How do you bank the “unbankable”? The question could hardly be of more importance to small businesses in emerging markets, an estimated 200m of which are starved of the finance they need to grow.
One somewhat unlikely – but increasingly popular – answer is through psychometric tests. By yielding profiles of loan applicants’ honesty, intelligence, aptitude and beliefs, the tests facilitate lending to otherwise “unbankable” borrowers who do not possess a credit history, collateral or accounts.
Artful questions are key to the tests’ efficacy, say finance executives and industry experts. For example, if you want to assess a prospective borrowers’ honesty, it would be naïve to simply ask if they are honest, or if they prize integrity.
Charles Okeahalam, chief executive of private equity group AGH Capital, tells the FT’s Richard Stovin-Bradford about the key role of governments in Africa to achieve growth and the need for public-private backing for infrastructure projects.
Privatisations, today known by the euphemism of public private partnerships, started in Brazil in the 1990s to overcome inefficient public services. Known as the National Privatization Program (PND), the plan earned $40bn between 1990 and 2009.
But not all privatisations are the same. Some, in fact, require a lot of government backing – and footing the bill if the private sector gets its sums wrong.
Less than a year after Philippine president Benigno “Noynoy” Aquino III launched an ambitious private-public partnership (PPP) programme hoping to tap investors to build key infrastructures quickly, his officials are shifting gears. Finding that private money is neither cheap nor readily available for some key projects, they are rediscovering the merits of official development assistance.
Two light rail systems due for upgrading in Manila, with a combined cost of $1.8bn, will now be likely built by the government itself. It will use low-cost and long-term loans from multilateral lenders or countries such as Japan or Korea, according to Manuel Roxas II, the transport and communications secretary.