Uzbekistan’s Dynamism Presents New Opportunities for Post-Brexit Britain

Though 5,000 km apart, the UK, an economic leader in the world, and my emerging but fast-developing nation are quietly forming a partnership no-one could have imagined three decades ago, when Uzbekistan broke away from the crumbling Soviet Union. I doubt anyone could have imagined it even five years ago.

[caption id="attachment_19671" align="aligncenter" width="680"] President of Uzbekistan: Shavkat Mirziyoyev[/caption]

The politics and international perspectives of both nations have profoundly changed. Post-Brexit Britain is eager for new friends and alliances. Under the reformist leadership of President Shavkat Mirziyoyev, Uzbekistan, too, is reaching out, resolving old arguments and finding common cause with its Central Asian neighbours and assuming a more active role in global affairs.

In my embassy, we see the results of the British changes on an almost daily basis. A few months ago, we were arranging a cultural webinar about the 15th Century Uzbek poet Alisher Navoi – our Shakespeare. One of my colleagues had the ambitious idea of trying to enlist some British politicians to recite passages from Navoi’s works in translation. Astonishingly, a dozen MPs and peers volunteered, and demonstrated genuine enthusiasm for their roles as interpreters of an ancient and, for them, exotic literary art form. A resulting video became a viral hit back home in Tashkent.

"All these seemingly disparate changes have a common theme: Uzbekistan is reviving its centuries-old role as an international crossroads."

The UK-Uzbekistan relationship is developing in several ways. British historians and archaeologists are exploring our ancient role as a crossroads for trade between East and West, while financial and legal experts are contributing to plans to create a similar role for the future.

Following his election in December 2016, President Shavkat Mirziyoyev set in motion a series of reforms. Make the private sector the driving force for the national economy, instead of the state; encourage competition; democratise and encourage development of civil society; open borders and reduce or eliminate visa requirements; liberalise the currency, and bring in fundamental education reforms.

We were to welcome foreign investment and bring economic regulation up to international standards. Mandatory labour in our cotton fields, which had drawn international criticism, was banned.

The president’s foreign policy objectives involved similarly dramatic changes. He set about improving relations with Uzbekistan’s neighbours and travelled the world to meet face-to-face with global leaders. His goal was to persuade them of the sincerity, and permanence, of his reforms. If there had been any doubts about the priority given to human rights issues, President Mirziyoyev sought and secured election to the UN’s 47-member Human Rights Council.

All these seemingly disparate changes have a common theme: Uzbekistan is reviving its centuries-old role as an international crossroads. The country is championing the reinstatement of close trade and transport links, people-to-people connections between Central and South Asia.

Mirziyoyev’s focus on regional unity has changed the calculus across the region, and in Afghanistan. He has put enormous effort into bringing peace to Afghanistan – a bridge between two regions. He appointed one of our most senior diplomats as his Special Representative on Afghanistan. Our officials have been helping to bring the Afghan factions to the negotiating table in Doha, and to nudge all parties towards peace. Meanwhile, we have reached a regional consensus on a major transportation and trade corridor through Afghanistan.

And what of the UK’s role in achieving the aims of Uzbekistan’s new development strategy? From my London vantagepoint, I can say with some pride that it has been significant. One of the president’s key advisors on economic and governance reforms, Sir Suma Chakrabarti, is British, and a former EBRD president. TheCityUK, an organisation representing the UK’s expertise in international finance, is finalising the concept for the creation of a Tashkent International Financial Center (TIFC). Among the considerations is the adoption of English Common Law, potentially with wider application in domestic dispute resolution.

"London is providing assistance to the implementation of economic reforms in Uzbekistan through the Effective Governance for Economic Development in Central Asia (EGED) programme, in partnership with the World Bank."

Most importantly, British education would be valuable for developing human capital and the capacity building much needed for delivering the reforms. We have already achieved some success in this. Throughout the country, special Presidential Schools are being opened, based on British education standards. Several higher education projects are under way, opening joint universities, launching double degrees and research programmes. We are receiving UK technical and advisory support for membership in the World Trade Organisation, a key step towards our embrace of world standards.

London is providing assistance to the implementation of economic reforms in Uzbekistan through the Effective Governance for Economic Development in Central Asia (EGED) programme, in partnership with the World Bank. We are interested in getting access to the UK’s Generalised System of Preferences (GSP) Enhanced Framework – an equivalent to the GSP+ agreement recently signed with the EU.

It’s not all plain sailing, of course. The UK government allocated £1.25bn in export credits for trade finance, particularly in the energy sector. A few weeks ago, the UK’s Trade Secretary Liz Truss wrote the UK Export Finance agency, setting energy renewables as a key priority. This is a key priority for Uzbekistan too, as we drive to keep to our Paris Agreement commitments on climate change.

Unfortunately, there has been little take-up on the UK side, with much of the work on Uzbekistan’s solar and wind power projects being undertaken by Middle Eastern, EU and American players. We would like to see more British participation in this.

Once the pandemic has been brought under control, and physical meetings and travel are once again possible, I am confident we will.

[caption id="attachment_19670" align="aligncenter" width="300"] Author: Said Rustamov, Ambassador of the Republic of Uzbekistan to the UK[/caption]


OECD: Blended Finance Institutional Role in Responding to COVD-19

COVID-19 has had a dramatic impact on developing countries and undone years of progress on sustainable development, pushing back into poverty large sections of the population. World Bank analysis projects growth in Sub-Saharan Africa to decline to -3.3% in 2020, giving the region the first recession in 25 years. In this respect, COVID-19 is and will have a negative influence on economies in many developing countries and further widen inequality, pushing back as many as 150 Million into extreme poverty by 2021.

As developing countries are already facing considerable fiscal pressures and in some instances debt burdens, mobilising the private sector in support of the SDGs will become increasingly important. Blended Finance is recognised as one of the tools available to development actors that can be used to bring the much needed private sector support to address the SDG financing gap. The OECD Development Assistance Committee (DAC) defines blended finance as the strategic use of development finance (concessional and non-concessional) for the mobilisation of additional (commercial) finance towards sustainable development in developing countries.

Filling the financing gap and directing the private sector to key sectors that can stimulate economic recovery, or attracting commercial finance that would not have otherwise invested in development are the key roles of blended finance. Blended finance should not be seen as a substitute of Official Development Assistance (ODA). ODA will always be primordial, particular in social sectors and least developed countries (LDCs). Currently ODA is likely to remain flat, yet the SDG gap due to COVID-19 will grow even bigger.

Directing and de-risking projects and markets is also an important objective of blended finance, particularly in sectors such as climate. Development actors, due to the concessional and non-concessional nature of blended finance, are willing to take risks and expose themselves to greater financial, political, foreign exchange and technological risks. However, whenever blended finance is being used, the fundamental goal is to work alongside the private sector partner in a program or transaction.

Blended finance has gained considerable traction since the launch of the Addis Abba Action Agenda and the SDGs. That is not to say that the instruments that underpin blended finance have not been used before; e.g. guarantees are a stable instrument of development actors. The difference now is that blended finance has become more mainstream and role of the private sector more evident. On the demand side, the development gaps are significant, while on the supply side substantial amounts of capital are invested in low or negative returning assets, yet could be funding projects and portfolios that contribute to the SDGs.

For blended finance to be effective the institutional architecture of the development landscape needs to be fully mobilised, otherwise the necessary scale will be out of reach. The OECD DAC blended finance definition has a wide approach, which financially means concessional and non-concessional funds mobilising the private sector. The goal being to ensure that institutions act as mobilisers of the private sector while not only using blended concessional finance but also in certain instances non-concessional finance but always the institutional capacity. Institutions bring not only finance to a transaction but credibility and assurances, through the undertaking of due diligence and development skills. The private sector when going in to high-risk transactions focus on the precedent and DFIs and MDBs have a lot of the necessary experience. This approach is captured in the OECD DAC Blended Finance Principles, which were agreed by the High Level Meeting of the DAC in 2017. The Principles have subsequently been referenced by several G7 and G20 Presidencies thereby forming a part of the international development architecture [1].

At the Blended Finance and Impact week, the release of the OECD DAC Blended Finance Guidance provided further insights on how to mobilise the private sector using all the institutional capacity possible, particularly MDBs and DFIs. Progress has been achieved, with Blended Finance increasing private sector mobilisation by 28% to USD 48.4 Billion in 2018. More still needs to be done and all the capacities of the development system should be mobilised. As highlighted in the Blended Finance Guidance, mobilisation is not only financial: the DFIs’ institutional role is critical given their understanding of the market, involvement in projects and due diligence capabilities. This institutional capacity is a key catalytic factor in mobilising private actors.

As new actors enter the blended finance space, the OECD DAC Blended Finance Guidance provides a tool for donor governments, development co-operation agencies, philanthropies and other stakeholders to design and implement effective and transparent blended finance programmes. The expectation is that as new DFIs are established or donors deepen their capabilities to work with the private sector, the Guidance will be the essential roadmap. Each of the five Principles and sub principles and their respective detailed guidance notes provide insights and knowledge that has been co-created over several years with development actors – from both developed and partner countries –, CSOs, the private sector and donors, amongst others.

Policy work on mobilising the private sector has been considerable and the mobilisation figures are starting to bear proof of this collective effort. However, blended finance is yet to show its full potential in terms of development impact. Work still remains to be done on assessing the outcomes of the institutions, instruments, and activities.

Development actors have a strong desire to show how they achieve development impact through blended finance. The OECD/UNDP Impact Standards for Financing Sustainable Development (IS-FSD), developed by the Community of Practice on Private Finance for Sustainable Development (CoP-PFSD), have this goal. Developed as a best practice guide and self-assessment tool, the Standards are designed to support all providers of development finance in the deployment of resources in a way that maximises the positive contribution towards the SDGs. The Standards were developed as part of a community of practice that counts over 300 members from government’s agencies, DFIs, private asset managers and CSOs. Following approval by the DAC, the Standards will be made freely available for subscription, with Detailed Guidance as a support to implementation.

A lot of work still needs to be done but the policy pieces are coming together thereby allowing development actors and the private sector to respond to the SGD challenges according to the direction given but COVID-19 means we now need to redouble our efforts.

[1] Specifically, under the Canadian Presidency, the G7 committed to “work to implement the OECD-DAC Blended Finance Principles including promoting greater transparency and accountability of blended finance operations”. Under the Japanese G20 Presidency, the G20 Osaka Declaration by Leaders recognised that blended finance “can play an important role in upscaling our collective efforts”. Under the G7 French Presidency in 2019, the G7 further highlighted their support “to mobilise additional resources for development and help increase the impact of existing resources” and “the implementation of the OECD DAC Blended Finance Principles for Unlocking Commercial Finance for the SDGs” (2019).

About the Author

[caption id="attachment_19703" align="aligncenter" width="800"] Author: Paul Horrocks[/caption]

Paul Horrocks is Head of the Private Finance for Sustainable Development Unit at the OECD Development Co-operation Directorate. Paul is working on a number of initiatives aiming at encouraging greater private sector investment into developing countries, in particular on policies and approaches that governments can adopt in order to ensure that activities are aligned and impact achieved.

Prior to this, Paul was a Senior Executive in Fiscal Group of the Australian Federal Treasury, working on the domestic infrastructure market but also providing policy advise during Australia’s G20 presidency on international policy challenges. Paul has over a decade of Senior leadership at the European Institutions in Brussels, having worked on initiatives such as the deepening of European capital markets in response to the 2008 financial crisis.

Paul has degrees from the University of Wales, and Masters from the University of Liverpool as well as an Executive MBA from Vlerick Business School in Belgium.Paul has degrees from the University of Wales, and Masters from the University of Liverpool as well as an Executive MBA from Vlerick Business School in Belgium.


LGX Hits 1,000 Sustainable Bonds Mark

CEO Julie Becker, has today announced the achievement of a major milestone for the Luxemburg Green Exchange (LGX). The exchange now counts 1,000 green, social, sustainability and sustainability-linked bonds.

[caption id="attachment_19706" align="aligncenter" width="900"] From left to right: Aldo Romani, Ricardo Mourinho Félix, Pierre Gramegna and Julie Becker[/caption]

According to Becker, “The 1000th bond currently displayed on LGX is the new 10-year USD 1.5 billion Global Climate Awareness Bond from the European Investment Bank (EIB). Ever since issuing its first green bond in 2007, the EIB has played an essential role in the development of the green bond market. It was therefore a great privilege for us to celebrate this landmark occasion with the EIB earlier today, in the presence of Luxembourg Minister of Finance Pierre Gramegna.

She went on to say that, “The Luxembourg Stock Exchange (LuxSE) established LGX in 2016 to facilitate sustainable investment and accelerate the sustainable finance agenda. What started as a platform for green bonds has grown in both size and product range to support new market developments and has reached 1,000 sustainable bonds within five years of launch. In total, these bonds are raising more than EUR 500 billion for specific green, social and sustainable development projects. This is an extraordinary achievement!

“We take this opportunity to thank all our 170 issuers from 35 different countries who are bringing their sustainable bonds to our exchange and LGX. We have reached this milestone thanks to your decision to disclose your sustainability strategies, fund sustainable projects and make responsible choices. We would also like to thank all sustainability-minded professionals who work tirelessly behind the scenes to advance the sustainable finance agenda. Today’s major milestone belongs to you, too.

“To issuers who have not yet entered the sustainable finance sphere, we encourage you to rethink how you can better link your financing strategies with sustainability, and thereby contribute to the increasingly urgent transition to a low-carbon and more inclusive economy.

“LGX is the world’s leading platform for sustainable securities and was awarded the UN Global Climate Action Award 2020 for its work in accelerating financing for climate friendly investment. Every milestone and every success story reinforce our mission and commitment to making finance part of the solution to our global challenges. Rest assured” she concludes, “The 1,000-bond mark is just the beginning!”


Building Bridges: Joining Impact Investing and Social Entrepreneurship

Finance is stepping up to a growing impetus from stakeholders to transform society for the better. Yet, there is a continuous disconnect between social entrepreneurs as vanguards of social value creation and the providers of financial services. A unique partnership between UniCredit and the EU Interreg project Finance 4 Social Change seeks to address this gap. The collaboration shows how we can build bridges, which are essential for spurring profound collaboration across fields of activity and sectors. Only if we harness the synergies that arise from these, are we going to make significant progress on the sustainable development goals.

Finance can be a tool for positive social change. With the ESG investment market flourishing and impact investing gaining traction, more and more people tend to agree with this statement. However, there remains a significant financing gap between those acting as vanguards of social value creation and those that could finance it—namely social entrepreneurs and global banking and financial service providers. Virtually no social enterprise survey has been performed to date, which does not conclude that social entrepreneurs are struggling to find adequate financing.

One factor causing difficulties is that social entrepreneurs are passionate problem solvers that care foremost about creating value for their often-vulnerable target groups. They act as system entrepreneurs or institutional entrepreneurs, roles that require activities, which are not easily condensed into a straight-forward business model. Social enterprises tend to take longer than their commercial counterparts to break-even, and some never do, continuing to depend on a mix of funding from investments, loans, grants and even donations. So, the often proclaimed statement by policy makers and financial providers that all their financial services are in principle available to social entrepreneurs, may often fall short of materialising in actual deals with social entrepreneurs.

"The growing importance of the social component in ESG is increasingly evident and relevant."

A number of banks have recognised that social entrepreneurs and impact organisations are a special, and often small customer group—but given our huge societal challenges—one with exceptional potential. In order to harness this potential and help drive sustainable development through financial inclusion, UniCredit set up their Social Impact Banking unit in 2017, which is an important part of the bank’s commitment to building a fairer and more inclusive society in all its 13 core markets. Roberta Marracino, UniCredit’s Head of ESG and Impact Banking, explained: “The growing importance of the social component in ESG is increasingly evident and relevant. Our aim is to combine philanthropy and social impact finance to increase financial access and foster inclusion and development in all our territories and our Social Impact Banking programme is a very important part of this effort.” Starting in Italy, UniCredit’s impact banking offer that includes impact finance, microcredit and financial education, has been extended to ten further countries of the Group. Both, the value imperative and the geographic focus made UniCredit a natural ally of “Finance 4 Social Change”, an Interreg project focussing on building capacity in impact investing and social entrepreneurship across the European Danube region.

The project brings together thinkers and doers active in academia, social enterprise networks, impact deal brokering, or public administration focussing on entrepreneurship and small business incubation. Two of the project’s core activities were the development of a Massive Open Online Course called #AirMOOC and a corresponding pitch competition for social ventures called #AirCompetition. Both, as the acronym suggests, focus on “Accelerating Investment Readiness” on the side of investors as well as that of investees. The MOOC has more than 500 registered users and 6000 views on its YouTube Channel, which should prove to push skills in the field, for instance on how to measure and communicate social impact. The course was recently awarded by the U.S. Association for Small Business and Entrepreneurship (USABSE) in recognition of its potential impacts on stakeholders, such as entrepreneurs, investors or policy makers.

UniCredit sponsored the pitch competition, which attracted applications from more than 240 social ventures across 14 countries. As of 2020 the bank had already dispatched €225,1 million of funding to more than 4380 initiatives and microenterprises. The lion share of those related to the sustainable development goals of good health and well-being as well as that of decent work and economic development. Supporting the pitch competition was another important occasion to offer tangible and meaningful support to the different communities where UniCredit operates, in particular to entrepreneurs in as of yet underrepresented areas of financing. In addition to the sponsorship, UniCredit experts also took part in the panels contributing their skills and know-how to the competition’s participants.

"A number of banks have recognised that social entrepreneurs and impact organisations are a special, and often small customer group—but given our huge societal challenges—one with exceptional potential."

The winners of the four separate regional pitch events, held at the end of 2020, show the incredible variety and richness of what social entrepreneurs do to create value for society, from preserving culture to fostering the dialogue between generations. Vollpension from Austria for example, on first sight, appears to be yet another stylish coffee house start-up in Vienna. However, at closer inspection it is remarkable on a number of levels. Instead of hiring professional confectioners, the organisation gives older persons the opportunity to share not only their secret recipes but also their memories of yore with the younger generation in vivid discussions. This does not only address the problem of intergenerational disconnect, but may prevent retired people from slipping into old-age poverty and loneliness. One Night Gallery based in Romania’s capital Bucharest builds its value proposition on a unique mix of preserving cultural heritage, featuring local contemporary artists who harness the power of digital technology and performance, and repurposing run-down urban locations through art.

The third awardee, from Croatia, called STEMI is an education tech company that seeks to transform classrooms into innovation labs, where students in middle and high schools acquire critical 21st-century skills such as competencies in 3D modelling, mobile app development, or embedded programming. Finally, Caritas, an initiative located in the Serbian city of Sabac, located west of the country’s metropolis Belgrade, seeks to achieve social protection for disadvantaged groups of the population, by promoting a blend of agricultural production and local tourism based on the principles of sustainable development.

The winners of the competition will not only benefit directly from the prize money they were awarded. The goal of the partnership between Finance 4 Social Change and UniCredit is that the competition will contribute to building up field capacity more widely. It helps the bank, and also other actors engaged shaping the local market environments, in getting to know the field of social innovators and entrepreneurs better, which in the long-run, may lead to further durable financial relationships between social ventures and finance providers. “Our continued strong commitment to social issues means we have a growing ambition to help drive change by offering concrete support to entrepreneurs and initiatives with a significant positive social impact. The network built thanks to this partnership is another important step in this direction,” added Marracino.

Nevertheless, the collaboration between Finance 4 Social Change and UniCredit is still the exception rather than the rule, as the world of finance tends to still remain at some distance to social entrepreneurs, especially such that tackle social inequalities, seek to preserve and enhance culture or introduce entrepreneurial methods into formal education. This needs to change fundamentally to establish a new level playing field for social innovation that can make an important contribution to sustainability. For this, we need to bring otherwise distant actors together and unleash profound collaboration across fields of activity and sectors. We hope this collaboration illustrates how bridges can be built, which genuinely fortify the role of finance as a source for positive social change.

About the Authors

[caption id="attachment_19713" align="aligncenter" width="263"] Author: Gorgi Krlev[/caption]

Gorgi Krlev obtained his PhD at Oxford University (Kellogg College) and works as a senior researcher at the Centre for Social Investment (CSI) of the University of Heidelberg. He lead-developed #AirMOOC, which was awarded by the U.S. Association for Small Business and Entrepreneurship (USASBE) for potential impact on stakeholders, such as investors, entrepreneurs and policy makers.
He can be found on Twitter @gorgikrlev.

[caption id="attachment_19714" align="aligncenter" width="270"] Author: Adrian Fuchs[/caption]

Adrian Fuchs is a Senior Transaction Manager at FASE. He holds a doctorate from University of Hamburg with a focus on asset management. He helped set up the first impact investment fund for foundations at BonVenture and structure impact investments at Bertelsmann Foundation.

About the Institutions

The Centre for Social Investment is a research centre at the Max-Weber-Institute for Sociology in the Faculty of Economics and Social Sciences of Heidelberg University. It is an interdisciplinary centre for research, education and training.

FASE – The Financing Agency for Social Entrepreneurship aims to create a thriving ecosystem for social innovation by boosting impact finance across Europe. The organisation connects outstanding social entrepreneurs with investors that are driven by the idea of creating sustainable, positive impact.

The Social Impact Banking unit at UniCredit was established in Italy in 2017. It has since been expanded to 10 other Group countries (Austria, Bosnia & Herzegovina, Bulgaria, Croatia, Germany, Czech Republic, Slovakia, Romania, Serbia, Hungary) with the aim to make a positive contribution to UniCredit’s local communities through impact finance, microcredit and financial education.


Vidici Busting Myth on Nordic Fintech: It’s Still an Under-served Sector

There is a general misconception that fintech in Europe and especially the Nordics is well funded, and it’s no problem to raise capital. This might be true for large companies such as Klarna, Tink and Trustly, but for early stage fintechs, the reality is very different.

[caption id="attachment_19731" align="aligncenter" width="900"] Stockholm City Hall[/caption]

The Perception of European Fintech

Funding rounds made by large fintech companies continue to break records, in valuations and in funds raised. Klarna, for example, has a market cap larger than all but one of the main Swedish banks. This gives the impression of a well-funded sector with a lot of growth. The truth is that most of the capital goes to top-tier companies in the later stages. Of all fintech investments in Europe in 2019, around 86 percent of the capital went into the top 10 deals. This left only 14 percent for the remaining companies, who are supposed to set the stage for the next wave.

Sweden Leading the Way

Having generated the most unicorns per capita — second only to Silicon Valley — there is no denying that Sweden is a tech leader in Europe, especially when it comes to fintech. Klarna, Spotify, Mojang have reached unicorn status and Trustly are all moving closer. Why Sweden and the Nordics have become such a great region to start tech companies can be attributed to several reasons.

There is a “digital native” population, for a start, along with a digitalised infrastructure with Mobile BankID, a highly educated population, and a tech ecosystem from generations of ground-breaking tech companies such as Ericsson, MTG, and King. The many fintech success stories serve as inspiration for others, and have helped to create a large community of entrepreneurs and developers.

They are used to working with, and scaling, fast-growing companies, and they bring great expertise and knowledge to bear. This has increased the number of new ventures started and resulted in fintech hubs, networks, and associations. It has also opened investors’ eyes to the potential of fintech.

Investment in Early Stage Fintech Lagging

Fintech investments in Europe during 2015-2020 were estimated to have been €190bn, of which €22.6bn were VC investments. Breaking that number down shows that on a European level, €11.3bn went to late stage and €8.8bn went to early stage fintech companies. This could be considered reasonable, given that later-stage investments demand larger tickets.

But of the European VC investments, only €300m went to early stage fintech companies in Sweden — over a five-year period, during which the sector was growing rapidly, with attractive opportunities. The numbers also show that the average ticket size in early stages in Europe is €5.6m, while in Sweden it is only €3.7m. A survey showed that for 65 percent of the Nordic fintech companies, the number one challenge is funding, ahead of achieving scale and regulatory issues.

This has many causes. In general, VCs have started to focus more on later stages to avoid taking on too much risk, especially given that fintech can be more capital-intense. There is also limited activity from CVCs, in particular bank CVCs, and many previous investors have stopped their investments all together. Investors may have a fintech focus or a Nordic focus, but those with both are rare.

This means that one of the hottest tech- and fintech hubs in Europe is under-capitalised in the stages when funding is most critical. Fintech companies experience the “Valley of Death” issue — a long time for research, development, product launch, commercialisation and traction before achieving business success. What makes this valley even deeper for fintechs is that they have to do all this in a regulated space (with or without a license), they might be dependent on partnerships with large, regulated entities, and time to profitability is often longer due to lower margins.

Keeping an Eye on the Target

There is a clear market opportunity here. The new generation of fintech companies need to be funded at an early stage, or we will be missing out on the next big success. Vidici is determined to keep targeting a tremendous investment opportunity of this under-served sector.

The firm’s mission is to build on one of Europe’s most attractive ecosystems for innovation and new ventures, and to support the next fintech wave. Having spent several years delving deep in the sector in the Nordics, creating a network of critical partnerships, and building relationships with companies and communities, Vidici is confident that it can support these skilled entrepreneurs on their journey to success.

Vidici’s quest: To find and support the next Nordic fintech stars.


Anna Radulovski: ‘Mompreneur’ Shares Struggles and Wins: is This the Next Unicorn in the Making…?

Anna Radulovski doesn’t just want to make money — she wants to make impacts.

Born and raised in the Ukraine, Radulovski now calls California home. In a podcast interview focused on empowerment and leadership, Radulovski spoke of her struggles — and triumphs — as a young graduate entering the international work force.

After moving to Bulgaria and receiving her first pittance of a pay cheque, she set her mind to never again accept “these coins, these peanuts” in exchange her time and talents. Now, she’s pushing the character limits to include all her titles on her LinkedIn profile.

Radulovski is the founder and CEO of WomenTech, the global network responsible for connecting 100,000 women, minorities and their allies via an annual science and engineering conference. The usual fanfare of the global event was moved online for 2020 and featured an interactive platform with keynote speakers, panel discussions, technical workshops and a tech job fair with face-to-face networking sessions spread over three days.

“During these hard times, many people are being laid off, losing their jobs; often women are the first ones to be asked to leave for unpaid vacation, and we’d like to help. Our focus is global since gender diversity and diversity in tech is not a regional issue,” Radulovski said in preparation for last year’s event, the main theme of which was “Being Human in Times of Disruption, Technology, and Innovation”.

The 2021 conference (scheduled for June 7-11) will build upon last year’s virtual success and include live ceremonies and breakout rooms as well as country and chapter leader sessions.

“In times of social isolation, crisis, and uncertainty it is more important than ever to feel supported by your family or your community. While many of our members are affected by the crisis whether financially or mentally, we see it as important as ever to give our helping hand to get inspired, connect, and find a mentor or career opportunities.”

Radulovski promotes the benefits of network membership from the WomenTech headquarters in Silicon Valley. The conference has already reached over a million people.

WomenTech Network has a symbiotic relationship with Coding Girls, Tech Family Ventures, Founder Institute and Tallocate — all of which count Radulovski among their co-founders and current leadership. Each organisation seeks to correct the gender imbalance in the tech industry. Coding Girls focuses on empowerment, education and engagement, while the others range from diversity-focused venture capital and female-founder fellowships to a bias-free, AI-powered hiring platform.

Like many female founders, Radulovski has experienced the tight-rope balancing act that comes with being a “mompreneur”. She warns women to choose a partner who will support — rather than stifle — their professional ambitions.

“Some countries and cultures are more open-minded while others are still narrow-minded, believing that women’s place is in the kitchen, looking after children or doing ‘feminine’ jobs,” Radulovski told Youth Time magazine. “On the other hand, we see a few role models in tech, who are excellent engineers, product developers, team leads, VPs, CEOs of tech companies, founders of start-ups.”

Radulovski is one such role model, lighting the way for future generations. For her tireless efforts, she was aptly named as the “Trailblazer” winner of the 2020 Diversity In Tech Awards.
There are many hurdles to deal with in a corporate culture that is still widely dominated by men, Radulovski says. “This leads to all kinds of specific challenges, including (but not limited to) limited funding, ‘men’s club’ workplace cultures, a lack of access to growth and resources.”

But, Radulovski says, women shouldn’t be discouraged — even if the numbers paint a dismal picture. She referenced a top-200 start-up list published by GeekWire last year, which only featured 16 women-led companies. Those figures might sound bleak, but according to Radulovski, they show incremental progress.

“A woman starting a tech business in a coworking space will, in addition to benefiting from the social atmosphere, feel like part of something that’s big, and growing. These are not wide-open spaces where individuals freelancers are huddled quietly at desks; they’re pleasantly busy, buzzy workplaces where, as corny as it may sound, there’s a sense of success in the air.”

Sounds like the perfect incubator for the next unicorn.


Lindsey McMurray, Co-founder of Pollen Street Capital: How Capitalising on Change Can Drive Benefits for Financial Services Industry

[caption id="attachment_19749" align="alignright" width="300"] Lindsey McMurray[/caption]

The firm identifies and champions businesses that are on the cusp of transformation, with agile operations that deliver solutions to customers underserved by mainstream providers.

“The financial services sector touches every aspect of our lives, something that has never been more apparent than in the past 12 months,” she says. “We consider our work through this lens; by accelerating change in financial services, we can have a huge positive impact on the overall economy.”

Lindsey McMurray has been a private equity and credit investor for more than 25 years, with a focus on the financial and business services sector. She chairs the Pollen Street Capital private equity and credit investment committees and serves as non-executive director of several portfolio companies, including Shawbrook, a leading UK challenger bank, consumer lender Oplo and Freedom Finance, a service provider to lenders.

“Across our private equity and credit business, we are dedicated to helping businesses reach a wider audience and reflect their potential,” McMurray says. “Through our credit strategy we can provide support to SMEs and community development and have a positive impact on regional growth.

“In our private equity work, we want to accelerate the progress of the sector by drawing on the capabilities of the entire portfolio. In doing so, we drive revenue at an accelerated pace, and create a community of trust, partnership and value-add.”

One of the ways it does this is through the Pollen Street Capital Hub. “Through our Hub initiatives, we can address portfolio-wide issues and develop solutions for common opportunities such as digital marketing, data and technology, as well as advancing the ESG agenda.”

Before founding Pollen Street Capital, Lindsey McMurray led the principal finance business for the Royal Bank of Scotland (RBS). From 2007, she led the launch of the Special Opportunities Fund within RBS, raising some £1bn from external institutional investors.

When not working to drive positive impact in financial services, Lindsey Mcmurray is a keen runner and completed the Marathon Des Sables in 2007 and 2011. She supports a number of charities, with a particular focus on mentoring children in state schools, supporting climate action initiatives through producing documentary films, as well as supporting the speech and language charity, Auditory Verbal UK, that provided early years therapy to her daughter Grace.


IBM Thought Leadership: Transparency Makes the Invisible Hand Visible Again, And Inclusive

[caption id="attachment_19763" align="alignright" width="300"] Paolo Sironi[/caption]

Paolo Sironi is the global research leader in Banking and Financial Markets at IBM, Institute of Business Value. IBV is the thought leadership centre of IBM.

Financial markets and economic systems are still exposed to periodic collapses, notwithstanding unprecedented institutional search for stability at all costs. Unorthodox central bank intervention and increasing regulatory action do not seem sufficient to save the macro-framework without a change in perspective. Kristalina Georgieva, chairperson of the IMF, reminded in a late 2019 CNN interview that “uncertainty is the new normal”. In 2020, the ECON Committee of the European Parliament identified that one of the top three challenges that central banks will be confronted with in the coming years is our lack of understanding of what a new “economic normal” looks like. As they observed in the turnkey paper “Challenges ahead for the ECB: navigating in the dark?”, some characterise this lack of knowledge of the new steady state, and therefore the lack of understanding of what the new equilibrium will be, as fundamental uncertainty. How can central banks decide on their policy response if they do not know where they are heading? It is in the nature of fundamental uncertainty that it is not measurable.

The Global Financial Crisis already revealed the weaknesses of the equilibrium assumptions, and that something was fundamentally broken in the main mechanisms that regulate or attempt to self-regulate financial services. During a public hearing in front of US Congress (after the default of Lehman Brothers) former FED Chairman Alan Greenspan declared that “I made a mistake in presuming that the self-interest of organisations, specifically banks, is such that they were best capable of protecting shareholders and equity in the firms ... I discovered a flaw in the model that I perceived is the critical functioning structure that defines how the world works”. Greenspan’s radical candour might exonerate him from responsibility, but accountability cannot be reduced forever by normatively removing the theoretical problem. Instead, a positive theory is required, as identified in the theory and principles of Financial Market Transparency (FMT) published in 2019.

The rude awakening of 2008 forced the financial services industry to face a two-fold reaction, both inconclusive.

On the one hand, behavioural finance gained new academic thrust in the search for a response to the behavioural problem of intermediaries and investors, qualified as irrational. Notwithstanding the relevant insights, the approach has dealt only partially with the central issue that is essentially biological, having focused on the idea that apparent investor’s irrationality could be resumed to a rational state once cognitive biases had been exposed. From a neurological perspective, it would be like attempting to halve human brain in order to suppress its supposedly “emotional” side. Simple, right? Instead, FMT explains why humans tend to underestimate long tail probabilities as a reaction to uncertainty-based survival needs. Uncertainty is typically considered exogenous to investment decision-making: forgetting the Black Swan facilitates a more “reassuring” risk-taking appraisal. Same happens to most mathematical models, which are largely based on the assumption that available data is sufficient to calibrate the algorithms. Therefore, the FMT provides needed reasoning to keep financial models and algorithms open, instead of closing the reference framework towards another collapse, as the GFC demonstrated.

On the other hand, regulators had to confront with industry failure of self-regulating capacity. Signs of stress had already emerged in the ’90s, with a repetition of crises increasingly more systemic until the epilogue of the sub-prime mortgage bubble. The strengthening of regulatory safeguards generated an intense debate because of skyrocketing costs of compliance. Instead, the deep anchoring in the causality of the crisis to reference theory might not have been fully discussed and understood. The FMT makes that step, recognizing that we are indeed operating in an environment of fundamental uncertainty, which is the norm in finance. FMT is a positive and practical theory that investigates the evolution of bank business models facing digital disruption on regulated platform economies. It allows to make uncertainty endogenous to investment decision making, thus generate economic antifragility at micro and macro level.

How does it to that? FMT uses an Occams razor to identify scientifically new biological micro-foundations for economic action, and discloses the gap between homo sapiens and homo economicus. It provides a new starting point and a more reasonable understanding of financial markets functioning based on elements that make homo sapiens conscious. In doing so, it opens economic theory to redefine the meaning of money, investing, value, and performance by recognising the endogeneity of fundamental uncertainty on which they lay. Our relationship with money is largely emotional because homo sapiens biology faces fundamental uncertainty in all decision-making processes, over the irreversible time. Consequently, emotion cannot be excluded - also on digital - in a false claim of homo economicus’ rationality that can be true only ex-post.

A theoretical change paired by regulatory action is a needed step to de-anchor industry mindset from efficiently inefficient output-focused economies, thus allow for sustainable digital transformation towards outcome-oriented economies, which only win on digital. The FMT institutionalist approach is required to avoid the pitfalls of mainstream financial theory and anchor the current process of digital transformation of business models to investors’ biology, from which that of markets can be derived (responding to the adaptive market hypothesis of Professor Andrew Lo of the MIT Sloan School of Management). Therefore, FMT allows to understand how to remunerate shareholders by generating sustainable value for clients in a transparent regime. It is regulatory transparency – as in the European MiFID II – that is fostering deeper and holistic understanding of the biological micro-foundations of financial markets, letting a “more reasonable” and positive theory emerge that guides business model transformation on a disrupted social, economic, and digital landscape.

To generate value for clients and survive, the banking industry already had to face a bifurcation of strategies which led either towards a fast race-to-zero-price competition, or to the complex search for transparency-driven competitive advantages. On one side, some institutions entrenched in a last-ditch defence of prevailing relationship models, still centred on the assumption of rational agents’ behaviour, fully efficient information, and instantaneous price dynamics that are supposed independent. Instead, the latter are often influenced by herding and self-referential (i.e., opaque) generation of information. Therefore, the advent of full regulatory transparency (e.g., the reduction of opacity in the European MiFID II) and the impact of digital technology applied on distribution channels of products and their marketing to clients - still designed to conform with mainstream reference theory - has only accelerated the compression of business margins. This led to the search for an efficient scaling on low-cost volumes only (e.g., passive investing). On a larger scale, this trend can produce more endogenous instability because intermediaries become more concentrated in increasing complexity. On the other side, opening financial markets to a business vision that leverages on content (i.e., transparent information and communication) allows clients - real drivers of business value - to reclaim centre stage of any relationships based on trusted and “conscious banking” engagement. In fact, regulatory transparency reveals the fundamental uncertainty of the system stability, behind any attempts of arbitrage. Only dynamic management of financial relationships on a decision-making space mediated by time (irreversible element of human behaviour) allows making sense of investment goals and purpose. This is the target of new financial services platforms, cantered on the financial planning of clients’ lifestyles (e.g., Goal Based Investing). Only making platform participants aware of the generated value makes them also willing to pay for access, transforming the economic relationships of international banking asked to operate on platform economies.

The FMT understanding of how regulatory transparency can turn investment relationships into a competitive advantage, based on real value-generation for participants, re-sets the economic foundations of financial services on more sustainable revenue streams. These can be finally centred on human goals and purpose, improving ecosystem antifragility and benefitting the whole economy, revising the perspective on what the contribution of exponential technologies should be, such as fintech innovation and artificial intelligence, to unlock added value. Embracing transparency and forging a new theory of value for financial services can truly help to create positive economic impact that is aligned with the UN Development Goals.

Democracy is a platform, society is a platform, economies are platforms, and financial services are platforms. On platform economies, transparency is the core governance principle that generates trust. In a world facing growing uncertainty (deep environmental issues, strong digital shifts and concerning geopolitical tensions) transparency only can help humanity to unlock inclusive economic value, and turn change into progress. Ultimately, transparency is the new invisible hand made visible again. i

About the Author

Paolo Sironi is the Global Research Leader in Banking and Financial Markets at IBM, Institute for Business Value. He is senior advisor for selected global accounts, assisting service teams in C-level conversations to leverage IBM portfolio of exponential technologies. He is one of the most respected Fintech voices worldwide and co-hosts the European edition of Breaking Banks podcast. Paolo founded the German startup Capitects, then acquired by IBM, and directed the quantitative risk management department of Banca Intesa Sanpaolo. He is celebrated book author on digital transformation, quantitative finance and economics.

Paolo’s website: thePSironi.com

FMT link to Amazon: amazon.com/Financial-Market-Transparency-Theory-Principles/dp/6202086777/ref=asap_bc?ie=UTF8


Crescat Capital: Navigating the Boom Bust Cycle

Kevin Smith, Crescat Capital founder and chief investment officer, has managed money through the tech bubble, dotcom bust, housing bubble, global financial crisis, the longest bull market ever, the Covid recession, and the present stimulus-led recovery.

He launched the Global Macro Fund in 2006. Since then, the fund has delivered a cumulative net return of 631.4 percent versus a 362.6 percent total return for the S&P 500 Index. The fund’s negative “downside capture ratio” means that it also generated positive returns in down months for the market. “This is evidence of the team’s ability to capitalise on its bearish macro themes through its short-selling acumen,” says Smith.

In March 2020, when the Covid downturn hit hardest, Crescat was prepared. The Global Macro Fund was up 20.7 percent that month thanks to its short positions — while the S&P 500 Index was down 12.4 percent.

The fund subsequently delivered strong returns through year-end due to its long positions to finish the year up 65.6 percent net. All three Crescat funds made Bloomberg’s top ten performing hedge fund list for 2020, according to its Hedge Funds Brief newsletter.

“Performance post-March 2020 was driven by our global fiat debasement macro theme,” says Smith, “which continues to be our largest thematic exposure across all Crescat strategies today.”

“We express this theme through our activist precious metals positions, and launched an entire fund dedicated to it in August 2020 — the Crescat Precious Metals Fund. Through May 2021, this fund has generated a cumulative net return of 250.7 percent versus a modest 7.2 percent return for its benchmark, the Philadelphia Gold and Silver Index, a period of just 10 months.”

Through Crescat’s partnership with esteemed exploration geologist Quinton Hennigh, the firm is able to identify a portfolio of companies with the world’s most prospective gold and silver deposits. “We are leading the charge to fund exploration and discovery of the new, large, high grade deposits to fill the supply void left by the majors after 10 years of underinvestment.”

Additional opportunities augment Crescat’s precious metals positioning, adds Smith. “In our Global Macro and Long/Short hedge funds, we remain committed to shorting overvalued equities in what today is the most overvalued US stock market ever, according to our 16-factor valuation model.”

The firm’s short positions are part of an overriding Great Rotation theme. There are inflationary pressures from all three major macro drivers in the economy — demand, supply, and monetary dilution. Crescat believes investors will be rotating out of over-valued long duration financial assets and into undervalued commodity cyclicals and inflation hedge assets, including scarce natural resource stocks.

The Crescat Global Macro Fund is where investors can get exposure to the full panoply of Crescat’s macro themes, including Great Rotation longs and shorts and currency options to mitigate the risk of the China banking and currency bubble.

Crescat Capital Management Team

[caption id="attachment_19788" align="aligncenter" width="236"] Kevin Smith: Crescat Capital founder and chief investment officer[/caption]

Kevin Smith has been managing investment portfolios since 1992, in a career spanning multiple business cycles. He has been the lead portfolio manager of Crescat’s five investment strategies since their inception. He is the creator of Crescat’s firmwide global macro investment process and systematic equity valuation model.

Prior to founding Crescat, he worked as a wealth advisor with Kidder Peabody. He holds an MBA from the University of Chicago Booth School of Business, with a specialization in Finance and a concentration in Statistics. He holds the Chartered Financial Analyst designation.

[caption id="attachment_19789" align="aligncenter" width="237"] Linda Smith, CPA: Crescat Capital co-founder.[/caption]

Linda Smith, CPA, is a co-founder of Crescat Capital. As chief operating officer, she manages business operations, including finance, regulatory compliance, and client service. In prior roles at Crescat and its predecessor companies, she has served as controller from 1997-2012, and the in dual position of chief financial officer and chief compliance officer from 2012-2015. She became COO in 2015.

Linda Smith came to Crescat with significant investment industry and public accounting experience from prior employment at Kidder Peabody and EKS&H (now Plante Moran) and corporate experience as controller of Pharmajet, a biotech company.

Born and raised in New Jersey, she earned an MBA from the University of Chicago, Booth School of Business and a BA in English Language and Literature from Tufts University. She is a Certified Public Accountant.

[caption id="attachment_19790" align="aligncenter" width="237"] Tavi Costa: Crescat Capital member and portfolio manager.[/caption]

Tavi Costa is a member and portfolio manager at Crescat Capital; he has been with the firm since 2013. He built Crescat’s macro model that identifies the current stage of the US economic cycle through a combination of 16 factors.

His research has been featured in financial publications such as Bloomberg, The Wall Street Journal, CCN, Financial Post, The Globe and Mail, Real Vision, and Reuters. Tavi is a native of São Paulo, Brazil. Before joining Crescat, he worked with the underwriting of financial products and in international business at Braservice, a major logistics company.

Tavi Costa graduated cum laude from Lindenwood University in St. Louis with a BA in Business Administration.

[caption id="attachment_19791" align="aligncenter" width="234"] Quinton Hennigh: Geologic Advisor.[/caption]

Quinton Hennigh, PhD, is a globally renowned exploration geologist with 30 years’ experience in the mining of precious metals. Hennigh began his career in gold exploration after obtaining his PhD in Geology/Geochemistry from the Colorado School of Mines. Early in his career he worked for major gold mining companies including Homestake Mining (now Barrick Gold Corp.), Newcrest Mining, and Newmont Corp.

Later, Quinton Hennigh founded Novo Resources Corp (TSXV: NVO), acting as its CEO and currently serving as chair. He has played a key role in major global discoveries such as Novo’s Pilbara assets in Western Australia, First Mining Gold’s Springpole gold deposit in Ontario, Kirkland Lake Gold’s Fosterville gold mine in Australia, the Rattlesnake Hills gold deposit in Wyoming, and Lion One’s Tuvatu gold project in Fiji.

For more information, contact info@crescat.net

Disclosure statement


Inclusive Markets Are Not Born: How UNCDF is Supporting Inclusive Digital Economies by Advancing the Right Policies and Regulations

If you were asked to describe in one word how digital has transformed finance, you wouldn’t be able to do it. Consider a few points.

First, when it comes to the key players in the financial ecosystem, the pond has a lot more fish. In the age of digital finance, capital relies on digital rails provided by mobile network operators. For that matter, in emerging markets across Africa and Asia, telecom companies like Airtel, Vodafone, MTN, and Orange are not only digital service providers. They are effectively financial service providers. And in this new financial ecosystem, the bank is not the central actor for most customers. The mobile network operator is. They serve as the link between banks, financial service providers, super platforms, and the mobile devices that are now the most important tool to access finance. And MNOs are not only facilitating the flow of commerce, but the flow of personal and financial data that can unlock finance from lender to recipients. Then, of course, there are the super platforms where commerce, capital, search, social media and financial inclusion are intersecting at global scale and unprecedented speed: Google, Facebook, and Alipay just to name a few. And if that wasn’t crazy enough, these actors are often in competition with each other.

"For more than 25 years, well before the rise of the digital economy and before anyone was considering a 4th Industrial Revolution, the UNCDF worked with national governments in more than 40 countries to improve the use of financial services."

If the complexity around access to capital has increased, so has the complexity around the challenges of regulating finance. A central driver of this complexity is the conflict between securing data privacy and validating digital identity. On the privacy side, there are questions relating to service channels, including who and under what conditions can cash agent distribution networks be leveraged; on the payment side, who can be an issuer and under what conditions; and on the store of value, where are funds held and what is the legal treatment? On the digital ID side, how can consumer protection be assured and mechanisms for redress be leveraged when such protection has been violated? Then, of course, there are the critically important efforts of supporting anti-money laundering/combating the finance (AML/CFT) policies and tools.

So, when you aggregate all of these challenges, they all meet at a fundamental question for advancing sustainable development: How can we ensure that financial regulation enables effective flow of finance while also promoting the financial health of the widest swath of people? Answering this question is most critical in the world’s least developed countries (LDCs) where the financial needs are greatest and the flows of formal finance are scarcest.

The answer lies in an irrefutable reality. That innovative and inclusive markets do not just happen. They need policies and regulations to create the environment to function effectively, especially in the financial services sector. Said simply, inclusive policies lead to inclusive markets. So, how can regulators design and enact those regulations and policies?

For more than 25 years, well before the rise of the digital economy and before anyone was considering a 4th Industrial Revolution, the United Nations Capital Development Fund (UNCDF) worked with national governments in more than 40 countries to improve the use of financial services. Since 2010, our focus gravitated towards digital financial services,

If there is one aspect of our experience that remains relevant in this new age of finance, it is that smart policymaking can help technology contribute to inclusive markets. But getting the right policies and regulations in place are probably more important than at any other time. If legal reforms fail to capture the potential of new business models and technologies, then the prospect of 'being left behind' is all too real, and the impacts will be all too severe, particularly for the worlds most marginalised communities. This is particularly the case given how the gap in access to digital financial services falls hardest on women and rural communities. Yet, despite the urgency, governments are not always sure where to start with policy or regulatory reforms and how to apply available information and resources.

In response, UNCDF has launched a Policy Accelerator, precisely to provide direct support to policymakers and regulators to bridge the gap between knowledge and implementation. The interdisciplinary team of specialists collaborate with regulators and policymakers to design a practical policymaking process that leverages global research, relevant publications, and peer network engagement. In addition to ongoing support for policymakers and regulators across Africa, Asia and the Pacific, we work closely with partners who share our goals to create enabling regulatory environments.

UNCDF’s method entails:

Identifying the policy opportunities, whether it is economic development, financial inclusion or policy harmonisation

Assessing the current market and regulatory landscape, while looking to learn from peer markets and align with global standards

Working with policymakers and regulators to identify the most suitable options available to them

Creating a framework for dialogue and consultation with stakeholders (like service providers and civil society).

Once the government decides on the best policy/regulatory option for the moment, UNCDF works with them to develop impact metrics and create a training program for the regulators and supervisors.

Leveraging this method in 2020, UNCDF has trained more than 75 regulators and provided focused technical assistance to 15 countries. Eight policies have been introduced or improved, despite the upheaval of a global pandemic. This success is recognised by financial support for the programme from the European Union, the Government of France, and the Bill and Melinda Gates Foundation.

Perhaps our best achievement is the launch and operation of the “Africa Policy Accelerator,” with support from the Bill and Melinda Gates Foundation. The “Africa Policy Accelerator” is UNCDF’s bespoke platform to provide targeted technical assistance and capacity building for policymakers and regulators in14 African markets with potential to ‘leapfrog’ to digital finance and benefit women’s financial inclusion and regional harmonisation. UNCDF is augmenting its work on the ground by contributing knowledge and policy guidance through the G7 Partnership for Women’s Digital Financial Inclusion in Africa as part of France’s 2019 G7 Presidency. With our participation in this high-level forum, we are looking to support policymakers and regulators to conduct country-level research on barriers to women’s economic empowerment to address critical policy and regulatory gaps, focusing heavily on francophone markets in West and Central Africa.

Looking ahead, UNCDF will leverage its approach, experience and expertise in financial inclusion towards the creation of the UNCDF Policy Toolkit. The Policy Toolkit will be a freely available collection of practical resources – including downloadable templates, worksheets, and sample materials -- that will enable regulators and policymakers to nimbly respond to the complex changes in markets and with inclusive policies and regulations.

Rather than proposing a new model for policymaking and regulatory development, we designed our Policy Toolkit in a sequence that parallels a logical approach to policy and regulatory design, while being adaptable so that users can apply it to ocal contexts. The resources within the Policy Toolkit focus on a stage, topic, or task related to the policymaking process, such as:

Identifying policy opportunities for DFS,

Assessing the current market, and

Improving regulatory reporting processes.

For example, instead of brainstorming your own list of stakeholder interview questions, we’ve drafted 50+ questions organised by theme and sector that you can use as a jumping off point. Or if you are looking for opportunities to improve regional harmonisation of digital financial services, we outline a sample process with supporting materials to help you work through it systematically.

We anticipate the Policy Toolkit will be fully live, and available to policymakers and regulators, by Q2 2021.

Digital finance will not become simpler with time. More actors will enter the pond and new technologies will alter the landscape. And one of, if not the most critical factor, in preventing this complexity from becoming a barrier to inclusive growth is delivering the right policies and regulations. UNCDF is ready to do its part to help policymakers and regulators deliver those policies and regulations. Innovative and inclusive markets are not born. They are made. We will work to keep making them now and into the future.

About UNCDF

The UN Capital Development Fund makes public and private finance work for the world’s 46 least developed countries (LDCs).

UNCDF offers “last mile” finance models that unlock public and private resources, especially at the domestic level, to reduce poverty and support local economic development.

UNCDF’s financing models work through three channels: (1) inclusive digital economies, which connects individuals, households, and small businesses with financial eco-systems that catalyse participation in the local economy, and provide tools to climb out of poverty and manage financial lives; (2) local development finance, which capacitates localities through fiscal decentralisation, innovative municipal finance, and structured project finance to drive local economic expansion and sustainable development; and (3) investment finance, which provides catalytic financial structuring, de-risking, and capital deployment to drive SDG impact and domestic resource mobilisation.

[caption id="attachment_19800" align="aligncenter" width="400"] By Ahmed Dermish Lead Specialist, Policy and Regulation for Inclusive Digital Ecosystems, UN Capital Development Fund[/caption]


Deloitte: Changes on the Horizon for Europe’s Alternative Investment Fund Market

The European Commission’s ongoing efforts to establish the Capital Market Union have reached the alternative investment manager’s market in Europe.

It has launched a legislative review cycle of the Alternative Investment Fund Managers Directive (AIFMD), giving the industry the first chance to weigh-in on the proposed changes and the future functioning of the alternative investment fund market.

In June 2020, the European Commission issued its review report on the AIFMD’s application and scope to the European Parliament and Council. Overall, the report concluded that AIFMD was successful in establishing an internal market for alternative investment funds, providing a high level of investor protection, and enabling EU-wide risk monitoring by the authorities. It also identified several topics for review to strengthen and adjust the framework.

"The fact that depositary banks can only provide their services in the country where they are domiciled runs counter to the idea of the Capital Market Union."

To receive industry feedback, a market-wide consultation was issued with questions across 11 topics. This consultation closed on January 29, and the industry has shared its perspectives on the market within the European framework. The conclusions attest to a generally well-functioning market, and discourages changes by the European Commission for the AIFMD’s Level 1 provisions, suggesting a focus legislative texts for Levels 2 and 3.

Several topics emerged, where industry participants differed on the best approach for the commission. These points diverge further between member states, driven by the respective local flavour of the industry.

Investor Access to Alternative Investment Funds

Should the AIFMD provide broader investor access to alternative investment funds? In the current market, alternative investment funds are available only to professional investors, as defined under the Market in Financial Instruments Directive (MiFID). While some national laws allow broader access (“well-informed investors” under Luxembourg laws), these national variations are not harmonised, and many clients are left out of the alternative market’s rise in assets and returns.

With private equity, real estate and infrastructure delivering highly sought-after returns in a low interest rate environment, European investors are looking for easier ways to access these products, and all retail investors are not equal. Some ultra-high-net-worth individuals still qualify as retail investors, despite having the resources and experience to understand and manage the risks. At the same time, the 2018 revamp of the MiFID framework left the criteria of client categorisation largely unchanged, showing that European regulators have no appetite to increase the population of professional investors in the market.

One key focus is whether the AIFMD review will tackle this access obstacle, or whether the industry will be left to wait for a broader change under the MiFID framework.

Amendment or Extension?

In 2013, the AIFMD introduced a sub-threshold manager regime, where managers of alternative funds below a certain threshold of AUM did not need to apply for a licence, but merely register with authorities. While theoretically useful for new market entrants, the applied assets under management size (€500 million/€100 million when leveraged) is very quickly exceeded in practice. It has done little to increase the entry of new players. Applying for a full license is often expensive, requiring substance and expertise; this can deter even large third-country players from entering the European market.

The consultation sparked a debate to either (i) extend the existing sub-threshold regime to allow for larger asset bandwidths considered “below threshold”, or (ii) introduce a “light” license for players of up to €2bn, to reignite market growth and attract more players. Whichever direction is taken, a study should be conducted to assess the relevance of the sub-threshold regime in today’s climate and the average size of players in the European alternative investment market.

Outsourcing and Delegation

Over the years, Luxembourg has developed a strong notion of substance requirements for management companies that delegate certain of their functions. It ensures that any manager retains at least one crucial function of portfolio management and risk management and can effectively service the retained function.

This call for substance is not harmonised across the European Union, but is nationally-driven. And while other member states are slowly following this trend, there are expectations that the AIFMD review will balance the substance rules and introduce a minimum level that is acceptable Europe-wide. The recent political environment surrounding Brexit has brought it to the forefront of the discussion.

European Depositary Passport

The fact that depositary banks can only provide their services in the country where they are domiciled runs counter to the idea of the Capital Market Union. It even runs counter to the European single market and its principles of freedom of establishment and freedom to provide services. Numerous European authorities have highlighted situations where a limited number of depositary banks in certain countries had led to quasi-monopolies, something a European-wide passport could address. The AIFMD review is a chance to rectify this.

The market has rather mixed feelings about this passport. On the one hand, large groups and top European depositaries see a chance to streamline and consolidate their operations. On the other, it introduces a new bar for market entrants, who will compete locally and against the entire European market of depositary banks. At least one of the large depositary groups has spoken out against such a passport due to its practical implications.

Another argument against these passports is the possible strain on consumer protection of the alternative investment market. By increasing the distance between investors and depositary banks, whose strong control function contributes to investor protection standards within the European Union, these standards may fall and present cross-border hurdles, at the cost of investors.

The call for such a passport pre-dates the AIFMD and was first voiced in the context of the UCITS regime. While the European Securities and Markets Authority (ESMA) has considered such a passport under both regimes, it has not issued an outright recommendation to introduce one. Instead, it has asked the European Commission to assess the passport’s risks and benefits.

Ultimately, the extent of the final changes remains to be seen in the regulatory text’s first draft, which is expected at the end of Q2 or in early Q3. Nor is it known how far the European Commission will honour the industry’s wish for changes through Level 2 and 3 regulatory texts, rather than a fundamental reworking of Level 1.

It is prudent for the industry as a whole to follow the current discussions and to review the consultation feedback to gain an insight into the market opinions, and the directions proposed. While the European Commission is of course not bound by the findings, they have not ignored feedback in the past.

The industry has only recently concluded its efforts regarding MiFID II, which indirectly affected alternative fund managers as product providers, and its efforts around Packaged Retail and Insurance Based Investment Products (PRIIPs). The European Commission has now announced the industry’s next major change. MiFID II and PRIIPs have shown that these changes should not be viewed as a compliance burden, but also as an opportunity to reposition, strengthen and explore new sectors and activities.

If carefully anticipated, all the topics presented here could represent key opportunities for market players, further strengthening the dynamic alternative investment fund market in Europe.

About the Authors

[caption id="attachment_19815" align="aligncenter" width="354"] Lou Kiesch[/caption]

Lou Kiesch joined Deloitte Luxembourg in November 2001 as Director in the Investment Management Services department, where he currently heads up the Compliance and Regulatory Practice.

Since 1 June 2005, he is a partner within Deloitte Luxembourg’s Investment Management Services.

Lou has a work experience of almost 30 years within the financial industry gained in Luxembourg, London, Frankfurt and Paris.

Prior to joining Deloitte, Lou was with Allianz Asset Management and Fidelity Investments where he was in charge of the Continental European Compliance Department.

Lou is co-founder of the Luxembourg Compliance Officer’s Association (ALCO) where he occupied the role of Vice President until April 2003. Lou was a member of different ALFI working groups and chaired ALFI’s committee for International Distribution. He was furthermore Vice-

President of the ALFI Regulatory Board and served the Alfi Board for 10 years. He was responsible for the Distribution Committee at Alfi and represented Deloitte at the EFAMA Distribution Committee.

[caption id="attachment_19816" align="aligncenter" width="354"] Xavier Zaegel[/caption]

Xavier Zaegel is leading Deloitte’s Consulting Investment Management & Private Equity / Real Estate Sub-Service Line in Luxembourg.

Before joining Deloitte, he worked for another audit firm where he focused on the audit of banks and vehicle with derivative instruments or guaranteed funds. He was also seconded to a Capital Markets department in London for 1 year.

Xavier is member of ABBL, ALFI, EFAMA and Invest Europe working groups. He is certified Financial Risk Manager from GARP (the Global Association of Risk Professionals).

About Deloitte Luxembourg

With more than 120 partners and 2,300 employees, Deloitte Luxembourg is one of the Grand Duchy's largest, strongest and oldest professional services firms. For 70 years, our talented teams have been serving clients in various industries delivering high added-value offerings to national and international clients in audit and assurance, consulting, financial advisory, risk advisory, tax, and related services. Deloitte Luxembourg is part of the global Deloitte network that is represented in more than 150 countries and territories and serves four out of five Fortune Global 500® companies. Learn how Deloitte’s people make an impact that matters at www.deloitte.com.


Curinde: Caribbean Island of Curaçao Becoming Logistical Trade Hub

Curinde’s business parks in the Caribbean isle of Curaçao have an enticing offer: pure possibility.

[caption id="attachment_19819" align="aligncenter" width="900"] Harbor Free Economic Zone: Aerial view[/caption]

Curaçao is ideally located at the crossroads of trade routes between South America, the US and Europe. Curaçao Industrial & International Trade Development Company, Curinde, is a semi-government company with 85 percent of its shares belonging to the government of Curaçao, and 15 percent owned by APC, a general pension fund.

As the managing company and developer of three business parks in Curaçao, Curinde guides and assists investors interested in establishing a company in one of its three business parks: Harbour Free Economic Zone, Airport Free Economic Zone, and Industrial Park. And it does that well: it recently received an award as Best Free Economic Zone Manager in the Dutch Caribbean for 2021.

[caption id="attachment_19820" align="aligncenter" width="900"] Airport Free Economic Zone[/caption]

Pending Developments

New Haven Industrial Zone

The New Haven Industrial Zone is an area in the Harbour Free Economic Zone that will be separated and designated industrial. Curinde has confidence that the project will strengthen the country’s economy, generate employment and contribute tax to the government.

Tropic Shopping E-commerce Platform

Curinde has launched an e-commerce platform, www.tropicshopping.com, for companies to sell their products online. Tropic Shopping is open for local and international companies, making it easier to start selling.

The platform offers safe and secure SSL-encrypted payment options for major credit and debit cards, as well as PayPal. A shipping solution is also provided.

The platform dovetails perfectly with the government’s plans to convert Curaçao into an export nation. The pandemic underscored the importance of collaboration, communication, and co-ordination. “It pushed us to become creative and adapt to changes,” says MD Jacqueline Jansen.

Curinde’s Parks

A Free Economic Zone is a fenced-in Customs area where one can import, export, store, package, label, assemble and produce goods, as well as provide services — all free from import duties.

One of the requirements for establishing in the Free Economic Zone is that a minimum of 75 percent of a company's annual turnover must be generated from export, while a maximum of 25 percent may be generated from sales within Curaçao.

In case of local sales, the normal import duties and taxes are applicable, while a permit is required to sell goods to the local market.

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Impact on the Community

Curinde operates on land, acquired 41 years ago, that has not been an object of spoilage. It has successfully completed the ISO certification process and obtained ISO 28001 (Prevention of Risks) and ISO 18788 (Private Security and Security in the Supply Chain) in co-operation with Cursecure, Curinde’s associate security company.

The next step is obtaining Authorised Economic Operator (AEO) status. AEO certification means an entity involved in the international movement of goods has been approved by, or on behalf of, the local Customs authorities. It complies with World Customs Organisation (WCO) or equivalent supply chain security standards. By obtaining the AEO certification, Curinde will prove its compliance with relevant existing international laws and regulations as well as those required by the Organisation for Economic Cooperation and Development (OECD).

Management of Product or Service

The activities performed by Curinde are characterised in strict accordance with the law and best practices that prevent illegal activities, especially those related to counterfeit, piracy, and forgery.

The joint work with Customs authorities is a priority for Curinde in its aim for a safe and transparent commerce.


CFI.co Meets the MD of Curinde, Jacqueline Jansen, and Her Dynamic Team: Curaçao’s Booming Business Parks are in Safe Hands

[caption id="attachment_19828" align="alignright" width="300"] Managing Director: Jacqueline Jansen[/caption]

Curinde is the operator and developer of three business parks in Curaçao.

Jacqueline Jansen was born and raised in Curaçao, and has occupied various positions at Curinde: assistant to the head of finance, and assistant to the managing director on personnel-related issues such as career planning, job evaluation and counselling.

After just a few months at Curinde, Jansen was appointed head of the finance department in 1989. She stayed in this position until 2012, responsible for preparing the company’s financial planning and budget, financial forecasts, annual reports and managing financial resources. In 2012, Jansen was appointed managing director. She has a clear vision for the company, and works closely with her dedicated team.

She now carries responsibility for three business parks with a client base of 200 companies.

One of the major achievements in recent years is how the Curinde team, in cooperation with other stakeholders, handled counterfeit in its business parks. Trainings and seminars created awareness on the topic. Due to Jansen’s experience and respect for intellectual property in the Free Economic Zones, based on laws and regulations in Curaçao, she was invited to participate as speaker and panellist in international conferences organised by the International Anti-counterfeiting Coalition (IACC), the International Trademark Association (INTA) and Interpol.

Jansen is also a board member of two entities in Curaçao. She is goal-orientated, resolute, and a team player.

The Team of Curinde consists of dynamic professionals with deep experience in their field. The Investment Promotion & Acquisition department is in charge of attracting and assisting new clients. Once the clients are established, aftercare is provided by the client management department.

The finance and IT departments and secretaries provide the necessary support for the daily operation of the company. Jansen has the support of Cursecure and Investigations and the P&P Safety Group. Cursecure oversees all security-related matters in Curinde’s business parks and the head office.

[caption id="attachment_19829" align="aligncenter" width="900"] Curinde's Dynamic Team[/caption]

It provides 24/7 security services. The CEO of Cursecure is a former police officer with broad experience in security issues. With his team, he controls the premises. P&P Safety Group is responsible for keeping Curinde’s business parks safe.

Business owners want to establish their companies in a safe and secure environment where they can concentrate on doing the job at hand. Security and safety are vital aspects considered in the decision-making process when selecting business locations — and Curinde has this one covered.


CFI.co Meets the CEO of Retail Opportunity Investments Corp. (ROIC): Stuart Tanz

[caption id="attachment_19810" align="alignright" width="300"] CEO: Stuart Tanz[/caption]

California-based Retail Opportunity Investments Corp. (ROIC) acquires, owns and manages grocery-anchored, open-air shopping centres on the US West Coast.

Since starting operations in 2009, ROIC has grown its asset base sevenfold. With a portfolio today totalling some 10 million square feet, ROIC is the largest publicly traded (US Nasdaq) REIT focused on West Coast shopping centres.

“Over the past 12 years, we have worked carefully and deliberately at amassing a portfolio of grocery-anchored shopping centres diversified across the most sought-after, demographically strong markets spanning the West Coast, from our headquarters in San Diego all the way up to Seattle,” explains CEO Stuart Tanz. “Our West Coast and grocery-anchor focus is what truly sets us apart, and it has been instrumental in our ability to build a quality portfolio.”

While the retail bricks-and-mortar industry has been hard-hit during the pandemic, ROIC’s portfolio has performed remarkably well. During multiple business shutdowns, all ROIC shopping centres remained open — with many of its key tenants achieving record sales. Tanz credits ROIC’s resiliency to its community-driven focus.

“By design, we have always focused on leasing our portfolio to essential tenants, most notably supermarkets and drug stores, providing basic household goods and services that are always in need, and our communities have come to depend on, especially in difficult times.”

For eight years running, ROIC has achieved a best-in-class portfolio lease rate that today is an impressive 97 percent. Tanz attributes the consistent performance to a hands-on approach “Each year we lease approximately double the amount of space that was actually scheduled to expire,” he says, “exemplifying how we proactively work our portfolio. We seek opportunities at every turn to enhance tenancies and increase the intrinsic, long-term value of our centres.”

As well as being a leader in the US REIT industry, ROIC fosters a corporate culture that cares for employees and tenants — as well as communities and the planet. ROIC’s ESG policies are aligned with the United Nations Guiding Principles on Business and Human Rights, and ROIC supports diversity, equity and inclusion in the workplace. ROIC is actively engaged in enhancing the environmental performance of its portfolio.

“Since day one, we’ve been committed to running our business responsibly and equitably,” Tanz says. “We are committed to being a leading steward in terms of operating our shopping centres in an environmentally sensitive and sustainable manner. We take great pride in the business that we built, the shopping centres that we own, and the strong relationships that we have fostered in the communities we serve. We all strive to make a difference.”

As e-commerce continues to grow, leading online retailers are now establishing physical stores to boost overall sales and solve “the last mile delivery conundrum”. Amazon’s acquisition of Whole Foods, a prominent supermarket chain with stores across the US, is a prime example.

Tanz explains: “These online retailers, like Amazon, understand the value of having a physical presence at key, high-traffic locations. Shopping centres that are located in the heart of densely populated communities, and feature supermarkets that draw daily consumers, are well-suited for meeting their objectives.”

As a growing number of omni-channel retailers and real estate investors are gravitating towards grocery-anchored centres, Stuart Tanz believes the best is yet to come for ROIC. “As we look ahead, we believe that we are ideally-positioned, with our strong, grocery-anchored portfolio and West Coast leadership position to continue generating consistent growth and building value for many years to come.”


Brand new Brand: Kaleido Puts Harmony, Colour and Passion into its New Look

[caption id="attachment_19848" align="alignright" width="300"] COO Gian Nay and CEO Rolf Bauer[/caption]

Kaleido Privatbank AG, formerly known as AP Anlage & Privatbank AG (AP Bank), is launching an ambitious rebranding of the 25-year-old boutique bank in record time.

The Swiss private bank’s new leadership team, CEO Rolf Bauer and COO Gian Nay, are heading the transformation to a new brand identity, Kaleido Privatbank.

The new name comes from the term kaleidoscope, a tube with oscillating glass fragments that collide to create a mesmerising rainbow of refractions. “Different pieces harmonically come together in different shapes and forms,” Bauer says, “and every time it gives you a different picture with a different perspective.”

The executive team decided that this symmetry of a creative process was a fitting theme for the bank’s new brand image. “As in a kaleidoscope, we bundle different elements into a holistic picture. We create individual solutions combining in- depth wealth management expertise, state-of-the-art technology and strong network-expertise for our clients.

“The idea of the so-called collective intelligence is the bedrock of the Kaleido rebranding in a world where everything is networked and digitalised. We believe in the idea of swarm intelligence, and this is something that certainly stands for Kaleido.”

The bank has built a network of partnerships and leverages those connections to “go beyond banking” when necessary. The scope of services is broader than that of a typical bank, leaning more towards a family office set-up.

“With Kaleido, the focus is on people. Over the years, we have developed very personal relationships with many of our clients. It is important to us to be able to assist them in non-financial matters as well,” Nay explains. Access to a global network of medical providers is not something most banking clients expect, but Nay believes it earns gratitude and trust. “We are in the fortunate position of having been able to build up a valuable network over the last few years. And we are pleased to make this available to our customers.”

Bauer is convinced that it all comes down to the Kaleido value system — caring, acting with integrity, and forward-focused thinking — and a belief in collective intelligence. “Gian and I, we are experts when it comes to finance and investments,” he says, “but thanks to our network we are able to offer our clients more.”

Bauer and Nay started at the boutique bank in August 2020, energised by the opportunity to modernise an institution with a sound and impressive history. The aim is for a complete overhaul — identity, location, technology — condensing a process that typically takes two-years into a six-month timeframe.

A herculean task for any bank, but feasible for a team that co-operates well with others. “We are on a very tight schedule, but very much up to speed,” says Nay. “Luckily, we have a great, hands-on team with whom we can drive the change process, which will be completed by July.”

Kaleido benefits from the expertise of Ripplewood Holdings, who represents the ultimate shareholders of the bank, a number of leading families. This provides the conviction and resources necessary to back-up Kaleido’s strategy going forward. In addition, the Zurich office of the very well known agency Jung von Matt, is also helping with the rebrand and website.

As part of the InCore Bank / SOBACO Private Banking Hub, the largest of its kind based on the state-of-the-art banking software Finnova, Kaleido will benefit from true economies of scale and skill. This will help to easily and efficiently develop Kaleido into a very modern financial institution.

This new set up will make it possible to include new asset classes (such as digital assets, cryptocurrencies and tokenisation schemes) and has integrated and automated compliance and reporting features.

“We have built the foundation for growth,” said Nay. “And through this platform, we can now offer digital assets and currencies. This is something that not all banks can offer —  but it's something that becomes more and more important when you want to serve the next generation. This will be a key focus in the second half of this year.”

The executives welcome the label “unconventional”; it’s exactly what they are aiming for. “Client success comes first, and this shows in different approaches.”

Bauer and Nay left successful banking careers at a leading institution to head the transformation of Kaleido Privatbank. “We consider ourselves blessed that we are in a position to shape and create something that is completely based on our values and beliefs. We were fortunate that we got a chance to learn form the best in this field. We want to carry that knowledge on, but want to bring our own handwriting to it,” says Nay.

“Every company pursues different strategic objectives and operates according to different time horizons. But that is in the nature of things,” Bauer adds.

Kaleido is grateful to be backed by shareholders that have a long-term horizon. This allows the bank to give clients some time to transform promising plans into a profitable business.

“For us, it’s common sense to invest a lot of time and knowledge into building relationships with our clients. It’s not about quickly building revenues, instead we opt for long-term growth that we can achieve in unison with our clients.”

For such a strategy to work on a long-term basis, it’s important that all parties share the same set of values such as respect and cordiality. “We are very lucky that we can say that our clients are very appreciative, loyal and conscientious in honouring contract terms,” says Nay. “They also tend to bring in other potential clients through word-of-mouth endorsement – which is the best validation for any private bank.”

Kaleido Privatbank – with a focus on the DACH region – aims to challenge conventional investment approaches by preferring a core-satellite model that allows clients to align investments with values and beliefs.

The Kaleido team has moved into new, modern offices in the heart of Zurich, full of confidence and passion to create something truly unique — a modern Swiss boutique bank, that offers clients an unexpected perspective. Just like looking into a kaleidoscope…