purchasing the relevant Frade field stake. The team used an innovative strategy to split the acquisition into different phases and include conditions to certain changes in corporate structure. It followed bilateral negotiations with the two parent companies as ultimate stakeholders. In October 2018, PetroRio signed the acquisition of an 18.26 percent non-operator stake held by Frade Japão Petróleo, belonging to Japan’s largest oil and gas company, Inpex. Three months later, in January 2019, PetroRio announced the acquisition of Chevron Brasil Upstream Frade, which held a 51.74 percent stake in the concession and operation of the Frade field. In both cases, the tactical approach was to separately acquire subsidiaries that held positions in Frade and in the FPSO operating in the field, streamlining the process and simplifying Brazilian regulatory approval. "The addition of these significant stakes in Frade is cash-accretive, reaffirms our strategy of growth through acquisition and redevelopment of producing fields, and represents a diversification of our portfolio and sources of revenue", says Mayhew. With the transaction, PetroRio is entitled to an additional production of 15,000 barrels per day. In all, the company’s production will add up to 27,000 barrels of oil and gas equivalent per day — more than twice the production reported in December 2018 — making it the largest independent oil and gas company in Brazil. In addition to expanding production, the business had an even stronger impact on the company's reserves, which increased from 26m barrels — from the assets Polvo (Campos Basin) and Manati (Camamu Basin) — to a total 87 million barrels of oil equivalent (including Frade). From an operational standpoint, the proximity between the Polvo and Frade fields allows for relevant logistics synergies, in line with the company’s strategic pillar of cost-reduction. PetroRio’s management believes that the margins of assets currently operated by the company will increase, leading to new levels of cash generation and financing capacity for other projects under negotiation. The Frade transaction is a solid example of PetroRio's eagerness to grow. The company 143

constantly seeks opportunities — in Brazil and abroad — that are in-line with its way of doing business. It has a strong track record of striving for excellence and operational safety, cost rationalisation, solid financial planning and the use of innovative financing instruments, such as the recent funding obtained from the Brazilian Innovation Agency (FINEP) and from Chinese giant ICBC. "We know we are on the right track,” says Mayhew, “and the company has been growing in a sound and sustainable manner while still having a very promising future. The acquisition of Frade is an important step that further strengthens PetroRio's presence in the oil and gas sector. We are very optimistic about the results that are yet to come." PetroRio’s CEO, Nelson Queiroz Tanure, hints on new acquisitions. "We are always looking for assets which have, as main qualities, sustainability, organic growth opportunities, and attractive returns for our shareholders." The company is preparing roadshows for US and European investors to gain support for new acquisitions and for investment to redevelop its producing fields through interventions and drilling campaigns. The focus is on increasing productivity and economic life of fields such as Polvo and Frade, which have new drilling campaigns lined up for 2019 and 2020. The acquisition of the operating interest in the Frade field is fully aligned with the company's investment philosophy, which is centred in the acquisition of cash-generation, producing assets, and in the redevelopment of mature fields to extend their useful life. "We are pioneers of this strategy in Brazil,” says Mayhew. The company's senior executives and the business development and finance teams hope to announce updates to PetroRio's expansion plans in the near future. i 144 | Capital Finance International

Summer 2019 Issue | Capital Finance International


> Ann Low, US Department of State

Combat Corruption by Enabling Tax Payment: El Salvador Case Study In May 2016, the US Department of State funded a project in El Salvador’s thirdlargest city, Santa Ana, to discover whether incentives for business registration and enabling tax payments could reduce corruption and rebuild trust in government.


wo years later, the results are in — and they are promising, as well as worrying. A third of the small business owners surveyed reported that they suffered from extortion, and half had considered migrating to the US to escape corruption. Less alarming, but troublesome, was the unsurprising discovery that tax payment forms were too numerous and too complex, and many businesses didn’t have a reliable way to calculate how much tax they owed. Less than 10% of El Salvador’s working age population filed income tax returns in 2015, despite those filings being mandatory for all workers with yearly incomes above $4,064. Business registration creates records, alerting federal and municipal government agencies that a business exists and is taxable. In El Salvador, “informal” businesses — with no legal right to exist —employ more than 60 percent of the labour force. Most businesses are not registered because compliance with administrative procedures is too difficult and costly. The owners of these businesses, and their employees, are vulnerable to extortion and bribery from gangs and unscrupulous government officials. The project recognised that Salvadorans need immediate improvements in the areas of personal safety and welfare to cut illegal migration to the US. In 2015, El Salvador was labelled the most violent country in the World, with 104 homicides per 100,000 population (4.9 homicides per 100,000 population in the US). Salvadorans had an average of 6.9 years of schooling and $6,898 per-capita annual income. Americans had 13.4 years of schooling and an average per-capita income of $54,941. The project provided technical assistance (skilled people paid by a donor) from the United Nations (UN) Business Facilitation programme to help Salvadoran government staff simplify business registration, tax payment, and the provision of public services. They created novel IT approaches, a citizens’ hotline, and training programs. They harvested data from the new systems to simplify work processes and make compliance with governmental obligations easier.


"The project recognised that Salvadorans need immediate improvements in the areas of personal safety and welfare to cut illegal migration to the US." The project design was demand-driven (responding to requests from the government of El Salvador), and informed by expert advice from the UN and the US Department of State. It leveraged three existing UN Business Facilitation systems in El Salvador, and substantial in-kind contributions. Altogether, the government of El Salvador and municipality of Santa Ana assigned 45 staff to the project. Officials from 11 Salvadoran government agencies contributed. SALVADORAN PROJECT LEADER’S PERSPECTIVE The results are best highlighted by Nelson Pérez, the Salvadoran Project leader. “We developed or expanded nine systems to improve governmental services, and we built a mobile app to track progress,” he said. “Initially, we planned to document the process to pay taxes, create an anti-corruption hotline (call centre) in Santa Ana, register businesses and issue identity cards to entrepreneurs to prove their legal status. “The processes for small businesses to register and pay taxes were so complex that we were unable to promote massive business registration because we first needed to identify and document all the steps to pay taxes, which was much harder than we anticipated. Then we needed to begin simplifying processes so entrepreneurs could fulfill their obligations without having to hire an accountant or spend several days each month on governmental paperwork.” The project added national level tax payment information for individual merchants and companies to the national business registration website ( “We established 32 public-private partnerships to offer immediate | Capital Finance International

benefits from business formalisation, such as access to lower cost credit,” said Pérez. “For the first time in El Salvador’s history, a small business can find all the information it needs to pay national level taxes on one website, including downloadable forms, and it can compare an array of benefits (health services, insurance, credits and guarantees, technical assistance) available to formalised businesses from 32 private sector suppliers.” While the expanded website is a major improvement, there are still 14 mandatory annual or monthly filings, involving multiple dates, forms and government agencies. There are also municipal-level obligations, which were documented for Santa Ana and San Salvador, but not for El Salvador’s 260 other municipalities. “In July 2017, my government made the national business registration website the unique channel for registering a business in El Salvador,” said Pérez. “The quantity of registrations through the online system increased 392 percent over the life of the project — from 1,735 in 2016 to 8,528 in 2018.” This represents a significant improvement in legal compliance and potential increase in tax revenue. “Once we documented how to pay taxes, we simplified some of the most frequently used and cumbersome processes.” The work began with the automation of the process for filing the mandatory annual statistical solvency certificate, so companies no longer need to travel to the office of DIGESTYC in San Salvador to file. That office estimated the online process saves each of El Salvador’s 26,000 registered companies about $40 per year in opportunity costs, amounting to $1 million annually. “In Santa Ana, we automated issuance of the municipal tax solvency declaration, which reduced processing time by 86 percent and eliminated the possibility for municipal agents to delete files or forgive obligations as happened in the past. Businesses in Santa Ana can now go to the city hall and get the tax solvency declaration in less than an hour.

“We interviewed small businesses and discovered that not only were tax payment forms too numerous and too complex, many businesses didn’t have a reliable way to calculate how much taxes they owed. We learned that a third of our 20 sample entrepreneurs suffered from extortion, and half had considered migrating to the US to escape corruption. “We also learned that the amounts the entrepreneurs paid the extortionists were typically greater than the taxes they owed, and that the extortionists were typically gang members who threatened the entrepreneurs’ families with violence. Were entrepreneurs able to pay taxes and count on police services to keep their persons and property safe, everyone would be better-off. “When we launched the anti-corruption hotline in Santa Ana in mid-2017, operators received many calls about inefficient municipal services. Gross administrative inefficiency is considered corruption under Salvadoran law. “We realised that to rebuild trust in government, we had to create an online administrative system for Santa Ana, so the operators could direct complaints, such as poor electricity services or missed garbage collections, to offices that could help. We discovered many municipal offices didn’t have, or enforce, standard operating procedures for providing services, so service levels

were inconsistent. We worked with government agents to document 44 municipal procedures online, involving 210 steps, 124 documents, 17 laws, and 19 municipal employees (santaana. “In that process, we discovered Santa Ana had over 200 taxes, permits, and fees which were not well publicised and inconsistently collected, giving the impression that compliance was unnecessary or arbitrary.” Santa Ana received 870 calls on the hotline through January 2019, including calls about gang members infiltrating the municipal police, bribes to municipal agents in exchange for incorrect registrations, public employment in exchange for money, and extortion. This cooperation led to eight corruption cases being transferred to the General Prosecutor’s office. “When we focused on creating the entrepreneur card, we discovered that many small business owners did not have the time to comply with the multiple documentary requirements and complex formalities that are mandatory to register a business and work formally,” said Pérez. “We partnered with the Small Business Administration (SBA) and the National Registry of Natural Persons to create the MYPE registry which entrepreneurs can join with just a copy of their national ID. The MYPE registry gives entrepreneurs access to technical assistance, | Capital Finance International

fairs, and expositions to help their businesses grow. As of March 2019, 3,700 entrepreneurs had joined the MYPE registry. “During the project’s two-year life span, we trained over 500 government officials and trusted third parties, such as lawyers and accountants, on how to use the new systems, including how to harvest productivity data to identify bottlenecks and improve services. For example, by analysing information in Santa Ana’s new tax database, the tax manager identified 30,000 accounts that didn’t receive invoices because the addresses were located in dangerous areas and that 54 percent of households that did get bills had not paid their municipal services taxes. “My government needs to further simplify business registration and tax payment to enable widespread compliance. It also needs to implement more content management systems in government agencies, so taxpayers get better services. Rebuilding trust in government requires a sustained effort, but we are headed in the right direction.” THE MAYOR’S PERSPECTIVE According to Milena de Escalon, the mayor of Santa Ana (2018-2021), the “Línea ciudadana unidos contra la corrupción” (citizens hotline), Santa Ana’s online administrative systems, and the behind-the-scenes work processes that those systems track have increased productivity and 147

transparency in the municipality and improved municipal services. Since the citizen’s line was launched, 870 cases have been addressed, resulting in improvements to public lighting services, solid waste collection services, maintenance of public works (sidewalks, walkways, streets), and inspections of businesses that were reported to violate regulations. At the same time, the system has motivated municipal officials in all departments of the municipality to be more responsive to requests for public services, so that citizens don’t complain about them. And the system has made it possible to detect acts of bribery by municipal employees. “We hope to continue expanding the project with the United Nations and the Department of State of the United States, so that we can offer more municipal procedures online and facilitate the declaration and payment of taxes,” said De Escalon. “I have personally guaranteed the transparency of this project by requiring that cases be sent from the Citizens hotline Contact Centre to the mayor’s office, which distributes the cases to the corresponding dependencies within the municipality, tracks them to resolution, and ensures that citizens are notified through the Contact Centre of actions taken to resolve their complaints.” THE UN’S PERSPECTIVE According to Frank Grozel, the UN Business Facilitation Programme manager, who oversaw the project’s implementation from Geneva, “The El Salvador project brings the world closer to a replicable model of technical assistance that can enable widespread business registration and tax payment. “My team had a decade of experience helping governments reduce corruption and enable economic growth through administrative systems and trade portals. Now we have experience simplifying tax processes and integrating IT solutions with a citizens’ hotline and publicprivate partnerships. “I believe many reform-minded governments could improve governance in a few years through a four-tier process of technical assistance. First, simplify one ministry’s processes and put them online (estimated costs $200,000). Second, pursue a more complex project to standardise more administrative functions online, implement a citizen’s hotline, develop public-private partnerships, and provide businesses with a simple accounting system, modelled on the El Salvador project (estimated costs $750,000 annually for two years). Third, re-think tax rules to make compliance easier for small businesses, who are over 90 percent of potential taxpayers in most countries. “Fourth, once compliance is simplified, implement a communications campaign (estimated costs $1 million annually for several 148

years) educating entrepreneurs about how to register businesses and pay taxes. Throughout the process continue improving all government services and expanding partnerships with the private sector, so new taxpayers experience immediate benefits from legal compliance, such as access to lower cost credit and the ability to bid on government contracts. CONCLUSION The El Salvador project provides reform-minded governments and donors with a tested, lowcost model to reduce corruption and improve public services through technical assistance from the UN Business Facilitation programme. The government of El Salvador and municipality of Santa Ana were able to simplify compliance with their laws and improve services through a citizens’ hotline and online administrative systems. Their combined efforts, and those of UN staff, multiple US agencies, other donors, and private enterprises who co-operated with this project generated measurable results in just two years. In the process, the project identified areas where more work must be done to simplify governmental processes, expand access to municipal and national services and enable payment for those services. The El Salvador project creates a replicable process to improve governance, enhance security, and build trust in government by enabling and encouraging formalisation of small businesses and tax payment. ADDITIONAL ACCOMPLISHMENTS • Contributed to a 22-place improvement in El Salvador’s World Bank 2018 Ease of Doing Business rating. • Created baseline statistics for the nation and municipalities of Santa Ana and San Salvador against which progress can be measured. • Created a system for the secure exchange of information among government ministries and with the user. • Continuity: Upon the project’s completion, the government of El Salvador committed 15 staff to continue maintaining, updating, and improving the online business registration and tax information system (, the municipality of San Salvador committed staff to | Capital Finance International

maintain its system (sansalvador.eregulations. org), and the municipality of Santa Ana committed five staff members to maintain the citizens’ hotline and its administrative system ( • Created a certificate programme with the National School of Public Training (ENAFOP) to begin institutionalising data-informed policy making. • Partnered with the electric company, to inform over 70,000 households about the Santa Ana citizens’ hotline in their January 2018 electric bills. • Created a prototype government central board which the government could build to track business registrations and compliance with rules for businesses in El Salvador. • Created a prototype simple accounting system which the government could integrate with a simplified tax payment process to enable easier compliance with governmental obligations by small businesses.

References available online from ABOUT THE AUTHOR Ann Low is the Knowledge Leadership Division Chief at the US Department of State and a career diplomat. She developed the El Salvador project, solicited colleagues’ support and ideas for it, identified funding, and monitored implementation.

Author: Ann Low

Summer 2019 Issue

> Experience

Pays Off for Banco Ganadero’s CEO

J Ronald Gutiérrez López is a renowned Bolivian businessman and economist, born in Santa Cruz de la Sierra, Bolivia.


e has more than 30 years of experience in the banking sector — 16 of them dedicated to leading Banco Ganadero. In February 2003, Gutierrez assumed the position of general manager. In 2016, the businessman was elected to preside over the Association of Private Banks of Bolivia (ASOBAN) in the city of La Paz; he continued in that role until last year. ASOBAN is a nonprofit organization comprising the top banks that make up the Bolivian financial structure. Its objective is to propose, design and programme policies to promote the development of financial services. J Ronald Gutiérrez López graduated in Economics from the State University of Campinas (Unicamp) in Sao Paulo, Brazil, where he also attained a Masters in Economics. He has a specialty in strategic planning from the University of the North in Illinois, US, and another in senior management from the Incae Business School in Costa Rica and Miami. He has participated in conferences and congresses in Bolivia, the US, Europe and Asia. Gutiérrez is described as an optimistic, moderate and simple person — qualities that have contributed to his successful career over the past three decades. Gutiérrez reaffirms his commitment to the sector and promotes education and financial inclusion programmes to contribute to the economic development of the Bolivian population. Through ASOBAN, he has worked to better represent an important sector for national development. He has fulfilled a valuable interlocutor role with authorities, and shown the ability to unify a vision that promotes stability and growth. i

General Manager: J Ronald Gutiérrez López | Capital Finance International


> Banco Ganadero:

Covering All the Angles Takes Commitment and Courage


anco Ganadero has been characterised as a multi-purpose bank since it was founded in 1994, focusing on its contribution to the development of Bolivia.

service via a portfolio of face-to-face and digital platforms which are under constant development. The financial institution believes that boosting the countryâ&#x20AC;&#x2122;s production capacity is crucial to driving national financial growth.

The bank has shown commitment to improving the lives of its customers and providing quality

With teamwork and co-operation, Banco Ganadero has achieved CSR compliance and is

150 | Capital Finance International

the first financial institution in Bolivia to develop an environmental and social management system, SARAS (ESMS â&#x20AC;&#x201C;Environmental Social Management System). The bank received favourable results in a 2018 audit of its environmental and social management system. External consultants approved

Summer 2019 Issue

to preserve and protect the environment, with the rational use of resources in its facilities to prevent or reduce pollution. The bank has changed the energy matrix in its offices and has installed solar panels to generate clean electricity and reduce consumption. Banco Ganadero was the first financial institution in Bolivia to introduce bicycle parking spaces for staff and customers, and closely monitors the use of water, electricity and paper. INNOVATION Always a pioneer, the bank has concentrated its efforts on swiftly adopting digitalisation. Its internet banking GanaNet and mobile banking GanaMóvil services are available around the clock and allow customers to make transactions wherever they are. City clients and those who live or work in rural areas can all carry out their banking activities with ease. Innovation is the essence of Banco Ganadero, one of the leading financial institutions in the field. This is reflected in the good reception virtual banking has had in Bolivia. GanaMóvil scored the highest rating from users in the country. Two-thirds of the bank's transactions are made through a self-service system, part of a modern and complete platform that can be used by a mobile device. The technological impulse has not always gone itsability to manage socio-environmental risks, specifically in the process of granting loans. It believes its loans process promotes responsible environmental and social sustainability practices among Bolivian companies.

“hand-in-hand with face-to-face” attention — but it has at Banco Ganadero. The team matches personal service with all improvements, ensuring quality and friendliness are synonymous with its services.

Banco Ganadero has demonstrated its environmental awareness through initiatives

DIVERSITY IN SERVICES Banco Ganadero identifies itself as a “full service | Capital Finance International

bank” thanks to the types of loans it offers. These are divided into sectors to meet the needs of large, medium-sized and small operations: industrial, commercial and individual. These services support the development of sectors including manufacture, agriculture, livestock and construction, among others. In this way, the bank fulfils its objective of contributing to the economic, financial and social development of the country. INCREASE Banco Ganadero received authorisation to operate from the Superintendence of Banks and Financial Institutions on March 31, 1994, in Santa Cruz de la Sierra; it subsequently opened his first branch in the city of La Paz. By 2002, it managed to consolidate at the national level. Subsecuently, the financial institution was associated with the Inter-American Development Bank (IDB), through IDB Invest, which allowed it to enter the international arena. The name of the institution comes from the transformation of the cattle raisers fund created to support it. When it emerged as a bank, the shareholders chose to keep the name as a gesture of thanks and for the strength, nobility and sustainability of the sector — but since its inception, the bank has supported virtually all economic sectors. Twenty-five years after its foundation, it has 300,000 clients, 300 points-of-service nationwide, more than 1,000 officials throughout the country… and 18 million transactions. The evolution of the bank's main indicators ensures its financial strength and solvency, while promoting an agile and modern banking style. i 151

> EY:

New Law Promotes Furthering of Knowledge Industry in Argentina By Sergio Caveggia

The “Knowledge Industry” employs more than 400,000 people and generates $6bn in revenues for Argentina.


he Government intends to foster this even further to create 200,000 new jobs and generate more than $15bn in exports.

A recently gazetted law grants tax benefits to remove obstacles and ease the way for the development of knowledge-related activities. The Software Promotion System (implemented about 15 years ago and effective until the end of 2019) was efficient at promoting the industry. The new law up-dates and simplifies it, including a wider definition than just the “software industry”.

"A recently gazetted law grants tax benefits to remove obstacles and ease the way for the development of knowledge-related activities."

The system promotes: • software, IT and digital services • audiovisual production and post-production • biotechnology, bio-economy, biology, biochemistry, microbiology, bioinformatics, molecular biology, neurotechnology and genetic engineering, geo-engineering, and the trials and analyses • geological and prospective studies, and services related to electronics and communications • professional services relating to export services • nanotechnology and nanoscience • aerospace and satellite industry, space technology • engineering for the nuclear industry • manufacturing, maintenance and introduction of goods and solution-oriented services and automation processes, such as AI, robotics and industrial internet, IoT, sensors, additive manufacturing, augmented and virtual reality and simulation (in these cases, only in connection with industry 4.0).

There are requirements to be met by taxpayers. The benefit is applicable to corporate income taxpayers engaged in any of the above activities in Argentina, on their own behalf and as their main business. They must meet at least two of these requirements: • evidence of continued improvements in the quality of services, products and/or processes, or through a well-known quality standard • evidence of disbursements related to research and development tasks (at least three percent of total revenues); training for such activities, involving at least eight percent of total salaries • evidence that they export goods and or/services in an amount representing at least 13 percent of the total revenues from such activities. When the activity under promotion involves professional services, the exports exclusively related to such activity shall account for at least 70 percent of total revenues. Micro and small enterprises providing professional services are subject to less demanding requirements.

It also comprises engineering, exact and natural sciences, agricultural sciences and medical science activities related to research and experimental development.

The new law also defines “main activity” as the situation in which the percentage of revenues related to the promoted activity represents at least 70 percent of total revenues.

It includes exports related to goods and services, and those meeting the requirements mentioned above, also falling under the “main activity” definition included in the previous paragraph. TAX BENEFITS Federal tax stability can be extended to provincial and municipal taxes, provided that the different jurisdictions join the system. This implies that the tax burden of beneficiaries will not be increased on their request to join the system. Unlike in the current system, “stability” includes export and import duties. A monthly deduction is based on the price index for each payroll employee of the tax base, subject to social security contributions (this is immediately applicable; the other companies are subject to a progressive schedule for applying the deduction until 2022). Tax credit bond equal to 1.6 times the contributions which should have been paid on the amount mentioned in the previous paragraph; that is to say, that a tax credit bond is generated over the employer contributions payable on a salary. Such a bond may be computed against prepayments or amounts payable arising from income tax or value-added tax returns. It may be transferred once. Income arising from the incorporation of the bond to the beneficiary’s equity will not be subject to income tax. A 15 percent income tax rate will apply if the payroll maintenance requirement is met. Beneficiaries are required to apply the tax rate on the distribution of dividends established by the Tax Reform of late 2017. The effective tax rate, considering shareholders and beneficiary companies, would stand at about 26 percent, if we take into account the 13 percent withholding on dividends applicable as from 2020.

"The new law also defines 'main activity' as the situation in which the percentage of revenues related to the promoted activity represents at least 70 percent of total revenues." 152 | Capital Finance International

Summer 2019 Issue

The beneficiaries of the system will not be subject to VAT withholdings or additional withholdings. Beneficiaries subject to withholdings made by foreign beneficiaries may compute them towards Argentine-source income under certain limitations. This includes a significant benefit in addition to those established by Income Tax Law; it provides a relief to service-export companies which used to incur high costs related to withholdings made by paying countries. The system grants verification and control powers to the enforcement authority (Ministry of Production and Labour), as well as a penalty system in the event of non-compliance. Lastly, the law provides for a transition system applicable to beneficiaries of Software Promotion Law, the effective term of which ends December 31 this year. This rule is effective from January 1, 2020, through December 31, 2029. i

ABOUT THE AUTHORS Sergio Caveggia is a tax partner with the international tax and transaction service area in EY Argentina. He joined EY Argentina in 1994 and has developed strong expertise over 25 years in international taxation and mergers and acquisition matters. He is experienced in acquisition structures for inbound and outbound investments, buy-side, sell-side and restructuring services within the Transaction Tax area. Caveggia gives lectures in national universities and is a frequent speaker in tax seminars. He has also written several articles dealing with Argentine tax issues He is a Certified Public Accountant, graduating from the University of Belgrano in Argentina. He obtained his Tax Specialistâ&#x20AC;&#x2122;s Degree at the University of Belgrano, and has a postgraduate certificate in Business and Management from Universidad Catolica Argentina (UCA). He is also a member of the Professional Council of Economic Sciences of Buenos Aires and the Argentine Fiscal Association.

Author: Sergio Caveggia


> Central Bank of the Dominican Republic:

Dominican Economy Surges Ahead, Bringing Growth to Multiple Sectors In recent years, the Dominican economy has shown high growth rates in an environment of low inflationary pressures, which has allowed the strengthening of its macroeconomic fundamentals.


rowth in economic activity has averaged 6.5% over the past five years — the highest in Latin America (LA), while inflation averaged just 2.2% over the same period.

The Dominican GDP expanded by seven% during 2018, driven by consumption and private investment, while year-on-year inflation stood at 1.17% at the end of the year. Good growth performance was accompanied by the reduction of "twin deficits" (the fiscal and current-account deficits in the Balance of Payments), reinforcing resilience to internal and external shocks. At the end of 2018, the non-financial public sector deficit reached -2.4% of GDP, while the current account deficit stood at minus 1.4% of GDP, below its historical average. The good performance of the external sector has allowed the continued accumulation of international reserves, which closed for 2018 at all-time highs of $7.6bn, equivalent to a coverage of 4.4 months of imports. In addition, maintaining the relative stability of the exchange rate, together with low levels of inflation, has contributed to improving the competitiveness of the export sector in recent years. The macroeconomic stability of the Dominican Republic, and the implementation of coordinated economic policies, have contributed to the perception of country risk (as measured through JP Morgan’s Emerging Market Bonds Index) of below the Latin American average since 2017. This is a reflection of international investor confidence in the fundamentals of the Dominican economy. Another economic strength is a liquid, profitable and highly capitalised financial system. In this sense, the total assets of the system expanded by eight% during 2018, while the solvency index was more than 17%. It presented a return on 154

equity (ROE) of 19.1% and average assets (ROA) of 2.3%, while the delinquency of the credit portfolio was just 1.6%. In terms of this year's performance, economic activity expanded by 5.1% during the JanuaryMay period, associated with a moderation of private investment and framed by the weakening of the global economy that has been affected by uncertainty factors, such as trade disputes between major countries and geopolitical tensions in some emerging economies. On the other hand, inflationary pressures have been reduced during 2019, with year-on-year inflation at 0.92% in June, significantly below the lower limit of the target range of the Central Bank of the Dominican Republic (CBDR) of 4.0% to 1.0%. In this context of moderation of economic activity and low inflation levels, the BCDR reduced its Monetary Policy Rate by 50 basis points in June, from 5.50% to an even five% annually, to drive domestic demand. The Monetary Board authorised the liberalisation of some DR$34bn ($670m) in legal reserve resources to be channelled as loans to productive sectors, including export, manufacturing, agriculture, procurement and construction of housing, commerce and small and medium-sized enterprises. The implementation of these expansionary monetary measures will accelerate the mechanism for the transmission of monetary policy through a decrease in the interest rates of the financial system and the dynamism of private credit, which will help to boost economic growth around the monetary programme levels by 5.5%, in a context of price stability. The immediate impact of monetary policy decisions has been reflected in a reduction in the interest rates of the financial system and | Capital Finance International

Governor: Héctor Valdez Albizu

Summer 2019 Issue

"The Central Bank is confident that the Dominican Republic will continue to show strong macro-economic fundamentals, supported by effective economic policies." the increasing dynamism of credit. National currency loans to the private sector grew by 10.4% year-on-year in June 2019, supported by the â&#x20AC;&#x153;multiplier effectâ&#x20AC;? of the reduction in minimum reserve requirements. In particular, the expansion of private credit in national currency in June was influenced by year-on-year growth in the sectors of manufacturing (30.2%), consumption (12.7%) and home acquisition (11.9%). In terms of outlook, both domestic projections and expectations of economic operators point to economic activity growth of around 5.5% in 2019 and converging on the potential of five% by 2020, remaining among the fastest-growing economies in Latin America. On the other hand, inflation is likely to remain low, closing this year at around three% and gradually approaching the core value of the target range of four to one% by 2020. In the external sector, the current account deficit is projected to be around minus 1.5% of GDP for 2019, supported by foreign exchange-generating activities such as FDI, remittances and, to some extent , tourism. This would contribute to the relative stability of the exchange rate and the accumulation of international reserves, estimated to end the year at around $8bn. On the other hand, the process of consolidating public finances is expected to continue, with a primary surplus expected to be achieved during 2019, as envisaged in the National Budget. The Central Bank is confident that the Dominican Republic will continue to show strong macroeconomic fundamentals, supported by effective economic policies. In this sense, this institution continues to monitor the uncertainty factors of the international and domestic environment, being prepared to react in a timely manner to preserve macro-economic stability, and contribute to sustained growth in terms of the economy and social welfare. i | Capital Finance International


> Kenneth Rogoff:

As Populists Rise, Latin America’s Economies Will Fall


hough US President Donald Trump tends to grab most of the headlines, he is hardly a global exception. Populist autocrats have enjoyed a breathtaking rise to power in countries around the world, and nowhere is the trend more pronounced than in Latin America following the elections of Mexico’s 156

leftist president, Andrés Manuel López Obrador (AMLO), and Brazil’s right-wing president, Jair Bolsonaro. Americans are right to complain about Trump’s autocratic tendencies, but, as former Chilean Finance Minister Andrés Velasco would remind them, Trump is a mere apprentice compared to Latin America’s populists. | Capital Finance International

To be sure, this does not mean that the Mexican and Brazilian economies will share the same fate as that of Venezuela under Hugo Chávez and its current strongman, Nicolás Maduro. Chávez and Maduro managed to take Latin America’s richest country – home to one-quarter of the world’s proven oil reserves – and turn it into a basket

Summer 2019 Issue

case with inflation over 1,000,000% and a poverty rate over 90%. At least four million of Venezuela’s 32 million people have fled the country, and forecasts suggest that number could double this year if Maduro remains in office. Venezuela owes its plight not so much to Trump-era economic sanctions as to its own populist leaders. The country has been declining for years, with most of the drop in its social and economic indicators far predating the Trump administration. AMLO, like the charismatic Chávez two decades ago, was swept into office last year on the promise that he would improve the lives of ordinary people. One of his first official acts was to abort construction of a desperately needed new airport in Mexico City – even though the project was already 30% complete – on the grounds that airlines are for the rich. He then launched a new airport project in an impractical, mountainous location farther away, where it stands even less chance of being finished.1 Though AMLO campaigned on a promise to end corruption, his government has eschewed competitive bidding for more than 70% of the contracts it has awarded. Like Trump, he dismisses media critics as “fake news,” and warns reporters to “behave well,” or “you know what will happen to you.” Still, global investors are encouraged by the fact that AMLO has left the central bank alone, at least so far. But even if the market isn’t pricing in a massive “Venezuela risk” for Mexico, many of the left-leaning celebrities, writers, academics, and politicians who once praised Chávez to the skies have been notably reticent to cheerlead for AMLO. Having watched Trump turn the Venezuelan tragedy to his political advantage, outsiders who may be sympathetic to AMLO’s socialist ambitions are wise to be cautious. The one exception, of course, is the British Labour Party’s far-left leader, Jeremy Corbyn, a longtime supporter of Venezuela’s corrupt Chavist regime, who attended AMLO’s inauguration in December 2018.

"To bring down inflation, which had probably reached around 30%, Macri’s government sought to slow the rate of money growth and find alternative sources of finance."

While AMLO poses a threat to Latin America’s second-largest economy, Bolsonaro is jeopardising its largest. As the sad old saying goes, Brazil, with its bountiful natural resources and talented people, “is the country of the future – and always will be.” Its new president, a former army captain who wants to arm the citizenry and raze large swaths of the Amazon (which would significantly accelerate global warming), has become a lightning rod for student protests, environmentalists, and gay-rights activists. Anticipating massive | Capital Finance International

protests, he recently canceled a trip to New York after receiving biting criticism from its mayor, Bill de Blasio. Things aren’t much better at home. Bolsonaro’s approval ratings have fallen by half since he took office at the beginning of the year. Early scandals make it far from clear that he will be able to clean up the endemic corruption that cripples Brazil’s governance, much less demonstrate the coalition-building skills needed to implement his government’s ambitious economic reform agenda. Making matters worse, Latin America’s third-largest economy, Argentina, is now facing the prospect of a return to corrupt, autocratic socialist rule after a presidential election this coming October. The country’s current president, Mauricio Macri, came to office in 2015, having promised a return to economic sanity after former President Nestor Kirchner and his successor/ wife, Cristina Fernández de Kirchner, squandered the benefits of an agricultural export boom in the early 2000s. Yet Macri, who inherited an extremely difficult situation – not least a large budget deficit and limited borrowing capacity – has also made some critical mistakes. To bring down inflation, which had probably reached around 30%, Macri’s government sought to slow the rate of money growth and find alternative sources of finance. But officials chose to rely on short-term foreign-dollar borrowing (a classic mistake), and Argentina soon found itself unable to pay its debts. The exchange rate has now collapsed, inflation is up to over 50%, and the Kirchners’ party is poised to regain power. If all autocratic leaders were as competent as the late Lee Kuan Yew, Singapore’s founding father, recent political developments in the Americas might not be so worrisome. Sadly, this is not the case, particularly when it comes to the populists in Mexico, Brazil, and Argentina. As matters stand, it looks like Latin America will remain the region of the future indefinitely. i ABOUT THE AUTHOR Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. The co-author of This Time is Different: Eight Centuries of Financial Folly, his new book, The Curse of Cash, was released in August 2016. 157

> North America

Big Tech Prepares for the Big Fight as Regulators Close-in Public opinion has turned against Apple, Amazon, Facebook, and Google â&#x20AC;&#x201D; and politicians and regulators have taken note.

158 | Capital Finance International

Summer 2019 Issue | Capital Finance International



he House Judiciary Antitrust Committee has begun an investigation into Big Tech, while the Federal Trade Commission (FTC) and Department of Justice (DOJ) have come to a very public agreement on which Big Tech companies each should investigate. People and politicians are unhappy with Big Tech’s pervasive presence, but it will be up to the FTC and DOJ to pin specific anti-competitive practices on them. Big Tech now dominates a range of activities and markets. Their complex technology has become pervasive, if not addictive. This dominance, along with the collective weight of several scandals, has turned Big Tech from darlings to deviants in the court of public opinion. Facebook has been hit with the Cambridge Analytica scandal and evidence of careless privacy breaches; Google has been caught using its search engine to promote its own products; Amazon is moving into bricksand-mortar with under-paid warehouse workers, and has asked taxpayers to stump-up for its new headquarters. Apple is being scrutinised over its app store. In terms of public opinion, Facebook and Google have fared the worst. In the 2019 Axios Harris Corporate Reputation Rankings of the top 100 most-visible companies, Facebook fell 43 places, and Google 13. But Big Tech cannot be prosecuted just for being big, pervasive, and scandalous. Under US antitrust law, primarily comprising the Sherman Act (1890) and the Clayton Antitrust Act (1914), the judiciary and regulators would first have to prove that Big Tech are monopolies. Proving that may be harder than it seems. The crux is the definition of “the market” for each of the Big Tech firms. Critics may argue that Facebook dominates social media… but what exactly does that mean? Is it a single market? Does it comprise networking applications like Facebook and LinkedIn, or does it also include Instagram, Twitter, Messenger, Snapchat, Viber, and WhatsApp? Instead of defining Big Tech’s markets by its applications, the criteria should perhaps be what they are selling. Facebook and Google have a combined 60 percent share of online advertising, Apple and Google (Android) have a 95 percent share of all app spending in the US, while Amazon has close to half the US e commerce market. Big Tech, however, would argue for broad definitions of these markets: online advertising is just part of the wider advertising market, app purchases is just

one form of e-commerce, and e-commerce is competing against brick-and-mortar stores rather than comprising a separate market.

and Profit Shifting Project (BEPS), which aims to harmonise corporate tax treatment between countries.

If Big Tech is found to have monopolies, the next step is to determine if there has been market abuse. Antitrust law does not prohibit monopolies, only unreasonable methods used to establish or maintain them. “Unreasonable methods” have typically meant the ability to raise prices (monopolistic pricing) or exclude competitors. Since the 1970s, and the influence of Robert Bork’s book Antitrust Paradox, the judiciary and regulators now also consider whether consumers are disadvantaged by monopolies. Are consumers paying more, or receiving less in terms of product, service, quality, or features?

If Big Tech harbours monopolies, and is found to have used unreasonable behaviour or have disadvantaged consumers, the next step is for the judiciary and regulators to decide on what must be done.

Price is largely irrelevant here, as most services are free. But as US Assistant Attorney General Makan Delrahim recently said, the DOJ will investigate any behaviour that appears to have the sole intent of lessening competition or disadvantaging consumers. Facebook’s acquisitions of Instagram and WhatsApp, though pre-approved by regulators at the time, are now seen to have lessened competition. It can be argued that Amazon and Google have leveraged dominant positions in certain sectors to gain unfair advantage in adjacent sectors (selling of their own products, or — in the case of Amazon — increasing market share in parcel delivery). Apple has tight control of which apps can be sold on its app store, but also offers similar apps. The music service Spotify recently made complaints about this to the EU. It is important to note that US antitrust law cannot be used to prosecute the misuse of consumer data unless the action has the intent of excluding or lessening competition. There is no federal law on data use. Some argue that data privacy is an antitrust issue, because data privacy is a quality issue and consumers are being disadvantaged. The FTC is currently negotiating a settlement with Facebook over the 2018 Cambridge Analytica scandal. The fine is not based on an antitrust breach, but on a broken agreement Facebook made with the FTC in 2011 on data privacy. Antitrust law is also unable to address the issue of Big Tech tax-avoidance. This is an issue that tarnishes the companies’ reputation, but needs to be addressed separately. France is considering a digital services tax, while the OECD and G20 are addressing this through the Base Erosion

Democratic presidential candidates Elizabeth Warren and Bernie Sanders have called for the break-up of the Big Tech. Even one of the co-founders of Facebook, Chris Hughes, is advocating for the company to divest Instagram and WhatsApp. History shows, however, that breaking-up is hard to do. Since the introduction of the Sherman Act in 1890, only two companies have been suffered this fate because of anticompetitive practices: Standard Oil (1911) and AT&T (1982). Microsoft faced an order to be broken up in 2000, but that was dropped. The likely outcomes of any investigation and subsequent court cases are fines, behavioural remedies, and new regulations. This is the path that the EU has taken. In 2017-18, the EU fined Google $9.2bn for breaches involving Google Shopping and Android. It also forced Google to change its business models around Google Shopping and Android. The US Microsoft Antitrust case also forced Microsoft to change its behaviour by giving access to its Application Programming Interfaces (API) to third parties. Another possible outcome is that the US implements federal data privacy regulations, like the EU’s 2018 General Data Protection Regulations (GDPR) which regulate the use of consumer data. Lawmakers may even create a new regulatory body to oversee the use of consumer data. The COO of Facebook, Sheryl Sanderberg, welcomes such regulation — because it would provide some guidance in a complex area. Currently, Big Tech is under pressure to anticipate future regulations — and regulations are probably best left to regulators. Whatever the process and possible outcomes, any investigations and court cases will probably take many years. Those against IBM and Microsoft each took a decade, and Big Tech is arguably better prepared for the fight than Microsoft was. Regardless of how long it takes to reach an outcome, history shows that the process itself will probably have a positive competitive impact. Some argue that Big Tech was born out of the Microsoft Antitrust case, and the subduing effect it had on the company. Now it is Big Tech’s turn to behave better. i

"Regardless of how long it takes to reach an outcome, history shows that the process itself will probably have a positive competitive impact." 160 | Capital Finance International

Summer 2019 Issue

> Randy Oostra, President and CEO of ProMedica:

Holistic Healthcare is the Only Way to Overcome Challenges We Face As the American healthcare system struggles under the pressure of shrinking profit margins and growing chronic-care cases, Randy Oostra, president and CEO of ProMedica, suggests an alternative model — a holistic view, including the social determinants that most affect patient health.


roMedica, the not-for-profit healthcare system serving north-west Ohio and south-east Michigan, is on a mission to address the social determinants of health. Its advocacy and intervention efforts thus far have garnered global recognition, with Oostra often serving as the company spokesperson. He pitched his plan at the UNSDG healthcare summit in Geneva this year. “As you got up today, you did not think of yourself as a patient, hopefully,” he said. “You did not think of yourselves as being under care of a doctor. You are thinking about your own individual health and wellbeing, and so we're thinking about the social determinants of health.” He questions why in some communities, within a matter of a few city blocks, you find

"The US healthcare system has been dominated by a treatment-focused approach with too little effort invested in prevention." a 25-year difference in life expectancy. Do these communities lack hospitals, doctors, or medicine? “Absolutely not, they have all those things,” says Oostra, “but what becomes clear as we begin to look at these communities is that there are other factors in play. “As we think about the provision of healthcare, we also need to think about other factors in life.” He points to statistics that showed US life expectancy was around the middle of the pack; now it is nearer to the bottom. This isn’t related to

the quality of US healthcare services, according to Oostra, but rather other contributors, such as how socio-economic status and social factors influencing people's lives and longevity. The US healthcare system has been dominated by a treatment-focused approach with too little effort invested in prevention. ProMedica aims to achieve more than medicine. Clinical and medical care accounts for only 20 percent of a person's overall health and wellbeing, whereas physical environment, socio-economic factors, and health and lifestyle habits make up the other 80 percent. Oostra estimates that the US spends around $3tn annually on clinical care, but not nearly enough on everything else. He views public-private partnerships as an ideal solution to help alleviate the pressure of the healthcare industry and, above all, to improve patient outcomes.











UTILITIES | Capital Finance International


ProMedica Social Determinants of Health



• We worried whether our food would run out before we got money to buy more. Was this often, sometimes, or never true in the last 12 months? • The food that we bought just didn’t last and we didn’t have money to buy more. Was this often, sometimes, or never true in the last 12 months? • Do you have a disability that prevents you from accepting any kind of work during the next six months? • Do you need help finding a local career center and/or training program?


• Over the last two weeks, how often have you been bothered by any of the following problems? Little interest or pleasure in doing things. • Over the last two weeks, how often have you been bothered by any of the following problems? Feeling down, depressed, or hopeless.


• How hard is it for you to pay for the very basics like food, housing, medical care and heat?


• Are you worried or concerned that in the next two months you may not have stable housing that you own, rent, or stay in as part of a household?

TRANSPORTATION • In the last six months, have you ever had to go without healthcare because you didn’t have a way to get there?

• Within the last year, have you been afraid of your partner or ex-partner? INTIMATE PARTNER VIOLENCE


• Do problems getting child care make it difficult for you to work or study? Yes or no?


• What is the highest level of school you have completed?



• Are you currently married or living with someone in a partnership? • In a typical week, how many times do you talk on the telephone with family, friends, or neighbors? • How often do you get together with friends or relatives? • How often do you attend church or religious services? • How often do you attend meetings of the clubs or organizations you belong to? • In the past year, has the utility company shut off your service for not paying bills?


© 2018 ProMedica

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ProMedica began to research America’s growing obesity problem over a decade ago, and found a clear link between childhood obesity and hunger. Oostra estimates that in the US today, “13 percent of households are food insecure — meaning they don't have enough food — 19 percent with children, 33 percent single moms with children. “What you begin to find out,” he says, “is that food is medicine.” These issues inspired Oostra and ProMedica to expand on the social determiners of health. “As we think about solutions to healthcare, and we think about where we invest money, the idea that we only want to spend our money on (the clinical side) is an issue. It impacts people not only from a health status, it impacts people in employment, their productivity, their happiness in life. “In our systems today, if you're a patient, we not only treat you clinically, we screen you for 10 social determinants of health.” ProMedica patients respond to questions about financial strains, including food or housing insecurity, lack of transportation or childcare, or unpaid power bills. The questions also address patients’ behavioural health, social connections, partner relationships, educational level, and employment status. “These are the 10 social determinants of health that we look at, and then we begin to provide interventions. We've given it for patients, now we do it for our own employees,” says Oostra, “and

we're talking to employers about screening for these same sorts of social determinants.” Employees dealing with any of these issues are not going to be as productive or as engaged at work as a result. Oostra says the interventions are yielding positive results. Employers are happier with a healthier workforce, lower absenteeism, and less turn-over — not to mention the cut in healthcare costs. The social determinants of health are an increasingly important focus, especially considering how many chronic conditions — which may exhibit symptoms later in life — are rooted in childhood experiences. The difficult situations described in ProMedica’s screening process would be stressful enough for an adult, but when a child is exposed to such challenges and stressors, the adverse impact can last a lifetime.

this care is done in the right settings, increasing primary care and also increasing our adoption of more non-traditional, non-clinical areas — what we find is we're setting ourselves up for a new model of care. Not one that is just based clinically, but one that really incorporates much more of an integrative approach, to hold the [new] ecosystem. “The technology exists today to take 30 percent to 40 percent of healthcare, and do it at home. It's existed for a while; it's just not been scalable.” Public-private partnerships, particularly within the booming technology sector, will pave the way for ProMedica to continue its mission-driven focus: to support individuals’ clinical needs with quality care treatment, and their social needs through active community collaboration and ongoing economic development. i

“It becomes destructive to an individual over a lifetime,” says Oostra, “and in healthcare, we then end up treating the end games instead of really treating the cause — we treat symptoms instead of the cause. As we begin to think about the future of healthcare, we really have an opportunity to think about it differently.” Home feels like the right setting for the future of healthcare, in his opinion. “I don't know about you, but I don't want to be in a hospital — even though I work for a hospital. I want to be at home for my care. If we can figure out ways with technology to deliver care at home — make sure | Capital Finance International

President & CEO: Randy Oostra


> Mohamed A El-Erian:

America’s Unusual Recovery is Now Also its Longest


ata released over the next few months will show that the current US economic expansion is the longest on record. But while the United States continues to outperform other advanced economies, this success has yet to dispel many Americans’ persistent sense of economic insecurity and frustration; nor does it alleviate concerns about the lack of policy space to respond to the next economic downturn or financial shock.


The current expansion began in mid-2009, following the 2008 financial crisis and the “Great Recession.” Powered initially by exceptional fiscal interventions and previously unthinkable monetary policies, the economy built enough of a foundation for private-sector confidence to return, and for corporate balance sheets to recover. Coupled with accelerating advances in new technologies, the expansion came to be led in large part by technology and | Capital Finance International

platform companies presiding over the new “gig economy.” It was given further impetus by progrowth measures, including deregulation and tax cuts. With the US unemployment rate at 3.6%, real (inflation-adjusted) wages are now growing at 1.6%. And with the most recent quarterly data indicating an annualised GDP growth rate of 3.1%, US economic activity continues to

Summer 2019 Issue

outpace that of Europe and Japan by a significant margin. Owing to this strength, America has become increasingly assertive in pursuing national objectives abroad, including by circumventing longstanding cooperative and conflict-resolution mechanisms and threatening import tariffs and other protectionist measures. To get to this point, the US had to overcome headwinds from abroad, including an existential debt crisis in Europe and slowing economic growth in China. Domestically, deep political polarisation, especially since 2011, has impeded congressional legislative activity and produced multiple actual or threatened government shutdowns (including the longest on record). In the absence of new pro-growth measures from Congress, monetary policy became the “only game in town.” After being forced to expand its role in the economy substantially during the crisis years, the US Federal Reserve flirted with some major policy mistakes, and became more vulnerable to political interference. Because annual growth over the past decade has often been tepid and insufficiently inclusive – what has become known as the “new normal,” or secular stagnation – the US economy has been left with a residual sense of underperformance and potential vulnerability. According to an oft-cited Fed survey, almost half of US households report having insufficient savings to cover a $400 emergency expense. No wonder trust in institutions and expert opinion remains so low. Coupled with excessive inequality (of income, wealth, and opportunity), frustration and political anger remain high. Making matters worse, fearmongering about the implications of technology and globalisation continues to fuel concerns of job dislocations and disruptions. And outside the US, many have come to worry that the superpower responsible for issuing the global reserve currency, and that plays a decisive role in many multilateral interactions, is no longer a reliable and predictable anchor for global trade and finance.

"No wonder trust in institutions and expert opinion remains so low. Coupled with excessive inequality (of income, wealth, and opportunity), frustration and political anger remain high."

Moreover, unlike in prior expansions, the US is yet to build sufficient buffers to deal with future economic and financial challenges. Or, to quote former US President John F Kennedy by way of IMF Managing Director Christine Lagarde more recently, we have not fixed the roof while the sun was shining. Beyond the lack of self-insurance at the household level, the Fed’s ability to counter economic recessions and financial disruptions is rather limited. Whereas the | Capital Finance International

current policy rate is 2.25%-2.5%, past downturns have usually required cuts of five percentage points or more. Also, the Fed has a bloated balance sheet and a rather weak mechanism for transmitting monetary-policy measures to the real economy. And even if fiscal policymakers were to become more responsive, they would be starting from a point of relatively high deficits and debt. Prolonging the current expansion will require great care. Policymakers, particularly Congress, need to avoid big mistakes and minimise the risk of market accidents while doing more to promote growth. The US needs a well-targeted approach to modernising and upgrading its infrastructure. Policymakers and leading economists also must be more sensitive to how the fruits of economic growth are shared; among other things, there should be better protections for the most vulnerable segments of society and stronger automatic stabilisers. Businesses, for their part, need to do more to embrace their social responsibilities, if only to avoid ending up in the same position as the banks after the 2008 crash. There is already a growing chorus calling for more regulatory constraints on Big Tech. Moreover, having shaken up global trade, the US needs to ensure that it will remain the anchor of the rules-based international system. Otherwise, its ability to inform and influence economic and financial outcomes around the world will weaken. The US will – and should – soon be celebrating its longest-ever expansion. But it must not lose sight of its remaining challenges. The last thing the world needs right now is for today’s expansion to give way to a sustained period of lower growth, higher financial instability, and greater cross-border tensions. i ABOUT THE AUTHOR Mohamed A El-Erian, Chief Economic Adviser at Allianz, the corporate parent of PIMCO where he served as CEO and coChief Investment Officer, was Chairman of US President Barack Obama’s Global Development Council. He is President Elect of Queens’ College (Cambridge University), senior advisor at Gramercy, and Part-time Practice Professor at the Wharton School at the University of Pennsylvania. He previously served as CEO of the Harvard Management Company and Deputy Director at the International Monetary Fund. He was named one of Foreign Policy’s Top 100 Global Thinkers four years running. He is the author, most recently, of The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse. 165

> Jamaica’s Largest Credit Union:

Making an Impact with Financial Inclusion and Education


he Community and Workers of Jamaica Cooperative Credit Union (C&WJ) started life in 1961 as Jamaica Telephone Company Employees Co-operative Credit Union Ltd. Back then, the union had a membership of 135 and assets of a £1,766.23 (equivalent to USD 42,772 today). The institution has grown with the nation, through independence from Britain in 1962 and the ups and downs of the following half-century to become Jamaica’s largest credit union. Today, it has a membership base of more than 122,000, and assets of JMD 16.6bn (about USD 126m). This growth has been achieved with a model that offers premium financial services to under-served communities, partnering with members to make financial goals a reality. Under the leadership of CEO Carlton Barclay, growth has continued — and the institution has entered a phase of unprecedented expansion. Barclay, appointed in January 2017, brought with him 25 years of experience in the banking and finance industries, having held senior positions at banks and building societies across the Caribbean region. Since Barclay’s appointment, C&WJ has completed two successful mergers with smaller credit unions, facilitating the institution’s expansion into the island’s largely rural south-west. He is quick to note that these mergers were carefully calculated to support the credit union’s priorities. “A merger is really about providing better benefits to our members,” he says. “That is the bottom line.” Barclay has 166

also led the expansion of the credit union’s services with online banking, increased ATM access, improved savings, and loanprotection insurance. Carlton Barclay has also overseen the implementation of C&WJ’s Sharetec online banking platform, enabled by a partnership with US-based Bradford Scott Data Corporation. C&WJ has emerged as a trailblazer among Jamaican credit unions, providing clients with online loan application services, external funds transfer to other financial institutions, internal funds transfer and bill payments, as well as a mobile app for Apple and Android users. This is all in keeping with Barclay’s intention to secure an additional 15-25 percent of market share over the next five years. Another key driver has been the credit union’s commitment to addressing social inequality through increased financial inclusion. It has adopted an innovative approach to meeting Know-Your-Customer (KYC) requirements, with a flexible approach to include rural dwellings that often lack street names and numbers. Its underwriting standards assess applicants’ demonstrated ability to earn, rather than depending on full-time employment status. This means that members with more informal employment — such as micro-enterprise owners and smallholder farmers — have access to financing. C&WJ offers benefits that banks do not, and has opened its doors to unbanked communities. A good example is the Life Savings Insurance product that gives beneficiaries their savings balance and up to JMD 700,000 in the event of serious

Summer 2019 Issue

President: Condell Stephenson

CEO: Carlton Barclay

injury and death, and JMD 1.4m in the event of accidental death. This is possible because the credit union has taken out a policy with an international insurance company. Members with loans have a loan-protection insurance up to JMD1m in the event of death. Given the emphasis placed on financial inclusion in the United Nations 2030 Agenda For Sustainable Development, C&WJâ&#x20AC;&#x2122;s strides in this area are particularly significant. This kind of innovation provides a model for financial institutions across the globe. C&WJ has demonstrated an on-going commitment to the communities where it operates. The institution invests in the future of its members and their dependents with a social outreach focus on education. In 2018 alone, C&WJ awarded more than JMD5m in scholarships, bursaries and grants. The

institution granted JMD3m to students pursuing tertiary level programmes, and 95 scholarships and bursaries valued at more than JMD2m to children of members of the credit union. Services reflect this focus on education with the popular Educator Flex Savings Plan. With the goal of financial inclusion for all, the credit union supports members and potential members today for the benefit of future generations. The governance structure of C&WJ comprises of a board of directors which consists of qualified, experienced and committed professionals led by president Condell Stephenson. C&WJ is an example of how â&#x20AC;&#x153;doing goodâ&#x20AC;? can be good for business. Though this is a small organisation with limited reach, it provides a model of how financial inclusion and educational access can be expanded, contributing to the global goal of sustainable development. i 167

> Asia Pacific

JETA-powered Advances Mean More Than Just "Cars for Cheese" With all the talk of trade wars, the Japan-EU Trade Agreement (JETA) has received little attention.

168 | Capital Finance International

Summer 2019 Issue | Capital Finance International



he agreement is more than “cars for cheese”, and more than a pointed statement to the US on free trade. It is even more than Abenomics. JETA and the accompanying strategic and data agreements are the continuation of Prime Minister Shinzo Abe’s policies to position Japan for the coming new world order. Two of Abe’s main goals when coming to office were reigniting the Japanese economy and ensuring Japanese influence with the rise of China. Since the bursting of the asset-bubble in 1991, Japan’s economic growth has been in the doldrums. The “Asian miracle” turned into a debt and deflation nightmare, and is now fighting against demographic drag. As soon as he re-entered office in 2012, Abe initiated two of his “three arrows” for reform: fiscal stimulus and quantitative easing. The third arrow, structural reform, is complex and requires a multi-pronged policy approach. One tool Abe has used for structural reform is trade agreements to remove protection around inefficient industries, opening them up to competition. The agreements also provide new market opportunities for stronger industries and can promote investment abroad. JETA is a continuation of the strategy of trade agreements and structural reform. It follows on from the Japan-Korea trade agreement (2014), the Japan-Australia Trade Agreement (2014), and the Trans-Pacific Partnership absent the US (TPP-11) (2018). JETA represents a big structural catalyst for Japan, in terms of both size and depth. JapanEU trade is large, it comprises around 40 percent of world trade. JETA will thus have a big impact on the Japanese economy. This impact will be deepened by the high degree of trade liberalisation in the agreement. JETA will remove 99 percent of the tariffs on the EU side and 94 percent on the Japanese side. Japan will maintain tariffs on a small number of sensitive goods, such as rice and some dairy products. Given the competitive advantage of Japan and the EU, the industries that will probably be most affected are the food and motor vehicle industries. Japanese consumers will enjoy cheaper and a greater range of European food (wine, cheese, pork, and chocolate) and clothing, while both motor vehicle and autoparts industries will probably export more to the other. The EU’s 10 percent tariff on Japanese cars will be phased out over seven years, allowing Japanese carmakers to increase their market share in Europe in-line with the level in other markets like the US. EU carmakers will benefit from the reduction in non-tariff barriers, with Japan agreeing to align itself with international vehicle standards. Compliance with Japanese vehicle standards, both the differences and process, had been a major complaint of European carmakers.


"JETA will facilitate increased investment between Japan and the EU because it allows for the free movement of capital and payments." But JETA is more than cars and cheese, it will also facilitate more investment between Japan and the EU. For Japan, investment is perhaps more important than trade. Since 2005, Japan’s current account surplus has been driven by income and dividends from foreign investments by Japanese companies (primary income balance) rather than from a positive trade balance. In 2018, Japan recorded a primary income balance of 20,810 billion yen, the second highest ever, while the trade balance was just 1,188 billion yen. For many years, Japanese exports faced heavy protection, so many Japanese firms relocated production to their export markets; Japanese car makers are the prime example. Japan also has invested heavily overseas to secure resources and take advantage of cheaper costs. JETA may mean some vehicle production returns to Japan (with Brexit playing a part here), but it will also facilitate more Japanese investment in the EU. Japan also wants to increase inward FDI from the EU to increase domestic growth. Back in 2014, Japan set itself the goal of doubling inward FDI. Since 2013, Japanese’s investment to the EU has grown significantly, but the EU’s investment in Japan has changed little. JETA should help increase EU investment. JETA will facilitate increased investment between Japan and the EU because it allows for the free movement of capital and payments. It also provides national and MFN treatment for both countries’ companies and prohibits a long list of performance requirements on investments, including requirements on domestic content, exports, and imports. JETA will also spur the growth of digital trade between Japan and the EU. As part of the negotiations on JETA, Japan and the EU agreed in July 2018 to accept each other’s data protection standards for consumers’ data. This means that data can move seamlessly between the Japan and the EU, which should help foster the trade in digital services, an area of large potential future growth. In addition to helping reignite domestic growth, JETA also helps achieve Abe’s aim of ensuring Japan’s global influence. With JETA, Japan and the EU have become the new global champions of free trade. This follows on from Japan’s role in ensuring the TransPacific partnership survived the departure of the US. Such leadership is sorely needed. The US | Capital Finance International

has stepped away from multilateralism and is now engaging China and other countries in trade brinkmanship. China has logically responded to the US with retaliatory measures. JETA provides a strong example for the international community not to turn their back on the all good work and benefits from GATT and the WTO rounds. JETA also gives Japan and Europe increased global leadership in terms of the environment. JETA reaffirms Japan’s and the EU’s obligations under the UN’s Framework Convention on Climate Change and the Paris agreement on climate change. Such a clause was not included in the Trans-Pacific Partnership. JETA also includes measures against illegal logging and fishing. More importantly, in terms of global leadership on the environment, it envisions the exchange of information on environmental bestpractice, and future co-operation in developing environmentally friendly technology, labelling standards promoting sustainability, and better corporate social responsibility. Lastly, in parallel to JETA, Japan and the EU negotiated and signed a Strategic Partnership Agreement (SPA), which like JETA increases international co-operation between Japan and the EU, and reaffirms their commitment to democracy, human rights, and a rules-based international order. The agreement covers areas such as international security, energy, education, research and innovation, space, and has a mechanism for developing future co-operation in new areas. As JETA does with free trade, the SPA puts Japan and the EU in a position of international leadership on a range of issues. This agreement could be particularly important as both countries examine the potential for a more active role on security issues in the future. The SPA is not a requirement for greater cooperation on security issues, but ensures that such co-operation is within international rule-based system and is multilateral in nature, both important qualifiers for Japan and the EU. With the JETA and the SPA, Abe is continuing his mission to reignite the Japanese economy and strategically position Japan for the future. The agreements cover 40 percent of world trade and over 640 million people. More importantly, they elevate Japan and the EU to a position of international leadership in free trade, the environment, democracy, and the international rules-based system at a time when the US has stepped away from multilateralism and China is distracted and has not yet asserted itself. i

Summer 2019 Issue

> Asian Development Bank:

Reducing Gender Gap in Asia and Pacific Essential to Realising Region’s Potential By Ingrid van Wees

Increasing women’s participation in the workforce and closing the wage gap would benefit Asia and the Pacific.


ver the past two decades, the Asia and Pacific region has made progress in reducing gender gaps in certain areas, most notably education.

According to the World Economic Forum’s 2018 Global Gender Gap Report, six of 25 developing Asian countries had attained gender parity in education. In 12 of 18 Asia Pacific countries analysed, women outnumber men in tertiary education enrolment rates. These improvements in skills and professional training for women have not yet translated into progress towards equal economic or professional clout. Gender gaps persist in labour force participation, gendered-segregation of the labour market, financial inclusion, and representation in senior managerial positions across the corporate world. This is the only region in the world where the labour force participation rate of women is declining. Meanwhile, a growing body of research on the future of work in the region has highlighted the high concentration of women in informal and vulnerable work, and that the bulk of unpaid care work is disproportionally carried out by women. Female participation in the labour force in 2018 ranged from 60.1 percent in East Asia, the top end of the spectrum, to just 25.9 percent in South Asia, according to the International Labour Organisation (ILO). When women do work, they are often segregated into “feminised” sectors, where wages are typically lower. Wages are not yet equal. In developing Asia, the gender wage gap (75 percent) is lower than the global average of 79 percent. Women’s share in managerial positions across Asia varies significantly. In the corporate sphere, three countries in this region are among the top 10 economies worldwide with women in senior management positions, higher than the global average of 25 percent. They are the Philippines, at 39 percent, Thailand at 37 percent, and Indonesia at 36 percent. On the other hand, there are countries in the region at the lower end, for example Japan, with only seven percent.

"There is growing evidence that gender equality in management and leadership results in higher productivity, more diverse decision-making, and better and more sustainable results." Women’s representation on corporate boards is even lower than at the managerial level. This ranged from 11.6 percent in Indonesia to 1.9 percent in South Korea. In 2011, India and Malaysia established 30 percent mandatory gender diversity quotas for senior management and board positions in corporations. However, implementation has been slow. As of 2016, women accounted only for 8.6 percent on corporate boards in Malaysia and 5.2 percent in India. Banking at the most senior management level in particular remains male territory in the region, since the share of female representation at this level reached only 6.9 percent on average, according to data gathered by The Financial Times. While developing countries in Asia and the Pacific are embracing new financial technology to make rapid progress on financial inclusion, the gender gap is felt there. Women accounted for just 35 percent of bank depositors and borrowers in these countries in 2016. Increasing women’s participation in the workforce and closing the wage gap would have a tremendous growth impact for the region. ILO in 2017 estimated that this could add $3.2tn to Asia and Pacific regional economies. Increasing women’s access to finance can have life-changing impacts on families and communities. Women-led small and mediumsized enterprises in Sri Lanka are benefitting from facilitated access to credit to grow their businesses through an ADB project, which has been further supplemented by a grant from the Women Entrepreneurs’ Finance Initiative (We-Fi). Since last year, over 323 women’s | Capital Finance International

businesses, employing 3,934 people, have financially benefitted from the project (see box). Financial institutions targeting female clients will be more successful at understanding and responding to customers’ needs if their personnel mirrors the market. Including female professionals and managers in research productselection and marketing will lead to better tailored products. That is one reason why ADB’s Trade Finance Program has been running a gender initiative to support its participating banks to improve its workplace gender equality/ family-friendly policies. There is growing evidence that gender equality in management and leadership results in higher productivity, more diverse decision-making, and better and more sustainable results. This is particularly true for female leaders in the banking sector. A study by the International Monetary Fund recently found that a higher share of female senior leaders is associated with greater stability and more prudent management. It is true for any type of organisation that effective female leaders provide positive role models and contribute to changing social perceptions about women and girls. Policymakers and multilateral development banks, such as my own, must lead by setting good examples, and work with the banking sector to address the gender gaps. For its part, ADB is committed to accelerating progress in gender equality in its developing member-countries. And it is championing the cause within its own institutional structure and corporate culture. Among other sectors, ADB supports various projects with a gender focus in such areas as technical and vocational education and training, urban and water, rural development, transport, and renewable energy (see box). It has also provided technical assistance for legal and judicial reforms in support of gender equality, as well as women’s leadership within government and communities at all levels. Last year, 56 percent of ADB’s sovereign and non-sovereign lending at entry had strong gender 171


ADB has achieved promising results and gained considerable experience in promoting gender equality in Asia and Pacific. Disaster response and management: Last year, ADB approved an Emergency Loan to Indonesia following a devastating earthquake and tsunami. Recognising that women and girls are left particularly vulnerable after disasters, special design features were included such as health centres with specialised services covering maternal health and support for the prevention and response to gender-based violence; the construction of 100 schools with gender sensitive designs; and extensive consultation and awareness-raising with women’s groups on disaster response preparedness. Health: ADB is supporting a comprehensive human papillomavirus vaccination (HPV) programme in the Pacific islands of Samoa, Tonga, Tuvalu, and Vanuatu for adolescent girls. design elements. ADB is setting even higher standards for itself. In July 2018, ADB’s Board of Directors approved a long-term corporate strategy called the Strategy 2030. Under this, ADB aims to ensure 75 percent of its projects in the public and private sector will include gender designs by 2030. Strategy 2030 sets gender equality and women’s empowerment as one of its operational priorities for the next decade. ADB will promote women’s economic empowerment by expanding entrepreneurship opportunities for women and promoting their access to quality jobs in higherpaying sectors and the science, technology, engineering, and mathematics sectors where women struggle to enter. ADB’s approach is also informed by a recognition of the importance of tackling discriminatory social norms and institutions. It includes supporting legal, institutional, and governance reforms at public level to explore measures are carried out to remove gender-based discrimination, enhance women’s participation in public resource allocation, and support leadership at all levels Another major thrust is reducing the domestic responsibilities faced by women through improved water, electricity, and transport infrastructure. In the Asia Pacific, women spend up to 11 times more time on unpaid care work (caring for family members, cooking, cleaning, fetching water) than men do. That time spent represents an important barrier to pursuing economic pathways. In 2016, ADB management took bolder actions and set higher targets to improve workplace gender balance by enhancing recruitment of talented women, career management, training, 172

In addition to increasing the immunisation coverage, which will directly reduce incidences of cervical cancer, the programme also includes education and awareness-raising activities through schools and communities. Women’s entrepreneurship: Established in 2017, the Women Entrepreneurs’ Finance Initiative (We-Fi) supports women entrepreneurs with access to finance, markets, technology, mentoring, and other services, while working with governments and the private sector to improve the laws and policies inhibiting women’s businesses in developing countries. We-Fi aims to mobilise more than $1 billion in commercial and international financial institution finance to enable women entrepreneurs to access to debt, equity, venture capital, insurance products, and other opportunities to link with domestic and global markets. It is governed by 14 founding contributing countries. development, and retention of female staff within ADB. ADB also has a gender target for various levels of management that is closely monitored and transparently reported upon. Leadership development programmes are now being conducted to prepare women for senior positions and enable senior staff to become better managers of diverse teams. Gender equality will indeed be at the heart of ADB’s priorities under Strategy 2030 and across the institution. On a wider scale, women’s empowerment is not just an objective in itself; it is essential to achieving inclusive and sustainable development in Asia and the Pacific. Given the economic, environmental, and technology challenges facing those regional societies, it is about time to utilise the ingenuity, creativity, and energy of the region’s entire population. To do this, countries must fully engage with women, and educate and empower them. At the same time, men and boys must be educated and equipped for this transition. i

ADB has received two rounds of financing from We-Fi. In 2018, ADB was awarded $12.6 million for Sri Lanka, where more than 600 women SMEs will have access to finance, and a further 450 women will have access to training and mentorship opportunities. In 2019, ADB was awarded $20.2 million to support women SMEs in Vietnam and the Pacific. More than 1,000 women SMEs will benefit from innovative financing tools, business acceleration programmes, mentorships, and a better environment for women’s entrepreneurship. Private equity funds: In Myanmar, ADB is investing for the first time in a private equity fund that has developed a gender equality scorecard to guide selection of the fund’s investments. The fund will also undertake a gender human resources assessment in order to foster a corporate work environment responsive to women. of debt and equity investments in Europe, the Middle East, and Asia and treasury. Prior to DEG, van Wees held management positions in corporate finance and business development at international corporations. She holds a Master of Science degree in Mechanical Engineering from Delft University of Technology in The Netherlands and a Master of Business Administration degree from INSEAD. ABOUT THE ADB The Asian Development Bank was founded in 1966 as a financial institution that would be Asian in character and foster economic growth and co-operation in one of the poorest regions in the world. ADB assists its members, and partners, by providing loans, technical assistance, grants, and equity investments to promote social and economic development. Under its new long-term Strategy 2030, ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and Pacific region, while sustaining its efforts to eradicate extreme poverty. ADB is composed of 68 members, 49 of which are from Asia and Pacific.

ABOUT THE AUTHOR Ingrid van Wees is the Vice-President for Finance and Risk Management of the Asian Development Bank (ADB). She assumed the position in December 2016. van Wees is responsible for the overall management of the operations of the Office of Risk Management, the Controller's Department, and the Treasury Department. Before ADB, van Wees was a senior official at the German Investment and Development Corporation (DEG). Her responsibilities included origination and portfolio management | Capital Finance International

Author: Ingrid van Wees





The ADB–UN Women Report is the first comprehensive review of the status of women and girls in Asia and the Pacific under the Sustainable Development Goals (SDGs) framework. It provides baseline data for 85 gender-related SDG indicators as well as analysis of how prioritizing gender equality can accelerate progress across all SDGs and support their achievement in the region by 2030.


Women and girls spend up to

11 times more time on unpaid care and domestic work

1 in 3 women experienced physical and/or sexual violence

from an intimate partner in the last 12 months

than men

Note: “$” refers to United States dollars.

Falling female labor force participation rates the only global region with declining rates, from 56% in 1990 to 49% in 2013

Highest child marriage rate in the world

in South and Southwest Asia, 1 in 3 women are married or in a union by the age of 18

Gender gaps in financial inclusion

Access to financial services for women ranges from 32.3% in South and Southwest Asia to as high as 96.1% in certain countries of Southeast Asia

330 million women and girls below the poverty line

For every 100 men, there are 104 women living below the poverty line ($ 1.90)

50% of the female

population living in slums (no access to clean water, improved sanitation facilities, durable housing and sufficient living area) are girls under the age of 15


The report provides analysis and recommendations for action for four transformative policy areas, identified for their catalytic effect and potential to accelerate progress in gender equality and the SDGs for the Asia and Pacific region. Sexual and reproductive health and rights

Recognizing, reducing and redistributing unpaid care and domestic work

Ending violence against women and girls

Empowering women to build climate resilience and reduce disaster risks

Source: Asian Development Bank and UN Women. 2018. Gender Equality and the Sustainable Development Goals in Asia and the Pacific: Baseline and Pathways for Transformative Change by 2030. Bangkok.

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> Nalin Perera, Executive Director & CEO of eChannelling PLC

Leading From the Front: Meet Sri Lankan Whirlwind Perera Nalin Perera was appointed executive director on the Board of Directors of eChannelling PLC on September 20, 2016. His is one of the foremost names in Sri Lanka’s Mobile Telecommunications industry.

Executive Director & CEO: Nalin Perera


results-oriented leader, Perera is the CEO of Mobitel, having completed dynamic stints as CMO and COO at the company. He has proven his leadership skills many times, steering both companies on a path of sustainable profits.

"One of his key 'success mantras' is to be open to change and to remain agile."

His mastery of brand management, product and channel development, as well as his human resource management skills, have lent him an enviable edge when it comes to creating a distinguished company’s portfolio.

his stellar career, Perera has won local and international recognition and reward for his companies, which has made eChannelling and Mobitel trusted and respected household brands in Sri Lanka.

One of his key “success mantras” is to be open to change and to remain agile, incorporating new trends and evolving products to suit customer needs in ways that exceed expectations. In

An industry veteran, Nalin Perera has played a pivotal role in pioneer operator Celltel’s introduction of mobile services to Sri Lanka in 1989. He subsequently rose through the ranks | Capital Finance International

in the Millicom Group to take the position of General Manager of Sales and Marketing. Perera spearheaded the launch of the mobile pre-paid concept and its business model in Sri Lanka. He has been in constant pursuit of greater value for products and services, and has pioneered a host of value-added services and enterprise business solutions to elevate the local telecom industry to meet global standards. Nalin Perera holds a Postgraduate Diploma in Marketing (UK) and is a Chartered Marketer (UK). He holds a Master of Business Studies degree from the University of Colombo. He is an avid sportsman and a prominent corporate personality. i 175

> Is there Anybody There…?

Doctor Channelling Service is a Godsend Launched in 2001, eChannelling has revolutionised the Sri Lankan healthcare sector with its innovative doctor-channelling service.


Channelling is a pioneer in providing a complete e-commerce-based service. It was the first software development and ICT service provider in the country to enter the digital healthcare industry. It has strengthened healthcare offerings with cutting-edge technologies, and bridged the gap between service providers and the public by improving effectiveness and efficiency in a user-friendly way. In that sense, eChannelling’s core service has been primarily about digitally empowering the society, and acting as a national builder in the healthcare category. In 2001, the company envisioned a service that would eliminate the inconvenience faced by the general public in performing what should have been the straightforward task: making an appointment to see a specialist or consultant. At the time of the launch, the process was a laborious, involving long waits and uncertainty.

The company’s dominance over the past 18 years has seen it carve a large market share for itself, with the brand at the forefront of doctorchannelling. The eChannelling brand has consistently been a part of Sri Lanka’s top 100 brands — and the latest Brands Annual placed eChannelling as the country’s top brand. The company’s portfolio includes a channelling system and service that has been implemented in 200-plus hospitals, private and Ayurvedic, with over 5,500 doctors, 2,000plus channelling agents, a hospital Information system, member card, and a mobile app. The brand also now a subsidiary of one of Sri Lanka’s leading telecom services providers, Mobitel, itself a fully-owned subsidiary of Sri Lanka Telecom. There are plans to develop eChannelling’s system — and increase benefits for the end user. Mobitel strives for the digital empowerment of society, and considers the partnership the right “brand fit” in making healthcare more affordable and accessible.

"It has strengthened healthcare offerings with cutting-edge technologies, and bridged the gap between service providers and the public by improving effectiveness and efficiency in a user-friendly way." 176

Summer 2019 Issue

As an internet-based e-commerce business, Mobitelâ&#x20AC;&#x2122;s mobile technology and expertise exponentially strengthened the brand, with a digitally enabled healthcare sector bringing many benefits to the people of Sri Lanka. With eChannelling conceptualised to empower Sri Lankans from all walks of life, its customers range across all socio-economic classes, provincial and regional divides, demographics and psychographics, age groups, and religions. The service reaches millions of Sri Lankans, as well as those citizens living abroad or travelling as tourists. To reach remote locations, the brand has partnered with various institutions to take services into different market segments in urban and rural areas, such as banks, post offices, pharmacies, supermarkets, and third-party applications. HOW IT WORKS Being a sophisticated and comprehensive system with various modules, eChannelling is a user-friendly system designed with speed and convenience in mind. It is updated in real-time, so patients can see the most up-to-date schedule of a consultant, make appointments, and conduct payments at their own convenience. Additional features include the doctor notification service, which sends an SMS notification to patients about the doctorâ&#x20AC;&#x2122;s arrival, delay or status for the specific session; this service is provided free-of-charge to all hospitals. The system automatically sends an SMS message to doctors to inform them of their appointment details. eChannelling includes a Queue Management Service that provides customers with updates on the current appointment number for the doctor they have channelled, to cut wait times. This can be viewed on the eChannelling website and mobile app. eChannelling also provides a Hospital Information System (HIS), which is an integrated software that supports the automation of operations of a multiple-care residential hospital. eChannelling has also introduced a member loyalty card that provides discounts. eChannelling has met international standards with its platform, and is in the process of extending this to international providers with the goal of connecting professionals and patients globally â&#x20AC;&#x201D; with no geographical boundaries. i | Capital Finance International


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Summer 2019 Issue

> Wing (Cambodia) Limited Specialised Bank:

Mobile Banking System is Taking Wing in Cambodia In Cambodia, 16.5 percent of the population lives below the national poverty line, and 83 percent of citizens are still unbanked. The result is that critical financial services, such as sending money to relatives, can sometimes be impossible.


ince its launch in 2009, Wing has worked to create a mobile banking ecosystem that is tailored to the needs of the Cambodian people, even in remote areas. It has created a network of more than 6,000 Wing Cash Express (WCX) agents who act as facilitators to the banking process. These agents define the Mobile Financial Services landscape in Cambodia, and through them Wing touches the lives of more than 4.5m customers. In 2018, Wing Agents’ revenue increased by 18 percent. Wing believes in diversity, and 60 percent of its WCX agents are women, who are now financially independent and able to take care of their families. The company’s goal has been to ease financial access to opportunities for underprivileged sections of the community, allowing them to participate in the country’s economic development.

Besides providing basic services such as money transfers, bill payments, phone top-ups, and online and offline cash payments, Wing offers outbound money transfer services to the Philippines, Vietnam and Thailand. This has enabled foreigners and migrant workers to make secure transfers in real time using the Wing Money App. Wing is the first payment services provider in South East Asia to acquire Mastercard Worldwide Merchant online services. Its Online Mastercard allows both the banked and unbanked to participate in e-commerce, from buying an online game to ordering a book from Amazon. This product, along with Wing’s digital payment system using QR codes, has enabled some 30,000 small enterprises to grow their business. Wing’s “physical” Mastercard provides customers with rewards programmes at more | Capital Finance International

than 8,000 points-of-sale in Cambodia, and in 200 other countries. In 2018, Wing donated $35,000 to the Garments Manufacturers Association in Cambodia. In collaboration with GoGreen Cambodia, it has mobilised its agent network, staff and customers to volunteer on World Cleanup Day to clear waste build-up in cities. CEO Manu Rajan says Wing places great emphasis on outstanding performance to sustain innovative financial solutions. “Financial literacy is the driving force for financial inclusion,” he says, “and Wing has taken up several initiatives to reach out to it customer bases, with special focus to underprivileged sections of the community. “We communicate details of our products and services with hands-on demonstrations, and we believe in giving back to the community.” i 179

> IHDpay Group:

Take a Few Tech Advances and Call Me in the Morning Interview by Chairman Tor Svensson

Tech advances are rippling across industries worldwide, challenging traditional systems in the quest for enhanced efficiency and user experience.


ealthcare is one sector on the cusp of radical technological transformation. Chiang Chun Yuan, a doctor with more than three decades of clinical experience, founded the IHDpay Group to create a bridge between Chinese patients, hospitals and pharmacies. Doctors in major Chinese hospitals treat as many as 20,000 patients per day. Before the launch of IHDpay, many suffered wait times of up to three hours — just to make an appointment. A flourishing enterprise of line-sitters, or “skippers”, developed as a cottage industry for those unable to endure the interminable waits. Those days are over. IHDpay has streamlined processes across the healthcare system from bookings to prescriptions and payments. “We focused partly on how the whole payment journey in the whole medical and pharmaceutical ecosystem can be served better,” Yuan told CFI. co. “Ultimately, no matter what you are dealing with — drugs or tests, etc — you're going to involve payment.”

The platform provides a hardware-software solution with an incorporated payment system. One of the main focuses of the company is to enable healthcare financers — whether government medical plans or commercial health insurance companies — to streamline services. Typical internet medical companies are dealing mainly with a concierge-type of service, Yuan says, ranging from appointment bookings to digital storage of medical records or even telemedicine. While he views these developments as essential, he hopes to “provide something a bit (closer) to AI”. The core technology underpinning IHDpay operations is its Payment Processing Authentication System (PPAS). Developed inhouse, it aims to meet the challenges of payment authentication in a digital world. PPAS is protected with facial recognition algorithms and biometric technologies, enabling authentication of individuals and quantitative analyses of trends. PPAS also forms the backbone of IHDpay’s Cloud-based Hospital and Insurance Platform, which supports the country’s growing demand for holistic healthcare management.

Switzerland: Dr Chiang Chun Yuan, Founder of IHDpay Group, speaking at a UNSDG Health Partnership Summit in Geneva.

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Know Your Customer procedures are a crucial component of healthy business practices, enabling companies to vet potential — and current — clients for regulatory compliance and risk assessment. With the advent of mobile technology and improved data-processing capabilities, e-commerce fraud and moneylaundering threats are increasingly common. The extra level of security provided by PPAS, Yuan explained, translates to better service and quality for patients. “When the patient collects the medicine at the drug store, they have to do a biometric reconciliation. Either facial or voiceprint, so there will not be a misplacement of medicine to another [person] because only you — biometrically fully identified and validated — will collect the particular pack of medicine.” The IDHpay platform is accessible via a mobile app, powered by AI and machine learning, to provide customers with real-time data for prescription procurement and payment. Patients can schedule medicine for pickup or home delivery — with a unique QR code for identification and immutable blockchain tracking. Booking a doctor’s appointment is a painless process through IHDpay’s 360° Total Information Medical Service, or 360° TIMS. Around 15 million active users benefit from the service, and Yuan anticipates reaching 50 million by the end of 2020. Originally from Hong Kong, IHDpay predominantly serves the greater Bay Area in southern China, but the company’s open platform — compatible with all mobile operating systems — has pushed the company to roll out a version for Japanese and English-speaking markets. Yuan has sights set on African markets for expansion. “It's basically like an operating system that serves some components of the medical and pharmaceutical ecosystem”, Yuan said. That includes the doctors and patients in hospitals,

Dr Chiang Chun Yuan and Tor Svensson in Geneva

the pharmaceutical industry from laboratories to manufacturers to retailers, and the healthcare financers, whether commercial or governmental. “With this kind of control, systemically making use of AI, big data and QR code repayment, you really are very much eliminating any human factor. Healthcare is not the market, it's the world.” Yuan is betting on AI to take over the industry’s more routine tasks and to assist health providers with more complex diagnoses or procedures. “I think in time the doctor-patient relationship will also be improved, because then the doctor has more time for every patient and the simple things just go back to the system.” Yuan, who was born to a family of medical practitioners, grew up with an appreciation for the complementary powers of Western medicine and traditional Chinese medicine. After dedicating over 30 years to his clinical practice, the doctor decided to explore the burgeoning digital health market. As the company continues to expand, through its geographic presence and open collaborative platform, Yuan hopes to ultimately “help to bridge the international experiences with the local wisdom”. “At this moment, we focus on improving efficiency, safety and transparency,” he says.

IHDPay Executive: Eric Ho | Capital Finance International

He isn’t worried about the competition — the two giants of regional digital and mobile payment markets, Ali Pay and Retail Pay — because IHDpay has created a special niche. The IHDpay leadership team boasts impressive expertise and healthcare networking contacts, enabling IHD Pay to deliver better end-solutions for all stakeholders in the healthcare ecosystem. i 181

> Clair Brown and Simon Sällström:

What America Needs to Understand About Capitalism


he candidates in the 2020 US presidential race are proposing an array of economic policies frequently described as either free-market or socialist. These labels often confuse the American public. In particular, capitalism is widely – and wrongly – understood to be synonymous with free markets. In fact, it includes all economic systems with private ownership of property, from free markets to social democracy. These various forms of capitalism require basic rules governing how markets operate, such as protection of property and the rule of law. Most capitalist societies also have social programs to protect the most vulnerable. Governments in capitalist economies therefore face two fundamental choices. First, they can either set market rules for the common good, or delegate this task to big business under the guise of “free markets.” Second, they can design universal social programs with the aim of reducing inequality and protecting the environment, or scale them back in order to minimise government spending in these areas. The choices governments make strongly influence levels of inequality, greenhouse-gas emissions, and overall wellbeing. To evaluate the Democratic candidates’ economic policies properly, therefore, we must understand their proposals for structuring markets and creating or expanding social programs.

Final Thought

US President Donald Trump disparages such measures as “socialism,” and instead praises free markets without acknowledging that markets need rules to function. Rather than having government set the rules, Trump prefers to let multinational corporations decide how to operate their own markets. Yet in Big Tech and many other increasingly concentrated sectors, deregulation does not increase competition; on the contrary, it allows big companies to rig things in their favor. Consider the energy sector, where Trump has put Big Coal, Oil, and Gas in charge of US climate policies. Corporate bosses now determine how much they may pollute and how fast they need to develop renewable-energy capacity, while the US remains addicted to fossil fuels. In the health-care industry, big pharmaceutical companies are free to set drug prices, and large insurers reap one-quarter of the sector’s revenues. The military-industrial complex rules the Pentagon, investment banks control Wall Street, and big agricultural conglomerates hold sway over America’s farmland. 182

"People need to know whether they will have access to health care, higher education, and childcare, along with a secure job that pays a decent wage and allows time for a balanced life with family, friends, and community." Market concentration allows a few large multinationals to control an industry, resulting in high prices and excessive executive pay. Big incumbents crush newcomers in order to maintain their market power, and then use excess profits to help elect friendly lawmakers and lobby for policies that support their continued dominance – often undermining the power of popular democratic movements. Several Democratic presidential candidates have highlighted these problems. Elizabeth Warren, for example, blames big-business corruption for worsening inequality and the climate crisis, and undermining American democracy. Bernie Sanders has called for a grassroots political revolution to create a social democracy in the US. Although Warren and Sanders differ on the details, both want to put government back in charge of structuring markets for the common good – including higher taxes on the wealthy and big business, along with stricter enforcement of antitrust and environmental laws. Both candidates also advocate government social programs aimed at providing everyone with health care, childcare, higher education, adequate housing, and decent jobs, along with a social safety net to support them in hard times. Other Democratic hopefuls have also advocated some of these measures, but more centrist candidates say such programs would be too expensive or even undermine freedom, thereby echoing a standard right-wing critique. Former Vice President Joe Biden, for example, recently told wealthy donors that “nothing would | Capital Finance International

fundamentally change” if he became president. Yet the US capitalist system needs a major revamp in order to tackle the climate crisis and unacceptably high levels of inequality. European countries have demonstrated how broad government programs, flourishing economies, and freedom go hand in hand. Some are mapping the way forward. Nobel laureate economist Joseph E Stiglitz says progressive capitalism could greatly help to reduce wealth-snatching and create a more sustainable, equitable economy. And the Poor People’s Moral Budget advocates progressive social programs funded via taxes and the redirection of existing federal spending. Our research team at the University of California, Berkeley, has created the Sustainable SharedProsperity Policy Index (SSPI) to measure policies that support a meaningful life in a sustainable world. The SSPI ranks 50 countries based on three broad criteria: policies that structure markets with rules and taxes; measures to protect the environment; and government programs that support healthy, educated people along with the infrastructure and human rights that establish a well-functioning society. By gathering data on over 50 policy indicators, the SSPI provides a practical roadmap toward creating an economy that cares for people and the environment. All US presidential candidates should present their plans for the economy so that voters can assess how the alternatives will affect their quality of life. People need to know whether they will have access to health care, higher education, and childcare, along with a secure job that pays a decent wage and allows time for a balanced life with family, friends, and community. This is surely not too much for citizens of a rich country to expect and demand. America has the resources to create a better capitalist economy, and we know which policies can improve wellbeing today and for future generations. Now the country needs to elect a president and Congress that can build this new system. i ABOUT THE AUTHORS Clair Brown is Professor of Economics and Director of the Center for Work, Technology, and Society at the University of California, Berkeley, and the author of Buddhist Economics: An Enlightened Approach to the Dismal Science. Simon Sällström is the research coordinator for the Sustainable Shared-Prosperity Policy Index (SSPI) at the University of California, Berkeley.


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