Michael Tichareva
17 October 2017 | 10:50 – 11:50 | Committee 4
Relevant practice area(s):Banking
Suggested audience knowledge level: All levels
Abstract:
The topic explores the problems currently being faced by African economies to achieve increased infrastructure development, trade and accelerated economic growth. The opportunities are many and entrepreneurial spirit is evident. However, the funding support structures are inadequate, thus constraining the full development of entrepreneurship and the African economies.
These problems include lack of expertise to develop well-structured projects and transactions for bankability given that most of Africa is below investment grade. Real and perceived political risks magnify the problems. This implies that investors are not attracted at an accelerated pace that would lead to huge economic growth. It takes time and effort to change the mind set of investors and this requires investment in understanding the real problems and developing appropriate solutions.
The problems are not limited to large infrastructure funding but to many other activities that include trade finance and working capital finance for small and medium sized businesses. Banks apply traditional funding models, often requiring strong balance sheets in order to manage their risk exposures. Basel II and III have made banks even more conservative. On the contrary, most of the great ideas that require funding are developed by entrepreneurs who have no balance sheet to attract financing, hence would not qualify for traditional bank finance.
The possible solutions are explored that include improved project and transaction structuring, improved risk management from end to end, credit enhancement solutions and limited recourse structured financing. A combination of traditional and non-traditional models of finance are explored. Practical examples to illustrate the solutions areshared.
The objectives of the solutions is to attract funding from a variety of sources to promote infrastructure investment, trade finance and entrepreneurial development in Africa, hence job creation, poverty reduction and accelerated economic growth.