A little faith too much to ask?

By Isla MacFarlane

Are consumers really drawn to the ethical appeal of Islamic finance, or will it always come down to which bank offers the best freebies?

It is often said that Islamic finance is not just for Muslims, but for anyone interested in ethical investing. As a non Muslim with an Islamic current account, I know this only too well – only it was the monthly millionaire draw that won me over, not the idea of sharing equal risk with a corporation far richer than me.

I was interested to hear from a contributor of mine who estimates that 90 per cent of Muslims still prefer conventional finance, but not entirely surprised. With a universe of conventional ethical funds only the most devout will confine themselves to what remains a limited choice.

Charity begins at home. Research shows time and time again that while consumers like the idea of ethical brands, they will still buy whatever’s on special offer that week. I gave up the idea of saving the world by using an environmentally friendly washing liquid when I realised I needed something that actually cleaned my clothes. Consumers will buy what is cheapest and what works. Or, of course, whatever they are familiar with.

Yet more research shows people in the western world are more likely to end a relationship with their spouse than they are their bank. People don’t like change.

This may explain why Islamic retail banking has been slower to take off than the commercial side. So what can a new industry do to drum up support?

I confess the millionaire draw did it for me. Outside the corporate world, where Islamic finance is muscling in on the mainstream and serious investors are snapping up opportunities, consumers are won with flashy offers and clever branding – the complexities of the contract and the good it will do for the wider world is lost on your average punter – including me.

It is pointless preaching transparency to people who don’t understand what they’re looking at. Islamic finance must evolve to be consumer-friendly as well as business-friendly if it wants more customers.

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Why you should care about Maggi stock cubes in Nigeria

by Tamara Pitelen
Did you know that people in Nigeria drink more Guinness beer than in the US or in Ireland? No, neither did I till a few hours before the earthquake that hit Iran on Tuesday [which, just as an aside, was felt frighteningly strongly by those of us sitting on the 33^rd floor of the CPI Financial offices in Dubai Media City].

Why you should care about Maggi stock cubes in Nigeria - cpifinancial.net

I learnt that fascinating little fact about the Guinness-loving African nation at a Mutual Funds conference sponsored by Allfunds Bank - it was an excellent event. I also learnt that every day in Nigeria, 60 million cubes of Maggi food stock are sold for less than 10 cents each. If you include the whole of West Africa, 100 million Maggi cubes are sold per day.

This is why Africa, in particular Nigeria, has asset and wealth managers so very, very excited. The demographics are the kind that make asset managers sing and skip. About 150 million people most of whom the median age is 19.

N-n-n-n nineteen [random reference to 1980's hit anti-war song by Paul Hardcastle that has nothing to do with Nigeria but may press home the point that these people are YOUNG. As a comparison, the median age in Europe is 40s, which does not inspire much dancing from wealth managers].

Sure, most Nigerians may currently be living on $1 to $2 a day but, as you can see from the Maggi stock cubes example, the quantity of people means companies targeting this market are still making a lot of money.

Why are so many stock cubes sold per day? I’m glad you asked because it’s very interesting. This is what Senior Portfolio Strategist for Goldman Sachs Asset Management (GSAM) Katie Kochs had to say about it, while speaking at the Allfunds Bank Mutual Fund Connection conference:

“The good news story coming out of Nigeria is that it’s had the strongest improvement in its Growth Environment Score… and if it continues to improve at this rate, it’s possible that Nigeria will be larger than South Africa in the next 10 years. If you project very far out, it could actually have an economy the size of Germany by 2050.”

Ok, here’s the bit about the stock cubes. Maggi make three flavours, chicken, shrimp and beef. According to Koch, there are three positive attributes of the wee cube. First, it tastes good. “It flavours food, so if you’re living on a couple of dollars a day, you can’t afford to buy beef or chicken or shrimp to put on the table for your family but you can afford to buy this cube. So you make a vegetable based meal, you add this and you get the protein flavouring that you might not be able to afford,” Koch said.

“Second, it’s fortified with a couple of different micro nutrients, iron and iodine. In Nigeria, 25 per cent of pre-school aged children could be classified as anaemic because of iron deficiency in their diet. Iodine is extremely important for pregnant mothers, they have to have enough in their diet for foetal brain development.” The company has gone out of its way to spread this message and educate Nigerian mothers about the importance of iron and iodine for their children.

Third, stock cubes are cheap. Families living on a shoestring can afford them.

Why is this all so very exciting for wealth managers? Because it’s a specific and very real example of one of the biggest – if not THE biggest – themes for global economic growth in the next decade or so, namely the rise of the domestic consumer in developing markets.

When millions and millions more people in Africa and Asia have greater discretionary income, it’s big news for companies providing basic goods in areas like healthcare (painkillers), personal grooming (shampoo, soap, toothpaste, etc), food products, and more.

As a result, GSAM have companies like Maggi in their portfolio as well as a Nigerian beer company, for reasons that should be obvious based on the first sentence of this blog.

I’ll give Koch the last word on this, “the consumer story is really important to growth markets over all, I’m extremely excited… if I had to pick a theme within the theme that I was most excited about, it is the rise of the domestic consumer.

“We think by the end of this decade, we think we’ll have over one billion individuals entering the emerging market middle class. It is going to have a dramatic impact on the fortunes of both developing and developed market companies.”

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Female billionaires

By Tamara Pitelen

Ten per cent of the world’s billionaires are female – many of whom are now coming out of China where communism has bred some great capitalists… what would Chairman Mau say to that?

Ten per cent of the world's billionaires are women.

An interesting little fact crossed my desk today. Did you know that on the recently released 2013 Forbes Billionaires list, there are now 1,426 names. All these super wealthy people own about $5.4 trillion between them. That’s up from $4.6 trillion last year. (Big thanks to Forbes for doing all the investigating involved in putting these figures together.)

Which is fascinating in itself and reveals that there is still a whole lot of major wealth creation going on in our economically troubled world. But here’s the thing that really struck me. Of the 1,426 people named as billionaires, just 138 of them are women. This is an increase on last year’s total of 104 female billionaires but is still a fairly poor percentage (9.6 per cent) when you consider that women make up 50 per cent of the world’s population.

In addition, according to The World Bank’s 2012 World Development Report, women represent 40 per cent of the world’s labour force but hold just one per cent of the world’s wealth.

Many, many people who are much cleverer and bigger than me have written oceans of text on the various reasons why women lag so far behind men when it comes to claiming their share of its wealth and being compensated equally for their labour so I’m not going to go there – I think most rational people will agree that if girls are denied access to education and married off at age 12, then it’s not a huge surprise to find they’re not sitting on the board of a large multinational corporation later in life.

It’s not all bad news for women though, in fact there’s a lot of good news. Globally, $20 trillion of spending is controlled by women and that’s expected to rise by another 40 per cent over the next five years, it was stated on the recent BBC series on wealth called Changing Fortunes. Not only that, it seems we might do a bit better than the fellas when it comes to inheritance because, according to Boston College’s Center on Wealth and Philanthropy, women will inherit 70 per cent of the $41 trillion in intergenerational wealth transfer expected over the next 40 years.

The World Bank’s 2012 World Development Report also found that, “Since 1980, female participation rate at each level of income has increased sharply... women now account for more than half the world’s university students.” Hurray!

Commenting on this, the BBC series Changing Fortunes said that, “As birth rates fall, discrimination decreases and educational opportunities improve and THUS the growing feminisation of wealth seems likely to continue.”

But let’s move on because there are some really interesting trends now emerging in the world of women and uber wealth. In a nutshell, the majority of the world’s richest women got that way through marriage or inheritance, however the number of self made women is on the rise and it is Chinese women who are taking the lead.

About 30 per cent of China’s millionaires are women and the nation is home for 11 of the world’s 20 richest self-made women. One of them is Zhang Lan, the CEO of South Beauty Food and Beverage, an upmarket chain of restaurants. Lan was profiled on the BBC’s Changing Fortunes episode called The Feminine Touch. Her brand is now worth $400 million and comprises 80 restaurants. She plans to have 100 by 2014.

What is it about China that has unleashed this female entrepreneurial spirit? Surprisingly and ironically, it’s their Communist upbringing that has made them such great capitalists. Growing up under Chairman Mau, who famously said ‘women hold up half the sky’ and a brand of communism that asserts everyone is equal has meant Chinese women have grown up believing that as long as they go out and work hard, nothing is stopping them.

According to the recent Boston Consulting Group’s (BCG) report entitled ‘Driving Growth: The Female Economy in China and India’, China's female economy will grow from $1.3 trillion in 2010 to $4 trillion in 2020 – a tenfold increase in 20 years.

For investors looking to cash in this means that “understanding what Chinese and Indian women want - their devotion to their children, their desire for safe and nutritious food, their fondness for affordable luxury, their brand consciousness - will be critical to the success of companies operating in these markets”, BCG states.

So it’s all very good news for Louis Vuitton et al. “China’s female economy is already strong—and over the next few years, we expect to see it grow even stronger. In particular, young professional women will break into middle and top management jobs and fuel the next wave of growth in the luxury business,” BCG’s report states.

The difference between women in China and India is marked, states the BCG report. In India, there is still “significant gender discrimination, limited access to education, low formal labor-participation rates, and low wages”.

“The female labor-force participation rate has been stuck at around 32 percent since 2000, while female wages have actually declined to 26 percent of men’s wages, on average. This decline is driven by repressive, education-stunting conditions in rural areas as well as by a government unwilling to step in and end discrimination, harassment, and physical threats.”

So come on India, lift your game. Don’t you want an army of go-getting successful businesswomen contributing to the country’s GDP as well?

Anyway, if there is anyone out there who would like to see the number of female billionaires leap by one to a total of 139, I would be more than happy to fill that position. I’ll just need someone to invest in my latest project at the discount bargain, no-wait-there’s-more price of one billion dollars.


SOURCES

1. Female Billionaires
2. Forbes Billionaires List 2013: http://www.forbes.com/billionaires/
3. Changing Fortunes is a co-production by D&E and Films of Record for BBC World News. Filmed with the sponsorship of Coutts Private Bank and airing from February to March 2013, the episodes of the show can be viewed at: http://international.coutts.com/en/news-and-insights/bbc-changing-fortunes/
4. Boston Consulting Group’s report entitled ‘Driving Growth: The Female Economy in China and India’ report available here: http://www.bcg.com/expertise_impact/publications/PublicationDetails.aspx?id=tcm:12-119928

Ding Dong! Which witch is dead??

By Isla MacFarlane

People of the UK would do better to direct their anger at the current state of the economy – not at the grave of an old lady who is, and had for a long time been, powerless to do anything about it.

Margaret Thatcher visiting Salford in 1982. Picture by: University of Salford Press Office

From the frenzied celebrations that followed her death, anyone would think Margaret Thatcher was a military dictator ousted from power or assassinated by a resistance, not someone who was democratically elected – on no less than three occasions –and who relinquished power over 20 years ago..

In death, Margaret Thatcher has taken the global stage once again, clogging up news channels around the world, even though in Thailand news channels accidently showed footage of Her Majesty the Queen and another of Meryl Streep when announcing her death. I found it strangely appropriate that she was stripped of her identity seeing as how, on shedding her mortal form, she has become a generic hate figure to rival the Wicked Witch of the West – a bogeyman who’ll snatch children’s dairy products when they’re not looking.

I suppose a backlash against Britain’s fawning rightwing press was inevitable. Taxpayers, many of whom lost their jobs, had loved ones die on NHS waiting lists or were educated on a shoestring under her reign are understandably insulted at shouldering the cost of her GBP 10 million state funeral. An honour not bestowed on any democratically elected official since Winston Churchill, it seems an ill-fitting tribute to such a divisive figure who loathed spending money on anything.

Being the daughter of a card carrying left-wing feminist and a working class Glaswegian, I grew up with an inherited hatred of the so-called iron lady. She was in power at a time when I favoured the goings on of the Magic Roundabout to her shenanigans in parliament, but had I been of voting age her policies certainly wouldn’t have won my support. However, she left power when I was seven-years-old and the bulk of my frustration is directed at her successors. To me she was one prime minister in a long line who made a lot of bad decisions. What marks her out is she seems to be carrying the can for all the others who have done the same thing.

Strangely, those ex miners dancing on her grave seem to be outnumbered by people of an age with me, whose memories of the ‘80s probably consist more of shell suits and Roland Rat than footage of strikes and riots. Is this a socialist outburst at what she stood for – capitalism, greed and selfishness? Frustration at a failed services-led economy she laid the foundations for? Desperation at high youth unemployment? A loathing for the rich who condone tax avoidance while social welfare is slashed?

If any of the above, their anger would be better directed somewhere useful – not at the grave of an old lady who is, and had for a long time been, powerless to do anything about it.

Reff: Ding Dong! Which witch is dead??

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Gold: Exit, pursued by a bear?

By Robin Amlôt

The fall in the gold price over the two trading days, Friday and Monday in the global markets has set a confusing variety of unenviable records, depending on whose reports you read: it was the biggest two-session fall since 1980, said Bloomberg; the sharpest two-day tumble since 1983, said The Financial Times, taking the price to a two-year low; a record decline since futures trading of gold started in the US in 1974, according to International Business Times.

What lies behind the slump in the gold price? The proximate cause appears to have been reports beginning on 11 April that the Cypriot Government would be selling part of Cyprus’ gold holdings. From bullion reserves of around 13.9 tonnes, reports suggested around 10.36 tonnes worth EUR 400 million would be disposed, marking the largest bullion sale by a Central Bank in the Euro zone since H1 2009.

While the absolute quantity involved is not large, the suggestion that Cyprus may be turning to the gold market to raise even such a relatively small amount (compared to total bail out costs) had some investors and analysts looking thoughtfully and nervously at the reserves being held by other troubled southern European economies. The reasoning being – if Cyprus can sell gold to raise funds so could Italy (holding the world’s fourth largest gold reserves of more than 2,450 tonnes), Portugal (382.5 tonnes) and Spain (281.6 tonnes) or even Greece (111.9 tonnes).

Gold as an investment does not create a return (unless you get into the complicated realms of gold lending and gold loans) and is, therefore, held by investors either as a disaster hedge or inflation hedge. Having said that, plenty of people piled in for the ride on the gold bull market which took the price to a high around $1920 an ounce in 2011.

Despite central bank printing presses in certain countries working overtime metaphorically with massive injections of liquidity through quantitative easing, inflation has so far failed to materialise. Add a growing belief that equities will be the outperforming asset class of 2013 and the tumble in the gold price begins to look like it was an accident waiting to happen, underlined by hints from the Fed, the US Central Bank that it may begin to wind down its QE programme by the end of the year. The next step after that might be firmer interest rates and, of course, rising interest rates would also make gold look less attractive.

And the headline? It is Shakespeare's most famous stage direction, appearing in The Winter's Tale.

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