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Micro-investing: The Next Step in Crowdfunding

 4 min read / 

An Initial Public Offering takes a private company public. But what if IPOs were actually public in the true sense of the word?

This is now possible due to recent technological innovations and mobile platforms that enable a much wider section of the population to participate in stock ownership through micro-investing or investing in very small sums of stock.

The Target Audience

Current micro-investing applications are intended for Millennials, primarily in the United States, who are encouraged to start saving for the future. Apps such as Acorns, Robinhood, and Stash target American Millennials with their mobile-first platforms that make investing straightforward and accessible.

Acorns is commission free, offers portfolio recommendations, and operates with high level security for users’ financial data. Robinhood’s slogan is “free stock trading.”

These micro-investing applications have become increasingly popular in the US. The number of people who use the Acorns app alone is one million and counting.

Taking It Global

But micro-investing could and should be expanded far beyond American Millennials.

Micro-investing advances financial inclusion in a sector that has remained largely untapped, as the dominant sectors in the world of financial inclusion have traditionally been savings, insurance, and remittance payments.

The fact that the wealthy dominate investments is just as true for Uganda and Nigeria as it is for the United States and micro-investing is essentially lowering the minimum investment sums so that a wider range of income groups can participate in investing and owning stock.

This way, micro-investing also democratises stock ownership, enabling greater participation into and accessibility of the stock market. Through this expanding accessibility, a ripple effect of wealth can be created through a wider network of prosperity and ownership in a firm’s success in the market.

East Africa ❤️ Micro-investing

If there is one region of the world in which micro-investing could be met with rapid success, it would most likely be in East Africa with its mobile technology infrastructure and track record of world-leading technological innovation. Indeed, the first stock exchange in Africa to offer micro-investments was the ALTX East Africa Exchange based in Kampala, Uganda.

Out of a nation of 35 million people, only 30,000 Ugandans currently trade securities. The ALTX East Africa Exchange aims to make investing an activity a much wider percentage of the population can engage in by offering “micro” loans, with a value equivalent to $3. By substantially lowering the minimum sum required to invest, the ALTX Exchange is estimated to be able to add five million more accounts.

The greater democratisation of stock ownership could also help drive institutional change, as many African stock exchanges remain small and encounter difficulties in attracting listings from small and medium-sized enterprises. Lowering the minimum sum amounts, as accomplished by the ALTX East Africa Exchange, can add millions of more investors and would increase confidence in the stock market and the chances of a firm’s success. The institutional strengthening and scaling up of stock markets would then be intertwined with increased public ownership and prosperity and would contribute to a better investment climate for domestic firms.

Other Players

Beyond national stock exchanges, there are also smaller exchanges for startups, such as the Startup Stock Exchange, or SSX. The SSX offers no investment limits and lists startups from a wide variety of sectors and geographical regions. This is a more substantial and expanded form of crowdfunding, which is sourcing funds for a project or venture by raising monetary contributions from a large group of people online.

Micro-investing takes crowdfunding to the next level by providing comprehensive security, liquidity, and control. Thus micro-investing contributes to financial well-being and economic success on the individual, firm, and macroeconomic level.

The prospect of micro-investing is particularly relevant in the context of the informal economy, in that it can serve to enhance income and contribute to savings. As reported by the African Development Bank, 80% of the labour force in Sub-Saharan Africa works in the informal economy and nine in ten rural and urban workers have informal jobs.

The Outlook

The McKinsey Global Institute has reported that there will be over 122 million new entrants into the labour force in the next ten years, but only 54 million new, stable wage-paying jobs created in that time. Due to this massive gap in job creation and the dominance of the informal economy, micro-investing activities can help contribute to a family’s shared income while also increasing confidence in the macro economy and investment climate.

Investing is an activity that should be available to all, not just the wealthy. Democratising stock ownership is a largely untapped sector of current financial inclusion efforts and one that could capitalise on current mobile technology infrastructure.

Micro-investing could contribute to national stock exchanges on an institutional level, as well as smaller platforms in which local populations could invest in local startups, particularly urgent in the context of challenges in accessing credit in many startup ecosystems.

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Companies

Saved: Emirates Places Order for Airbus A380

 1 min read / 

airbus emirates

The Dubai-based airline, Emirates, has announced an order for 36 A380s worth $16bn, saving the superjumbo after Airbus threatened to stop production. The deal places a firm order for 20 planes with the option of ordering another 16. Deliveries are scheduled for 2020.

The two-decked superjumbo has faced declining sales as more airlines opt for smaller, cheaper aircraft.deal is said to be worth $1.6bn. Emirates is by far Airbus’ largest customer, with Thursday’s order taking their commitment to 178 aircraft.

Keep reading |  1 min read

Companies

Financing for Green Sustainable Development

 3 min read / 

Green Sustainable Development

Green sustainable development has been on multiple discussions channels. Talks, seminars, workshops, you name it. However, financing it has not been thoroughly discussed. How do we finance sustainable green development? Is it profitable for companies who do so? Is the rate of return high enough to cover the cost of investing in green technologies?

No doubt, green sustainable technology is an expensive technology with no clear ROI. Venturing into green technologies may be a blind-man guided only by a voice in his head. Yes, green sustainable technology yields a significant Marginal Social Benefit (MSB). But often, MSB is non-quantifiable.

Leading this social-technology movement, Jeffrey Sachs, with the support of foundations such as the Jeffrey Cheah Institute, established the Sustainable Development Goals (SDG) centre in the backdrop of academics – Sunway University.

The aim is to directly address the issues for SDGs and to ensure the goal set in the Paris Climate Agreement is able to be achieved successfully.

Now, as mentioned, private firms are both afraid and pessimistic about green sustainable development. Many do not see the outcome of this initiative and are not concerned about the environment. The technology is costly, and some firms are even struggling to break-even at their current costs. Lack of momentum from firms involved in similar industries and lack of financial support has made venturing into green technology unattractive.

On 14th of January 2018, pioneers and advocates from across the globe were invited to join a workshop at Sunway University. The idea was to bring together a group of academics, from the Asian Development Bank Institute to representatives from New Zealand and Austria, to discuss how to finance green sustainable developments. It attracted a number of firms involved or who wanted to be involved in this movement.

Financing models such as the SIB model and the Yozma model were introduced by Dr Hee Jin Noh. Papers on the theoretical relationships between a firm, a bank, and households were presented by Dr Maria Teresa Punzi. And the outcome of these series of workshops will be a book, which aims to provide a better insight and guideline for green financing, written by Dr Hee.

Also presented was a case study, comparing different countries. Associate Professor Ivan Diaz-Rainey had made comparisons on some successful countries, looking at European countries versus New Zealand and Australia. In the case study, countries were compared, and recommendations were made on how to make green financing successful. Though the definition and KPIs of a successful green development country are still vague, countries from Europe are exemplary on the ‘theory to practice’ phase.

While there is a significant increase in awareness and wanting to be involved by private firms, it needs to be supported by the government more. Regulators need to provide sufficient information to assist private firms venturing into green technology or green development. A healthy government support will increase the chance of a firm venturing into green development being successful. And these are the baby steps needed in order for transformation at city-scale or nationwide-scale.

Keep reading |  3 min read

Companies

Carillion: Funds Buy Debt for Peanuts

 1 min read / 

carillion debt

Distressed debt investors are reportedly buying up debt in the collapsed construction company, Carillion, for as little as 2% of their face value, with private notes exchanging for as little as 5%.

Distressed debt investors normally buy up bonds in companies facing liquidation on a hunch that their value will increase. Often they will buy a small amount that allows them access to company records before deciding on whether to place a larger bet. If Carillion retains its public contracts, in schools or hospitals for example, then investors can expect a return by buying up bonds now.

Keep reading |  1 min read

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