By Matt Gamser, SME Finance Forum

Financial inclusion has become something of a buzz term in development circles. It is generally understood to mean the provision of finance and financial services by regulated institutions to disadvantaged and marginalised sectors of society, those who have been ‘excluded’ in the past.

What is not spoken about or generally well understood is that the group of ‘excluded’ includes the owners of small and medium-sized businesses (SMEs). When we speak about where financial inclusion is most critical, we are generally referring to the 4bn people on the planet who live on less than $2 a day.

The owners of small businesses are generally not in that group. But they are the most likely employers of the 4bn and are themselves being starved of capital. Read more

If there’s one subject on which policymakers around the world seem to agree, it’s that foreign direct investment is a Good Thing.

The annual tables of inward foreign direct investment (FDI) are treated by governments of rich and poor economies alike much as football fans treat rankings in the English Premier League, crowed over by countries in the leading pack and quietly forgotten by those in the relegation zone.

There is no doubt that FDI can do a lot of good: it can add to an economy’s productive capacity and import not just capital but technology, production skills and better management. China, which not only welcomed FDI but witnessed intense competition between different provinces to attract it, stands as a shining example. Read more

By Ben Aris of bne in Moscow

Unless you live in Moscow and are in the retail business, you probably haven’t heard of Moskovsky Kreditni Bank (Credit Bank of Moscow, in English). But you may soon. A top-20 Russian bank, CBM is joining the increasingly long line of Russian companies that want to IPO on London’s stock exchange.

“We are contemplating an IPO, but have not decided on specific timing or plans,” CBM’s CEO, Vladimir Chubar, tells bne in an exclusive interview. “It depends on if the market improves, as the current valuation levels for Russian banks are not necessarily attractive. We are still growing, we have one of the lowest cost/income ratios and the return on equity of about 18-20% is one of the best in the sector. We feel like we are still quite a young bank and will wait for the right window of opportunity to open.” Read more

We’re late to this but we couldn’t resist sharing a chart from JP Morgan’s latest Global Data Watch, dated January 31. It shows part of the reason why Bruce Kasman and colleagues are bearish about the prospects for EM growth in 2014.

This from the report: Read more

Another stimulating note from the always-readable Frederic Neumann at HSBC in Hong Kong, titled An inconvenient truth. In it, he looks at the relation in Asia ex Japan between credit on one side and productivity and growth on the other.

The results are more disturbing than inconvenient. Read more

Central banks, we are often told, missed the warning signs that led to the “Great Recession” in 2008: an excessive build-up of household and mortgage debt.

But Malaysia’s central bank, Bank Negara, is showing that you can get ahead of the curve and prevent trouble before it starts to build up to critical levels. That’s the hope, at least. Read more

Recent editions of the IMF’s World Economic Outlook have made pretty gloomy reading for developed economies, with growth forecasts trimmed and few recovery prospects.

But despite the global headwinds, emerging markets are still getting a positive writeup from the Fund’s economists. Here are the charts that tell the story. Read more

China isn’t holding back in its financial support for a flagging economy. The latest lending figures, published on Thursday, show banks made new local-currency loans totalling Rmb1.06tn ($171.2bn) last month – far more than forecast by analysts polled by Reuters and Bloomberg.

That puts Chinese lenders on target to lend Rmb9tn in new loans this year – well up on last year’s Rmb8.2bn. Read more

By Nguyen Phuong Linh and Jake Maxwell Watts

It was almost inevitable that Vietnam’s central bank would cut interest rates for the seventh time in a row on Monday. What is much less certain is whether the move will succeed in boosting the country’s struggling economy, with commercial banks reluctant to pass on lower interest rates to cash-strapped businesses. Read more

China is to rein in its fast-growing shadow banking system by requiring banks to provide extensive disclosures about the off-balance sheet investment products that they sell to customers, according to people briefed on the new rules.

The Chinese shadow banking system – credit flows beyond traditional bank loans – has increased fourfold in size since 2008 to about Rmb20tn ($3.2tn), or 40 per cent of gross domestic product. These flows were crucial in reviving the country’s growth last year, but banking analysts and rating agencies have warned that they pose an increasingly serious risk to Chinese economic stability.

 Read more

Hot on the heels of Chinese prime minister Wen Jiabao’s call this week for curbs in the over-heated housing market, comes official data showing China’s new home prices rose in January for the third month in a row

The National Bureau of Statistics said on Friday that, on a month-to-month basis, prices rose in 53 of the 70 cities covered in its survey, with striking increases in Beijing and Shanghai. No wonder the authorities are worried. Or that equity investors have taken fright, with the Shanghai Composite index falling this week by 4.9 per cent, its biggest weekly drop since mid-2011. Read more

How gloomy can you get? The Brazilian central bank’s latest weekly survey of market economists suggests the sky, or rather the ground, is the limit. The survey’s consensus on GDP growth this year is now 3.2 per cent, down from 3.26 per cent a week earlier, 3.3 per cent the week before that, 3.4 before that, 3.5 before that, and so on back in time to late November, when it began falling from the 4 per cent that had been expected for several months.

But while growth is creeping down, inflation is creeping up. The two make a miserable combination. Read more

David CreightonBy David Creighton of Cordiant Capital

With record flows into emerging market bonds you could be forgiven for thinking growth economies were awash with credit, and that they had avoided the fallout from the eurozone crisis.

Unfortunately this is not the case. The benefits of the boom in EM bonds have not been evenly spread. Not only is issuing bonds an option available uniquely to the very largest class of emerging market enterprises, but these bond issuers are generally concentrated within limited geographies like Brazil, China and Russia, and in the energy, mining and telecom sectors. Read more

The crisis in the eurozone has been causing plenty of worries in Asia – particularly around the supply of credit to the region. But the bigger problem for many countries lies closer to home – in a dramatic reversal of the build up of surplus cash that has been Asia’s hallmark for the past decade.

Across the region, according to research from Morgan Stanley analysts, declining exports and strengthening domestic demand for goods produced locally and abroad are combining to cut current account surpluses. Read more

From the FT’s Lombard column

Experian has struck a creditable deal to buy out minorities in Brazilian subsidiary Serasa, as it bulks up its emerging markets presence. The credit checking agency is paying $1.5bn for the 30 per cent stake, at the top end of City expectations. But at least the deal has a price and timing that suits Experian. The banks who are selling out possess a put option that could have triggered a transaction with neither characteristic. Read more

Bank of Nova Scotia’s new chief in Mexico, Troy Wright, is enthusiastic about the growing purchasing power of Mexico’s middle class. “We see a lot of opportunity right now to really start to drive a lot more of the business, and take advantage of people’s credit health,” he told Bloomberg this week.  Read more

Brazil’s government, retailers and banks are all interested in reviving the jaded Brazilian consumer, the driver of economic growth in recent years.

But interest rates in the country are phenomenally high, with users of credit cards, for example, paying an average of 238.3 per cent a year, according to Anefac, a financial sector association. Worse, the charges aren’t always as clear as they might be to the shoppers at the tills. Read more

By Leif Eskesen of HSBC

The Asean-5 economies – Indonesia, Malaysia, Thailand, the Philippines and Vietnam – recovered very rapidly from the global financial crisis in 2008-09 on the back of sound economic fundamentals and a heavy and well-targeted dose of monetary and fiscal stimulus.

However, except for Vietnam, the recovery was aided by strong capital inflows that poured into the region following the crisis. The attraction was that these countries offered far better growth and interest rates than were available in the West. Moreover, exceptionally loose monetary policies in these advanced economies pushed capital flows into the region. Read more

Could emerging market borrowers’ appetite for cheap developed world credit be finally easing?

A slowing of  the huge growth in the EM’ foreign exchange reserves could point in that direction. So says Lars Pederson of fund manager Alliance Bernstein who says demand for foreign credit could be weakening because of concerns over possible local currency depreciation, worries about accumulated foreign debt holdings and a lack of suitable investment projects. Whatever the reasons, the easy money party is nearly over. Read more

David Hauner of BofA Merrill Lynch Global Research

The renewed eurozone crisis is raising questions about the fundamental resilience of emerging markets. The advocates of decoupling point to strong EM balance sheets, while the pessimists underscore the dependence of emerging markets on global demand and capital flows.

We believe that the close trade and financial links make decoupling unlikely, and that fundamentally weak emerging markets may even harbour crisis risks of their own. Read more