Fintech can make finance accessible to Small Businesses in Lebanon

Fintech is changing who has access to money. It can empower a whole new section of the Society.

Do you know what is the most important thing a person who runs a business should do?

Never Run Out of Cash

Growth Driven Economy by Key Economic Indicators

Economic Progress is always measured in terms of GDP growth. Lebanon’s GDP growth has come down from 10.1% in 2010 to 2.5 % in 2017. GDP is measured by the key indicators which drive the country’s economy.

The Banque du Liban (BDL) and the International Institute ofFinance (IIF) have designed indicesto measure the evolution of the country’s economic activity. The former was developed in 1993 and is called “Coincident Indicator Index”. It relies on eight indicators: electricity production, imports of petroleum, passengers flows, cement derivatives (all in volume terms), imports and exports, cleared checks, and broad money.(1)Check the citation below for the same for additional indicators.

Here is a graph of GDP Growth for the past 10 years

Today everyone is alarmed at the decline of GDP growth. We are crying ourself hoarse with our public debt figures. Is there anything we can do to leapfrog to prosperity and wellbeing? Will Lebanese hold their head high and claim they have overcome their fiscal problems? 

Fintech - 10 year GDP Growth Chart for Lebanon

Can we speed up Economic growth by Flow rather than by GDP growth?

Our growth driven economic system seems to have reached the limits. Growth for growth purpose without serving the larger section of the society is no good. Due to this underlying growth driven operating system the government incentivises the indicators (capital intensive industries) for GDP growth. 

Since I am a banker, I will talk about access to Finance.

It is common sense that the cost of servicing a big loan is lower than say for a retail loan. Banks also know a big loan will add up to their assets. [The earning asset ratio will tell the real story though.]

A win-win situation for the Banks, the big Corporation and the Government. The Government hopes that Big Corporation involved in the key indicators for GDP will drive up the GDP growth. In practise it doesn’t translate and the bubble can burst like in the 2007-2008 meltdown.

Big Corporations are inefficient

Big players are great at taking the cash off the table than actually delivering results. Big companies are sluggish due to its legacy systems and develop multiple inefficiencies because of their larger size and complex managements structure. 

It sometimes also leads to manipulating the books (like Enron) to show false growth to keep the ball rolling. Bigger loans are again accessed by the Corporations to service previous loans. 

The Corrupt Flourish

In the process of getting access to finance, they bribe numerous intermediary players and corruption flourishes. No one knows about the Corporations real performance until the balls drop. The winners are people in the know like politicians and the loser is the tax payer. 

What is growth. 

Lot of plush apartment building lying vacant is not growth. Clogging the highways with easily financed cars is not growth. What is real growth is the improvement in the well-being of the Lebanese citizen. Growth is reducing the endemic in-equality. Providing access to good housing, transportation infrastructure, education and health services is growth. Driving up the cost of these essential services is not growth.  

Without improving the quality of life for the general population, no government will accomplish what they were elected to do. 

How do we improve the flow

MENA Fintech is currently estimated at $2bn with expected growth of $125m p.a. until 2022, according to [MENA Research Partners]

Making Money accessible to the Small Businessman and Trader.

Big Banks due to their legacy systems can never service the under-serviced population for various reasons.

Here is where Fintech can come to rescue

I have come across interesting Fintech Startups addressing the under serviced population for e.g. : [Nowmoney] who are trying to give banking facilities to the huge migrant workers population in the Middle East. 

Fintech being nimble has advantage to Banks 

1. Fintech do not have huge capital reserve to service the big players so they will be focussed on the under-served population.

2. They are digital first.

3. Technology lowers the cost of service. 

4. Low cost to service small loans because of small size.

Here are a couple of Fintech Ideas which can help small businesses and traders raise capital. 

1. A Crowd funding Fintech Company

A Fintech which helps the small business owner raise 60% capital from banks and rest from the existing customers of the business. 

2. Peer to Peer – Fintech 

Everyone is connected to each other with 6 degrees of separation. This could be the Blockchain meet Fintech scenario. Smart contracts get executed and they disburse loan after due diligence. 

Do you have a Fintech Idea ?

I am eager to enable our leaders to achieve their technology vision. If you have an interesting fintech idea  hit me up on atie(at)atiejelmouallem(dot)com

References & Citations

1. [Estimating Real GDP Growth for Lebanon – BLOMINVEST Bank][]

2. [Twitter – Katharine Budd][]

3. [Idea for the Blogpost][]

4. [GDP Growth Chart][]

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About the author

Financial advisor to UHNWI, private entities, family offices, and companies. Certified Anti-Corruption Manager from The American Anti-Corruption Institute

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