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Global Entrepreneurial Financing Microloans EXIM bank Crossborder financing Mexico financing

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Global Entrepreneurial Financing. Micro-loans. EXIM bank. Cross-border financing. Mexico ... are 35 percent female ... In the classroom, we become superheroes. ... – PowerPoint PPT presentation

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Title: Global Entrepreneurial Financing Microloans EXIM bank Crossborder financing Mexico financing


1
Global Entrepreneurial Financing Micro-loans EXI
M bank Cross-border financing Mexico financing
  • Craig S. Galbraith, Ph.D.
  • EBD 482 Global Entrepreneurship, Spring, 07

2
Micro-loans
  • "Micro-entrepreneurs" in developing countries,
    or poor enclaves in developed countries
  • make and sell tortillas, sew clothes, sell
    vegetables in the street,etc
  • No capital to grow their businesses, they remain
    trapped in a cycle of poverty (poverty-traps).
  • Often borrow from loan sharks, who charge as much
    as ten percent daily, or they pay higher prices
    to buy goods on credit.
  • Any profit they earn goes to others, leaving them
    locked in a daily struggle for survival.
  • Micro-loans attempt to break free from no working
    capital

3
Characteristics of Micro-loans
  • Customers
  • In developing countries
  • are among the region's poorest people at the time
    of their first loan
  • usually have no collateral
  • may not be able to read or write
  • may not have enough capital to open for business
    every day
  • are 65 percent women
  • In the U.S.
  • are 87 percent minority and 52 percent Hispanic
  • are 35 percent female
  • are 55 percent low-income by federal HUD/CDFI
    standards (earning 80 percent or less of area
    median income)
  • often rely on their micro-enterprise for 50
    percent or more of their family income
  • often have business assets of less than 5,000
  • often have no personal or business credit or have
    bad credit prior to receiving a micro-loan

4
Micro-Loan Models
  • Accion Micro-loan models
  • Individuals
  • Form solidarity groups
  • this method allows members to cross-guarantee one
    anothers loans in lieu of collateral
  • First loan, 100 in developing countries, 500 in
    the U.S.
  • Increasing amounts based upon performance step
    lending

5
Cumulative Statistics from 1996-2005 for ACCION
Partner Programs
6
Melvin Gibson spends his days making thick, green
slime.  The owner of a local franchise of Mad
Science, he earns his living performing hands-on
science experiments for elementary school
children. With presentations ranging from
creating slime out of household ingredients to
hair-raising demonstrations of static
electricity, Melvin's in-class workshops make
science fun.  "Kids love this stuff," says
Melvin.  "In the classroom, we become
superheroes." Melvin had always wanted to work
with children and launched his home-based
business two years ago with the help of his wife,
a former schoolteacher. "To start up, we cashed
in all our savings," he remembers. Soon Melvin
found he needed a computer to track expenses and
organize curricula. "We went to a lot of banks
for a loan, but we didn't have any collateral,"
says Melvin. "They saw us as a financial risk."
Discouraged, Melvin chanced upon an ad for
ACCION USA in his local paper.  He applied for a
loan and soon had the 2,500 he needed for a
computer. "ACCION was a good opportunity for me,"
he says. "With the computer, our productivity is
way up."
7

8
Exporter Financing
  • Pre-Export Financing
  • Ex-Im Bank's working capital guarantee helps
    exporters access working capital funds to acquire
    inventory and finance export-accounts receivables
    to fulfill sales orders for U.S. goods and
    services to international customers.
  • Benefits of Pre-Export Financing
  • Makes funds available to fulfill export sales
    orders
  • Permits financing of exporter's inventory and
    accounts receivable
  • Offers fast turnaround
  • Insurance
  • Ex-Im Bank's export credit insurance helps
    exporters get paid and provide your international
    customers with competitive credit terms.
  • Benefits of Insurance for Exporters
  • Eliminates most risk of nonpayment by
    international buyers
  • Provides credit terms to international buyers
    that can increase sales
  • Short- and medium-term insurance available

9
Buyer Financing
  • Buyer Financing Loan Guarantees and Direct Loans
  • Ex-Im Bank's loan guarantees and direct loans
    provide your international buyer with medium- and
    long-term financing for purchases of capital
    goods and services produced in the United States.
    Our buyer financing gives you a cash sale, and we
    take care of collecting from your buyer.
  • Ex-Im Bank will support up to 85 of the contract
    amount (depending upon the U.S. content) after a
    cash payment of at least 15.
  • Guarantees cover 100 of the loan principal and
    interest against political and commercial risks
    of buyer nonpayment. We also make fixed-rate
    direct loans to international buyers.
  • Loan Guarantee Benefits for Exporters
  • Protects lenders against risks of nonpayment by
    international buyers of U.S. capital goods and
    services
  • Ensures loans will be paid, making more money
    available for financing
  • Local costs and ancillary services (e.g.,
    financial, legal and technical consulting fees)
    may be financed
  • Medium- and long-term guarantees available

10
Cross-Border Financing
  • Borrow money in U.S. for foreign operations
  • Usually collateralized by U.S. assets
  • Can be simple, to very complex with
    paper-companies for tax advantages
  • Often used to repatriate pre-tax or restricted
    foreign profits (rigidity of foreign capital
    markets)
  • Benefit is often function of local country
    valuations and capital costs

11
Internal Entrepreneurial Financing - Mexico
  • Economic growth, better financial regulation and
    a wave of foreign acquisitions have stabilized a
    banking sector
  • nearly collapsed after the devaluation of the
    peso in late 1994.
  • The authorities have now succeeded in
    re-capitalizing and re-privatizing all the banks
    they had to take over in that crisis.
  • Foreign banks dominate the Mexican Banking sector
  • Foreign investors have also made important
    acquisitions in other financial-services sectors,
    such as insurance, fund management, factoring and
    leasing.
  • These three areas are relatively sophisticated in
    Mexico
  • Financing conditions for foreign companies in
    Mexico have improved in recent years as a result
    of the peaceful transition to multi-party
    democracy, responsible economic policies and the
    flotation of the peso, the local currency.
  • Recent Presidential controversy has hurt Mexico
    within international community (Felipe Calderon
    v. Lopez Obrador - To hell with the institutions"
    is Obrador's new slogan)
  • Since NAFTA, Mexico has become a favored
    destination for US and Canadian direct and
    portfolio investors.
  • There are no restrictions on capital flows, but
    foreign investors remain barred from important
    sectors of the economy (Oil, mining, natural
    resources, etc.)
  • Mexico has competitive tax rates but offers
    inadequate public services.

12
Mexican Credit Unions and SAPs
  • Regulated savings-and-loan groups (sociedades de
    ahorro y préstamoSAPs) predominantly serve areas
    of fewer than 250,000 people.
  • These non-profit companies, authorised by the
    Secretariat of Finance and supervised by the
    National Banking and Securities Commission (1.2),
    are organised and owned by depositors in a mutual
    form.
  • Credit unions are non-bank financial
    intermediaries. They primarily provide financial
    services to small and medium-sized businesses.
  • 135 credit unions, but declining
  • SAPs and credit unions serve business or farm
    groups or small communities, and aim to make
    low-overhead credit available to those who, for
    geographic or structural reasons, are unable to
    obtain bank financing.
  • Credit unions and SAPs are allowed to accept
    savings, demand and time deposits, and to make
    loans exclusively to their partners.

13
Mexican Banking
  • Mexicos stock exchange, the Bolsa, continues to
    suffer from a gradual erosion of its trading
    volumes and liquidity
  • Failed to attract a significant number of new
    listings.
  • 2003 implemented a series of changes to widen its
    investor base, improve corporate governance and
    attract listings from medium-sized companies.
  • Derivative exchange MexDer, is much more
    successful.
  • Access to Funds
  • Multinationals and blue-chip Mexican firms, have
    easy access to bank credit and international debt
    markets.
  • Small and medium-sized domestic enterprises,
    often locked out
  • Expensive and limited to the short-term (under
    one year).
  • Foreign owned small firms often have more access
    to local lenders than Mexican owned small
    enterprises
  • BANCOMEXT is the EXIM bank for Mexico

14
Mexican Banking
  • Conclusions
  • Domestic credit remains stagnant
  • Non-bank financiers, such as leasing companies
    and factoring firms, have expanded their
    operations.
  • Private pension funds and government efforts to
    establish longer-term benchmarks have bolstered
    the still-small market for corporate debt issues.
  • Small U.S. firms more respected than small
    domestic Mexican firms
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