| BUILD ON GLOBAL FINANCING |
| Capital Seeds Corporation represents an office for Financial Reporting and Related Products, a line of communication between lenders and low-income borrowers and also a web-based research and brainstorming service to promote modern financing schemes to the microfinance industry. Capital Seeds comparative advantage resides in the fact that we clearly understand the mission of “serving the poor” alongside with the purely “commercial incentive of making profit”. We can integrate these different agendas and create a synergy that could optimize the Capital Structure of Microfinance Institutions. We attribute the pattern of stagnation/recession of Low Developing Countries to deficient investment, stressed particularly in machinery, technology, training and market development. As we are on the demand-side theory of economy, we believe in package to stimulate demand in order to reduce unemployment and shake off economic stagnation. One approach to stimulate demand in Low Developing Countries is an Integrated Model of Business Expansion and Development of Rural Financial Markets. The Core Question, where the Capital will come from? Let’s have a look together at what happened with the evolution of the Microfinance industry. In the formative years of microfinance, “traditional public donors were the angel investors”, to repeat the words of Elizabeth Littlefield, Chief Executive Officer of the Consultative Group to Assist the Poor. Donors provided the seed capital for promoting Microfinance Institutions; it was like financing Research & Development. Over the years, hundred of Microfinance Institutions became profitable, promoted financial transparency, increased disclosure standards, attracted a flow of money from institutional investors and commercial banks and transformed themselves into credit-worthy investment. Based on the experience and evolution of the microfinance industry, we could say that Donors bring Seed Capital to test ideas in the fields. But when it comes to scale, performance and efficiency, funding from international donors is replaced by private investment. But, Microfinance itself can not create the effect of raising a community out of poverty; the community needs also what the industry calls Support Services or Non Financial Services. For Example, small farmers in a geographic area growing cocoa beans needs patios to dry the wet beans, training to learn how to process the beans according to the requirements of a preferential niche market, a warehouse to secure stocks before a truck comes and pick the bags, communication infrastructure, a dynamic marketing services to penetrate niche and preferential markets and also an understanding of price trends and fluctuations. A Microfinance Program shaped for Cocoa Beans Sector (for example) in a Low Developing Country, to be successful, should bring not only the required working capital to collect and assembly the beans, but should set a financing package taking into consideration training, processing activities, storage and transportation, infrastructure building, electrification, marketing and production; that’s what we call an “Integrated Package of Business Expansion and Development of Rural Financial Markets”. We clearly understand the challenges facing by the development of Rural Financial Markets such as: fluctuation of local exchange rates, uncontrolled and seasonal price of agricultural products, lack of regulation in lending practices, weak ownership documentation of rural assets, low possibility of diversification and risk mitigation, almost no liquidity of stakes. Local Technocracy in synergy with Political Government and with the participation of Territorial Communities will address these issues, bring answer and facilitate Business Expansion and the Development of Rural Financial Markets. Developing Rural Financial Market requires a two-step transition: 1) a better valuation of the current production in rural areas; 2) the increase in income that will follow, will raise the demand for other products and lead to a structural transformation from an agricultural based to a non agricultural based economy (with the hypothesis of no transfer of the additional income out of the rural areas).The selected Microfinance Institutions will be responsible to fund infrastructure for production, communication and transportation, training and also give loan to small enterprises benefiting from the new built infrastructure. In this model, The Microfinance institutions will work closely with the Territorial Communities during the strategic planning process and during the implementation and execution to have the local population identifies itself with the package and also develop more autonomy. The model does not minimize the role of the already established commercial banks. They will continue to mobilize savings from households and established businesses and also continue playing their role in the transfer of remittance. Commercial Banks would represent an alternate channel of financing and they would compete with the microfinance institutions. However, the private capital market will not provide with the start-up cost. For example, if the global capital market would find an opportunity to invest billions of dollars to develop a Specialty Flavor of Coffee or a wild clone of natural cocoa beans in a specific Low Developing Country (based on the model of Ivory Coast or Ghana for the Cocoa Beans), the Microfinance Institutions and the Territorial Communities would take over and capitalize on the Research and experiments previously funded by the Government, the International Donors (USAID, Lome Convention, …) and Local Well- Established Businessmen. Ian Callaghan from the Microfinance Section of Morgan Stanley wrote: “key shareholders, such as the International Financial Institutions, are often reluctant to free up stakes” in Microfinance Institutions. Some of the Stakes may also belong to Local Non Governmental Organizations, to Territorial Communities and even Part of the Eminent Domain of the Country. We believe there could be possibility of negotiation to free up stakes and use the money to develop other territories and open new markets. The momentum is there for the Economic Revolution and Poverty Alleviation. It will be a long process for every single Low Developing Country, maybe as long as and as expensive as opening a new oil refinery or building a new model of aircraft or spaceship, or launching a new drug on the market. We can do it; Dubai did it. It is a question of making our mind set for the work. |