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Should We Regulate the Way Big Data Can Be Used To Make Loans?

Should We Regulate the Way Big Data Can Be Used To Make Loans? | EFL Reading | Scoop.it
The buzzword tsunami that is “big data"—a handy way of describing our vastly improved ability to collect and analyze humongous data sets—has dwarfed “frictionless sharing” and “cloud computing” combined.
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Jentzsch: Biometric Identification of Customers - Pathway to Greater Financial Inclusion?

Jentzsch: Biometric Identification of Customers - Pathway to Greater Financial Inclusion? | EFL Reading | Scoop.it
In many developing countries, the identification of poor people is a challenge.
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The business behind financial inclusion in Africa for MasterCard

The business behind financial inclusion in Africa for MasterCard | EFL Reading | Scoop.it
“Africa is on the move, and those that have the first mover advantage will definitely have a leg up,” said MasterCard's sub-Saharan Africa division president.
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The AfDB SME Program Approval: Boosting Inclusive Growth in Africa - BusinessGhana

The AfDB SME Program Approval: Boosting Inclusive Growth in Africa BusinessGhana The social effects of the Africa SME Program will be significant given the particular support to microfinance institutions in low-income countries and fragile states,...
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Few Indian bank licence applicants likely to succeed: Fitch

Few Indian bank licence applicants likely to succeed: Fitch | EFL Reading | Scoop.it
The central bank's objective to address financial inclusion places heavy demands on profitability and capital, and is likely to lengthen the time it takes for a successful applicant to establish a presence...
Entrepreneurial Finance Lab's insight:

The Reserve Bank of India is giving new banks 3 years to meet these requirments: "new banks to open one in four branches in rural areas and fulfil statutory reserve requirements...We believe some entities will find the 40% priority-sector lending targets [such as SME and agriculture credit and housing loans] tough." Also since many applicants have no experience or presence in these new sectors they are going to find meeting the requirments challenging:

 

"The strict conditions mean that profitability for new banks is likely to be limited until they secure a strong foothold. Many of the applicants are likely to need to invest in new systems and processes to manage new asset risks."

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SMEs and Entrepreneurship in Mexico | OECD Free Preview | Powered by Keepeek Digital Asset Management Solution | www.keepeek.com

SMEs and Entrepreneurship in Mexico | OECD Free Preview | Powered by Keepeek Digital Asset Management Solution | www.keepeek.com | EFL Reading | Scoop.it
Small and medium-sized enterprises (SME s) account for a large share of employment in Mexico, but their contribution to value-added remains limited. T
Entrepreneurial Finance Lab's insight:

SMEs in Mexico make up 99.8% of all enterprises, and 72% of employment – more than any other OECD economies (SME employment is 60% in France & Germany for example). However, the Mexican SME sector as a whole contributes less to GDP than the SME sectors of other OECD countries. This is because of the high percentage of very small and less productive micro enterprises, which represent 96% of all businesses (a much higher percentage than OECD countries) and 41% of employment. As you can probably guess most of these micro enterprises are informal.  And most of these informal businesses have … poor access to credit. 

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Casi 900 mil mypes tienen problemas con sus deudas

Casi 900 mil mypes tienen problemas con sus deudas | EFL Reading | Scoop.it
Sólo el 63% de ellas tiene créditos en el sistema financiero regulado, mientras el 25% tiene una calificación crediticia que no es normal. Sentinel observa crecientes problemas de sobreendeudamiento en este segmento.
Entrepreneurial Finance Lab's insight:

Courtesy of Juan Luis.

 

Why traditional credit scoring doesn't work - 900K Peruvian SMEs struggle to pay their bank loans.

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India’s Most Financially Inclusive States

India’s Most Financially Inclusive States | EFL Reading | Scoop.it
Crisil has launched an index that measures financial inclusion in India, and some of the county’s most industrialized states don’t fare too well.
Entrepreneurial Finance Lab's insight:

Indian rating agency Crisil also gives reasons why 60% of Indians are financially exluded.

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gladwell dot com - the sure thing

Entrepreneurial Finance Lab's insight:

Long but a good EFL read. According to Bailey: "Gives good context to what we say about risk appetite not actually relating to entrepreneurship as commonly reported."

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Access to finance: USAID launches private equity fund for Pakistan – The Express Tribune

Access to finance: USAID launches private equity fund for Pakistan – The Express Tribune | EFL Reading | Scoop.it
Abraaj Group and JS Privat­e Equity will partne­r with USAID to run fund.
Entrepreneurial Finance Lab's insight:

USAID provides $24 million in funding for 2 private equity funds in Pakistan aimed focused on SMEs (although details not provided for exactly how).

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DailyNews Mobile Edition - Agency banking to reach the unbanked

Tanzania\'s leading online News Edition (The National Newspaper).
Entrepreneurial Finance Lab's insight:

Costs of opening physical bank branches in Tanzania crippling financial inclusion efforts (Tanz has highest rate of unbanked pop.), enter: CFDB Bank w/ mobile banking and POS (point of sale) locations.

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The mobile banking game-changer in Ethiopia | East & Horn Africa

The mobile banking game-changer in Ethiopia | East & Horn Africa | EFL Reading | Scoop.it
New regulations will bring m-banking to Ethiopian consumers, but limits on the companies involved and how transactions must be managed could slow growth.
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How mobile phones are making cash obsolete in Africa

How mobile phones are making cash obsolete in Africa | EFL Reading | Scoop.it
Rise of services that allow people to conduct transactions on cell phones is making paper money and credit cards a thing of the past
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Taking financial services to Africa's poorest consumers

Taking financial services to Africa's poorest consumers | EFL Reading | Scoop.it
Pindie Nyandoro: Millions of Africans have no access to banks. There can be no sustainable development without catering to these groups
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SMEs: Asset or Liability for Banks? | Africa Strictly Business

SMEs: Asset or Liability for Banks? | Africa Strictly Business | EFL Reading | Scoop.it
Entrepreneurial Finance Lab's insight:

Ex-CEO of Ecobank: “SMEs are the biggest risk of banks. They don’t pay. So they are the engine of growth, but they are also the source of very bad loans,” he says.

                                                   vs.

CEO of Diamond Bank: “You need to get out of the myth of the SME space being dangerous. Of course, you can lose money. You need to have propositions that address the risks that exist in that space. Make a call about the risk premium. If I think it is a very risky area and I’m looking at 10 percent loss, I need to price that into the product… You will be amazed at the ideas that come from [entrepreneurs] when they have no support. In Nigeria today, Diamond is the only bank that will lend you money without collateral once you have a good idea,” he states.

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NEWS ANALYSIS: Unbanked India a new frontier

NEWS ANALYSIS: Unbanked India a new frontier | EFL Reading | Scoop.it
Firms buy stakes in Indian companies seeking bank licences to tap credit growth in Asia’s third-biggest economy
Entrepreneurial Finance Lab's insight:

"Foreign companies are chasing higher returns by investing in new lenders in the country, where the World Bank estimates only 35% of the population has bank accounts. Wide gaps between interest rates on deposits and loans would drive up profits for new banks in India, said Saurabh Mukherjea, CEO for institutional equities at Mumbai-based Ambit Capital.

'It’s as close as you can get to a licence to print money in a democracy,' Mr Mukherjea said. 'A bank can get deposits by paying about a 5% interest rate on a savings account and lend it to businesses for as high as 15%, making India an immensely attractive geography.'"

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Score the unscored!

Score the unscored! | EFL Reading | Scoop.it
It doesn't need to end with public housing agencies.
Entrepreneurial Finance Lab's insight:

Courtesy of Carlos, who says:

 

"The institutions that really matter are BANKS, the ones who lend the money and face the risk. Giving it to credit bureaus adds an unnecessary intermediary. The only reason for Credit Bureaus to exist is that the current driver of scoring models is credit history (info from many banks that needs to be centralized); if we finally find alternative information that can replace or even outperform credit history, then Credit Bureaus have their days numbered as the de facto providers of information to assess credit risk of new applicants for banks. They won't be needed anymore. They would be replaced by companies that aggregate whatever new info is used for scoring, who's only customers will be banks that want to outsource getting that information. If that "new" information comes from the client and can be quickly/easily verified by the banks (psychometric test, facebook logins, phone transaction data, etc.) there's no need to outsource; furthermore, outsoutcing is a disadvantage as you are using the same inputs as your competitors"

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Only 59% of households in India had access to banking services in 2011.

Only 59% of households in India had access to banking services in 2011. | EFL Reading | Scoop.it
India's central bank has received 26 applications for an unspecified number of bank licenses it plans to issue. The applicants include large companies such as Aditya Birla Nuvo, L&T Finance and Reliance Capital.
Entrepreneurial Finance Lab's insight:

Background: Banking licenses are highly coveted - in the last 20yrs, only 12 have been given out. Perhaps due to stringent requirements, including a focus on financail inclusion, only 26 financial institutions applied for an unspecified number of licenses (apparently over 100 were expected to apply). License winners to be announced first quarter of 2014.

 

Janalakshmi is one of the applicants: 

http://www.business-standard.com/article/specials/with-only-26-banking-aspirants-rbi-s-job-is-half-done-113070200634_1.html

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allAfrica.com: Zimbabwe: SMEs Drive Economic Growth (Page 1 of 2)

allAfrica.com: Zimbabwe: SMEs Drive Economic Growth (Page 1 of 2) | EFL Reading | Scoop.it
allAfrica: African news and information for a global audience
Entrepreneurial Finance Lab's insight:

Informal SME sector in Zimbabwe created $7.4bn USD yet none made its way into the formal banking system...looks like Mugabe wants in...

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New World Bank Loan to Support Turkey’s Small and Medium Enterprises

The World Bank’s Board of Executive Directors today approved a US$300 million loan for the Third Access to Finance for Small and Medium Enterprises (SMEs) project for Turkey.
Entrepreneurial Finance Lab's insight:

Ziraat Bank will act as a wholesaler, and the loan will be intermediated through leasing companies and banks that target SMEs employing fewer than 250 people and having an annual turnover of less than TL 40 million. Total funding under the project will be US$400 million, including US$100 million in co-financing from participating financial institutions.


Lease financing definition: https://en.wikipedia.org/wiki/Finance_lease

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Don’t miss out on this target - Hindustan Times

Don’t miss out on this target - Hindustan Times | EFL Reading | Scoop.it
Accelerate financial inclusion because it has a direct correlation with economic growth.
Entrepreneurial Finance Lab's insight:

Compares India to Brazil which is apparently similar in terms of economic development and explains why financial inclusion is important in India (1/10 people have bank account).

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What SMEs Do (and Don't Do) for Jobs

What SMEs Do (and Don't Do) for Jobs | EFL Reading | Scoop.it
For any budding Bill Gates and Steve Jobs, there are literally thousands of craftsmen, real estate agents, lawyers, and small shop or restaurant owners who might take the tax break, but won't create new jobs.
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Darrell Grissen's comment, July 2, 2013 11:49 PM
Interesting comment: "MIT economist Antoinette Schoar recently pointed me to an intriguing piece of research that has mined a number of data sources for the U.S. and found that SMEs are highly concentrated in relatively few industries. More than 60 percent of American SMEs are working in areas where they bring known solutions to known customer groups with little innovation" I'm a bit critical of this despite the fact that we see a lot of traders. in the near term they aren't innovating much beyond retail but if you think over multiple generations each one gives a better leg up, better education to their children, which means better chance for innovation in their economy. Another interesting comment about "reluctant entrepreneurs" - those are forced to be so due to lack of other attractive options. Makes you wonder how many of EFL's folks fall into this camp.