International Finance Magazine Apr - Jun 2015

www.internationalfinancemagazine.com

April - June 2015

Volume I Issue 3

pg.09 DATA ANALYSIS: ADVANTAGE WATSON

UK £4 | Europe €5.35 | USA $6

pg.84 INVESTING IN UK: DID YOU ACCOUNT FOR FLOODS?

SME: LESSONS FROM GERMANY Europe’s powerhouse leads our special package on small and medium-size enterprises

pg.

32

Four SME entrepreneurs in four nations speak about their journey

pg.108 SOLAR POWER: A NEW STAR IN THE US

Note FROM EDITOR

T

he world economy is at a difficult stage. Some nations are showing growth but many are simply dragging themselves. Europe’s woes have been well-documented. In fact, they appear to be never ending. The only silver lining is the resilience of Germany which has not only stood its ground but also helped struggling economies.

It is a story that needs telling. Which is why our cover story is about this wonder of Europe. It is the lead story of our package on SMEs, which are the backbone of any economy. We would love to hear from you on the stories and issues featured in the package.

It would help us better organise the summit on SMEs that IFM is putting together in the second half of this year.

Africa has some good news. It is finally on the path to speedy economic growth. Despite daunting challenges, many companies are pushing ahead with investments. However, the problem is that the continent lacks sufficient power plants. This is in addition to the unreliability of the political leadership. The continent is also bogged down by a number of conflict zones.

In fact, Ghanaian IT entrepreneur Enyo Kumahor says that many of the

Dhiraj Shetty Editor editor@ifinancemag.com

innovations in the continent can be attributed to the increasing desire of Africans to overcome the constraints they have to live in.

One country that seems to be looking up is Kenya, which is now trying to ride the boom in Islamic finance. After a slow start, the number of banks offering shariah compliant products has gone up manifold since 2006 when the first licence for Islamic banking was granted.

Meanwhile, the US is looking forward to the benefits of what is possibly the biggest solar power project in the world. It will be a giant step in the quest for developing renewable sources of energy. Fuel prices may be down, but for how long?

I look forward to hearing your views on our news, views, stories and features.

Also, write to us about interesting stories that need to be told and what else you would like to see in your magazine.

Director & Publisher Sunil Bhat Editor Dhiraj Shetty Production Sarah Williams, Mark Miller, Karan Belani Editorial Adriana Coopens, Jessica Smith, Lacy De Schmidt, Suparna Goswami Bhattacharya Business Analysts Dave Jones, Adam Lobo, Sharon Mendis, Ashton Ray, Tanya Jones, Sean Thomas Business Development Manager Steve Martin Business Development Newton Gois, Sunny Shah, Ashish Shenoy Accounts Angela Mathews Head of Events Basant Das Registered office INTERNATIONAL FINANCE MAGAZINE is the trading name of INTERNATIONAL FINANCE Publications Ltd 843 Finchley Road, London, NW11 8NA Phone +44 (0) 208 123 9436 Fax +44 (0) 208 181 6550 Email info@ifinancemag.com Press Contact press@ifinancemag.com Design & Layout Rahil Shaikh Miya

Apr - Jun 2015 International Finance Magazine

INDEX April - June 2015

04

92

Volume I Issue 3

13

Interview: ‘INNOVATIONS DRIVEN BY CONSTRAINTS’

22

Charles Thorburn

THE JOB CREATORS

80

CHASING DOLLARS

HEAVEN, OR A HAVEN FOR HACKERS?

Ah! PIEMINISTER

International Finance Magazine Apr - Jun 2015

78

Simon Price

RESTORING FAITH IN FINANCIAL SERVICES

COVER STORY

P20-76 In the world of SMEs

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102

Africa: PROBLEM OF POWER

124

Out of Office: ‘The entire week I look forward to guitar lessons’

112

KENYA KEEN TO RIDE ISLAMIC FINANCE BOOM

116

A CAR BUILT JUST FOR YOU

David Drake

EXPLORING EXTREPRENEURSHIP IN THE MIDDLE EAST

122 Book Review CRIME AS A SERVICE

Apr - Jun 2015 International Finance Magazine

4

International Finance Magazine Apr - Jun 2015

Heaven, or a haven for

hackers?

‘Risk’ with corporate cloud apps comes down to the type of data businesses put in them Tim Ring

Apr - Jun 2015 International Finance Magazine

5

byte by byte

G

lobally, firms are plagued by staff using unofficial ‘cloud’ apps that hide hackers and leak customer data, according to a new report. But another study urges businesses to set aside their security concerns and seize the cost benefits of ‘the cloud’. So who’s right?

So-called cloud apps – which include the likes of Twitter, LinkedIn, Salesforce and Dropbox – are used extensively in companies but present a far bigger security risk than people realise. That’s according to a new report by service

provider CipherCloud, based on data from around 100 customer organisations and 3 million users in North America and Europe.

Described as “the industry’s first comprehensive study of cloud usage and risks”, the report makes disturbing reading: it finds global enterprises use on average about 1,100 cloud apps, but nearly 90% of these are completely unknown to the organisation and used by employees unofficially — what’s known as ‘shadow IT’.

And around 80% of these apps are high to medium-

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International Finance Magazine Apr - Jun 2015

risk, says the report — with ‘risk’ being defined as whether or not the app encrypts data, controls access, checks users are who they claim to be, and so on.

Worryingly, the leastsecure cloud apps are in popular areas like publishing, social and careers; examples of cloud publishing apps include WordPress and Adobe Creative Cloud, and social apps include LinkedIn and Twitter.

CipherCloud CEO Pravin Kothari says these previously unknown levels of shadow IT create “a multi-pronged problem for companies”.

“It is hard, if not impossible, to protect against something you cannot see. And worse, each unsanctioned application is a vehicle for introducing a host of other risks into the enterprise,” he said.

The risks boil down to two main threats, says Willy Leichter, global director for cloud security at CipherCloud.

Firstly, unofficial cloud apps may not match up to a company’s security requirements, and so they open up a backdoor route into the corporate networks for hackers.

byte by byte

Secondly, these apps may be storing sensitive customer information in places completely unknown to the company, risking data loss and sanctions against the business for its failure in data governance.

In fact, shadow IT could be a main cause of the “epic data breaches of 2014”, CipherCloud says.

Leichter explains: “We don’t want to be fear mongers, but there is a very real possibility now of account hijacking – people stealing credentials – and we don’t know exactly where that happens. We have applications that don’t have very good security practices.

And at the same time as this whole cloud explosion, there’s this incredible increase in major hacking events. So, it’s warranted to be cautious.”

But contrast this view with another authoritative new report, from KPMG, which takes a completely different tack.

KPMG’s 2014/15 Global IT Outsourcing Study, published in February, looks at over 2,000 contracts from 24 countries worth over $12 billion and finds that “cloud adoption remains sluggish”.

KPMG says that 60% of organisations spend less than 10% of their IT budget on cloud services “despite widespread acceptance that cloud services offer access to the latest technologies, and make IT more accessible”.

And the main reason for this reluctance – cited by 28% of companies – is none other than the risks they perceive around security, privacy and the location of their data.

Jason Sahota, director in KPMG’s Shared Services and Outsourcing Advisory team, is critical of companies who are failing to stick their heads in the cloud.

“While concern about the security risks surrounding new technology is understandable, it may also be disproportionate, as cloud options are just as safe as other outsourcing solutions,” Sahota said.

“Of course, investors and stakeholders will welcome caution on the part of the buyers, but they also want to see innovation.”

Companies “will need to find the right balance to remain competitive”, he says.

So are cloud apps highrisk or not? And are companies being too cautious or too cavalier about the cloud?

It turns out both reports may be right.

CipherCloud’s warning about the huge scale of cloud apps being used unofficially by staff in many companies cannot be ignored: Leichter cites one firm who “knew” they had a dozen cloud-based file sharing apps. “It turned out there were 70 of them.”

Leichter added: “File sharing - like Dropbox or others - is a great solution to problems everybody has.

But there’s literally hundreds of these apps that have popped up, many of them inherently risky. You can go online, get a free account, and click ‘send’ – and who knows where that data is actually going?”

But even CipherCloud doesn’t want to turn the clock back and stop companies adopting cloud apps.

These apps have spread like wildfire because they provide services that many IT departments were failing to offer, such as enabling executives to work and share data wherever they happen to be.

Leichter said: “We aren’t telling people ‘shut down all your cloud apps’ because first of all, you’ll have a user revolt. These apps are solving problems. The genie’s out of the bottle. We don’t say it’s all bad and the sky is falling.”

Instead, CipherCloud urges companies to grasp the scale of the ‘shadow IT’ problem and offer approved apps that deliver what users want, without them having to resort to unofficial sources.

“Rule out the most highrisk apps,” Leichter suggests. “And you can cut the number of overlapping apps by 80% and still give people some flexibility.”

But he agrees with KPMG that in areas like IT infrastructure – where companies use servers hosted by suppliers like Amazon, or access corporate-level apps like Salesforce – cloud is a viable option that could and should be adopted more quickly.

“A lot of infrastructure is deliberately being moved to the cloud – this is a large trend that we absolutely support,” Leichter said.

“Good cloud providers have excellent infrastructure security. The problem then shifts to actual data security.

Companies are still responsible for the data they put on Salesforce.”

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We aren’t telling people ‘shut down all your cloud apps’ because first of all, you’ll have a user revolt. These apps are solving problems. The genie’s out of the bottle.

We don’t say it’s all bad and the sky is falling Willy Leichter, global director for cloud security at CipherCloud

Apr - Jun 2015 International Finance Magazine

»

Chris Hoff, blogger on cloud and security CTO at Juniper Networks’ Juniper Development and Innovation business.

Other cloud experts largely share this view 8

Chris Hoff, a well-known blogger on cloud, and security CTO at Juniper Networks’ Juniper Development and Innovation business, says ‘risk’ with cloud apps comes down to the type of data businesses put in them.

“If employees are using social media, publishing or career applications, as cited in the CipherCloud survey, and there is no critical, confidential or otherwise business-impacting information shared - despite ‘threats’ that said information may be abused, misused or misappropriated, the risk is low,” Hoff said.

“If, however, the information that is shared is critical or confidential, the risk may be high. Simply suggesting that cloud is ‘riskier’ than classical legacy enterprise applications is disingenuous.”

Hoff suggests companies should first focus on *why* their employees are using such apps and either “offer equivalent services that meet their unique security and compliance mandates and/or engage in strategic vendor partnerships that do”.

They should also get visibility of

International Finance Magazine Apr - Jun 2015

what cloud services are being used and why. “That’s the first hill to climb,” he said. “There are numerous solutions available today that allow companies to understand how cloud services are being used.”

Hoff also feels “educating employees is important” - but depriving them of cloud apps is not an option: “Attempting to control access to services that enable agility, flexibility, cost-effective services and reduced time-to-market is not good business practice.”

Likewise, cloud expert Dmitriy Viktorov, a director at cyber security firm F-Secure, agrees with CipherCloud that companies need to track down all their unsanctioned cloud apps, to reduce the threat of being hacked.

“Visibility is the first thing that companies must gain,” he said. “Based on latest targeted attack and data breach reports, it appears that attackers sometimes knew more about assets, infrastructure and defences than compromised companies did. Companies must actively track and control their devices, accounts, networks, apps and services, including mobile apps and cloud-based services.”

But he too accepts that cloud is here

to stay. “The simplest solution would be to block access to insecure cloud services, but the reality is that companies need to use insecure services for business reasons.”

“It is still possible to take precautions though,” Viktorov says. Among other actions he advises: “Make sure that users don’t access insecure services from the same devices they use to access company sensitive or confidential data.

“Deploy host and/or network-based data loss prevention (DLP) to prevent sensitive information going to insecure cloud services.

“Make sure that users have access to cloud services with strong passwords.

“Last but not least, train and educate end users about security, privacy and data protection. After all, end users are always the weakest link in any security chain.”

It seems that in today’s exodus to ‘the cloud’, companies must balance the benefits of business agility against the security risk. But they should also open their eyes to the near 90% of cloud apps that are sitting below the surface in most organisations, threatening like a glacier to sink the corporate ship. IFM

My list of precautions •

Make sure users don’t access insecure services from the same devices they use to access company sensitive or confidential data • Deploy host and/or network-based data loss prevention (DLP) to prevent sensitive information going to insecure cloud services • Make sure that users have access to cloud services with strong passwords.

• Train and educate end users about security, privacy and data protection — Dmitriy Viktorov, director, F-Secure

advantage

Watson

IBM teams up with an innovative firm and shows that being big has not slowed it down Tom Groenfeldt

Apr - Jun 2015 International Finance Magazine

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V

antage Software, based outside Boston in the US, has built a business of providing private equity firms and small hedge funds with reporting and analytics. It had developed sophisticated quantitative tools to help acquisitionminded firms analyse potential deals.

“We help financial analysts make faster, more accurate evidence-based decisions,” said Greg Woolf, the company’s founder and CEO. Now it has added to its depth of analysis by working with IBM’s Watson to provide qualitative research as well.

“With Watson, we can examine tens of millions of pages of documents, explore available market intelligence, risk profiles and financial profile data to

provide better information to analysts,” Woolf added.

Vantage Software has combined its private equity know-how and quantitative analysis with state-of-theart cognitive computing capabilities from IBM Watson to create Coalesce, which analyses and evaluates thousands of pages of information, instantly searching through market intelligence, risk profile and financial performance data to provide intelligent support for investment decisions.

Vantage contacted IBM through its Watson web site and explained what it wanted to do. IBM responded and the two began working together in November and were up and running in February, helped, said Woolf, by the amount of work Vantage had already done on the quant side.

International Finance Magazine Apr - Jun 2015

“Now we are working with a handful of beta customers, and it is promising. It has been hard, but I think we got ahead of the curve. We saw it as a natural extension of our quantitative analytical tools.”

With the introduction of Coalesce, Vantage Software extended its suite of investment research products that enable investment managers to make superior investments with lower risk and higher returns to their investors.

“Coalesce is the qualitative, natural language counterpart to Vantage Insight, our leading tool for quantitative investment performance analysis,” said Woolf.

Its initial focus is on investment research, helping firms conduct due diligence on investments, a process

We help financial analysts make faster, more accurate evidence-based decisions Greg Woolf, founder and CEO, Vantage Software

which can involve months analysing thousands of pages about a company’s profile, risk factors, management and competitive landscape.

“Most content about companies is in the form of raw, unstructured text via industry news, company write-ups, blogs and various subscription databases, which requires a new breed of qualitative tools to com-

bine, digest and analyse the content for meaningful interpretation,” the company explains on its web site.

Lauri Saft, director of the Watson Eco-System, explained that IBM has developed a program to invite companies to show how they could use Ms. Watson — she figures anyone that smart must be female.

IBM will expose the Watson APIs through a devel-

oper cloud.

“We offer services to partners like Vantage who have an existing app or an idea of a new market they want to tackle and need to get access to all that unstructured information — newspaper articles, journals, SEC filings, proprietary client information. We can show them how to build on top of that and allow a cognitive system to ace it.”

IBM assigns a new partner like Vantage a solution architect and a partner advocate.

“When we opened this up last January (2014), we said to the market ‘Come with your ideas, tell us what you are thinking.’ We had over 5,000 applications, a ton in health care because of our early work with the Mayo Clinic — from personal wellness and personal devices, to how we are interacting with payers, to point of care with the clinician. Our use cases run the gamut of health care companies.”

IBM has also seen a lot of interest in education, she added.

“The same set of disruptors is happening in every area of that value chain, from the moment a student is trying to decide what college to attend, to once they are in school how can you layer on top of the learning materials to create a cognitive tutor to help the student. How to decide which courses to take, what pursuits to follow to get a job after college.”

The common thread in these uses is organisa-

Enamoured by Watson

Citi signed a contract with IBM in 2012 to use Watson in its consumer banking while DBS in Singapore has decided to use Watson in its wealth management group. Standard Bank of South Africa announced in October that it would use Watson to work with customer information and enable staff to understand their requirements. RBC and ANZ have also announced plans to work with Watson.

Apr - Jun 2015 International Finance Magazine

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Watson at work

USAA, which provides financial services to people who are in or have been in the military, is making Watson available to customers to answer their questions, such as “Can I be in the reserve and collect veterans compensation benefits?” or “How do I make the most of the Post-9/11 GI Bill?” IBM’s Watson Engagement Advisor will answer military separation-related questions on topics such as job searching, home purchasing, military benefits, USAA said.

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tions are sitting on a lot of data that doesn’t fit into a database — information from tweets, text articles, resumes, long-form magazine articles.

“If you put cognitive on top, you can make sense of it and allow users to interact with it in more of a natural way.”

Financial analysts used to work long hours devouring reports, trying to make sense of them and find patterns.

“That is what Vantage has done. It is sitting as an assistant on top of all that info so investors can make sense of it as it is coming off the wire.”

IBM offers Watson access with no upfront charge, taking a revenue share on the backend, making it an easy choice for a cash-strapped startup.

“It’s (revenue share on the backend) a radically different model for us, but it gives us access to a whole set of companies that would have thought differently about IBM. They are pleased we

will invest up front.”

Vantage has been one of the nimbler companies to enter the Watson program, she said.

“They came to us and said we think we have an idea. We have started to expose them to some of the big banks and get them in front of some large players in the industry. We have had them on stages with us. If you have an idea and think you could use the technology and if you have developers who are willing to play with the technology and ingest some content and see if there is market opportunity…we assigned a solution architect and an engagement manager to them immediately. That is why we exist.”

Woolf found them on the IBM web site, she added.

“We have a submission form where you put your idea forward and one of the guys on my team had come from a private equity firm in Asia Pacific. He saw the idea, picked up the phone and called Greg and said

International Finance Magazine Apr - Jun 2015

let’s talk. They met in the atrium at our old office and Greg was ready to go. He already had the team, the content and the idea.”

Vantage gets its own unique instance of Watson in the cloud and then trains it through Q&As. “Watson gets smarter very quickly as you teach it the industry and show it how to devour content,” she added. IFM

It’s (revenue share on the backend) a radically different model for us, but it gives us access to a whole set of companies that would have thought differently about IBM Lauri Saft, director, Watson Eco-System

INTERVIEW

‘Innovations driven by

constraints’ Miriam Mannak

Apr - Jun 2015 International Finance Magazine

INTERVIEW INTERVIEW

Africa, particularly in terms of technology, is still often seen as the Dark Continent. Whilst this part of the world is certainly lagging behind the West, it is catching up quickly, says Ghanaian IT entrepreneur Enyo Kumahor.

International Finance Magazine spoke to her about the past, present and, more importantly, the future of Africa’s technology sector.

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How is Africa’s IT industry today, compared to – say – 10 years ago?

The sector has become quite important in this part of the world, and it has certainly evolved over the last recent years. Many exciting things have happened and are happening. Take M-Pesa, which was developed in Africa and has been a massive success, as it has provided financial inclusion for many millions of people.

Growth of the African IT sector is a good thing, as it enables the continent to keep up with the rest of the world. Technology, after all, gives one the ability to process, analyse and apply information a lot quicker, and it helps you to get things done faster.

You have often stated that Africa’s IT sector has a great story to tell.

You raised the issue again during the 2015 Qcon London conference.

The title of my Qcon talk

was ‘software tales from the continent’. My main message was that things are happening here: we are building software and we have been doing so for quite some time. In addition, we are adapting to the global business environment. One of the things I explained during Qcon London was that Africa-developed software innovations are often driven by the constraints we are experiencing here.

The response to my speech was great. Representatives of some 20 companies, mainly from Europe, told me how they wanted to get involved in African IT projects. Some offered to mentor African software engineers, others said they wanted to make room for internships.

Speaking at conferences and talking to the media, like IFM, makes me happy as it enables me to tell Africa’s story. Africa’s story has not been told enough and as a result, nobody knows what

is happening here. We, as Africans, need to change our own narrative.

Constraints drive technology development and innovation in Africa: can you explain that?

Take e-commerce.

In Europe, one needs a secured, stable internet connection and a credit card or debit card, or at least a bank account. That is common knowledge.

The reality in Africa is that 80% of the people don’t have credit card and are not financially included. Some African IT companies have used this situation to their own benefit by developing e-commerce scratch cards.

These work like mobile phone credit vouchers: you buy a scratch card for a certain amount. The code on the voucher reflects this amount, which you can use to shop online. It is this type of innovation that is so important in Africa.

What other strides has Africa made over the

past decade?

Over the last 10 years, the financial and banking services industry has become more sophisticated.

There tends to be a greater awareness of what IT can do compared to 10 years ago.

We have also seen a greater use of IT in the public sector. That said, the digital divide remains huge. If you compare the use of technology in the banking system in London and Johannesburg in South Africa, the latter lags five years behind the former. Africa can bridge this divide by leapfrogging.

We need to get involved in the technology race, which, according to me, is more a software race at this stage.

What is the investment potential of the African IT sector?

In Nigeria alone, the investment potential amounts to 76 trillion Naira (£258 million). There are over 102 tech hubs across the continent, which are manned by innovative, driven and

In Nigeria alone, the investment potential amounts to 76 trillion Naira (£258 million). There are over 102 tech hubs across the continent, which are manned by innovative, driven and entrepreneurial techies who are building great software applications that deal with e-commerce, mining, real estate.

International Finance Magazine Apr - Jun 2015

INTERVIEW

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entrepreneurial techies who are building great software applications that deal with e-commerce, mining, real estate. The problem is that some of them lack direction and support, as there is a not a great connect between funders and investors, and African techies. Investors, generally speaking, don’t know what is happening in Africa. That is where my company – the Cobalt Partnership – comes in. We are an advisory firm and a catalyst in the private sector that helps companies in Africa, particularly in the tech sphere, grow by putting them in contact with third parties.

Apart from running

your business, you are the co-founder of Ghana Women in IT (GWITT), which gives Ghanaian women a platform to network and share experiences. The organisation also plays a role in encouraging women and girls to work in and study IT. What motivated you to take up this work?

Half of the African population is female, yet the number of women in tech is less than 1% of the continent’s IT workforce.

The reason is that there is this belief that tech is too difficult for girls and women, and that it is a guys’ environment. We need to

demystify the field of technology and make it more accessible to girls and women.

This is important, as in to get more women into jobs.

This will foster economic growth and increase productivity levels. We need to start harnessing the female interest from a young age, for instance, by developing school programmes that make tech fun.

What else can be done to get more African women interested in IT? Established tech women from Africa need to get involved. There is a shortage of visible and vocal female role models. Women who have made it in technology should show their faces

more. We don’t hear many established tech women from Africa talking about giving up-and-coming counterparts a chance. If it were up to me, every successful female IT professional should take newcomers under her wings, and mentor and inspire them. This is not yet happening. GWITT hopes to play a part in changing this and persuade women to get involved. IFM

Apr - Jun 2015 International Finance Magazine

COLUMN

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International Finance Magazine Apr - Jun 2015

COLUMN

COLUMN

David Drake

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Exploring entrepreneurship in

the Middle East UAE Wamda and twofour54 influenced Nina Curley and Flat6Lab’s expansion in Abu Dhabi

Apr - Jun 2015 International Finance Magazine

COLUMN

F

lat6Labs, an Egyptian startup accelerator, announced its move to the United Arab Emirates (UAE), and more specifically Abu Dhabi, as part of their expansion program in the Middle East in 2014. Their choice for the venture was Nina Curley, who eventually accepted the proposal. She was the former chief editor of Wamda, a media platform and a VC firm rolled into one.

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From Wamda to Flat6Labs The road to that position was quite peculiar for Ms. Curley who was at a crossroad in her life at that time: “Coming out of that role at Wamda, I had to decide whether I was a media person or a startup person.”

After leaving Wamda, she took a trip to New York to meet up with friends and family, then she flew back to

the Middle East. Nina wrote and posted what she calls “a little manifesto”, expressing her gratitude to everyone who helped her develop and become the person she is today. It was this post that was spotted by the Fla6Lab’s team, which led to the proposal for her to head the startup accelerator.

After crossing the threshold towards a degree in neuroscience and psychology, she moved to the East in 2009 and started looking for a job that could employ her entrepreneurial and media expertise. Despite her love for research, she realized it was not the life of travel and excitement she had dreamed of. After her arrival in Amman, Jordan she became a journalist for Syntax and Wamda. In 2011, Wamda, headed by Habib Haddad, became a famous media magazine and VC firm in the Arab world.

It was in this year that Nina

International Finance Magazine Apr - Jun 2015

finally launched her career as chief editor. The position required the two skills Ms. Curley possessed – journalism and knowledge of entrepreneurship.

The latter is exactly what makes Nina a good fit for the new operations of Flat6Labs. Although there has been a wave of incubators and accelerators setting up in Dubai, this will be the first company that will be targeting the capital of UAE itself. In Nina’s words, “Abu Dhabi doesn’t have anything like that and while there are accelerators in Dubai, I also think every accelerator has its own culture, and our accelerator is the only one in the region that I know of that has a focus on media.”

The accelerator will be focusing on dealings with the media, as well as backing up the numerous partners in Abu Dhabi teams that are developing projects for online content, data analyt-

“

Abu Dhabi doesn’t have anything like that and while there are accelerators in Dubai, I also think every accelerator has its own culture, and our accelerator is the only one in the region that I know of that has a focus on media Nina Curley, former chief editor of Wamda, a media platform and a VC firm

COLUMN

ics, e-commerce and social media.

Flat6Labs and Nina Curley The Flat6labs program will be similar to the ones the company already has set up in Cairo, Egypt. There were 20 teams participating in an introduction camp in 2014 and only half of them were chosen to contribute to the four-month long accelerator program. The funding ranges from $30,000 to $50,000, which buys either a 10 or 15 percent equity.

One of the biggest supporters of the venture is twofour54, a media free zone based in Abu Dhabi that facilitates the development of Arab media and entertainment content in the region. It provides a company both office space and help in the licensing for it to establish operations.

Another organization backing Flat6labs is the United Markets International Holding, and the very first intake of teams is planned for this year.

According to Nina, the Middle East and the UAE have a very complicated entrepreneurial system, yet the possibilities are huge.

UAE can give companies access to numerous regional markets. Under the supervision of Ms. Curley, one of the goals of the venture is to enhance this complicated landscape by attracting more international companies to the country. This will make UAE an even more global marketplace. Her enthusiasm comes not only from her adventurous spirit but also from the opportunities that are constantly arising in the Emirates. As she says, “It’s a really exciting time to be in Abu Dhabi

because of these opportunities.”

Ever willing to contribute, Nina will also be continuing a pilot program that she started – ‘Wamda for women’. It will be organizing several round tables in cities such as Cairo, Doha and Riyadh to address the hardships that entrepreneurial women are facing in the region. Uprooting herself from the US to make her way to the Middle East in 2009, she has become a model for women entrepreneurs in the region and the globe. Her advice to them: “What women talk about is having confidence issues, and so that’s where skills like negotiation come into play. The more we practice pitching and negotiating, the better we are at realising it’s not a scary thing.” IFM

David Drake is an earlystage equity expert based in New York City. He is the founder and chairman of Victoria Global; LDJ Capital, a family office and private equity advisory firm; and, The Soho Loft Media Group, a global financial media firm.

Apr - Jun 2015 International Finance Magazine

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The entrepreneur’s factory International Finance Magazine Apr - Jun 2015

S

mall and Medium Enterprises (SMEs) are the backbone of every economy. Most often, they are the result of people’s entrepreneurship and not the outcome of any kind of promotion by the government. The size and health of SMEs is a good indicator of the entrepreneurial spirit of a nation and its people. Governments that nurture this spirit reap the benefits in the form of stable employment figures and an economy that is less vulnerable to a financial crisis. It is this spirit that is the need of the hour as many developed countries struggle to spur growth in their economies.

At the time of a crisis, ministers may offer tax breaks and other concessions, but often these do not translate into the desired results. The reason is that firms nurtured on such measures get used to surviving by taking advantage of various concessions. The firms that grow into larger companies are ones that innovate. Governments must encourage SMEs to innovate and compete rather than survive on tax breaks and other financial jugglery. In a crisis, financial jugglery can only take you so far. What a nation really needs is innovative thinking.

The Germans are the best in this business. They come up with innovative and quality products. They are so confident about their products that they do not compromise on price even in volume driven markets. But the real story is their resilience. They have maintained their standing in the global market over several decades. They have never been swept away by a wave nor felled by a financial crisis, of which there have been many in the rest of the world.

What makes them different from the rest of us?

Actually, have you ever wondered what makes an entrepreneur different from the rest of us? Read the experience of four entrepreneurs and tell us what you think. Do you have it in you to be an entrepreneur? During the course of doing these stories, we learnt that the second generation of an entrepreneur does not have it easy either. Alaa Syro of SASCO is the best person to tell you why.

Not everyone can be an entrepreneur. But remember, entrepreneurs need trained and enthusiastic support staff to help them realise their goals. The word to highlight here is trained. Apart from lending funds, governments can contribute to growth by setting up training institutes that can provide human capital to SMEs. Read their stories, their journeys, their triumphs, the challenges they face and their contribution to the economy as we turn the spotlight on SMEs. We would love to hear what you think about our coverage.

index

28 32

FUNDING: THE ALTERNATIVES INTERVIEW: I AM LIVING MY DREAM

40

INTERVIEW: NOT EASY TO MANAGE AN ALREADY SUCCESSFUL COMPANY

48

COVER STORY: DECODING GERMANY’S SUCCESS

56

ENTHUSIASM FOR INNOVATION ON THE WANE

59 62

GUIDE TO EXPORTS

65

NOTHING IS TOO SMALL FOR HACKERS

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LATIN AMERICA: NOT EASY TO START

72

EGYPT: GOING GREEN

COVER FOR DIRECTORS & OFFICERS

Apr - Jun 2015 International Finance Magazine

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COLUMN

COLUMN

Charles Thorburn

22

The job creators It’s time for society to recognise the entrepreneurs

International Finance Magazine Apr - Jun 2015

COLUMN

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Apr - Jun 2015 International Finance Magazine

COLUMN SME

Work hard in school and get good grades (whilst making sure you fit in) and you’ll do well in life. Marry early, land a job in a large organisation, get a cubicle, free dental care and, perhaps, even a company car. Keep your head down and after 10-15 years, you’ll have a comfortable middle-management job, be a frequent visitor to the local golf club and, perhaps, a senior figure in the local Rotary club.

T 24

here are many versions of the above. Some will choose a practical career with little academic training. Others will stay in university as a researcher.

But on some level this narrative will be familiar to many of you. It could be a description of how you want your life to look, a version of what you tell your kids, or for some of you, a nightmare scenario.

It may not be that exciting but what is the alternative, you may ask. I’m not advocating jumping from one job

to the other for the sake of it. Neither am I encouraging you to live a life depending on benefits. I am talking about becoming an entrepreneur.

Not following the norm In the UK, the Bank of England restricts banks from offering mortgages over a certain multiple of regular income. This makes it very difficult for entrepreneurs who would rather reinvest their business earnings than take out a large salary. When you sign up with a new electricity

International Finance Magazine Apr - Jun 2015

provider, apply for a gym membership or subscribe to an Internet forum, there is rarely an option under ‘occupation’ that says entrepreneur. Everyday life is full of examples where we don’t accommodate entrepreneurs.

Walking down a welltrodden path is a safe play.

Perhaps, that is why it is encouraged by societal norms and the way our economic system is built. We lead a life with a stable and predictable (but capped) income at the facile cost of working 40 to 60 hours per

week for someone else.

Despite this, we are depending on entrepreneurs for our so-called normal lives. The jobs you apply for are likely created by an entrepreneur. The accountants need entrepreneurs to use their services, the builders need entrepreneurs to hire them for the construction sites and the government needs entrepreneurs to generate tax to run the country.

In the UK, SMEs employ over 15 million people, or close to 50% of private sector employment. The European Commission

COLUMN SME

The European Commission report on European SMEs for 2013/2014 found that two out of every three private sector employees work for SMEs, and that SMEs generate 58 cents on every Euro of value added in the economy. This is not just a European phenomenon. SMEs are estimated to employ over 40% of India’s workforce, and 52% of Brazil’s. report on European SMEs for 2013/2014 found that two out of every three private sector employees work for SMEs, and that SMEs generate 58 cents on every Euro of value added in the economy. This is not just a European phenomenon.

SMEs are estimated to employ over 40% of India’s workforce, and 52% of Brazil’s.

My firm, which is also an SME, focuses on easing one of the perennial top three worries for SME business leaders – access to finance – by advising UK SMEs on debt financing. As such, I am highly aware that the value of SMEs is indeed acknowledged by politicians. In the UK, we have government policies such as the funding for lending scheme, entrepreneurs tax relief and the enterprise investment scheme. This text, however, is not about the issues of supporting existing businesses, but about the attitudes that prevent people from becoming entrepreneurs.

Pros and cons – not a life for everyone The life of an entrepreneur makes you a master of your own destiny. You can decide whether it is worth coming into the office on any given day. You can set

the office policies however you like them. You have the potential to achieve financial independence in a way that no other career can match. And best of all, you can design your own job to make sure you spend all day doing something you are passionate about – work can be a valued part of life rather than something you put up with in order to live.

The flipside is that you probably won’t go on holiday with your friends as planned if that week turns out to be busy. In fact, as an entrepreneur you are likely to take very few extended holidays. You may be able to spend a Monday morning outside in a park on the first day of spring, but overall you are likely to make up for that threefold by the late nights and weekends (It’s 11:30 pm as I’m writing this and I’ve got some more work to finish before I go home). You can’t rely on a regular paycheck. And perhaps most of all, you are responsible; people will ultimately depend on you, if something goes wrong, you are to blame. You need to make sure you follow all the rules and regulations in whatever industry you operate and pay all your taxes and bills on time. If you don’t succeed, you will be judged harshly by the

people who stayed on the safe path, it is easy to be labeled a failure.

A lot of people will read this text and be more convinced than ever that entrepreneurship sounds terrible.

That is perhaps as it should be; not everyone can be an entrepreneur.

What is a problem though, is the anti-entrepreneurial structure and attitude in our society that prevents people who want to be entrepreneurs from following their dreams.

What defines an entrepreneur?

I’ve talked about entrepreneurs in the traditional sense, but an entrepreneur is a wide concept. It includes anyone who takes risks and dares to try something new in life. Vincent Van Gogh only sold one painting in his lifetime and was labeled a terrible painter.

John Grisham’s first book was rejected 28 times. The Beatles were rejected and told “guitar groups are on their way out”. Charles Darwin gave up on having a medical career despite his father’s wishes.

All entrepreneurs in my mind.

I have two coworkers who both elected against lucrative careers in large institutions to work with us

in a young and unproven company. They are both entrepreneurs whether they know it or not.

Final Thoughts We all need to recognise the importance of entrepreneurs. It isn’t easy to take a plunge into the unknown, which is exactly what entrepreneurship is. People who are on the edge should be given a push rather than being dragged back to ‘safety’.

So next time you are having a discussion with someone about a major life decision, remember that Bill Gates was a disappointing college dropout and that Elvis Presley was told after one of his first performances he “should go back to driving trucks”. IFM

Charles Thorburn is the co-founder of CreditSquare Limited

Apr - Jun 2015 International Finance Magazine

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SME

‘Banks are continuously withdrawing from

lending to SMEs’ Fleximize’s Founder and Managing Partner Max Chmyshuk says the alternative finance market’s volume lent is expected to reach £4 billion by the end of 2015 Suparna Goswami Bhattacharya

F

leximize, which has its main operating office in Ipswich, offers business loans to small companies in the UK. The firm has 22 employees and, till date, has disbursed loans to over 200 small businesses.

Excerpts from an interview with the firm’s founder and Managing Partner Max Chmyshuk: Please give us a brief background about the company.

Fleximize is a UK limited company providing small loans and revenue-based finance to UK-based small businesses with typical annual revenues ranging between £50,000 and £5,000,000. Since its launch in January 2014, Fleximize has extended over £4 million to over 200 small businesses. Currently, we

offer two different products: FlexiLoan: A flexible installment loan whereby a borrower repays interest and principal over a set time period in equal monthly installments. The product offers flexibility features, such as penalty-free early prepayments, repayment holidays, and top-ups often unavailable in competing offerings.

Revenue Advance: A revenue advance product based on monthly revenue receipts whereby a borrower repays an agreed percentage of their monthly revenues, typically 10-20%, until the original advance and an agreed additional amount (‘cap’) is repaid. A revenue advance is inherently less likely to put pressure on the borrower’s cash flows in a slower month because the payment due that month would also be lower.

International Finance Magazine Apr - Jun 2015

Equally, the business would pay more in a good month with higher revenue and would repay its revenue advance quicker, if revenues and monthly repayments grow on the back of funding provided by Fleximize.

How many branches do you have?

We don’t have typical ‘bank’ branches. Customers are served on the phone, email and internet.

What is the size of your current loan portfolio?

Though we will not be able to disclose the exact figure, we can say it is just over £3 million.

How would you describe the alternative funding market for SMEs? There are an estimated 4.9 million small businesses in the UK collectively generating around £1.6 trillion in turnover. Traditionally served by high street banks, many SMEs, particularly the smallest ones with under £5 million in annual revenue, have experienced withdrawal of credit lines from their banks since the credit crunch of 2008. Despite pressure from the government to lend more, banks have been continuously withdrawing from the market, leaving a void for alternative finance providers. According to Bank of England data, in the first half of 2014 alone, banks’ net lending to SMEs shrunk by over £2 billion.

As a result, the alternative finance market is booming with volume lent growing from £0.6 billion in 2013 to almost £2 billion by the end of 2014 and expectations of reaching £4 billion by the end of 2015 (Cambridge

University and Nesta Foundation Research).

In which country is the alternative funding market for SMEs most mature?

It has to be the USA. What factors do firms like yours consider before deciding to fund an SME? Every alternative finance provider has their own underwriting model, which lays more emphasis on some factors as compared to others. For Fleximize, the most important criteria are credit history and good standing of the company and its key shareholders, purpose and affordability of the proposed financing, and understanding key success drivers and risks for the business.

Till what stage do firms like Fleximize support SMEs? Is there is limit on how much you can lend to them?

We lend up to £100,000 to each company. That naturally limits our target audience to small businesses with annual revenues under £5 million. As we grow the book, we plan to increase the single borrower limit accordingly.

Which are the evergreen sectors in SMEs? I would probably point out retail and wholesale, where companies need working capital to purchase new inventory as their revenues grow. We have seen, however, businesses borrowing in order to recruit new staff, upgrade their premises or website, and acquire equipment. IFM

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Max Chmyshuk, Founder and Managing Partner, Fleximize

Apr - Jun 2015 International Finance Magazine

SME

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The alternatives Where banks have failed to offer funds, other sources of finance have stepped in to fill in the gaps Tim Evershed

International Finance Magazine Apr - Jun 2015

SME

T

he UK’s economy is finally battling its way out of the troubles of the past few years and reports tell us that growth is up, as are wages. Naturally, many SMEs are now looking to take advantage of these conditions by growing their businesses. To do this, it is vital that they can access finance.

However, the mainstream banks remain slow to lend to SMEs forcing companies to look elsewhere for finance. Fortunately, there are a number of other

streams of finance available from both the public and private sectors.

The public purse is still open to business in the UK with a range of funds, grants, loans and investments that are available from central government, the EU, universities and local authorities for private business.

One of the key sources of public funding comes from the Regional Growth Fund (RGF). It made £1.4 billion available during 2014 with the purpose of helping companies throughout England

to create jobs between now and the mid-2020s. For SMEs, the RGF is available through Local Enterprise Partnerships (LEP) across the regions. SMEs must want to “strengthen, consolidate or grow their business, create or protect jobs, be investing private capital and be unable to find funding else”.

Funded by the EU is the Horizon 2020 programme of research and innovation that is focused on the sciences. The €80 billion fund includes a new initiative to facilitate the engagement of SMEs, and the process has been devised to be more accessible for smaller businesses and actively seeks their participation.

And there is a range of smaller funds that focus on areas like transport, engineering, or biotechnol-

“

Confidence is a massive part of making deals happen along with vendors getting the right price for their business Mark Hughes, Partner in Corporate Finance at law firm Browne Jacobson

Apr - Jun 2015 International Finance Magazine

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SME

30

ogy that the UK government or EU deems vital. Each of these funds has criteria that businesses must meet before qualifying for finance.

For businesses unable to access public funds because they operate in a sector that is unsupported or fail to qualify on some other grounds, there are a number of options, including community lending, peer-topeer, business angels and venture capital.

Venture capital (VC) lay largely dormant in the years following the 2008 crash but the signs over the last 18 months are that it is back and hungry to make deals.

Many now expect the coming year to see a number of private equity (PE)

houses raising funds for fresh investments, while pundits expect deals among smaller businesses and secondary buyouts to rise during 2015.

“Confidence is a massive part of making deals happen along with vendors getting the right price for their business,” says Mark Hughes, Partner in Corporate Finance at law firm Browne Jacobson. “There are loads of new funds, big funds and small funds. There are a host of venture funds with cash up to £2mn available, which drives lower transactions. We’re going to see loads of bigger PE deals, the kind of stuff we saw back in 2007, such as £3bn buyouts.”

International Finance Magazine Apr - Jun 2015

VC and PE funds come in all shapes and sizes, from global behemoths such as Kohlberg Kravis Roberts to local and regional ones, such as the Foresight Nottingham Fund.

Funds say they aim to provide long-term, patient capital to help companies grow, often with the final goal of a management buyout or initial public offering (IPO). They say there is a real acceleration in activity and lots more confidence coming back into the VC market with deals being actively sought by equity investors.

Roger Wood, Director at Birmingham-based VC fund Midven, says: “Investors are still looking for the

traditional things. That is good management, a good product with some kind of a USP or patented technology behind it. Certainly, one of our funds that focuses on the early stage puts a lot of emphasis on patented technology as the cornerstone of the business.”

The last few years have also been notable for the rise in high net worth networks and investor pools, such as Connections Capital and Rockpool. These networks are now working in parallel with VC funds and business angels.

Business angels are often successful business people that have built up and sold businesses in the past. They now have the funds and

SME

finance into start-ups that mainstream funders can’t.

In addition, they help other business survive or grow in order to help create or preserve jobs.

According to the Community Development Finance Association (CDFA), in the final quarter of 2014, CDFIs lent £23.5 million to businesses throughout the UK. There are currently around 60 CDFIs operating across the UK, ranging from national outfits to regional and local players.

A key element in securing funds is the ability to show that the business will either safeguard or create jobs.

CDFIs are looking for businesses that will add to the local economies rather than simply competing for a slice

of the existing pie with established businesses.

Nature abhors a vacuum and where banks have failed to find the funding for UK SMEs, other sources of finance have stepped in to fill in the gaps. Debt and equity options are out there for businesses of all sizes. And no matter which lender or investor is most suitable for a business, the key to funding remains the same as it always has. It is about the viability of a business plan and the viability of a proposition. IFM

Your options are • Regional Growth Fund • Horizon 2020 the time to help businesses grow with advice, guidance and mentorship from their years of experience.

Recently, peer-to-peer lenders have come onto the scene; these include funding circles and crowd cubes, and are an alternative to the banks. They raise money through crowd-funding initiatives, often using online portals, and lend at competitive rates of interest to businesses they consider attractive.

Then there is invoice finance, which allows companies to raise cash quickly

and easily against their sales ledger, affording businesses a greater flexibility and control over their cashflow.

And community development finance institutions (CDFI) are an often overlooked but increasingly critical part of the entrepreneurship ladder. CDFIs help to fill the gaps in the financial services system created by the inability of banks and other mainstream lenders to provide access to credit for underserved markets.

Predominantly functioning in socially challenged areas, CDFIs put faith and

• Venture Capital • Private Equity • High Net Worth networks and investor pools • Business Angels • Peer-to-Peer Lenders • Crowdfunding • Invoice Finance • Community Development Finance Institutions

Apr - Jun 2015 International Finance Magazine

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INTERVIEW INTERVIEW

INTERVIEW

‘I am

32

living my

Dream’ Suparna Goswami Bhattacharya

International Finance Magazine Apr - Jun 2015

Makrand Appalwar, chairman and managing director, Emmbi Industries

Rinku Appalwar, director, Emmbi Industries

Apr - Jun 2015 International Finance Magazine

INTERVIEW INTERVIEW

Makrand Appalwar, chairman and managing director, Emmbi Industries, believes that the manufacturing sector in India has been long ignored and is happy that the present government is finally focusing on this neglected industry.

Excerpts from an interview:

34 You started in 1994.

Around the same time, India was experiencing an IT revolution. What made you start a manufacturing company?

It was my childhood

ambition to start some sort of manufacturing unit. My mother was very much impressed by a SAIL manufacturing unit at our native place Chandrapur in Maharashtra. Since then,

International Finance Magazine Apr - Jun 2015

she dreamt of me becoming an entrepreneur in the manufacturing space.

Fortunately, I had the same dream. I followed my dream and passion.

What does your company do?

Emmbi Industries is one of the well-established brands in India in the field of woven polymer-based products. We now have two decades of outstanding performance in technical textile and various application products, such as Flexible Intermediate Bulk Container (FIBC), Canal Liners, Road Underlay-

ment, Protective Irrigation Systems, Flexible Water Tanks that find large scale application in segments like cement, bulk chemicals, agriculture, water conservation and infrastructure. We are one of the pioneers in the production of flexible water tanks in India. The company was listed on Bombay Stock Exchange (BSE) and National Stock Exchange of India (NSE) in 2010. We have customers in about 50 countries across five continents.

What were the main obstacles that you faced while starting out?

INTERVIEW

As we are first generation entrepreneurs, we had very little experience about running a business. We came from a very moderate financial background; this caused a shortage of initial capital, which was the cause of slow growth during the startup period.

Do you feel manufacturing SMEs are neglected by the government visà-vis software companies?

This is a very well-established and unfortunate fact for this country. We are glad that the government took good care of the educated white-collar workforce.

But there is a huge base of blue-collar workers who have been constantly

ignored. Globally, it is quite evident that no economy in the world could reach great heights by depending on their service sector. It is the manufacturing industry which is the game changer.

We are happy that the present government has recognised this and is focusing on this sector. Campaigns like ‘Make in India’ will definitely bring good days for the Indian manufacturing sector.

How will you rate the growth of your company?

In the last five years, Emmbi has grown with the CAGR of 32.50 %. We hope to maintain similar growth in the coming years. We are targeting a top line of

Rs 500 crore in the next three years from the present level of Rs 201 crore. Our sales have increased to Rs 54.61 crore from Rs 43.50 crore, which is an increase of 25.54% over the previous quarter in the same period last year.

What steps do you want the government to take to enable growth in the manufacturing space?

The government should focus on infrastructure development, especially ports and roads. They should provide stable indirect tax rates for longer periods.

The operating procedure needs to be simplified. As SMEs usually have limited management bandwidth, entrepreneurs should focus

on core business rather than compliance issues.

What factor or factors helped you succeed?

We were very consistent in our efforts and innovative in our approach. Success did not come in the initial stages, but we always took failure as a challenge and chugged ahead slowly. We always looked for the newest ways and technologies to overcome challenges.

What is your advice to fellow entrepreneurs?

Just put in whole hearted effort. Do not ever give yourself a fall-back option.

Go with the ambition that come what may, I am not going to quit. I am sure you will succeed. IFM

Emmbi Industries Headquarters: Mumbai, India Annual Turnover: Rs 1950 million (£20 million) Industry: Technical textile and polymer processing Apr - Jun 2015 International Finance Magazine

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INTERVIEW

‘It is important to do your research properly’ Suparna Goswami Bhattacharya

International Finance Magazine Apr - Jun 2015

INTERVIEW

37

Qais Al Khonji, serial entrepreneur

Apr - Jun 2015 International Finance Magazine

INTERVIEW INTERVIEW SME

Qais Al Khonji is a serial entrepreneur. Till date, he has founded three companies. Though his first venture failed, he believes that the mistakes he made then helped him succeed in his current ventures.

Excerpts from an interview:

38

How and when did you think of becoming an entrepreneur?

I decided to become an entrepreneur in 2010. At that point, I decided to start my first company Qais United Enterprises. Though I have a family business – Al Khonji group — I decided to do something on my own because I am a risk taker and a decision maker. When you are part of a family business, it is difficult to take a decision on your own, as you need to consult a group. I want to learn the hard way.

Tell us something about your various ventures?

Since 2010, I have started three companies. The first one is Qais United Enterprises, which was a trading company. The company was into import of goods that were not available in the local market. Unfortunately, that wasn’t enough to be successful. It was a

major lesson in my life that encouraged me to start my second venture – Genesis International, which is into communication and fisheries. When I say communication, I mean we are trying to implement what is known as a smart city where you can pay your utility bills online. As for fisheries, we manufacture a device that coverts sea water into ice for fish storage within the boat.

It saves a lot of time and effort for fishermen. It looks very promising. The third company is called Genesis Projects and Investments, which is into oil and gas. We are a core testing lab for the oil and gas sector.

What lessons did you learn from ventures that did not succeed?

Quite a few. In a small market like ours, it is better to start a business in services rather than selling products (unless it’s a brand). It is important to do

International Finance Magazine Apr - Jun 2015

market research properly.

Being in a small market is a challenge. There is a study that says 9 out of 10 projects fail. Unless your idea is very unique, it would be difficult to sustain, especially in our market.

Once your venture failed, how did you raise capital to start all over again? Were banks ready to lend you money?

To be honest, I try to fund my projects from my own money. A bank is usually my last resort. Since I have a family business that is up and running, I fund my projects through my annual dividend. I chose to be independent as I like to take risks. It is okay to make mistakes. That’s the journey every entrepreneur has to go through to achieve success.

What problems do SMEs face in Oman? Is Oman much better place for SMEs than other emerging countries?

Oman certainly is one of the best countries to start a business. It is tough though because it is a small market.

Unless your idea is very unique it would make it tough to survive. But once you clear the initial hurdles, the sky is the limit.

There are certain chal-

lenges. For instance, administration issues take a lot of time. Finance could be also an obstacle if you can’t find an entity that is willing to finance your project.

What policies does the government in Oman have for SMEs? The government has done a lot to support SMEs, but I believe that there is always more that can be done. They have started a fund called al Raffad to finance SMEs. One thing I would love to see for sure is entrepreneurship to be taught in schools here. The government has to push for that to become a reality. It will definitely bring in a positive change to the mindset of our youth and students.

Do you wish to expand beyond Oman?

That’s the plan for both companies. For Genesis International, we are already working in some parts of India to implement the smart city concept. For Genesis Projects, we are getting orders from Dubai and Abu Dhabi. So, we already have crossed the border.

What is one factor that helped you succeed in your present ventures?

It is important to find the right people and partners to work with. Today, I have

INTERVIEW SME

a team that is capable of handling their tasks. I think this has led to my current success.

Your advice to fellow

entrepreneurs?

They have to be patient, believe in themselves and their ideas. Never ever give up. For every door that

closes, there is another that small conversation might opens. Do what you love and lead to a business deal. IFM educate yourself by attending seminars and networking session. Sometimes, a

Genesis Projects and Investments Headquarters: Muscat, Oman Annual Turnover: $600,000 (ÂŁ400,000) Industry: Oil & gas

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Apr - Jun 2015 International Finance Magazine

INTERVIEW

‘Not easy to manage

an already successful company’ Suparna Goswami Bhattacharya

International Finance Magazine Apr - Jun 2015

INTERVIEW

41

Alaa Syro, VP of manufacturing and finance, SASCO

Apr - Jun 2015 International Finance Magazine

INTERVIEW INTERVIEW SME

If you thought the second generation have it easy, think again. It is no mean task to deal with employees who have been in a successful company since the beginning. Alaa Syro, VP of manufacturing and finance, SASCO, talks to IFM about the difficulties he, along with his partner, Tarek Syro, VP of sales and marketing, faced.

Excerpts from an interview:

42

When and how did this company start?

Sasco was founded by my father (Nabil Sryo) in the late 70s. Our involvement and love for the business started at a young age. Seeing random people on the streets carrying products that we helped creating only added to our interest. Soon we got hooked. We made expansion plans and now we have six production facilities. We have also started a new venture called go-sos. com — an online office stationery supply company.

What were the difficulties in getting the busi-

ness going?

It was our father who started this venture. However, managing a successful company that has

International Finance Magazine Apr - Jun 2015

been in business for more than 35 years and taking it to the next level is not easy.

To add to this, managing people who have been working in the company for a long time, some even before we started managing SASCO, is really tough. We had to put in a lot of hard work to change the mentality of people so that they would believe in us and our vision. We had to be patient and take every step carefully so that our mission did not harm the company.

We had to ensure the

involvement of all management — old and new — so that nobody felt left out.

Being a successful business, was it difficult to raise fresh funds?

Getting funds for SMEs wasn’t easy five years ago, but now things are changing in Egypt. The banking sector is coming forward to help finance SMEs and support their expansion. The change is happening globally as well. More and more individuals and investment companies are coming forward to invest in

INTERVIEW

SMEs. SMEs around the world face a tough time getting funds. What is the approach of the government in Egypt? Does the government have special programmes for SMEs? The Egyptian government now acknowledges that SMEs are a dynamic force for sustained economic growth and job creation. Hence, reforms have been carried out in the banking sector. Most Egyptian national and private banks have started to keep aside dedicated funds for SMEs. The banks offer a distinguished package of financing schemes tailored to the needs of SMEs. According to government officials, 42% percent of Egypt’s work force is employed in SMEs, making it the country’s largest in terms of the number of people employed. Consequently, the government started to support and train young graduates to be ready for employment, especially in the SME sector. This has had a positive impact on Egypt’s economy, from hospitality services to manufacturing.

What is the one thing that made you succeed?

Pushing myself beyond my comfort zone.

What is your message to entrepreneurs?

You can do anything, but not everything. Secondly, try to be part of an entrepreneurial organisation like Endeavor, which will provide mentors who will open your eyes to the missing dots. We were lucky to be part of Endeavor. IFM

SASCO Headquarters: Cairo, Egypt Annual Turnover: (Not available) Industry: Office stationery

Apr - Jun 2015 International Finance Magazine

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INTERVIEW

’ ntrepreneurship ‘E important is reduce to unemployment

Suparna Goswami Bhattacharya

International Finance Magazine Apr - Jun 2015

INTERVIEW

45

Murat Kolbasi, chairman of the board, Arzum

Apr - Jun 2015 International Finance Magazine

INTERVIEW INTERVIEW SME

According to TGI Global research, Arzum’s products are among the most preferred 10 brands in Turkey, and are being used in more than 10 million homes.

It is the market leader in small home appliances, with 4 million units sold every year.

Excerpts from an interview with chairman of the board Murat Kolbasi:

46

What were the challenges you overcame to reach here?

The foundations of Arzum Elektirikli Ev Aletleri (home electrical appliances) were set in 1953 when Güney İthalat Kolektif Company, an importer of a broad range of products from small household appliances, radios, bicycles and televisions, was established.

In 1966, we registered the ‘Arzum’ trademark and began focusing on small home appliances. Arzum had only 15 types of products in 1995, now it offers more than 250 in 8 product categories from food preparation, cooking and frying, beverage prepa-

ration, cleaning, personal care, iron, kitchenware and accessories. It wasn’t easy to get our products into more than 10 million homes.

We’ve been through many economic and financial crises, but we survived them all.

How many countries do you export to?

We started to export in 2001. Today, people in 26 countries, ranging from Germany to Australia, Chad, Jordan, France and Egypt, are using our products.

As an SME, was it difficult to get funding?

We took an important step towards ensuring sustainability, strengthen-

International Finance Magazine Apr - Jun 2015

ing our finances, institutionalising and reaching the international markets. In April 2008, we established a strategic partnership with Ashmore Private Equity Turkey, a member of Ashmore Group, a prominent global financial corporation.

Initially, Ashmore acquired 38 percent of Arzum. As of the end of 2008, they became 49 percent shareholder. During this partnership (2008-2013), our revenue doubled. In this process, we professionalised the management to ensure sustainability. At the end of 2013, we started a strategic partnership with SDA International, an affiliate of Mediretta Capital Partners.

In the partnership, Arzum Elektirikli Ev Aletleri has a 51 percent share.

How mature is the environment for SMEs? Are there enough programmes by the government to support this sector?

In 2011, we were involved in Brand Supporting Program under the government’s Turquality program, a major step towards

becoming a global brand.

Turquality aims to increase exports from this territory, strengthen the “Made in Turkey” perception and our country’s reputation, with the vision to “create 10 worldwide brands in 10 years”. In addition, the confidence of being supported by the government is also important. After being taken within the scope of Turquality, Arzum’s recognition abroad has increased twofold.

What kept you going?

I have learnt that ‘We have to never give up’. Our company’s vision is ‘We create and make you feel great comfort with small differences’. It’s very important for us to make a difference in all areas. And we will keep improving to make your life easier in every way we can.

What was the most difficult period for you?

When I took over our shop in 1988, the company was acting as a trader rather than a brand. Our main challenge during this journey was the economic crisis in 2001, which was out of

INTERVIEW SME

our control.

What is your message to aspiring entrepreneurs?

Entrepreneurship has a very important place in my life. Once, during a panel on entrepreneurship at a university, I took a banknote from my pocket and asked the participants “What do you need to do to get this?”

Students made various comments. One of them said “I

need to come and take it from your hand.” I called the student, saying “Then, come and take it”, and gave the note to him. To succeed, we must implement what we see. Otherwise, it’s not easy to succeed.

According to a World Bank study in 2011, only six out of 100 people in Turkey are into entrepreneurship. Entrepreneurship is

very important to reduce unemployment. We need to facilitate the entrepreneurship spirit to reduce unemployment. IFM

Arzum Headquarters: Istanbul-Eyüp Annual Turnover: $100 million (£65 million) Industry: Home electrical appliances

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Apr - Jun 2015 International Finance Magazine

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Decoding Germany’s success story

International Finance Magazine Apr - Jun 2015

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The country is not only weathering the financial crisis in Europe but also helping others stay afloat Suparna Goswami Bhattacharya sgoswami@ifinancemag.com 49

Apr - Jun 2015 International Finance Magazine

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T

he 2008 financial crisis left many industrialised nations reeling.

Yet, one country continued to chug along. Its economic wheels, though moving slower than earlier, were still better than its neighbours. Then came the 2012 Euro crisis when this country singlehandedly saved the Union from collapse.

Germany has long been the envy of many. Though not as boisterous as the US when it comes to showing its might, it has been steady in its own right, to say the least. What is the secret of its resilience?

According to a study

prepared for the Directorate General of the Treasury, Germany, the unemployment rate hardly budged during the 2008-09 financial crisis. It stood at 7.3% in 2008 and was 7.5% in 2009.

This is in sharp contrast with what happened in other large countries of the Euro Zone. In Spain, the figure hovered around 18%.

In France, it increased from 7.8% in 2008 to 9.4% in 2009.

Barbara Boettcher, head of European Policy Research, Deutsche Bank says, “The German economy has long benefitted from its competitive corporate sector that has a strong global

presence. Also, the private sector in the country has low indebtedness, which in turn fuels private consumption.”

This, coupled with strong Mittlestand companies (family-owned small and medium-size enterprises), makes Germany stand out in the crowd. It is not only the industrial powerhouse of Europe, but a big manufacturing hub of the world.

Satyajit Das, a former banker and author of Extreme Money and Traders, Guns & Money, says, “Germany’s success is based on an economy heavily rooted in manufacturing.

The country also has some

»

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Workers assemble an Opel Vectra stationwagon on the Opel production line in Ruesselheim, Germany

International Finance Magazine Apr - Jun 2015

“

The German economy has long benefitted from its competitive corporate sector that has a strong global presence. Also, the private sector in the country has low indebtedness, which in turn fuels private consumption Barbara Boettcher, head of European Policy Research, Deutsche Bank

COVER STORY

amazing labour reforms (explained in detail later).

The labour unions and the industry generally share a cordial relationship.”

To be fair, SMEs are important everywhere. Where Germany differs is in the importance given to innovation, pro-active approach in global markets and very specialised medium-size big family-owned companies.

Andreas Woergoetter, senior economist, Organisa-

tion for Economic Co-operation and Development (OECD), France, says, “Employees have long tenures and career opportunities at all levels. Regional ties are deep and cooperation with vocational education is intensive. The combination of stable employment and rising income prospects is providing strong incentives to mobilise synergies at the workplace and participate in

productivity increasing innovation.”

Germany is known to produce high quality products, though not necessarily at cheap rates.

And that is probably one of the reasons that the country, still after so many years, continues to enjoy its numero uno position in the manufacturing space.

Companies know that price is not always the deciding factor. They know that consumers buying German goods are looking for that little bit extra — something that can’t be

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They compete through superior value and not lower prices. They produce highly specialised and high-quality products for markets worldwide

»

A worker scrubs the turbine of an aircraft jet engine at the Rolls-Royce aircraft engine factory in Berlin, Germany

Michael Holz, an expert in international comparative SME research at IFM Bonn, an institute which provides comprehensive statistical information on small and medium-size enterprises in Germany

Apr - Jun 2015 International Finance Magazine

COVER STORY

found elsewhere. And this is precisely the reason many German SMEs are innovators — they know they have to innovate to survive and retain customers. In fact, many stay away from pricedriven volume markets.

The country has a broad and diversified sector of SMEs. They tend to be larger on average than in other European countries and are more export oriented.

The latter, in particular, helps the corporate sector leverage growth in dynamic export markets to the German economy as a whole, says Boettcher.

Michael Holz, an expert in international comparative

SME research at IFM Bonn, an institute which provides comprehensive statistical information on small and medium-size enterprises in Germany, says companies often adopt the strategy of niche leadership. “They compete through superior value and not lower prices. They produce highly specialised and high-quality products for markets worldwide,” says Holz.

As a result, most enjoy a competitive edge which is not easy to challenge.

In 2013, approximately, 3.7 million German firms were classified as small and medium-size enterprises, accounting for 99.6% of

the total number of enterprises in the country. In an international comparison, its economy is marked by a large number of mediumsize enterprises that are international market leaders.

“Germany has been specialising in this (manufacturing) space for years now. It has been close to 50 years now, or even more.

The firms here do not shy away from making strong R&D investments. The best part is they constantly try to improve,” says Alexander Kritikos, research director, German Institute for Economic Research, a leading economic institute in the country. IFM

“

Germany has been specialising in this (manufacturing) space for years now. It has been close to 50 years now, or even more. The firms here do not shy away from making strong R&D investments. The best part is they constantly try to improve Alexander Kritikos, senior economist, Organisation for Economic Co-operation and Development (OECD), France

Development of Turnover in the German Industry(2012) 52

Data in percentage, Calculations by IfM Bonn | Basis: n = 842

International Finance Magazine Apr - Jun 2015

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Good labour reforms – How to motivate employees

Sound education system – Vocational training

Somebody said it right: It is the work that matters, not the number of hours put in. Germany could not agree more. Its inhabitants work fewer hours than most of their counterparts in other countries.Yet, their productivity is one of the best. A data published by Office of National Statistics shows that Greek workers put in longer hours than anyone else in Europe — 42.2 per week, compared to just 35.6 in Germany (see table).

There is no denying that a major contributor to a successful economy is the human capital. The Germany model stands apart mainly because of the policy it follows in the later years of schooling.

Many students in high secondary schools get into vocational training.“Unlike in other countries, vocational training is not looked down upon in Germany. In fact, sharpening one’s industrial skills is valued highly in Germany. The training given by companies to students is very elaborate and covers every aspect of manufacturing,” points out Kritikos.

Germany undertook labour market reforms in 2003, which was mainly sparked by the excesses of post-unification wage increases. Thanks to the strong bond between employers and employees, the government could bring down wages a bit. “Mittelstand companies are aware that their employees are the key success factor for competitiveness, innovation and growth. These companies usually show a high degree of social responsibility towards their staff members and other stakeholders, and have an interest in establishing and maintaining trustful and long-lasting relationships with their employees,” remarks Holz.

Thus, a value-based enterprise culture which fosters identification of employees with the company helps to increase motivation, productivity and creativity. In general, the German economy is marked by a higher degree of cooperation and coordination both within enterprises, between enterprises and their stakeholders as well as between governments, businesses, business associations and trade unions etc.

Government-backed programmes – How the government helps One striking feature of the German economy is the large number of public support programmes and measures offered by governments and policy makers at various levels. For almost any specific enterprise need, there is a support measure. A data bank on the website of the Federal Ministry of Economic Affairs and Technology provides a comprehensive and up-to-date overview of available EU, federal and land-support programmes.

German immigration policies aim at attracting highly-skilled foreigners from countries outside the European Union to tackle shortages of skilled labour. It recently introduced the EU Blue Card, which allows skilled workers from other countries to live and work in Germany and the EU. To conclude, a blind replication of the German model is not advisable, as every economy is different, but there are definite lessons to be learnt. For instance, a mindset that more hours in office means more productivity can be changed. Germany has shown that sometimes less can be more. And, it definitely helps to share a great relationship with employees.

In fact, a lot of time is spent on receiving on-the-job training, coupled with theoretical training provided by vocational schools, both according to national standards. Apprenticeship scheme is regarded as being central to the relative competitiveness of the manufacturing sector.

“The German intermediate vocational training system is known for its comprehensive dual apprenticeship training that includes practical training at companies and theoretical training at vocational schools.

This develops as a well-qualified work force and is seen as a key driver of economic growth,” says Anwar Shirpurwala, executive director, MAIT, an apex body that represents ICT sector in India.

The federal government funds the intermediate vocational training and employers who train apprentices. Also, employers try to retain the apprentice in their employment to recoup training costs.

Thus, the education system ensures a constant pool of highly skilled workers to meet the needs of the country’s strong manufacturing base.

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COVER STORY

Medium-size company Annual Turnover

< or = EUR 43 million

In 2013 3.7 million enterprises

were classified as SMEs, which account for 99.6% of the total number of enterprises

Annual balance sheet < or = EUR 43 million

<250

No. of employees

Small Company Annual Turnover

Approximately

15.97 Mn employees subject to social insurance contributions were employed by SMEs in 2012

< or = EUR 10 million

Annual balance sheet < or = EUR 10 million

54

<50

No. off employees N l

Micro Company Annual Turnover < or = EUR 2 million

Annual balance sheet < or = EUR 2 million

<10

No. of employees Source: Deutsche Bank

No play during work For Germans, there is only work that needs to be done during work time. Employees in Germany do not log in to Facebook, gossip with co-workers, open Twitter accounts or surf the net during working hours as these are socially unacceptable. In a documentary by BBC titled Make Me A German, a German woman explained that she was shocked to see the casual nature of the working style in Britain.

In fact, employees in Germany do not even check their private email during work hours.

International Finance Magazine Apr - Jun 2015

Almost all SMEs are family businesses but not all family businesses are SMEs

There is no singly â&#x20AC;&#x2DC;keyâ&#x20AC;&#x2122; to the success of German SMEs but a complex bundle of aspects, partly shaped over centuries

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Germany has safeguards to shrug off a financial crisis Resilience has a lot to do with the ability for error correction. In this respect, Germany went through the pains of adjusting to and correcting the policy failures in the course of reunification, which made it ready for the big international crisis to come. These measures included strengthening the fiscal policy framework and sustainably reducing the size and weight of the public sector. Reforms of wage bargaining and work organisation greatly increased the possibility of internal adjustment.

Outsourcing into the near Eastern neighbourhood improved and diversified the production capacity of Germanyâ&#x20AC;&#x2122;s export-focused manufacturing sector and facilitated access to new and rapidly growing markets.Work incentives were restored through the famous â&#x20AC;&#x153;HartzReformsâ&#x20AC;?, which made work pay, improved matching services of the Public Employment Service and allowed new forms of labour contracts Furthermore, Germany had not accumulated large internal imbalances, like real estate bubbles with an inflated construction sector or excessive lending to private households. True, during the run-up to the international financial crisis erupting in 2008, Germany achieved large current account surpluses, leading to large international asset positions, which were hit hard by the collapse of some segments of overseas financial markets. But these types of problems are more of a nature which signal missed opportunities than threaten the existence of companies and the well-being of households.

When the crisis hit, the economy was strong. Companies, consumers as well as the government had buffers to adjust. In addition, the need for structural change was small and the flexibility of hours worked, coupled with a rapidly growing non-standard labour market with labour agencies and fixed-term contracts helped strong and competitive firms to survive and maintain the workplaces for their highly qualified employees.

As a consequence Germany did not need to slash public spending and the amount of layoffs was small. Germany absorbed the crisis, rather than making it worse.

Andreas Woergoetter

senior economist, Organisation for Economic Co-operation and Development (OECD), France

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SME

Less enthusiasm

for innovation

It may be reflecting the general pessimism about economic conditions in Europe Peter Taberner

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International Finance Magazine Apr - Jun 2015

SME SME

T

he German public investment bank KfW has revealed in their latest SME report that innovation amongst SMEs has declined for the third year running.

In a survey included in the report, only 28% of the respondents said that they invested in innovative products or processes, between 2011 and 2013.

Product innovations have suffered the worst, having fallen particularly sharply, while process innovations have dipped only slightly.

SME innovation is now lower than in the period between 2007 and 2009, despite economic conditions faring better than during the hyperbole of the financial crash. The full analysis disclosed that there are currently 1.01 million SMEs at present, and that 51,000 companies have stopped innovating compared to the previous innovation survey, which reviewed SME activity between 2010 and 2012.

Moribund economic conditions across Europe, KfW

believe, has been a major factor for many SMEs turning their backs on creativity in their businesses.

Due to the snail pace of growth, many internationally active and larger SMEs have also seen a reduction in innovation, as there is a lack of market space for new products.

Eurostat have recorded Euro area and European Union growth at 0.3% and

0.4% respectively, for the fourth quarter of last year.

While positive figures, it hardly paints an optimistic picture that growth will return soon to a level that can create dynamic economies for SMEs to thrive in.

KfW believe that many companies will become more innovative again, as soon as economic conditions improve.

Innovation is being aban-

4

2

3.8

3.2 3.0

3

2.1 1.9

2

1

1.2

0.6

1 0.3 0.1 0

0 Product innovator with imitation

Product innovator with market novelty

Process innovator

Employment growth (left axis)

Product innovator with imitation

Product innovator with market novelty

Turn over growth (left axis)

Process innovator

Product innovator with imitation

Product innovator with market novelty

Process innovator

Change of return on sales (right asis)

Difference between return on sales of innovators and non-innovators in percentage points

Difference between the growth rates of innovators and non-innovators in percentage points

Impact of innovation on company performance by kind of innovation

doned by otherwise highly ground breaking SMEs in the manufacturing industry. In particular, those companies who in other circumstances would conduct intensive research and development in mechanical engineering, electrical engineering, or the pharmaceutical industry.

The report also concluded that when taking a long term view, a worrying development is taking place from small companies. KfW say that since the middle of the 2000s, the innovation output of small companies with fewer than 5 employees has fallen by 39%.

As pricing competition is becoming more intense in all industries, there is less leverage for investment in innovative products and processes.

Researching for improvements is therefore quickly disappearing in sectors that usually have a low propensity for innovation. For example, in construction and the services sector, innova-

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SME

Development of the share of innovators among SMEs 45%

43 %

42 % 40%

36 % 37 %

35%

32 %

35 %

30 %

29 %

30%

30 %

23 %

25% 20%

20 %

20 %

19 %

24 % 16 %

28 %

22 %

21 %

18 %

17 %

2010/12

2011/13

17 %

15 %

15%

29 %

26 %

10% 5% 0%

2002/04

2003/05

2004/06

2005/07

2006/08

Innovators

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tion output has dropped by 38% and 43% respectively.

Mr Joerg Zeuner, the chief economist of KfW, explains his view of the results of the survey. “We remain concerned that just under 30% of small and medium-sized enterprises are significantly advancing their products or processes. The share of innovators is now lower than it was during the economic and financial crisis in 2008-2009. Positive and stable sales figures are most important. Hence, growth in Europe is most important. This involves much less policy uncertainty. The availability of skilled workers also boosts innovation in small and medium-sized enterprises.

The German economy is competitive for a number of reasons – product quality, service orientation, flexibility and a balanced mix of industries and services, among others. These factors remain key. However, a slowing process of innovation reduces potential growth. This is more severe as Germany enters a phase of a declining work force.”

The survey concluded that

2007/09

2008/10

Product innovators

2009/11

Process innovators

the almost stagnant growth of the Euro area was one of the main reasons why innovation has fallen.

Zeuner outlined why this has such a negative effect on SMEs in Germany. “German firms trade and invest globally. At the same time, the German SMEs focus more on domestic and European markets as they get smaller.

Hence, the European economic prospects are more important for the SMEs than the global developments.”

St Gereon is an SME providing health care. It is based in the state of North Rhine Westphalia. It has just over 300 employees.

Its manager Bernd Bogert is surprised by the results of the survey, as businesses need to continually thrive on new ideas and concepts. “That only 28% of companies are investing in innovation practices is a bit of a shock. From our point of view, innovation has to be on top of the list for businesses to keep moving forward. For example in our own business, we keep creating special services for our people, especially for the

International Finance Magazine Apr - Jun 2015

elderly because they need our services. We are always searching for new ideas and concepts.”

The question of how Germany’s SMEs should improve matters would provoke many different opinions, but Bogert prefers a more collaborative approach to ensure that they rediscover their desire to innovate.

“I think that digitalisation should be recognised

by SMEs, in that a platform could be provided in order to explain ideas and new concepts. We could help each other develop across all sectors. I also think that it is important to invest in human resources so that people can create more, and develop their skills.”

SMEs in Germany, or the “Mittelstand” as they are better known as, are psychologically and culturally very important for the German economy, with many being the world leaders in their market sector.

A joint SME mood study conducted by the KfW and Munich-based Ifo Institute found that SMEs were increasingly pessimistic about economic conditions throughout 2014.

This was in terms of overall climate, expectations and the current situation, a mood that perhaps will not improve until economic growth across Europe finally gathers pace. IFM

• SMEs generate one out of every two euros in Germany • Create 37% of corporate turnover • Account for just under 55% of added value • 3.6 million employed by firms that had fewer than 10 staff • 11.8 million working in companies that had between 10 and 499 employees • Had roughly 60% of those jobs requiring social insurance contributions (in 2012) • Provide 1.27 million of 1.54 million training places in companies (as of 2013) • 1 in every 2 firms with a turnover greater than €2 million is active in foreign markets

Source: German Federal Ministry for Economic Affairs and Energy

SME

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Guide to exports Tim Evershed

Apr - Jun 2015 International Finance Magazine

SME

How do you locate customers overseas and assess their reliability?

E

xporting has never been so popular in the UK with some estimates showing that 40% of SMEs are looking to either increase their exports or sell overseas for the first time.

However, exporters face three key barriers, finding reliable trading partners, financing the deal and ensuring payment is received.

Exporting can be a

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daunting process. How do you locate and assess the reliability of customers overseas? This often means going to countries with different business cultures.

Looking for business partners The best starting point for any SME looking to export for the first time is UK Trade & Investment (UKTI).

The government department helps promote foreign trade and has experts on hand that can help and advice on a number of factors facing exporters.

In addition, a trade credit insurer will help companies with their sales effort. Trade credit insurance policyholders can apply for reports on the creditworthiness of individual customers or entire markets.

“The most important thing is an assessment of an overseas customer

International Finance Magazine Apr - Jun 2015

at the start of the process.

The further afield you go the more difficult it is to get that but the large export credit insurers have expertise, they have set up a databank so the insurer can tell their client how should they deal with a customer,” Simon Baker, Branch Director of Trade Credit at insurance broker Aon. Based on these assessments, insurers will give exporters advice on what terms they can deal with overseas customers.

Arranging payment The least risky way of doing this is through a Confirmed Letter of Credit.

This is a guarantee from an overseas bank that comes to a UK bank — it is an insurance policy for the UK exporter.

“How do you guarantee payment and how do you raise finance are one and the same question in many respects because things like a Confirmed Letter of Credit can fulfill both,” says Guy Phelan, Associate Director, UK Corporate and Commercial Sales, HSBC Global Banking and Markets.

“The UK bank can then put security around it and if something was to happen

to the overseas bank, the UK bank can still pay out.

It is an insurance policy for the UK exporter because if the foreign bank can’t pay out because of economic or political factors, the UK bank will.”

Bills of Collection or Bills of Exchange: Banks effectively handle the documents between the parties and release the documents and the payment once certain conditions are met. Usually that means documents being sent overseas and the cash being repatriated to the UK. In Open Account trading, there is no bank involved.

It is just an agreement between the buyer and the seller about what time money will be released in the transaction. In the

The challenges •

Finding reliable trading partners

•

Financing the deal

•

Ensuring payment

SME

event of non-payment by the buyer, then the credit insurance is activated. The insurers have debt recovery services around the globe, and if these fail to ensure payment, the insurer will settle the claim.

A trade credit policy will help potential exporters secure finance from lenders, as the lender will be able to see that transactions are securitised.

Foreign exchange hedging Exporters’ concerns do not end with securing payment from overseas

customers. If you choose to deal in foreign currencies, you expose yourself to FX rates, which can be extremely volatile. Movements either way can have a significant impact on the profitability of a particular deal or the competitiveness of a product.

Banks can help with an FX strategy through forward contracts or a currency option. A forward contract offers the chance to fix the foreign exchange rate in advance.

These provide certainty and protect businesses trading overseas when rates move against them. However, the business will not profit if the rate moves in its favour.

A more flexible alternative is to consider a currency option. Here, the business specifies the worst rate they would accept and the currency exchange is protected at that level. If the rates move against them, they can still deal at the protected rate, but if rates move in their favour, you can deal

at the more advantageous spot rate. However, an upfront premium is usually payable for a currency option.

Phelan says: “Doing business is challenging enough in today’s economy; the last thing a company needs to deal with is a significant currency loss. To do nothing with your foreign exchange rate risk is potentially dangerous.

“Hedging your transaction exposures gives your business time to change its pricing, costs or underlying business operations accordingly. Midlands companies should think about potential moves in FX rates whenever they conduct a strategic review of their business and look to exploit new opportunities.”

Ensuring delivery Finance is only part of the picture though. Fulfilling an export order will require shipping goods overseas to a new international customer and there is always a risk that they may be delayed, damaged or lost in transit.

Most people in the supply chain who facilitate the movement of goods operate under conditions limiting their liability in cases of loss, damage or delay. For instance, in the UK a haulier’s liability is limited to £1,300 per tonne — a standard limit imposed

under the Road Haulage Association’s ‘RHA Conditions of Carriage’. This limit is inadequate to cover the value of many goods.

Traders should, therefore, insure their goods against loss, damage or delay in transit.

It is, therefore, vital to ensure appropriate insurance is in place and that companies assume another party has made the necessary arrangements, leaving it liable in the event of a claim.

A typical cargo insurance policy covers goods in transit via road, rail, sea or air. In its simplest form, it provides cover against accidental damage and other risks.

Open cover is the most common form of policy. It provides great flexibility — coverage can apply to either an unlimited number of shipments within an agreed time frame or for an indefinite period until either party cancels the agreement.

Alternatively, insurance can be arranged that covers shipments up to an agreed value. This is done by making an initial deposit on the annual premium and then adjusting later payments according to the actual turnover value of goods exported. IFM

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SME

Cover for 62

Directors & Officers Tim Evershed

International Finance Magazine Apr - Jun 2015

Research shows that SMEs tend to believe that Legal Expenses or Professional Indemnity insurance cover all their needs

SME

D

irectors & Officers Liability insurance (D&O) is one of the least understood products available from insurers, according to research conducted by Allianz Global Corporate & Specialty.

This supposed complexity might go some way to explaining some of the findings of Allianz’s report into D&O. The research found that while SMEs account for 99.9% of all private sector businesses in the UK, D&O cover for these businesses stands at just 23%. Instead, it is larger companies and major corporates that pre-

dominantly see the value in D&O cover and, therefore, purchase it.

The research showed that SMEs tend to believe that Legal Expenses or Professional Indemnity insurance cover all their needs in these areas. Perhaps, this is because insurers generally offer SMEs more standardised products while larger multinational corporations require tailored solutions with bespoke policy wording to cover specific needs.

Some smaller private companies do not see themselves in the same bracket as publicly traded companies where the roles of directors

come under close scrutiny from not only shareholders but also the general public.

And though it is the major publicly listed companies that are most at risk from a D&O claim, all firms regardless of size, public or private, including the nonprofit sector have potential D&O exposure.

“The initial exposures of large companies and SMEs probably don’t differ too much. For example, claims can come from shareholders and although larger companies can have their shareholders in the public domain, private companies have their

shareholders a lot closer to the business. There’s still a shareholder exposure, there’s still an exposure from suppliers and customers. There’s still an exposure from regulators,” says Dan Holloway, D&O Underwriting Manager at ACE Group.

There is a significant risk of being exposed to a D&O claim irrespective of the size of the business. An employment claim can be brought against a company whether it employs two or 10 or 200 people.

In fact, some estimates

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Apr - Jun 2015 International Finance Magazine

SME

SMEs account for 99.9% of all private sector businesses in the UK, but D&O cover is taken only by 23% Source: Allianz Global Corporate & Specialty

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put the chances of an employment claim as five times higher than the chances of a property claim, but virtually all companies would insure their buildings before considering D&O coverage.

Holloway says: “SMEs still have employees. So they are as exposed as larger public companies. In fact, you could argue that larger companies have dedicated HR departments and controls in place that negate some of that risk.”

There are major differences in coverage between

the different policies. For instance, Professional Indemnity does not cover directors from the threat of shareholder action, which is where many claims stem from. And in terms of legal expenses, it doesn’t cover the damages, which D&O does.

Craig Toyer, Placement Leader for Marsh ProBroker, says: “If you tell a director that they have to comply with tax and company laws and if they don’t their personal assets will be at risk, it becomes a technical sale.

International Finance Magazine Apr - Jun 2015

You have to understand it so you’re able to explain the benefits to the client and why they should be paying a little bit more for D&O as opposed to some of the other add-ons.” IFM

“

SMEs still have employees. So they are as exposed as larger public companies. In fact, you could argue that larger companies have dedicated HR departments and controls in place that negate some of that risk Dan Holloway, D&O Underwriting Manager at ACE Group

SME SME

Nothing is too small

for hackers Data shows that it is profitable to go after SMEs to procure information about their bigger partners Suparna Goswami Bhattacharya

L

eo Hisnaeje (name changed) never really believed that his small business, which has an annual turnover of less than €2 million, could attract the attention of a hacker. However, last month he spotted emails coming from random places on the official id of the company. He chose to ignore it but eventually, after a few days, decided to call an expert who said that the account was hacked.

In today’s digital world, companies can no longer afford to ignore hacking.

And though the big companies have the power of money to restrict, if not

completely block, the hackers, it is the smaller firms that suffer.

And though SMEs would like to believe that they won’t garner the attention of hackers, the truth is no one is too small to hack. According to key findings from PwC’s ‘Global State of Information Security Survey 2015’, large organisations (gross annual revenue of $1 billion) detected 44% more incidents compared with last year. Companies with revenue of less than $100 million detected 5% fewer incidents this year.

“The potential explanation may be that small companies are investing less

in information security, which might leave them both incapable of detecting incidents and a more tempting target for breaches. Sometimes, SMEs consider themselves too insignificant to attract hackers, which is a dangerous misperception,” says Chuan-Wei Hoo, CISSP, technical advisor, Asia-Pacific, (ISC)2, a non-profit organisation specialising in information security education and certifications.

“SMEs think the richest pickings lie in the hands of those companies with the biggest assets. The fact is that size doesn’t matter. Vulnerability is not the exclusive preserve of big business:

Apr - Jun 2015 International Finance Magazine

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SME

66

small businesses are equally at risk. More importantly, many small businesses feel that the information they hold is of no value to cybercriminals,” says Youssef Elmalty, head of cyber security, IBM. More often than not, the information held by SMEs are far more valuable than they think because SMEs are effectively stepping stones; that is, a link in the chain to larger enterprises.

Hackers, therefore, target smaller businesses in order to unlock the data and assets of larger organisations.

Once a hacker hacks into an account, it impersonates the SME and uses the credentials to access the larger organisation’s data.

Post this, they could gain access to confidential information, which can be used to blackmail the company.

“There are many things that hackers can do. For example, they can make the resources of that SME into their own (make them into their zombie machines) and sell these resources online,” says Aloysius Cheang,

Managing Director, Cloud Security Alliance, APAC. Hackers also target SME employees through traditional social engineering attacks, such as email phishing or SPAM. SME employees will not have the necessary protection or proper training, causing them to be very vulnerable on the internet world and exposing their system or the company’s network to the perpetrators.

“Once hackers get into the network or the employee’s laptop, they get access to a wealth of information, including sensitive research projects, customer related information, product innovation documents, staff data, designs, tenders or future business plans,” says Matthias Yeo, CTO for Asia Pacific, Blue Coat Systems, a provider of security and networking solutions based in California.

To put it in simple words, targeting SMEs often proves to be a better pay off for hackers. Firstly, the chances of a small firm detecting and tracing the hackers are rela-

tively small. “Large organisations have sophisticated technology, such as Security Analytics, to discover signs of infection or unknown attacks, and also the ability to trace the origin of the attack, and gather evidence to nail the perpetrators.

Unfortunately, this kind of technology requires skilled IT teams and might be costly for SMEs ,” remarks Yeo. Hence, chances of being detected and eventually traced in SMEs are, therefore, harder.

The only way SMEs can protect themselves from hackers is to have a proper system in place. They need to profile the different kind of security risks they could potentially face. An SME should adopt good cyber hygiene practices (like endpoint security, updated OS and software, strong password control, etc.).

“Where applicable, adopt 2FA for authentication and apply encryption to sensitive information. Hackers will normally look at data control and access control, and try to find holes/weak-

There are many things that hackers can do.

For example, they can make the resources of that SME into their own (make them into their zombie machines) and sell these resources online Aloysius Cheang, Managing Director, Cloud Security Alliance, APAC

International Finance Magazine Apr - Jun 2015

SME SME

nesses to exploit,” says Hoo from (ISC)2.

Cheang says, “In a cloud environment, I will recommend choosing the right cloud partner by looking at their certification status, such as whether do they have Cloud Security Alliance (CSA) STAR and use CSA’s Cloud Control Matrix, Consensus Assessment Initiative, PLA initiative for their RFPs and process to manage the vendors.”

SMEs are often seen complaining that it is not easy for them to shell out a huge amount to have a proper IT cover in place. However, Elmalty says, “If security is expensive, then try getting hacked. It is not expensive as long as you are following best practices with the right reasonable technology.

There is no point in buying a multimillion dollar cutting edge technology and after that carelessly clicking on any link or spam. Spend on technology, but more importantly on awareness.

Education is the key investment,” he says.

Hoo says, “Investing in information security training and certification is like buying insurance. Not having reputational loss, loss of business due to a security incident and regulatory fines is already putting the organisation in the black instead of red.”

So, you might not win prizes for having a proper security in place, nor will you get famous, but at the end of the day you are saving what is dear to you — your company. IFM

What SMEs can do

Once hackers get into the network or the employee’s laptop, they get access to a wealth of information, including sensitive research projects, customer related information, product innovation documents, staff data, designs, tenders or future business plans Matthias Yeo, CTO for Asia Pacific, Blue Coat Systems, a provider of security and networking solutions based in California

•

Profile the different type of technology risk they could potentially face and provide a mitigation strategy for each. A website that does online transaction has a higher risk exposure to an employee using a laptop to send emails.

Conversely, a website that provides information has a lower value of risk compared to a website that stores customer information.

•

SMEs should have a proper risk management process in place, and allocate a certain amount of their budget to implement controls to address these risks.

•

SMEs need to understand some of the terms and conditions provided by their vendors for their business to function. For example, some cloud service providers differentiate themselves through the security measures they have taken to protect their clients’ information.

•

SMEs need to understand the implication of the impact of their IT security on their business. This includes regulatory compliance, and the penalties involved in not securing information.

•

Emphasise that this security strategy is not a one-off activity. It will need to be revisited on a regular basis to keep up with the security landscape and keep security issues in front of the mind.

•

All employees need to be responsible for security, especially with the number of personal devices being used for work.

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Not easy to

start 68

But Latin American economies are trying to change that by calling out to entrepreneurs Kamilia Lahrichi

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Start-Up Chile offers qualified entrepreneurs worldwide $40,000 in equity-free financing to relocate to the capital Santiago. It also grants them a one-year visa to develop their project

S

itting in his air-conditioned conference room in Palermo, a trendy neighbourhood in Buenos Aires, Agu de Marco keeps pouring hot water in his mate, a traditional tea with an astringently bitter taste, despite the suffocating heat.

The tattooed 32-yearold is the founder and Chief Executive Officer of Wideo1, a platform to create online animated videos. He launched the first version in December 2012.

“I wanted to start a business linked with technology that would be global,” he explains; he sports the Wideo logo on his grey t-shirt.

Today, Wideo has more than 350,000 users across 200 countries. Agu often hops on a flight to the United States, Europe or Asia, to seek funding and speak at conferences. He first got investment from 1 2

500 Startups, a seed fund and accelerator in Silicon Valley. His 12-people team includes employees from the United States, Canada, Russia, Israel and Venezuela.

In 2005, the bubbly young entrepreneur founded Road2Argentina, immersion programs for foreign students and travelers in Argentina. Five years later, he launched EmprendING, a faculty program to foster an entrepreneurial culture in the South American nation, and interSpanish, a language school.

“My dream now,” he says, “is that Wideo becomes the first Argentine start-up known globally.” He cites the examples of Estonia’s Skype and Sweden’s Spotify.

Catalyst for the economy Small and medium-sized companies (SMEs) in Latin America are key to the busi-

ness fabric.

They represent an overwhelming 98.7% of all businesses in Argentina, 98.9% in Brazil and 99.4% in Chile, according to a report2 by the United Nations Economic Commission for Latin America and the Caribbean (CELAC) titled “Latin American Economic Outlook 2013: SMEs policies for structural change”.

They also employ about 67% of the region’s workforce.

“SMEs bring creativity to the economic system, always innovate, add value to production [and] create stable employment,” says Vicente Lourenzo, spokesman of the Argentine Confederation of Mediumsized Enterprises (CAME) in Buenos Aires.

While 15 years ago, successful companies like MercadoLibre – the local eBay – and Despegar – an online travel agency – adapted existing business models to the local market, Latin America has today more potential to innovate.

The main challenge is attracting the right talent, argues Agu. He takes pride in the fact he hired an American girl from San Francisco

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The limits to be global are in people’s head rather than in reality Agu de Marco, founder and Chief Executive Officer of Wideo

http://wideo.co/ http://repositorio.cepal.org/bitstream/handle/11362/1464/S2012085_es.pdf?sequence=1

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Employees of Wideo, working in their office

who preferred working for Wideo in Argentina than LinkedIn in California.

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Beyond market conditions Agu embodies Argentina’s growing entrepreneurial spirit and resilience. The country has a high percentage of entrepreneurs per capita, despite the economic turbulence and political mayhem.

In 2001, the state defaulted on its debt, thereby becoming ostracized from international sources of capital. The economy now suffers from rampant inflation and the devaluation of the local currency, the peso.

This has created uncertainty for investors.

“SMEs went through a period of strong growth between 2003 and 2012 but in the past two years, the economic context got 3 4

complicated and many companies are being affected by the fall in demand, both internal and external,” says Mr. Lourenzo.

Latin America too is troubled with sluggish growth. Although it grew by about 4% a year3 between 2003 and 2012, the region is subject to the volatile price of raw materials – on which it depends.

In addition, investors fear risk in Latin America as they are used to investing in copycat projects rather than innovative ones.

“The main challenges facing Argentina and Latin America are the lack of successful cases entrepreneurs can use as a reference, as well as the lack of an active market for initial public offering that provide liquidity to the investment of venture capital,” says Sebastián Ortega, Executive Director

of South Venture4, an online venture capital (VC) fund based in Buenos Aires.

South Venture gathers more than 5,000 investors from over 20 countries. It invested over $3,000,000.

In other words, if a VC fund invests in a qualified start-up in Brazil or Argentina, it might not recover its investment.

Data from the International Labor Organization and the World Bank found that creditors in Latin America get back about 17% of their debt compared with 68% in countries of the Organization for Economic Cooperation and Development (OECD).

It also set out that businesses in Latin America need about four years to close down and liquidate their assets whereas companies in OECD countries need 1.7 years to do so.

In Latin America, the governments are increasingly dedicated to the start-up scene Jacques Chauvin, Director of Emprear Business Angels, an investors’ club in Buenos Aires that connects innovative and socially responsible projects with investors in Argentina and the region

http://www.keepeek.com/Digital-Asset-Management/oecd/development/latin-american-economic-outlook-2014_leo-2014-en#page6 https://sthventures.com/about

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Bank started the Investment Funds Program to overcome the strict regulations of the Brazilian market and boost companies’ capitalisation.

In Mexico and Colombia, the government co-invested on start-ups with VC funds.

“These company are led by foreigners [because] it is a mechanism to attract highquality and global entrepreneurs,” says Mr. Ortega.

Finally, access to financing is a notable barrier to SMEs’ development in Latin America because banks prefer to finance large businesses.

Hence, entrepreneurs in the region have to be ever more resourceful than their counterparts in the United States, for example.

One encouraging factor, though, is that 80% of SMEs’ loan applications in Brazil and Argentina are successful, according to the CEPAL report.

Governments’ boost The intervention of the public sector in the region is thus crucial for SMEs’ viability.

There have been public initiatives in the region to spur financing of SMEs based on company size, type and sector, and to foster a

business-friendly environment.

Public financial institutions, for instance, significantly contribute to the development of SMEs as they represented 23% of the loan portfolio in the region’s banking system in 2009, or $600 billion.

“In Latin America, the governments are increasingly dedicated to the startup scene,” notes Jacques Chauvin, Director of Emprear Business Angels, an investors’ club in Buenos Aires that connects innovative and socially responsible projects with investors in Argentina and the region.

It deals with projects requiring $100,000 to $500,000 investment.

For example, the Chilean government launched StartUp Chile5 in 2010. This accelerator program seeks

to turn the South American nation into the region’s entrepreneurship hub.

Start-Up Chile offers qualified entrepreneurs worldwide $40,000 in equity-free financing to relocate to the capital Santiago. It also grants them a one-year visa to develop their project.

It has graduated more than 1,000 start-ups from its accelerator program and they have raised hundreds of millions in follow-on funding.

Similarly, the statebacked Start-Up Brasil6 initiated a program investing up to $78 million in 100 local and foreign startups that moved to Latin America’s first economy and hired local staff.

Also, the federal Funding Authority for Studies and Projects (FINEP) and the Brazilian Development

Going global SMEs in Latin America have struggled to access foreign markets. About 10% of them take part in export activities, compared with 40% in Europe, CELAC reported.

Yet, to avoid being trapped in the economic woes of a country like Argentina, the “mobility of start-ups is often a necessary condition for success,” says Mr. Chauvin. “Argentine is a fertile ground for start-up creation, Chile enables them to develop in good conditions, and Brazil and Mexico are targeted markets,” he explains.

Wideo is one of the success stories in the region as it internationalised. “There are three things we wanted for Wideo: to be global, scalable and to not depend on the market in Argentina to be successful,” says Agu. With humility and a hint of idealism, he adds: “The limits to be global are in people’s head rather than in reality.” IFM

5

http://www.startupchile.org/ 6 http://www.startupbrasil.org.br

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Going green Alessandra Bajec

Turning sustainable is no longer an option for the business community in Egypt

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t a time where fuel and electricity subsidy reforms are being implemented by the Egyptian government, there are increasing economic incentives for ‘greening’ growth in Egypt. With small and medium-sized businesses making up over 90% of the Egyptian industry, increasing their capabilities to go green offers a strong potential for commercial opportunities.

In a changing environment where energy has become very scarce, consumer demand for quality products is rising and environmental management systems are in place, turning sustainable is no longer an option for the business community.

Egypt is the biggest consumer market in the MENA region and one of the largest emerging markets in the world. Estimates indicate that SMEs in Egypt contribute 70-80% of the GDP, offer roughly 75% of job opportunities and serve major industries.

Growing pressure is being put on companies by consumers, government regulators and other stakeholders to adopt green practices in their processes and manufacturing activities.

“Going green is becoming a must today,” said Dr Amr Taha, Research & Develop-

ment Programme Manager at the Industrial Modernisation Centre (IMC), “Those who don’t comply with environmentally oriented regulations won’t find a market and will die soon.”

Greening of industrial policies and strategies for Egyptian SMEs not only becomes mandatory but represents a big opportunity for many companies, strengthening their competitiveness and driving job creation.

The IMC operates as a hub for sustainable development helping Egyptian industries be competitive both locally and abroad, including assisting with environmental certification.

One major driver for Egyptian SMEs to go green is competitiveness. If

companies see real business benefits and want to sell, they will have to fulfil set green standards. Once certified, companies are deemed ‘environmentally sound’ and ready to access the domestic and international markets.

Lamia Afify, Managing Director and founder of BUNT, has been working in the sustainability development business in Egypt.

“Businesses recognised the importance of resource efficiency, and the need to be competitive in order to survive,” she noted.

Some businesses adopted a proactive approach, Afify added, as they not only saw the risk in not going sustainable but also the opportunity of becoming more competitive.

Dr Taha mentioned cutting costs and energy preservation as two other main factors for choosing green.

A range of stakeholders from pubic authorities to companies, business associations and entrepreneurs took the initiative to participate in environment friendly activities.

Dr Taha explained that every company is required to undergo an environmental impact assessment to obtain a licence from the Industrial Development Agency (IDA). While big industries abide, small and medium enterprises don’t always get licensed as Egypt’s industry largely sits on the informal sector.

Today, more of them are joining the formal market.

“SMEs are encouraged to go green otherwise they won’t be able to market their products or compete on costs,” the R&D manager argued.

He stressed that an enterprise cannot survive unless it gets into sustainable industrial development that involves best use of resources, minimum waste, energy efficiency and cost reduction.

Markus Donath, Head of Green Business Services at the Deutsche Gesellschaft fϋr Internationale Zusammenarbeit GmbH (GIZ) working on behalf of the

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German Federal Ministry for Economic Cooperation and Development, has been focussing on how to develop SMEs through higher resource efficiency within the Egyptian-German Private Sector Development Programme (PSDP).

“Sustainable companies can reorganise and market themselves in a better way, save resources and money, and grow,” Donath observed.

Afify highlighted that resource efficiency, if correctly implemented, will always attract environmental and social benefits, which will result in economic benefits.

In her view, putting in place a change in the company’s management process remains a big, but necessary, task to achieve higher resource efficiency.

The sustainability consultant suggested that one problem faced by Egyptian SMEs is finding easy access to the global market, where they are expected to fulfill high standards in line with international certifications.

Walid W. Darwish, Head of the Environ-

ment Department at the Social Fund for Development (SFD), believes one big challenge for Egypt’s industry is there is no extended producer responsibility, which is a strategy requiring producers to internalise waste management costs in their product prices and ensuring safe disposal of their products.

“Every company should be responsible for recycling their own products after packaging instead of leaving them behind,” SFD’s environment specialist pointed out.

Dr Taha stated that infrastructure for green activities is scarcely available and expensive, so efforts should be made to minimise costs and thus incentivise businesses to turn to alternative energy sources.

The R&D expert pointed to other challenges like the need for a map of potential business opportunities for SMEs, regulatory reforms, private-public partnerships, a communica-

International Finance Magazine Apr - Jun 2015

tion campaign targeting different stakeholders, a long-term capacity building programme, and easy access to environmentally sound technology.

“There should be solution providers who understand the sector, production and customer habits, and meet the needs of SMEs,” Donath hinted, “They should have the knowledge not only to consult but also to implement.”

Although the concept of going green is present in Egypt, there is not yet an existing company that has turned green by all standards. Rather, a number of Egyptian SMEs have taken up sustainable initiatives.

In July 2014, the IMC launched a governmentfunded project in Burj Al Arab, an industrial city in Alexandria, to transform the area into a green city. The centre focuses on a number of targets, including making industrial premises green through energy efficiency, motivating the usage of renewable energy, and providing waste management.

“This project won’t be done overnight, it will take time to introduce the

Every company should be responsible for recycling their own products after packaging instead of leaving them behind,” SFD’s environment specialist pointed out Walid W. Darwish, Head of the Environment Department at the Social Fund for Development

SME SME

In July 2014, the Ministry of Industry and Trade announced allocation of 500 million EGP of its 2014-15 Fiscal Year budget to finance SMEs in the following period by securing adequate funds, training the youth, and modifying SME regulations to attract new investment in the sector. idea among businessmen and residents, get the right infrastructure, and build human capacity,” Taha commented.

Two significant initiatives In cooperation with industry experts, GIZ’s Green Business Services developed WAFFAR, a tailor-made service for improving the innovation opportunities for Egyptian private sector enterprises by enhancing their growth and strengthening their competitiveness.

In addition, top Egyptian and German tourism firms, with the technical assistance from GIZ, established the Green Star Hotel Initiative, aiming to improve the ecological performance and competitiveness of Egypt’s hotel industry nationwide.

There are currently 51 hotels in the Red Sea area that obtained the Green Star Hotel certification.

“WAFFAR and the Green Star Hotel are the two leading initiatives in Egypt in terms of SME sustainable development,” GIZ’s green business services director said.

“WAFFAR helps SMEs to achieve

quick win results though small easy steps, and gives them the confidence to implement eco-friendly decisions, invest and grow,” Afify remarked.

Donath also flagged off a training programme for engineers in the installation and maintenance of photovoltaic (PV) and Solarthermal (ST) units. The training,

by RENAC-OASIS Solar Academy Egypt (ROSAE), includes installation, commissioning, operation and maintenance. ROSAE is a public-private partnership between the Berlin-based Renewables Academy (RENAC) and Oasis Renewable Energy (ORE), based in Cairo, supported by GIZ. Afify and Donath agree that there’s a big potential for SME development in Egypt in every sector, recognising a common flair for innovation among Egyptians.

Diesel to gas According to Darwish, one of Egypt’s big green initiatives is that introduced by Cargas and

Gastec, service providers working in the vehicular natural gas industry.

The SFD has been partnering with both companies in the field of conversion of diesel-fuelled vehicles to be powered by natural gas (CNG), granting loans for those drivers willing to transit to the new vehicle technology.

Until now, the SFD has signed contracts with Cargas and Gastec to convert around 21,500 vehicles to run by natural gas; 95% of them are taxis.

“The added value of dealing with these companies is they have a good reputation and a wide outreach countrywide,” SFD’s environment expert explained.

In 2011, Gastec contracted with the SFD for financing the conversion of 1,000 vehicles at a cost of L.E. 5 million. Gastec concluded the second phase of the contract in 2012 to

convert another 1,000 vehicles. In March 2014, the company signed the third phased of the SFD’s contract to convert 2,000 vehicles at a cost of L.E. 10 million.

Darwish mentioned the SFD’s new initiative started in Cairo, in conjunction with the Ministry of Environment and Cairo governorate, to replace some 1,000 microbuses, which are known for being old, ill-maintained and their polluting vehicle technology.

Dr. Taha is confident that greening businesses will add to the country’s growth, and will make up for the energy subsidy cuts. He estimates that going green is going to have an impact of between 15-20% on Egypt’s national economy.

Along with SMEs, many Egyptian big industries have shown interest realising the benefit of saving money by converting to alternative

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energy sources. Others are still reluctant, not willing to make an initial investment for turning green.

The R&D manager believes the Egyptian government is pushing for sustainable initiatives.

However, he pointed out, the government needs guidance from the other stakeholders, especially in terms of regulatory reforms and infrastructure.

End of last year, feed-in

tariffs were set for renewable energies in a positive move for potential investors in green projects.

In Darwishâ&#x20AC;&#x2122;s opinion, the government is doing its part by promoting green institutional arrangements, supporting transition towards green economy, and setting incentives for investors, like reduced taxation on equipment or

International Finance Magazine Apr - Jun 2015

use of land.

He thinks, nevertheless, the government needs to put more efforts in two areas: disseminating at a national level the know-how concerning green technology and innovation so as to attract investment in green business opportunities; prioritising projects in energy efficiency and renewable energy, improved water supply, waste water and sanitation, sustainable waste management, and air quality. IFM

Green Star Hotel certification

Itâ&#x20AC;&#x2122;s an awards scheme designed specifically for hotels in Egypt.

Criteria include environmental management, water and energy use, and staff training.

Hotels are awarded Green Stars for successfully improving their environmental performance, saving valuable resources and cutting down on waste. The initiative helps improve environmental standards of the destination, raise awareness among hotel guests, tour operators, hotel staff and residents.

EVENTS

OMAN SME SUMMIT

“Reinventing the SME market in Oman”

15th-16th September, 2015 For further details, contact: Basant Das | +44 (0) 207 1936 304 | bdas@ifinancemag.com

COLUMN

Simon Price

Restoring faith in

financial

services

Policy makers are taking a much tougher stance with organisations that fail to prevent fundamental failings in financial controls in a post-recession world

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International Finance Magazine Apr - Jun 2015

to remediation, then there is potential to negotiate with regulators and seek an element of control over spiraling legal costs. Of course, this depends on the bank’s ability to meet demands for the necessary information to support investigations.

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t’s no secret that the banking sector experienced a turbulent 2014. A number of incidents uncovered further instances of malpractice, including forex manipulation, Libor scandals and the mis-selling of Payment Protection Insurance (PPI).

As a result, the regulators’ resolve to reshape the financial services industry and protect clients’ interests is dramatically hardening.

With growing pressure to create a more controlled industry, reform of wholesale financial markets is well underway. The Financial Services Act has already come into effect and will soon count false or misleading statements in relation to benchmark setting as a criminal offence. In addition, the Financial Conduct Authority (FCA) is overseeing investigations into Libor, reaffirming its role in ensuring good conduct by placing more focus on the individuals that can be held to account for breaches of compliance.

A proactive approach: the race for leniency However, the increased

scrutiny on banking behaviour comes at a cost. As financial institutions experience the wrath of regulators, legal costs are spiraling with banks having to set aside even bigger contingencies to resolve investigations. For example, in recent financial statements we’ve seen HSBC set aside $1.7 billion to cover one-off charges and JP Morgan raise its provisions to $6bn for legal costs.

Whilst city watchdogs on both sides of the Atlantic have demonstrated their appetite for creating a more controlled market, we are beginning to see instances in which they’ve shown willingness to reward banks that co-operate with investigations. The Royal Bank of Scotland escaped a €115m fine in late October for alerting the European Commission’s competition watchdog to two attempts to fix the prices of key interest rates. Even more recently, the FCA granted a 30% reduction on forex fines for the five banks that settled at an early stage as part of efforts to quickly reach a resolution.

Increasingly, banks should look at these decisions as an indication that if they review their approach

The challenge Often when investigations begin, governing bodies know more than those running the entity that is being investigated. As such, the priority for banks needs to be quickly finding the facts that the regulator is looking for. In most cases, this requires getting a deeper dive into both the manipulations that have occurred and the individuals at the heart of them.

Yet, the biggest challenge for banks is that this information will rarely be held within a single document.

In order to fully co-operate with the regulator, financial institutions are required to review millions of archived documents, faxes, emails, instant messages and audio conversations.

Furthermore, the information that regulators are looking for is much more likely to be hidden within a sequence of events prior to certain transactions. For example, innocuous phases from chat logs, emails or phone conversations that disguise something more sinister. To navigate an evolving regulatory landscape, the financial services industry needs to look beyond its reliance on compliance officers to handle investigations. It’s no longer feasible for individuals to manually review

many thousands of documents efficiently and cost effectively or spot patterns in communications. Instead, organisations need to have systems and processes in place that can visually identify the themes in information flows and prioritise the data review process.

Banking organisations need to be able to quickly recognise the patterns within emails, spreadsheets, social media posts or online transactions that contain crucial information or indicate potential breaches, so that regulators can start to piece together the jigsaw.

This supports banks in demonstrating good governance by providing regulators with a better understanding of what has happened and where responsibility lies.

As the pressure mounts on banks to hold individuals to account, this capability will become even more crucial.

The regulator’s drive to create a more orderly market is not going to dissipate but banks can take a more proactive approach to dealing with investigations.

By adopting tools and processes — such as advanced clustering, pattern matching and true predictive analytics technologies — financial institutions can reduce the impact that investigations have on balance sheets, help keep litigation costs down and introduce best practice as part of due diligence processes, all without significantly increasing headcount. IFM Simon Price is Managing Director at Recommind UK

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chasing

As inflation hits hard, Argentines seek refuge in foreign currencies

DOLLARS Kamilia Lahrichi

International Finance Magazine Apr - Jun 2015

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t is common to hear people shouting cambio, cambio, cambio (change in Spanish) in busy commercial streets in Buenos Aires to offer illegal currency exchange rates, right next to police officers. These arbolitos (little trees in Spanish) say they trade money at the best black market rate.

As inflation is hitting hard, tourists, expatriates and Argentines alike are resorting to illicit means to change money at the most interesting rate. Because of the highly fluctuating peso, most residents try to save in US dollars.

Fishy official figures by the national statistics agency (INDEC) estimated that consumer prices rose by 16.7% in July 2014 compared to the beginning of the year.

The reality is that INDEC tampers with inflation data. Analysts consider that inflation stands between 30% and 40% â&#x20AC;&#x201C; one of the fastest inflation rates in the world.

Some restaurants write their menus on a chalkboard because prices increase every month.

The Argentine peso has been a shaky currency since it was de-pegged from the US dollar after the 20012002 economic crisis.

The South American nation defaulted on its debt, thereby locking itself out of international financial markets.

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Argentines then tried to withdraw their savings from banks all together. The government and financial institutions therefore restricted the amount of money residents can withdraw.

In 2012, the Central Bank barred anyone in the country from swapping pesos to hoard US dollars, the hot commodity, so as to prevent flight of capital and protect foreign reserves.

The worst kept secret Argentina’s wobbly economy has thus prompted the creation of a black market with a separate exchange rate. The “blue dollar” rate stands at 13.1 pesos to one dollar – as of February 25, 2015 – compared with 8.7 pesos to the dollar – as of the same date.

Notwithstanding that authorities are turning a blind eye, changing money at the unofficial exchange

rate is illegal in Argentina. A 1995 law stipulates that financial institutions conducting such activities will be fined or punished with one to four years in prison.

Yet, this alternative exchange rate is so popular that daily newspapers, such as La Nacion, provide both exchange rates on their website. The blue dollar rate is also updated live online.

It has a Twitter account –

@DolarBlue – and its Facebook page has more than 31,000 followers.

Currency exchange has become such an obsession in this South American nation that Argentines openly ask foreigners living in the country what currency they get paid with and how they withdraw their money.

“This is crazy!” some would yell if you confess using your foreign credit card – charged with the official rate.

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An arbolito stands on the side of Florida Street, in the centre of Buenos Aires, shouting cambio cambio, cambio (change in Spanish)

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Under the cover of selling travel services, this man hails tourists offering to change money at an illegal currency exchange rate that is higher than the official one, on Florida Street

»

Why get 8 pesos when you can get 13?

To skirt the official currency rate, residents in Argentina go to a “cueva” (cave in Spanish), one of the thriving underground money exchange houses.

On the busy Florida Street, some follow the arbolitos who usher customers into a shady apartment in a neighbouring street to exchange money illegally at a better rate.

Money launderers frequent the place for US dollars, euros or Argentine pesos. A man is usually sitting behind a desk, counting money quickly, in the back of the place.

“We want to enjoy our holidays to the fullest,” says a Brazilian tourist lining up in a humid room without a window, waiting for his turn to change his Brazilian reals. “This is cheaper for us here,” he explains.

In case of a police crackdown, most of these caves look like fully functioning businesses. They are generally travel agencies that, surprisingly, attract many customers in a time of economic slowdown.

Some of these illicit money exchange houses do big business by changing large sums of money for Argentines who work in the hospitality industry, for instance, and get paid in cash in US dollars.

In one “cave” in the Microcentro neighbourhood, people have to go through

83 two double layer security doors with cameras to get in. The place is supposed to be a capital assistance company with a receptionist at the front desk.

There, money launderers have bank notes counters.

People with large bags come in and out.

Mobile exchange Companies like Mobile Wechselstube (mobile exchange in English) offer another means for Argentines, and foreigners in particular, to circumvent the government’s strict monetary policy. Holders of foreign bank accounts get

the amount of Argentine pesos they need delivered at the blue dollar rate.

Other residents in Argentina transfer money via Western Union from their bank account to one they opened in neighbouring Uruguay. They then cross the river by ferry – it takes about one hour to travel from Buenos Aires to Montevideo – to withdraw their money in US dollars.

“This is despairing, but this is what I have to do,” says Gloria, an Argentine journalist who regularly travels across Latin America and hence needs to often change money. IFM

Why the name arbolitos?

Illegal currency exchangers are called arbolitos, which means little trees, because they stand like trees all day long on streets hailing people.

Are you among the lucky ones?

All people living in Argentina, whether Argentines or tourists, are paid in pesos. Some lucky, albeit rare ones, get paid extra money in US dollars, but “under the table”, meaning not officially. This is more common for foreigners who live in Argentina, as their employers try to retain them by paying them a small part of the salary in US dollars.

Apr - Jun 2015 International Finance Magazine

Investment tips

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International Finance Magazine Apr - Jun 2015

Investment tips

Did you account for

floods?

This is of critical importance for investors in UK property Ian Joyner

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Apr - Jun 2015 International Finance Magazine

Investment tips

At present, an estimated 28,500 commercial properties are at high risk, with greater than a 1 in 30 chance of flooding in any year

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mercial properties were also affected by flooding from December 2013 to March 2014.

Flooding is one of the critical environmental risks facing commercial property in the UK. The direct damage to buildings caused by flooding can be bad enough, but these are compounded by trading or rent losses while lengthy repairs are undertaken and the potential negative publicity associated with flooding.

Furthermore, impacts on

Thames Barrier

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he countries that make up the United Kingdom are frequently described according to their differences, but something they share is the vital role that rivers and coastlines have played in the development of their towns and cities. Historically important centres of population, commerce and industry have grown up along waterways and coastlines over centuries. Todayâ&#x20AC;&#x2122;s investors in the UK property market cannot afford to ignore the risk of flooding that this gives rise to.

In the last decade, hardly a year has gone by without notable flooding affecting parts of the UK. Last winter, flooding hit the headlines again, with large parts of the country affected by serious flooding from the sea, rivers and groundwater over a four month period. The media focussed on the plight of families forced from their homes, but along with the 7,700 homes flooded, the Environment Agency estimates that 3,200 com-

International Finance Magazine Apr - Jun 2015

supply chains or transport and logistics networks can mean that even companies not flooded themselves can suffer financially.

Following a number of high profile flood events in recent years, these factors are starting to have a material impact on the long-term value of commercial property and investors are becoming savvier when it comes to investing in riverside and coastal locations. This was more than evident on a recent sale of an asset only minimally impacted by the floods of last year, which, during the due diligence stage, lost all interest from institutional investors and sold, with a 10% reduction in value, to local property developers.

While politicians struggle to agree on a cause and

response, scientific conscensus points towards climate change resulting in increasing frequency of storms in the UK in future, against a backdrop of rising sea levels. Experts predict that this will mean an increase in the frequency of flood events.

The Committee on Climate Change estimates that the number of people working in commercial properties at high risk of river or sea flooding may double by the 2050s (at present, an estimated 28,500 commercial properties are at high risk, with greater than a 1 in 30 chance of flooding in any year).

Recent government announcements on the next six years of investment in flood defences will be welcomed by many of those recently flooded. There remain ques-

Investment tips

tions, however, about the government’s focus on ‘big ticket’ capital projects, with many asking whether maintenance of existing assets is being sacrificed in the drive for capital spend.

Others would prefer the term ‘flood defences’ to be phased out altogether, with natural flood management and sustainable drainage offering more effective, but perhaps less spectacular, methods of maximising the benefit of taxpayers’ money.

In reality, there will never be enough money to address all flood risk to a satisfactory level and government will rightly prioritise limited funds on protecting homes over businesses. The onus remains with property owners to understand their risk and take action to minimise the impact. The headaches facing the government in allocating this funding emphasise the level of risk we face in the UK, as an island

nation with a vast coastline and our notoriously changeable weather. With climate change expected to increase risks in the future, flood defence funding will continue to attract high media and political interest, and for every town perceived as gaining from government spend, there will be others feeling they are losing out.

Whilst the government and insurance industry have agreed the terms of the ‘Flood Re’ scheme that will ensure that all residential properties at high risk of flooding can obtain flood insurance, no such scheme would be appropriate for the diverse range of insurance products applicable to commercial property.

A range of techniques exist to protect against flooding, from raised walls and banks designed to keep entire sites dry, to building modifications such as flood doors, raised entrance

thresholds and waterproof airbricks. Costs can vary considerably, and it is imperative that an accurate and up-to-date assessment of the likelihood and consequence of flooding is obtained to inform the selection and design of any mitigation measures. The type of flooding, its precise mechanism and its duration all require consideration, as does the potential impact of any proposed measures on the normal day-to-day running of the businesses occupying a site.

The UK is rich in data and knowledge about the risks of flooding. Flood maps are available online, which everyone considering investing in UK property should be encouraged to investigate. It is important to note, however, that these maps are based on a range of underlying data that are subject to a number of assumptions. Furthermore,

Find out if you are at risk https://www.gov.uk/prepare-for-a-flood/find-out-if-youre-at-risk

they consider only the likelihood of flooding, not the consequences at a specific location. Areas flooded a couple of inches are shown in the same blue shading as those flooded to head height. Specialist flood risk expertise is often needed to interpret key messages from these resources effectively, and to quickly identify whether flooding is of sufficient risk to halt an otherwise attractive investment transaction.

For the overwhelming majority, waterside sites remain deeply attractive places to live, work and play, but investors in these locations need to be able to take an informed view about the risks to their investment that a ‘once in a generation’ flood event may pose at some point down the line.

An informed review of the risk of flooding affecting an asset, now and throughout the lifetime of an investment, is absolutely vital for any property investor undertaking due diligence. IFM

Ian Joyner is an Associate Director (Flood Risk) in CBRE’s Building Consultancy team

Apr - Jun 2015 International Finance Magazine

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ADVERTORIAL

Asian bonds offer good opportunities amid low interest

rates and high volatility Chia Tse Chern, Head of Singapore and Asia Fixed Income, UOB Asset Management (UOBAM), explains why Asian bonds should form part of investors’ portfolios in the current investment environment.

89 Most people in Asia are only familiar with investing in stocks. Why do you think they should consider investing in bonds as well?

Bonds are an attractive asset class due to their strong historical performance, low volatility and low default rates. Buying bonds and holding them to maturity will provide a predictable stream of coupon payments and repayment of principal.

A rapidly ageing population in Asia will lead to more emphasis being placed on capital preservation and steady interest income accrual. This is the key reason why we think Asian bonds will gain significant popularity over the next ten to 20 years.

Many retail investors regard bonds as ‘boring’ and ‘conservative’ investments with lower returns compared to stocks. What are your views with regard to this opinion?

Bonds may be more conservative investments but the returns are definitely not boring. Asian ex-Japan bonds gave an annualised return of 7.95%1 in US dollar (USD) terms (5.19%1 in Singapore dollar (SGD) terms) during the 13-year period from end December 2001 to end December 2014 (based on the J.P. Morgan Asia Credit Index). This compares well with the total returns (in1

Source: J.P. Morgan, 31 December 2014

Apr - Jun 2015 International Finance Magazine

ADVERTORIAL

Time Period from December 2001 to December 2014 12 %

Asia ex-Japan Equities

Annualised Return

10 %

8%

Asian Bonds 6%

4%

2%

0% 0 %

5 %

10 %

15 %

20 %

25 %

Annualised Risk Source: J.P. Morgan, Bloomberg, 31 December 2014, data from end December 2001 to end December 2014 in USD. Asian Bonds = J.P. Morgan Asia Credit Index (JACI) composite Total Return, Asia ex-Japan Equities = MSCI Asia ex-Japan Total Return.

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cluding dividends) of Asian ex-Japan equities, which gave an annualised return of 11.42%2 in USD terms (8.57%2 in SGD terms) over the same period (based on the MSCI Asia ex-Japan Index).

Also, Asian fixed income experienced only two negative years over the past 13 years (2008 and 2013)1 while equities had gone through four down years2 over the same period. Further, Asian fixed incomeâ&#x20AC;&#x2122;s risk (4.65%1, annualised, as measured by the standard deviation of daily returns) is only one-fifth the risk of Asian equities (20.86%).3 Why should one consider Asian bonds com2 3 4 5

pared to US or European-focused bonds, for example?

Asian bonds offer significantly higher yields compared with US or European bonds. A BBB+ rated USD 5-year Asian bond offers a yield of 3.40%4 versus a yield of 2.24%4 for a BBB+ rated USD 5-year US bond and 0.80%5 for a BBB+ rated euro (EUR) 5-year European bond.

When interest rates rise, bond prices decline. Many people think that interest rates are at a low now and can only head upwards. What are your views on this as a bond fund manager?

Given that Asian credit

Source: Bloomberg, 31 December 2014 Source: Bloomberg, UOBAM, 31 December 2014 Source: HSBC, 11 February 2015 Source: Bloomberg, 11 February 2015

International Finance Magazine Apr - Jun 2015

currently has an average yield of 4.6%1 and duration of 5.25 years1, the yield on US treasuries must rise by almost 90 basis points for investors to see the value of their capital decrease from buying Asian credits. We think that this is an unlikely scenario given the current situation of muted global deflation.

Investors can consider placing a 65% weight on corporate high grade credits and a 35% weight on corporate high yield bonds.

Such a strategy will give an average yield of 5.1%1 and duration of 4.57 years1 and will only experience capital depreciation if interest rates rise by more than 110 basis

points.

UOBAM has an excellent track record in investing in Asian fixed income and has won numerous awards. What are UOBAMâ&#x20AC;&#x2122;s strengths that have enabled this?

UOBAM has been managing Asian fixed income funds for two decades, accumulating a wealth of experience and capabilities.

We adopt an investment approach that focuses on total returns. We are committed to achieving outperformance not just from credit selection but also from managing interest rate and foreign exchange risks.

Being a client of most top fixed income brokers

ADVERTORIAL

in Asia, we also have wide access to the markets in the region and enjoy good allocations for primary bond issues and competitive pricing for secondary issues.

Further, with 25 investment analysts and portfolio managers covering Asian, global and emerging markets, UOBAM has one of the largest fixed income teams in Singapore. This enables UOBAM to manage multiple fixed income investment strategies. IFM

For more information, please contact Rachel Ong (Ms.) Business Development, Director UOB Asset Management Tel: (65) 6531 7891 Email: Rachel.OngHY @UOBgroup.com Website: uobam.com.sg

Important Notice and Disclaimers This publication shall not be copied or disseminated, or relied upon by any person for whatever purpose. The information herein is given on a general basis without obligation and is strictly for information only. This publication is not an offer, solicitation, recommendation or advice to buy or sell any investment product, including any collective investment schemes or shares of companies mentioned within. Although every reasonable care has been taken to ensure the accuracy and objectivity of the information contained in this publication, UOB Asset Management Ltd (â&#x20AC;&#x153;UOBAMâ&#x20AC;?) and its employees shall not be held liable for any error, inaccuracy and/or omission, howsoever caused, or for any decision or action taken based on views expressed or information in this publication.

The information contained in this publication, including any data, projections and underlying assumptions are based upon certain assumptions, management forecasts and analysis of information available and reflects prevailing conditions and our views as of the date of this publication, all of which are subject to change at any time without notice.

UOBAM does not warrant the accuracy, adequacy, timeliness or completeness of the information herein for any particular purpose, and expressly disclaims liability for any error, inaccuracy or omission. Any opinion, projection and other forward-looking statement regarding future events or performance of, including but not limited to, countries, markets or companies is not necessarily indicative of, and may differ from actual events or results. Nothing in this publication constitutes accounting,

legal, regulatory, tax or other advice. The information herein has no regard to the specific objectives, financial situation and particular needs of any specific person. You may wish to seek advice from a professional or an independent financial adviser about the issues discussed herein or before investing in any investment or insurance product. Should you choose not to seek such advice, you should consider carefully whether the investment or insurance product in question is suitable for you.

Apr - Jun 2015 International Finance Magazine

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Ah! Pieminister Peter Taberner

International Finance Magazine Apr - Jun 2015

The story of baking a good pie and turning it into a successful business

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Apr - Jun 2015 International Finance Magazine

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n an era of the refined tastes of the “foodie”, Pieminister have proven that traditional produce can still be a winner, with their wide selection of the old fashioned pie.

Their pies can be sampled at nine restaurants, eight of which they have opened across the UK, plus a shop in Amsterdam in The Netherlands/Holland, that was launched in 2012, in an adventurous expansion into a foreign market.

And they have tapped into UK’s famous pub scene, collaborating with several well-known outlets, for customers to enjoy a pie with a pint of beer, creating “Pie Pubs”.

In the company’s evalu-

ation of 2014, they have seen growth of 47% year on year, with like for like sales increasing by 10%.

The reasons for the upturn are the decision to give greater focus to their retail and food service channels, and to invest in the development of their much loved pie and mash restaurants.

The success has triggered ambitious plans to open 20 more restaurants, in the UK‘s most vibrant cities, as the fast casual dining sector continues to expand.

Their innovative food outlets have three main products. The original “Pieminister Pies”, where the flavours range from the more traditional steak and ale pies, to a wild mushroom, asparagus, cream and

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International Finance Magazine Apr - Jun 2015

white wine pie, imaginatively titled a “wildshroom” pie.

They are accompanied by their “Pie Pots”, designed as a fast food product, which can be microwaved and ready to eat in just four minutes.

For those who are worried about piling on the pounds, you can choose the lighter pies that do not exceed 440 calories, which are packed with wholesome ingredients.

The company prides itself on creating a product that puts consumers’ health first and attempting to turn the pie away from the stereotypical image of being an unhealthy snack that is a one-way ticket to obesity.

Pieminister insists that every product is made with

100% free range British meat, 100% free range eggs, non-hydrogenated fats, and fresh herbs and vegetables.

The Pieminister story began in the early nineties when co-founder Jon Simon met the girl who he married.

He co-founded the company with her brother Tristan Hogg.

Following what they describe as a “bumpy” academic ride, and periods living in Australia, and after Hogg ran the kitchen for Simon at a pub in London, they began to think seriously about opening their own pie shop.

In 2003, Pieminister was born after they acquired an old print works in Bristol.

Once they renovated the premises, they created a pie kitchen and shop. A year later, they treated fans at the famous Glastonbury festival.

Pieminister then arrived at some more salubrious outlets in London’s upmarket Knightsbridge district, such as Harrods and Harvey Nichols food halls. They even supplied the Queen with pies for her Christmas Party!

Since 2007, they have grown at an impressive rate, opening eight of their pie shops during the years that followed.

The progress has not gone unnoticed. In 2013, they made it to the London Stock Exchange’s list of 1000 companies to inspire Britain, one of the most influential and up and coming SMEs in the food and beverage sector.

An accolade that made their owners very proud. IFM

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Tristan Hogg, co-founder, Pieminister

Jon Simon, co-founder, Pieminister

UK will have more Pieministers

Apr - Jun 2015 International Finance Magazine

Speaking to IFM, company co-founder Jon Simon reflected on the growth of the company and where the future lies.

“A

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chievements in a business are relative to what stage the business is at. In the beginning, the fact that we created a pretty impressive product, and developed it into a high quality product, which could retail at a reasonable price, was obviously a major step forward. After that phase, getting into London’s Borough Market, who were looking for a quality pie supplier for a long time, really put us on the map, only three or four months into the business.”

Managing to produce pies that appeal to the consumer could be seen to be a major achievement, in a climate where consumer trends are heading towards healthy eating, but Simon believes that his produce is simply part of a balanced diet.

“We have spoken to nutritionists about our pies.

Although they can be

calorific at times, they are not unhealthy as part of a balanced diet. You certainly can’t compare them to overloading with sugar or smoking!”

Of course, the journey of running a business is never smooth.

“As the business grew, we had to make sure that we kept a sharp eye on the quality of the products, and to make sure that we deliver the same quality pies every day, which we have done.”

“Another aspect was dealing with various outlets, including supermarkets who we supply. You certainly need a specific skill set and turn up very well prepared.

That was a steep learning curve.”

Exporting Pieminister to Amsterdam was a significant step forward for the business. It is a franchise.

The shop evolved via a contact and a mutual friend.

International Finance Magazine Apr - Jun 2015

“We like the Dutch on a personal level. The shop is doing well,” Simon said.

“There are some differences to the way business is administered in the UK compared to Holland. For example, in the amount of bureaucracy from local councils. We are looking to open in Dublin (Ireland) within the next year, but our main focus is to expand in the UK.” Looking to the future, the next step is to be a recognised food chain all over the UK. Plans are in place for new Pieminister shops.

Simon enthused: “We have chosen a building in Leeds, and another site to add to our outlet in Manchester, and we also looking at expanding into new cities such as Nottingham. The development of more stores is what we are trying to do. So far, our restaurants have proven to be popular.

People really enjoy the experience. We are very passionate about our restaurants.”

That will be music to the ears of pie lovers all over the UK, and maybe in the future all over Europe. IFM

“

Another aspect was dealing with various outlets, including supermarkets who we supply. You certainly need a specific skill set and turn up very well prepared. That was a steep learning curve Jon Simon, co-founder Pieminister

COMPANY NEWS

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Delighting the customer Mashreq continues to lead the innovation space

The move towards digital banking is not just about technology enablement, but a mindset change on which banks must embark

Apr - Jun 2015 International Finance Magazine

COMPANY nEWS

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winning, state-of-the-art digital branches, to our mobile and online banking platforms, the emphasis remains one of customer centricity. Our objective is to give our customers the most rewarding banking relationship, and as such the most important aspect of our digital transformation journey is delighting the customer with an everyday banking experience, that is secure, and above all trusted.

Never before has the banking industry been so prone to disruption as it is today. The proliferation of the smartphone, tablets and the internet of things has created a whole new generation of customers, who are looking for easy and reliable access to financial services anywhere and at any time. The widespread adoption of digital channels across the globe, and even more so in the UAE, means that if banks are to remain relevant and competitive with the disruptive threats of non-banks, they simply must transform at the grassroots level.

The move towards digital

International Finance Magazine Apr - Jun 2015

His Excellency AbdulAziz Al Ghurair, CEO, Mashreq Bank

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lobally, the traditional industries are facing disruption through the proliferation of a digital society; the financial sector is no different.

Digital transformation is not just important, it is imperative. Banks like Mashreq are embracing the change, and are realigning their business models to expedite the digital migration, by investing and building digital capabilities that meet the expectations of an always connected consumer.

Mashreq is setting the precedent for everyday banking in the region, and is already seeing its market share increasing as a result of its innovative leadership.

Omni channel banking is moving towards ‘Digital channel’ banking. The customer is not choosing either physical channels or digital channels — they are choosing both. For this reason, all aspects of smart banking are equally important and Mashreq has taken this once-in-a-lifetime opportunity to lead the banking sector in this space.

From our multi-award

banking is not just about technology enablement, but a mindset change on which banks must embark. For consumers new and old, banking is no longer a place you go; it is just something you do. Banks are therefore looking to digitise their business models, forge ‘everyday’ relationships with their customers, and are fast realising they are in the business of selling trust

and transparency – in short, financial inclusion for all.

Online presence & innovation The company has four eportals contributing hugely in bringing innovation in the Property, Business Banking, E-Commerce & Financial Literacy verticals, namely Mashreq Property Mart, Mashreq SEMXchange, Mashreq Store and Foloosy portal.

The last Foloosy is a firstof-its-kind in the Middle East and was set up under the guidance and futuristic vision of our CEO. In bringing innovative customer engagement via the mobile devices to boost spends and retention, three significant app enhancements and additions were made starting with the most popular MAX2 with a brilliant new look and feel with a host of new features.

Mashreq Flavours was

COMPANY NEWS

re-launched with a fresh new interface powered with 1,800 national and 1,300 international outlets plus unique integration with Timeout Dubai giving our customers access to a wealth of offers on the go.

Lastly, Foloosy’s online presence was extended to the mobile space with the launch of Foloosy App, which also featured interactive learn, explore and play features. This outstanding performance of our website has been twice recognized with industry awards — once by Banker Middle East as the Best Web & Mobile site and once by Global Finance as the Best Consumer Website Design & Best Integrated Consumer Bank Website in 2014.

Online banking UAE’s popular Mashreq Online banking platform has nurtured and empowered more than 200,000 customers this year with

exceptional user experience second to none in the region, an array of rich features which boast the best in class and industry best security standards. It recorded 36% YOY growth with close to 100,000 unique logins, the highest ever in the history of online banking in Mashreq.

International Bill Payment (no bank in the world offers this feature), Integration with Mashreq Securities and Emaratech, Video Chat for Mashreq Gold customers, Personal Finance Manager, Cardless Cash and customer propensity based targeted new Cross-Sell model are a select few features out of the 50+ new features introduced in 2014.

The online banking platform for retail customers was upgraded to build new features and functionalities, and enhance the robustness of the platform for security, which keeps evolving with the times to combat any

potential threats.

A transactional platform — SME Direct — exclusively built for the Business Banking segment was introduced.

It focuses on the needs and aspirations of small and medium enterprises banking with us.

The next ideal step in the channel life cycle of online banking was to offer investment services to our retail customers. This was enabled by extending the Mashreq Securities integration with MashreqOnline, which enabled customers to view their investments directly from MashreqOnline and even login to Mashreq Securities for further investments.

Proudly, this year too we managed to continue the legacy — Banker Middle East and Global Finance both acknowledged and awarded MashreqOnline as the Best Consumer Internet Bank and Best Online Bill Payment services in 2014.

Name: Mashreq Bank Location: UAE HQ: Dubai Business: Financial Services & Banking Products: Corporate Banking, Retail banking, Islamic Banking etc Turnover: (Not available) Employees: Over 3,500 Branches: Present in 12 countries Owner: Abdullah Al Ghurair CEO: His Excellency AbdulAziz Al Ghurair

Mobile banking The future of banking lays in the hands of mobile technologies being maximised in providing the banking services with the most simple but comprehensive set of functionalities by making technology transparent and merging convenience with mobility. This is exactly what Snapp managed to do this year. Three hardcore numbers — 101k Snapp users (120% YOY growth), 64k registered users (34% YOY growth) and unique logins reaching as high as 33k (57% YOY growth) in the month of December 2014 alone – are a clear indicator of the trust placed by our customers on our mobile banking channel.

This year, this channel too upgraded the user interface (UI) for enhanced user experience and. It was well received by users resulting in more than 27k monthly unique logins, better adoption and usage, which is evident in the numbers above. Snapp also reflected Mashreq Securities & Emaratech integration, International Bill Payments, Cardless Cash withdrawal and various other features to make this channel featurerich and one stop “on the go” banking channel.

For all the good reasons, Snapp also grabbed three awards for being the Best Mobile Banking channel in the Middle East for 2014 (Banker Middle East), Best Mobile Phone Banking (Asian Banker) and Best Mobile Banking in UAE (International Finance Magazine). IFM

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COUNTRYnEWS FOCUS: Oman COMPANY

The choice is

clear The government is pursuing a strategy to reduce dependence on oil revenues Giovanni Puglisi

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man is the biggest non-OPEC oil producer in the Middle East, with 5.5 billion barrels of estimated proven reserves as of January 2014, according to the Oil & Gas Journal.

The government has widely relied on oil exports to fuel its economy boosting crude output to as much as possible as crude oil and condensate production combined touched 26.8 million barrels in February 2015, according to a statement from the Ministry of Oil and Gas. However, the fall in oil prices has convinced the Omani government to accelerate its pace on economic diversification as the IMF expects losses to reach $300bn in the Gulf, causing financial conditions to tighten in all the Gulf Cooperation Council (GCC) countries.

H.M. Sultan Qaboos bin Said’s Vision 2020 plan was put in place in ’95 with the purpose of diversifying the country’s

International Finance Magazine Apr - Jun 2015

economy away from direct dependence on oil to focus more on other strategic sectors. Despite steps being taken in this direction in recent years, the IMF suggests that there is further room for improving the business environment.

Oman is certainly among the countries that have been hit by the oil crisis, but “the government still has margin for public investments if the price per barrel remains above $50”, according to Qais Al Khonji, CEO of Genesis International and member of Young Arab Leaders (YAL), which is an independent, not for-profit organisation founded in 2004 at the World Economic Forum.

Mohammed Hassan Al Ansi of the Oman Chamber of Commerce and Industry confirms that the government has several plans in place to boost Oman’s economy. He says it is time for the country to re-examine its strategies to improve its position in economic terms and reduce its dependence on oil revenues.

The Omani government is increasingly reinvesting revenues from the energy sector in other strategic sectors of the economy. New projects to boost the economy and attract foreign investors, including the opening of a new airport in Muscat and a rail network to connect Buraimi and Sohar

COUNTRY FOCUS: Oman COMPANY NEWS

as well as the creation of Duqum new industrial district, are already well underway as part of 15-year infrastructure plan worth $50 billion announced 2013.

In turn, ramping up investment in the tourism and retail sectors have also been driven by the same strategy. Besides investing in infrastructure projects, the government is redesigning its education system to focus on science, technol-

ogy and engineering with the aim of training Oman’s large youth population to take more jobs in the private sector to fill the skills shortages existing in a number of occupations as well as reduce unemployment.

Yet, Oman is still lagging behind its regional competitors that have liberalised their markets and changed their economic structures well ahead of Muscat. Al Khonji argues that despite the country already “on the radar of foreign investors

and multinational companies, progress leading to a real structural change is still slow due to cultural barriers as well as the decision by the government to open its market gradually to avoid possible risks deriving from the spillover effects of the global crisis”.

At a time of steep fall in oil prices, it is a strategic necessity for Oman to diversify the economy in order to earn extra revenue from non-oil sectors. However, the government is trying to strike the right balance between fierce privatisation and public ownership and investments.

“

The government still has margin for public investments if the price per barrel remains above $50 Qais Al Khonji, CEO of Genesis International and member of Young Arab Leaders (YAL), which is an independent, not for-profit organisation founded in 2004 at the World Economic Forum

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Problem of

power The hurdle that can trip the growth story of Africa Miriam Mannak

International Finance Magazine Apr - Jun 2015

Whilst Africa is seen as a region of endless possibilities and opportunities, low electrification levels are having a tremendous impact on the continent’s economy, particularly the natural resource industry Electricity: it is something those living in Europe or the United States might take for granted. Across the African continent however, access to power is far from evident.

According to the World Bank, of the 1.2 billion people globally who are not connected to the grid, 650 million live in sub-Saharan Africa. This means that twothirds of the African population south of the Sahara is plummeted in darkness after the sun goes down.

The World Bank estimates that 6-7 Gigawatts (GW) need to be installed across the continent every year to achieve universal access to electricity by 2030.

Currently, only 1 to 3 GW of electricity is installed annually. Not only are ordinary people affected by this, businesses – large power consumers such as the mining sector included – suffer too.

“The power gap in Africa is huge. It is truly an issue one has to look into urgently,” says Nigerian business owner Tonye Cole, co-founder of Nigerian

energy conglomerate the Sahara Group. “If you get power right in Africa, than you have won.”

Paulo Scaroni, Deputy Chairman at the Rothschild Group, agrees with Cole. “Energy in Africa is one of the most important concerns today. Millions of people in sub-Saharan Africa do not have access to electricity,” he says. “The problem is that you can’t have development without power. One needs to solve this, also to grow the mining sector … and to create a more positive environment for investors.”

The mining and extractive sectors are the main industries that are expected to struggle if Africa doesn’t sort out its electricity situation. The World Bank says that the annual demand from the natural resource sector in Africa, now booming due to various new discoveries, is likely to triple between now and

2020, to 23,000 MW. This situation leaves investors worried. “A big concern among them has to do with power,” said Credit Suisse mining analyst Justin Froneman during this year’s Mining Indaba. “There is a dire need to grow mining production across Africa, but this requires more energy. The question is where this power base will come from.”

One of the World Bank’s suggested solutions is for mining companies to start generating their own power and pump excess electricity back into the national grid or supply it to communities around them. “Power-mining integration can bring substantial cost savings to mines, electrification to communities and

investment opportunities to the private sector,” says the World Bank’s Vice President for Africa Makhtar Diop.

“But to be successful, we need governments, power utilities and mining companies to work together.” IFM

“

The power gap in Africa is huge. It is truly an issue one has to look into urgently Tonye Cole, co-founder of Nigerian energy conglomerate the Sahara Group

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International Finance Magazine Apr - Jun 2015

Securing

energy A pressing need for Egyptâ&#x20AC;&#x2122;s development Alessandra Bajec

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t this year’s three-day economic conference in Sharm El-Sheikh, Egypt signed energy deals and agreements worth over $40 billion with international companies.

In a country hit by frequent power outages resulting in substantial losses to the economy in recent years, the government is expected to turn the announced investments into real commitment.

Just days ahead of the summit, there were reports in Cairo and several other governorates of a new shortage in diesel and gasoline octane 80 prompting truck and taxi drivers to queue up at gas stations. The petroleum minister then promised to tackle the problem by injecting larger amounts of petroleum products into the market.

Egypt has been suffering from regular fuel short-

ages since several foreign oil companies suspended extraction due to increasing arrears after the 2011 uprising. No exploration and development agreements were signed between 2010 and 2013 as Egypt passed through political transition.

The scarcity has come as a result of an increase in demand that has not been matched by development and maintenance of generation and transmission capacity.

“Egypt’s government estimates an annual increase of about 7-8% in demand,” said Wael H. El-Nashar, President & CEO of Onera Systems, which specialises in solar photovoltaic systems.

Hydropower engineer Eslam Mamdooh says existing capacity totals 31,000 megawatt (MW). Of this, oil and gas account for 91%, with 8% coming from hydropower and less than 1%

International Finance Magazine Apr - Jun 2015

from wind and solar energy.

Mamdooh, a member of the Constitution Party’s economic committee, explained that fuel consumption consists of gasoline, diesel, butane gas and fuel oil (mazot). Referring to energy use, he gave a rough estimate: 60% for power plants, 33% for industries and 7% for households.

While Egypt has a significant oil and gas infrastructure and a large domestic market, the hydrocarbons sector has come under growing pressure in the past years. Most electric power plants are operated by natural gas, which has seen production shortages, particularly in the last three years.

Increasingly frequent power outages have hampered production at energyintensive industries such as fertilisers and cement.

Gas production declines by 1.2bn cubic feet annually

at least. According to an official at Egyptian Natural Gas Holding Company (EGAS), production will not increase in the next fiscal year. In the mid-2000s, Egypt became a net oil importer.

The shortage of gas, which fuels around 70% of electricity production, has not only caused power plants to shut down but also made potential investors reluctant to put money into building new plants.

El-Nashar is against importing raw material for power production. “We should use existing resources,” he argued, “Our energy mix should be 50% renewable, 20% nuclear and 30% hydrocarbons.”

He stressed that consumer behaviour should change as overconsumption, instead of saving, is common in the average Egyptian household. “Also, the government should restore its trust with citizens

The deals at Sharm El-Sheikh

and also with investors, and prove it can stick to a plan for the coming 25 years or so,” he said.

“The electricity capacity should be increased by approximately 2,500 MW every year,” Mamdooh said.

The estimated investment: $5 billion per year.

Dr Ibrahim Nawar, Head of the Economic Research Unit at the Arab Centre for Research and Studies, says, “If these deals (signed at Sharm El-Sheikh) go ahead, we can expect a 25% increase in oil and gas production.”

Nawar, a former adviser to the Minister of Trade and Industry, said that the government has cleared more than half of the arrears owed to its international oil and gas partners, and promised to pay the rest by end of next year. But before companies set up new power plants, he wants the government to clarify whether electricity will be priced by the state or on a market basis? Will it be transported through the national grid or private companies have to build their own grid?

Earlier in February, the cabinet passed a new law allowing private companies

to distribute and sell power directly to consumers, cutting the Egyptian Electric Holding Company – the monopoly buyer – out of the process.

Going private comes as an attractive option for the government as Egypt cannot afford to upgrade its energy infrastructure on its own. Besides, it cannot depend on donors or private banks to raise capital to build power plants every year.

Speaking at Sharm El-Sheikh summit, Electricity Minister Mohamed Shaker said the energy sector would need $70 billion in investment through 2022.

In Mamdooh’s opinion, a free market should come with a certain protection for ordinary people.

Electricity is heavily subsidised in Egypt, eating up 20% of its budget.

The government plans to eliminate subsidies within three to five years.

But, the process will be painful. Partially lifting subsidies in July 2014 led to an 80% rise in prices.

Dr Nawar believes Egypt needs to act quickly to provide enough energy supply to preempt another summer of power cuts though he douts that can be averted in the short term.

“Egypt attracted more investments than what it dreamt of. The funding is there. Now. it’s the government’s responsibility to make it work for the benefit of the Egyptian people and the country.” IFM

•

British Petroleum committed to invest $12 billion over four years to develop gas resources in the West Nile Delta, reportedly the biggest single foreign investment deal in Egypt’s history.

•

Italian oil company Eni signed agreements worth $5 billion in several gas discoveries over 4-5 years.

•

British energy company BG said it would invest $4 billion in Egypt to develop natural gas fields in the Mediterranean over two years.

•

UAE’s Dana Gas announced a $350 million gas deal.

•

German energy firm Siemens signed four MOUs worth over $10 billion with Ministry of Electricity and Renewable Energy to construct several power plants with a total production capacity of 6,600 MW.

•

Egyptian General Petroleum Corporation (EGPC) signed an agreement worth around $3 billion with the International Islamic Trade Finance Corporation to import petroleum products for the Egyptian market over the next three years.

•

Egypt signed MOUs worth $2.4 billion with Abu Dhabi-based renewable energy company Masdar and ACWA Power of Saudi Arabia to build a number of power plants, including solar plants and a wind plant with a production capacity of up to 4,400 MW.

•

General Electric pledged $200 million in a new training and manufacturing facility in the city of Suez.

Apr - Jun 2015 International Finance Magazine

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Renewable energy

108

International Finance Magazine Apr - Jun 2015

Renewable energy

A new

star in

the US

The 579 MW Solar Star in California, possibly the largest solar power project in the world, is expected to be fully operational by the middle of 2015 Peter Taberner

I

n February, Citibank announced a milestone commitment of $100 billion to lend, invest and to facilitate projects that mitigate the effects of climate change.

It’s not for the first time that the global investment bank has looked to create environmental solutions. In 2007, it pledged $50 billion towards efforts to “go green”.

The target was to allocate the capital over the course of a decade, but Citibank managed to meet their goal three years earlier than was

planned.

A seminal project that was designed from the Climate Initiative of eight years ago was the 579 megawatt Solar Star in California, which is expected to be the largest solar power project in the world. When completed, the plant will deliver enough electricity to provide power to 255,000 homes.

Berkshire Hathaway Renewables, an arm of Berkshire Hathaway Energy, are the owners of the project. They contracted Sunpower to provide the solar panel modules.

Recently, Sunpower CEO Tom Werner announced that the project is on track and is expected to be fully operational by the middle of 2015.

The project is co-located in Kern and Los Angeles counties.

Construction began in the early part

of 2013. In total, 3,200 acres will be hoovered up by the vast array of panels, which will consist approximately of 1,720,000 modules.

Berkshire Hathaway Renewables are excited by the benefits that the project will bring to the local economy, increasing the amount of prosperity to the area.

Over the construction period, they said that 650 full time jobs will be created. Additionally, there will be 15 full time site positions when the project is complete.

Apr - Jun 2015 International Finance Magazine

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Renewable energy

As the Solar Star project gathered pace, Citibank facilitated a $1 billion project finance bond offering, which they say is still the largest renewable energy bond offering that has ever existed carbon dioxide emissions being avoided per year. This is the equivalent of removing 2 million cars from the United States’ highways, for a staggering total of 20 years.

It’s a statistic that hands the Solar Star project a huge amount of supporting evidence, over the ecological worth from the investments made.

Citibank were attracted to the project, as it was owned

by BHE, who are existing clients. They had collaborated on Topaz Solar Farm, also based in California,

The project is co-located in Kern and Los Angeles counties

»

110

It is estimated that the financial impact will be more than $500 million.

This will be generated by a rise in business activity, accompanied by public revenue growth because of the development.

Reviewing the environmental benefits, the vast area consumed by Solar Star 1 and 2 will make positive use of land which previously served no purpose.

Impressively, Berkshire Hathaway Renewables says that the enormity of the solar project will result in more than 570,000 tons of

International Finance Magazine Apr - Jun 2015

where BHE were again the owners of the project.

When BHE acquired the Solar Star project from Sunpower, Citibank were approached for financing the project.

Citibank’s interest in solar has been palpable, as they administered the financing for the Desert Sun solar plant, which was considered the largest in the world before the creation of Solar Star.

As the Solar Star project gathered pace, Citibank facilitated a $1 billion project finance bond offering, which

“

There isn’t much clarity regarding how the Citibank announcement will impact renewable energy investments at this time. However, it’s another sign that renewable is considered mainstream and not considered as risky as they were in the past Marlene Motyka, US alternative energy leader at Deloitte LLP

Renewable energy

they say is still the largest renewable energy bond offering that has ever existed.

The bond was offered in the 144A format, enabling exemption from Securities and Exchange Commission registration.

Investors in the bond ranged from life insurance funds and asset managers, in what was a typical investment pattern for a project of this kind.

The demand for the bond was enormous, and this hunger to invest was due to the quality of the project, and the sponsorship of it, with the companies who were involved, and the structure of the financing.

As these factors were accompanied by an environment of low interest rates, the project was even more enticing to invest in, as a long term high yield project, in comparison to corporate bonds.

The bonds also received a favourable response from rating agencies. Moody’s delivered a BAA3 rating, Standard and Poor appraised the bond as BBB flat, and Fitch also confirmed the bond’s good credit quality, with a BBB rating.

Many enthusiasts of renewable energy will be hoping that many other major institutions will follow in Citibank’s footsteps, in creating a viable financial sphere for the energy sector.

Marlene Motyka, US alternative energy leader at Deloitte LLP, reviewed the latest conditions in energy investments: “Like all renewable energy projects, it’s important to have a long term power purchase agreement of

hedge agreement, and they also need a third party who can utilise tax credits if the developers cannot. A strong market exists for the financing of renewable projects in order to monetise the tax credits.”

Motyka is also optimistic that commercial banks such as Citibank, and capital market investors, are now willing to come forward and participate in energy projects.

“There isn’t much clarity regarding how the Citibank announcement will impact renewable energy investments at this time. However, it’s another sign that renewable is considered mainstream and not considered as risky as they were in the past.”

She added: “There are more and more companies that are now utilising renewable energy to meet their electricity needs. This is consistent with Deloitte’s “reSources 2014” study where more than four-in-10 businesses (44%), say they generate some portion of their electricity supply on-site. Among those who generate electricity on-site, 10% of the generation comes from renewable sources.

“Things will continue to progress. There are many Yieldcos that have emerged in the last two years. In 2013, there were three that went public and they raised $1.07 billion, and in 2014 there were six and they raised $3.2 billion. There are at least four or five more YieldCos that will emerge in 2015.” IFM

ECONOMIC BENEFITS • Approximately 650 construction jobs over a three-year construction period • More than $500 million in regional economic impact • Increased local business activity and public revenue • Up to 15 full-time site positions

ENVIRONMENTAL BENEFITS • High-efficiency solar panels and SunPower Oasis Power Plant technology reduce land use • Avoidance of more than 570,000 tons of carbon dioxide emissions per year – the equivalent of removing over 2 million cars from highways over 20 years • Generation of clean energy that will power the equivalent of approximately 255,000 homes

Apr - Jun 2015 International Finance Magazine

111

Islamic Banking

Kenya keen to ride Islamic finance boom The number of shariah compliant products has risen tremendously with almost all major banks opening a window for Islamic banking Amos Wachira

112

International Finance Magazine Apr - Jun 2015

Veronicah Riba

Islamic Banking

O

ver the last two years, Islamic finance targeting both Muslims and non-Muslims has gradually taken root in Kenya, with a handful of conventional banks also keen on gaining from the “Islamic finance boom” sweeping across the east African nation.

Despite the growth of shariah compliant banking the world over, Islamic banking in Kenya had remained dormant over the years as the market is dominated by conventional commercial banks. Kenya granted the first licence for Islamic

banking in 2006 when Gulf African Bank (GAB) was established followed

by First Community Bank in 2007. The two banks served a Muslim population estimated at 10 per cent of the country’s 44 million population.

However, the number of banks offering shariah compliant banking has risen tremendously with almost all major banks in Kenya opening a window for Islamic banking.

In May 2009, Chase Bank introduced the Iman eyeing the growing demand for Islamic banking products.

Barclays Bank of Kenya fol-

lowed suit with the La Riba asset financing product.

Since then, National Bank of Kenya, Standard Chartered bank and Kenya Commercial Bank have opened similar windows.

Why this spurt According to the World Islamic Banking Competitiveness Report, which was released by Ernest and Young, Islamic banking has been on an upward trajectory globally with an annual growth of 17.6 per cent over the last four years.

Tellingly, Islamic banking assets held by commercial banks globally rose to $1.7

“

There is a latent pent up demand for Islamic banking products as more Kenyans start appreciating Islamic banking. This can be attributed to growing awareness about shariah compliant banking Munir Ahmed, managing director of National Bank of Kenya

113

»

GAB Board member Ahmed Said, a client Khalif, GAB CEO & Board member Abdalla Abdulkhalik, Chairman Jamal Al-Hazeem and Board member Alaga Raja during the official opening of the Mombasa Road branch

Apr - Jun 2015 International Finance Magazine

Islamic Banking

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trillion in 2013, signaling a massive growth of noninterest banking. Islamic banking is being offered in a number of countries in north Africa while Nigeria, Kenya, South Africa, Uganda, Tanzania, Zimbabwe and Malawi have accelerated efforts to introduce the same.

Munir Ahmed, managing director of National Bank of Kenya, says, “There is a latent pent up demand for Islamic banking products as more Kenyans start appreciating Islamic banking. This can be attributed to growing awareness about shariah

compliant banking.”

GAB chairman and CEO Abdalla Abdulkhalik says, “As more people get to learn about the basic underpinnings of Islamic banking as subscribed to by GAB, the more they take up the product. Islamic economics is fast developing into a different and distinct paradigm of economics.”

Fringe benefits The rise of Islamic banking in Kenya has also spawned the growth of other segments in Islamic finance, including insurance, commonly referred to as takaful,

International Finance Magazine Apr - Jun 2015

Islamic-based investments and a possible sukuk.

Takaful Insurance of Africa Ltd (TIA) is a pioneering Islamic insurance firm which has introduced a new and exciting ethical perspective to risk management in the Kenyan market.

It was founded in 2008 and formally licenced in 2011.

Another offshoot is Crescent Takaful, the first shariah compliant savings and credit co-operative society in Kenya, which covers more than 4.5 million Muslims.

Meanwhile, Kenya’s financial markets regula-

tor is seeking ways to tap investments in the Islamic financial sector to help spur capital flows.

The Islamic Finance Strategic Roundtable, organised

by Capital Markets Authority (CMA) in conjunction with Islamic Development Bank Group, the Malaysia International Financial Centre and Awal Consulting Limited, is part of the drive to unlock the potential of shariah compliant investment to support infrastructure financing.

“In the context of the recent announcement by the government that it will

Islamic Banking

be seeking to issue its first sovereign sukuk in the near future, it is critical that the domestic financial markets are effectively prepared to leverage the opportunities arising from that increased visibility,” says CMA acting CEO Paul Muthaura.

This has consequently led to increased curiosity on the part of Kenyans as they seek to boost their knowledge of Islamic finance.

Keen on opening up the nascent industry, Kenya amended its banking Act in 2010. Over the last few years, Islamic banking has grown to account for more than 2 per cent of the market.

GAB CEO Abdalla Abdulkhalik says, “This just shows the huge potential it holds. This has seen us commit to opening two new branches each year as part of our expansion plans.

Most recently, we launched our 14th branch in Nairobi.”

One of the main challenges stifling growth is the scarcity of talent and resources to train bankers

on Islamic banking.

National Bank CEO Munir Ahmed says that though the same conventional bank tellers are oriented to serve Islamic banking clients, the number of professionals with knowledge of Islamic banking remains low.

In a bid to help Kenyans understand key operations of Islamic finance, the Kenya School of Monetary Studies (KSMS) — a training institution run by the Central Bank of Kenya (CBK) — has introduced a course in Islamic banking. CBK Governor Njuguna Ndung’u says, “We feel there is no better time to offer a course that will cover not just the conceptual apparatus, but the various opportunities and challenges that face Islamic finance, whose growth shows no signs of abating.”

Ndung’u pointed at available figures which indicate that globally, the Islamic finance market is growing with investments now worth $1.6 trillion and forecast to increase to $2.5 trillion by 2015.

Umma University is among the few institutions offering a diploma in Islamic banking, and might be the solution to the challenge of talent that continues to haunt the industry. As it stands, Kenya might well be on course to become the newest Islamic finance hub in Africa. IFM

This just shows the huge potential it holds.

This has seen us commit to opening two new branches each year as part of our expansion plans. Most recently, we launched our 14th branch in Nairobi Abdalla Abdulkhalik, GAB CEO

How does Islamic banking work

Islamic banking operations are based on the Islamic economic system where interest or ‘riba’ is forbidden. It only deals with profits as opposed to interest. Certain business transactions are considered unlawful in Islam. For example, trading in alcohol, intoxicating drugs, gambling or producing pornography are contrary to Islam. A shariah board ensures that the bank’s practices are in conformity with the shariah and do not oppress disadvantaged clients.

Apr - Jun 2015 International Finance Magazine

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feature Your Life Your Style

116

A car built just for you International Finance Magazine Apr - Jun 2015

feature

117

For today’s ultra-wealthy car buyers, even the latest Ferrari or Aston Martin isn’t enough – it has to have an extra touch of exclusivity to set it apart from others of the same type. Manufacturers have risen to this challenge, creating dedicated personalisation services to produce some truly incredible cars for their most valued clients.

Stephen Errity

Apr - Jun 2015 International Finance Magazine

Your Life Your Style feature

Aston Martin Pebble Beach

118

‘W

e are only bound by the limits of imagination’ announces the website for Aston Martin’s ‘Q Division’, before adding that ‘no detail or request is too specific for our expert team. Named after the world’s most famous Aston Martin driver James Bond’s long-suffering technical wizard, Q Division was founded in 2012 and already boasts an impressive portfolio of customised Aston Martins to its name. Sometimes the customer simply wants their car painted in a unique shade of paint, but often the requests are much more elaborate and expensive.

Aston Martin says the division continues to grow in popularity throughout the company’s 44 global markets, with an increasing proportion of new orders now requesting special Q attention.

At the recent 2014 edition of the world-famous

Pebble Beach car show in California, Q unveiled several one-off cars ordered by customers of Galpin Aston Martin in Los Angeles as a showcase of its abilities. They included a DB9 Volabnte featuring a blush pearl leather interior, metallic-flake Ashen Blonde exterior paint and – most extravagantly – a pink Rodachorsite stone inlaid into the dashboard. Too much for some tastes, perhaps, but this is precisely the aim of Q Division and other bespoke services – the car becomes attuned precisely to the owner’s taste.

A different take altogether was offered by a bright red Vanquish coupé, which accentuated the model’s performance credentials with a rich bright orange-red paint scheme plus an enlarged and enhanced carbon-fibre weave.

While Aston’s Q Division focuses mainly on exterior paint and interior trim customisation, its fellow British

International Finance Magazine Apr - Jun 2015

brand McLaren takes things even further with its McLaren Special Operations (MSO) department. MSO has its origins in the part of the company that built the legendary McLaren F1 road car in the early 1990s, and was

Ferrari SP12 EC

formally launched in 2011.

Today, the company says that 20 percent of its roadcar sales are customised in some way by MSO. ‘The

Your Life Your Style feature

only parameters we set are legal limits and automotiveapproved materials. Beyond that, we will take your brief, no matter how challenging and make your ideas a reality,’ the department’s website states.

As McLaren’s 12C, 650S and P1 supercars are built around a compact carbon-fibre MonoCell chassis, MSO has the flexibility to almost completely alter the cars’ exterior appearance without excessive cost and complexity. This has resulted in some truly stunning commissions, most notably the X-1 that was the star of Pebble Beach back in 2012.

This futuristic, spacecraftlike vehicle retained the superb 12C mechanicals under the metal, but had an unmistakeably unique profile, complete with

Group C racing car-style wheel cowls.

Describing the process that led to the creation of the car, MSO Programme Director Paul MacKenzie said, “One of our clients who already owned a McLaren F1, a MercedesBenz SLR McLaren and now a 12C, wanted a unique car.

The conversation began with our Executive Chairman Ron Dennis before the 12C was even launched. The client wanted a machine that had all the capability of the 12C but wrapped in a unique body that reflected his needs and personality.”

Cars that inspired the X-1 included a 1961 Facel Vega, a 1953 Chrysler D’Elegance Ghia, a 1959 Buick Electra, a 1939 Mercedes-Benz 540K and a 1971 Citroën SM. Influence was also drawn from various buildings, including the New York and Bilbao Guggenheim museums, plus a

Jaeger LeCoultre art deco clock, an Airstream caravan, a Thomas Mann Montblanc pen and a grand piano.

Further details of the X-1 development process reveal just how far customisation divisions such as MSO will go to satisfy their clients’ desires. In this case, the buyer requested a competition between external designers – some outside the automotive world – and McLaren’s own designers.

The final design took 18 months to sign off and the client insisted on seeing scale models at every stage of its development.

The finished car has a whole new body made of advanced materials. Everything is bespoke, even the lights and wheels, necessitating new testing and homologation that resulted in the car taking two and a half years to build. Many components were tooled exclusively for the car, including unique headlamps and tail-lights, inspired by

“

The only parameters we set are legal limits and automotive- approved materials. Beyond that, we will take your brief, no matter how challenging and make your ideas a reality, McLaren Special Operations department

Apr - Jun 2015 International Finance Magazine

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Your Life Your Style feature

Mercedes-Benz X-1

120

the McLaren logo.

The X-1 represents the very apex of what MSO can do, but the expertise demonstrated on this car can be applied to less extensive (and less expensive!) modifications to the standard McLaren range. Currently the most popular areas for personalisation include external visual carbon fibre body panels, carbon-fibre exterior trim, carbon rear wings, vented wheel arches and different wheel finishers. Different graphics are also in demand, while bespoke colour schemes are popular. Interior changes typically include different

trim and unique upholstery stitching.

So the British brands are clearly among the leaders when it comes to high-end bespoke motoring, but what about that classic Italian marque, Ferrari? It will come as no surprise that the Maranello marque has its own customisation division – Ferrari Special Projects Programme (SPP). The brand has long produced special versions of its cars – such as the run of 456 Shooting Brakes made for the Sultan of Brunei in the 1990s – and more recently SPP created a unique take on the Ferrari 458 inspired

International Finance Magazine Apr - Jun 2015

by the 1980s Ferrari 512BB. This Ferrari SP12 EC was commissioned by legendary rock guitarist Eric Clapton, who has owned three 512BBs in the past.

Another spectacular SPP creation was the 599-based Superamerica 45, created in 2011 for New York collector Peter Kalikow. The buyer wanted to mark the 45th anniversary of buying his first Ferrari with a unique car finished in an exclusive Blu Antille, a colour that matches another important car in his collection – a 1961 400 Superamerica cabriolet. The wheels are body-coloured with a contrasting diamond

finish to the spokes. The roof and other carbon-fibre elements of the bodywork – front splitter, side skirts and rear diffuser – are in a special contrasting darker blue, a theme carried over to the cockpit, which features dark blue carbon-fibre dash trim and driver zone.

When you admire the detail and finish of cars like the Ferrari Superamerica 45, the McLaren X-1, or any of the Q Division Aston Martins, you quickly realise why ‘off-the-peg’ is no longer good enough for the most discerning owners of the best supercars and grand tourers. IFM

MARK YOUR

Calendar

Calendar

3-5 June 2015 Embedded China (Industrial Products)

Luxury China (Luxury Consumer Show)

Shanghai, China

Beijing, China

4 June 2015 Small Business Expo - 2015 (Business Trade Show) New York, USA

Shanghai International Industrial Ceramics Expo (Industrial Ceramics)

Oil Power Mining 2015 (Oil) Orlando, USA

1-2 September 2015 Energy Efficiency Exhibition (Energy ) Frankfurt, Germany

Shanghai, China

16-17 June 2015 World National Oil Companies Congress 2015 (Oil & Gas)

29 May -6 June 2015

1-5 September 2015 China International Equipment Manufacturing Expo (CIEME) (Equipment Manufacturing) Shenyang, China

16-20 June 2015 Metec Germnay (Industrial Products)

Bensheim, Germany

12-14 August 2015

10-12 June 2015

London, UK

The National Exhibition (Industrial Products)

3-5 July 2015

Dullesdorf, Germany

13-16 September 2015 Aapg International Conference & Exhibition (Energy) Melbourne, Australia

2-4 June 2015 Advanced Manufacturing - UK (Manufacturing) Birmingham, UK

17-18 June 2015 Surat Basin Energy and Mining Expo (Mining, Oil & Gas) Toowoomba, Australia

3-4 June 2015 Australian Energy Storage Conference & Exhibition (Energy )

24-25 June 2015 Cloud World Forum 2015 (Cloud Computing) London, UK

17 September 2015 Small Business Expo - 2015 (Business Trade Show) San Francisco, USA

30 September-1October 2015 E COMMERCE EXPO 2015 (E-Commerce and online retailing) London, UK

Sydney, Australia

Apr - Jun 2015 International Finance Magazine

121

book review

Crime as a

service 122

Willie Sutton famously said he robbed banks because that’s where the money is.

Future Crimes author Marc Goodman says today the money is in data Tom Groenfeldt

A

t Money 20/20 in Las Vegas last autumn, Marc Goodman held the crowd’s attention with his detailed description of cyber threats. Now his book Future Crimes is out and it should be on the reading list of everyone concerned with internet security.

Willie Sutton famously said he robbed banks because that’s where the money is. Today the money is in data, said Goodman, and cyber crime costs an estimated $400 billion per

year. A breach like Target, Home Depot, Neiman Marcus or Sony can cost a company $188 per record stolen.

The bad news is that the bad guys are three or four generations ahead of security experts, not to mention governments.

In Mexico, drug cartels run a separate and encrypted mobile phone network.

Joaquin “El Chapo” Guzman Loera, a Mexican drug lord who ranked above Oprah on the Forbes 400 list, had $200 million in cash in

International Finance Magazine Apr - Jun 2015

his home when arrested, more than twice Interpol’s budget. And while laws and enforcement are limited by state and national boundaries, internet crime works across borders.

Innovative Marketing, based in Ukraine, would launch an attack that froze a user’s computers and offered to fix the virus it had “discovered” for $49, or $79 for a deluxe version. Users who paid had their computers unlocked but loaded with what Goodman calls crimeware — software that

disabled any virus blockers and provided a back door for malware. The company pulled in $500 million in three years and its founders have disappeared.

Goodman describes a dark web accessible through TOR where transactions are often in bitcoins or Darkwallet, which promises to be even more untraceable.

The world is facing new threats, and a new acronym — Crime as a Service. In Brazilian favelas, CDs with stolen credit card numbers are sold with SLA guaran-

book review

tees that 80 percent will work or you get your money back. They also provide tech support for users who have troubles.

“Crime is becoming software, it is becoming automated and it can run 24 hours a day in the background.”

That’s serious when it takes a Fortune 500 company an average of 211 days to discover its network has been hacked. The problems are going to get worse with the Internet of Things, one trillion devices connected, including 60,000 pacemakers.

In Lodz, Poland, a 14-year-old hacked the tram system and caused a wreck. The electrical grid, pipelines, air traffic control, stock markets, drinking water systems, retail point of sale and ATMs are all connected. Goodman described interruptions in the GPS system at Newark Air Traffic control that were eventually linked to a truck driver using a $50 jammer to avoid paying electronic EZ Pass tolls on the nearby New Jersey Turnpike.

“These systems are wildly

insecure and we are adopting them into our everyday lives.”

One more abbreviation, popular with help desks: PICNIC — Problem In Chair Not In Computer.

The dangers can be anywhere Russian customs officials checked tea kettles from China and found they had embedded wifi and could send information back to China. The US Chamber of Commerce discovered that a thermostat had been communicating with China.

Home electricity smart meters can tell which TV and your camera-equipped TV, tablet or computer may be watching you. A Pennsylvania school district was discovered using laptop cameras to photograph students in their homes, a discovery that cost it more than half a million dollars.

The good news? Well, there isn’t a lot of it. Users can help by using twofactor authentication, which several social sites, including Facebook and Google, offer. Until passwords are replaced, they can help

themselves by using good ones, and different ones for different accounts. Keep software updated — running the latest version of Android would reduce successful attacks on phones and tablets by 70 percent.

The book describes some of the big state-sponsored attacks, like the Chinese on Lockheed to steal plans for the $300 billion Joint Strike Fighter.

For individuals, the threats are closer to home. A good portion of his book is about data collection that is perfectly legal, at least in the United States where corporations have been successful in keeping individuals’ data as an asset for them to collect and use. He describes a web site, Patients Like Me, where people with illnesses could discuss their conditions with others who were suffering the same thing. Not only was Nielsen scraping the site to combine with massive amounts of other social data — 130 million blogs, 8,000 message boards plus Twitter and Facebook posts — but the site itself was selling information posted.

The data brokerage business, led by Acxiom, has earnings of $156 billion annually, which is twice the size of the US government intelligence budget according to Goodman and entirely unregulated. Al Gore at SXSW in 2013 called this the “stalker economy”.

One category that brokers sell — gullible pensioners. A couple of academics recently installed an app on Android that recorded what other apps were sending out — a weather forecaster was reporting the phone’s location every 10 minutes. Google changed the OS so no one else could run such a study.

As Goodman remarks, all these free services like Google’s are there to collect data to sell — the user is not the customer, she is the product.

Goodman thinks that in a world where food producers are held responsible for the safety of their products, software vendors should have similar liability and be required to pay people who discover vulnerabilities in their products. Companies should encrypt data in storage as their default.

Ultimately, cyber crime will require government action.

“We can no longer neglect the public policy, legal, ethical, and social implications of the rapidly emerging technological tools we are developing; we are morally responsible for our inventions.” IFM Future Crimes. By Marc Goodman. Doubleday, 392 pages. $27.95

Apr - Jun 2015 International Finance Magazine

123

COLUMN OUT OF OFFICE

‘The entire week,

I look forwarD to

guitar lessons’

Doug Mow is senior VP Corporate Strategy and CMO at Ness SES. He is based in the US Suparna Goswami Bhattacharya

124

What do you look forward to doing in your down time – weekends or even week days?

Spending time with family and friends is definitely something I look forward to. I tell everybody in my team that while we are having a good time working and trying to make the world a better place, it’s really family and friends who last with you forever.

So, it is important to keep that in mind. My parents are getting older. As much as my mother can get under my skin, I really treasure the time I spend with her and I know it is not forever.

On your off day, what typically is your schedule?

The entire week I look forward to my guitar lessons. When my daughter went to university, I thought I would have some time on my hand. I decided to take guitar lessons and I do it religiously every week.

Every Saturday morning at

10.30, I am up for my guitar classes. It is really the most fun time I have the entire week. The reason is because it is unlike anything else that I do. When I am playing guitar, I do not think about work. I should have taken guitar lessons a long time ago, but it is never too late to start on something. And if weather permits, I like to be outdoors. Hiking, skiing, spend time at the beach, cycle around. Anything.

Do you buy the latest gadgets or books?

I am an early adopter but not a visionary. Meaning, I will not be the first person to buy a gadget, but will be one of the early adopters. Also, I read a lot. Right now, I am reading Natchez Burning by Greg Iles. It is a murder mystery and was recommended in NY Times.

I bought it on my Kindle.

It is 700 pages long and I am on the last 10%. It is an extremely well written book.

Before this, I was reading Boys on the Boat. I read

International Finance Magazine Apr - Jun 2015

a lot of business books as well.

Where was your last holiday destination?

It is really horrible, but I never take a holiday. But I do a lot of skiing. Every year in February, I go to Utah near Salt Lake City area in the US. I have been doing this for the past 25 years even before my daughter was born.

Did you ever end up skipping events in your daughter’s school/college?

I try not to skip events, but sometimes it is inevitable. I have only one child and we share a great relationship. It was important for me to be with her as much as possible. I do not recall having missed any major event in her life. But if you ask my wife, I am sure she will come up with a few.

What is your favourite dish?

There is this fish called

Halibut. It is grilled. And, there is this sauce made of mango, chilli and lime juice.

The taste sensation is vibrant. We get fresh fish a lot in summer time. Previously, we ate a lot of steak. We have replaced that with fish, which is much better for our health. I eat that when I go to a restaurant. And we also prepare it at home.

What are your hobbies?

I am a chef, I like to paint.

I am also a photographer and I love to write.

Are you associated with social causes?

I used to be when my daughter was in school. It was easy to do that then as the school has different causes. We would raise money for a disease, or for school music programmes.

Since she went to university, we do a lot less of that. But we do community activities. IFM