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Africa leads in plans to start fresh ventures

NAIROBI, Kenya, Aug 6 Forty two percent of Kenyans plan to start their first business in a years time, according to Gallup, a US based research and data analysis firm.

This puts the largest East African economy at ninth position out of the 32 countries from Africa included in the 2013 survey.

Malawi has the highest number citizens planning to start a business in 12 months time at 57 percent followed by Ivory Coast at 48 percent.

Two in three Africans believe their communities are good places for people to start new businesses, which should be encouraging news as leaders discuss ways to increase trade and investment in Africa this week at the US-Africa Leaders Summit, Gallup states.

In the region, Kenya stands second from Uganda at 43 percent while Tanzania is at position 12. Rwanda is at 31st position.

Despite Africa outpacing residents in any other region of the world, the challenge is in getting credit and proper training.

The degree to which access to training and money are potential barriers to entrepreneurship and job creation through private sector start-ups varies across the 32 countries that Gallup surveyed in 2013.

Kenya seems to in a better position where 33 percent of those who want to start their first business say they have access to credit, ranking third among the 32 countries.

On the other hand 44 percent of Kenyans who intend to start a business for the first time say they have access to training ranking second from Botswana.

Botswana are the most likely to say they have access to training (56percent) and to money (38percent) to start or grow a business.

At the other end of the spectrum, only 7 percent of Nigeriens say they have access to training and 8 percent of Beninese and Guineans say they have access to money.

The relatively high entrepreneurial intent, despite the potential barriers of training and money, largely reinforces the reality that many entrepreneurs in Africa tend to be more necessity-driven than opportunity-driven, the firm argues.

The report shows that African respondents who say they have access to training and money to start a business are nearly twice as likely to say that they are planning to start a business in the next year.

With the ongoing US-Africa Leaders Summits objective being expanding trade and investment with Africa the report recommends for more investments in education to shore up this training deficit in the continent.

Personal debt levels higher in Northern Ireland says charity

Levels of personal debt in Northern Ireland are 20% higher than the rest of the UK, according to a charity report.

StepChange, a nationwide debt advice service, said its clients owed around £18,400 on credit cards and unsecured loans. The UK average is £15,300.

In the first six months of 2014 the charity helped almost 2,000 people in Northern Ireland, where it has an office in Limavady.

It said there was a move towards high interest debts such as pay day loans.

In recent years the types of debt held by clients in Northern Ireland have gradually, but significantly changed, said the charity.

Debt owed on pay day loans and to shopping catalogue companies – both high interest – has increased radically.

It suggested this is because banks have applied stricter lending criteria post credit-crunch.

People are turning to other forms of credit to plug the gap in their finances, the charity added.

StepChange said unemployment and reduced working hours were the primary drivers of the local debt problem.

It added a particularly worrying trend was among self-employed people who had average debts of £36,000.

West Texas Educators Credit Union offers financial services to everyone

West Texas Educators Credit Union may be a bit of a mystery to many local residents. The fact that it is a credit union may make some think that it is not open to the general public, or that only those with a specific economic or credit standing are qualified.

The fact that “Educators” is in the name also suggests it is only for those employed with the school district.

Neither scenario is correct. It is no harder to open an account with WTECU than it is with any bank, and membership is open to the general public, although it was originally started to service educators first.

WTECU has been in business in Fort Stockton for the last 25 years, and it is one of two credit unions in town. It has two more branch locations in Odessa, and one more planned for Midland.

Lifelong Fort Stockton resident Billie Jo Adams is the Manager, and she says credit unions are more customer friendly because CUs are owned by their members, while banks are corporations that serve their shareholders.

WTECU welcomes everyone, especially first time bankers, because it provides an opportunity to grow a customer relationship over time, which can last for years, even decades.

“When you get ready to buy your first car, we can educate you on that,” Adams said, adding that her credit union, customers aren’t just another name on the ledger.  “You build that business relationship with us.”

It also makes financial sense to use a credit union, she says, because “credit unions have lower interest rates than banks.”

It only takes $25 minimum savings account to join, and checking is free. WTECU offers money market accounts, along with IRAs, CDs, auto, boat, jet ski, RV and motorcycle loans, refinance loans, home equity, education, secured and unsecured loans, based on credit score.

Secured loans have collateral attached to them, and thus a lower rate than unsecured loans.

Adams says they do their best to explain the complexities of interest rates, which can be greatly affected by an applicant’s credit score and length of the loan, as well as external factors.

“The economy has a lot to do with [interest rates],” she said, although they try to be competitive with the other credit union in town.

For those in need, WTECU offers free credit counseling, and can pull a customer’s credit report and go over it with them. She says WTECU strives to provide services and guidance to increase their financial health.

“We try to work with people,” Adams said, ” We try to counsel them. Maybe if we can’t get you a $20,000 vehicle we can start you out at $12,000. It’s all about members here.”

She says they have less of the typical fees that banks do, and offer some free services such as faxing and document shredding. They don’t nickel and dime their customers over little transactions.

“You want a print out?” Adams says, referring to balance statements. “We just give you a print out.”

Adams received the promotion to manager last month after working at the location for just about a year. Previously, she worked doing collections for City Hall.

“That kind of job, either its for you or its not,” Adams said. She says it’s easy to loan money, but the hard part of the job is securing repayment. Adams fortunately enjoyed her work.

From there, she moved into the small loan industry, which educated her about the financial needs of people in Fort Stockton.

“That just stuck with me,” she said. “Out in the community, there was always something different going on.”

WTECU has about 300 current members, and their location is big enough to staff five employees, although at the moment it is just Adams and Erica Gonzales, the Member Service Advisor. Many of their members take advantage of online banking, so there is almost never a line in the office, allowing for more one on one attention to customers.

They’re open from 9:00 am to 1:00 pm, then from 2:00 pm to 5:30 pm, Monday through Friday.

Dear Reader: The moral rot in unsecured lending

We rarely have occasion at Noseweek to borrow an editorial from another, competing publication. This is one such occasion: we cannot think of a better way of saying it than Patrick Cairns has done recently on Moneyweb:

Unsecured lending in South Africa has always had its detractors. Since 1992 when an exemption to the Usury Act was first granted to allow microlenders to operate legally, there have been people who are uncomfortable with the practice.

It doesnt take much to argue that, ultimately, the business models practised by microlenders in South Africa are exploitative, degrading and profoundly negative in their impact on the economy.This is a sentiment that is not limited only to lenders like African Bank either. The unsecured lending industry also feeds another that is perhaps even more morally suspect one that is most prominently represented by Cambist, a company that promises South Africans incredible returns of 19.5% per year.

How do they do that? By facilitating the sale of debt of unfortunate individuals who have failed to repay unsecured loans and have suffered the indignity of having garnishee orders granted against them. (These are court orders that allow creditors to attach a portion of someones salary. The employer is obliged to pay the creditor directly to ensure that the funds are received.)

Anyone with money on the Cambist platform is effectively collecting their 19.5% on the misfortunes of the poor. There is nothing economically uplifting about this. It is only making poor people even poorer.

Its not enough to argue that the borrowers made their own bad decisions. By its own admission, African Bank has not been strict enough in its lending criteria. It has lent too much money to people who had little hope of ever paying it back.

What reason would it have for doing that, other than greed? There is a clear link between this reckless lending and what Cambist is doing, because the more risk lenders take in their writing of loans, the more likely borrowers are to default. And with garnishee orders being granted, that means more business on the Cambist and other similar platforms.

Whichever way you spin it, it is an appalling exploitation of the poor.

It is made even more unpalatable when you consider the way that Cambist markets itself. A recent Twitter post from Cambist reads: They say its better to cry in an expensive car than on a bicyclehellip; what do you think?

What solace is there in an expensive car bought with the 19.5% per annum earned off someone who can hardly afford a bicycle?

This sort of thing only highlights the ethical failure in the entire microlending cycle. It is not, and has never been, about uplifting the poor. It has been about how much money can be made off them.

Can we be proud of a country where the exploitation of the poor is sold as a means to buy yourself a nice car?

Cambist will argue that it is not doing anything illegal. Its a matter of willing buyers and willing sellers. The assets in question, it will say, are debt contracts. Isnt that what is traded on the bond market every day?

But that ignores what we are actually dealing with, because behind those debt contracts are human lives. There are people trying to make an honest living, feed their families and improve their lot in the world.

Over the years Noseweek has highlighted the problem in various reports, see nose44 (Loan sharks or bankers); nose86 (Thieves dance the Limpopo polka) and nose100 (Juicy Saambou pickings for African Bank).

Read the article onMoneyweb.

Copyright 2014 www.noseweek.co.za

Russia Sanctions Raise Risk of Inflation Miss, Central Bank Says

Russia’s central bank said
inflation is on course to miss policy makers’ target in 2015 for
a fourth consecutive year as sanctions will have a prolonged
effect and geopolitical risks are set to persist.

The inflation rate will be 4.5 percent to 5 percent at the
end of next year, according to the base-case scenario of the
Moscow-based monetary authority’s draft 2015-2017 policy plan,
published today on its. The target is 4.5 percent. The economy
will grow 0.9 percent to 1.1 percent next year and as much as 2
percent in 2016, it said.

The central bank has raised rates three times this year to
curtail inflation. Price growth has been spurred by capital
flight and a weakening ruble as President Vladimir Putin
exchanged sanctions with the US and its allies over the
Ukraine crisis. Policy makers left borrowing costs unchanged
today, saying that an increase is possible if there is risk of
inflation exceeding the medium-term target of 4 percent.

“We aren’t going to use all means available to push 2015
inflation below the target,” Bank of Russia Chairman Elvira Nabiullina told reporters in Moscow today. “There are risks of
missing the target, though not big ones.”

The ruble has lost 13 percent against the dollar this year,
the second-worst performance among 24 emerging-market currencies
tracked by Bloomberg, after the Argentine peso.

The central bank published its draft a day after the US
joined European Union in tightening sanctions against Russia,
targeting individuals and some energy and defense companies.

Faster Inflation

The measures announced so far and Russia’s retaliatory ban
on some food imports may add 150 basis points to the inflation
rate by the middle of the next year, according to Nabiullina.

Inflation accelerated to 7.7 percent as of Sept. 8,
according to the the central bank. Consumer prices grew 7.6
percent in August from a year earlier after 7.5 in July and 6.1
percent in January. Policy makers, who target 5 percent
inflation in 2014, estimate it the rate remain above 7 percent
this year.

A possible tax increase discussed by the government may add
100 basis points to 150 basis points to price growth, the
central bank said.

That move, along with a deteriorating geopolitical
situation, would push next year’s inflation to the 6 percent to
6.5 percent range next year, according the central bank’s medium
scenario.

That version puts price growth at 4.5 percent to 5 percent
in 2016 and 4 percent to 4.5 percent in 2017. In this case, the
economy will expand 0.8 percent to 1 percent next year, 1.4
percent to 1.6 percent in 2016 and 1.7 percent to 2.1 percent in
2017.

Other Scenarios

Under the middle scenario, the central bank will focus on
financial stability and may use currency interventions and
provide unsecured loans if signs of destabilization emerge,
according to the draft policy plan.

The worst-case scenario assumes a drop in oil prices,
higher taxes and a prolonged impact from sanctions, leading to
gross domestic product growing less than 1 percent in 2015-2017.

Conditions for economic development are “highly
uncertain” for the next three years and will depend on external
factors, including the geopolitical situation and the duration
and scale of the sanctions, according to the draft.

Capital fight may be $30 billion to 45 billion in 2015,
depending on the scenario. Outflows reached $74.6 billion in the
first half of 2014, which exceed last year’s total of $60.3
billion.

To contact the reporters on this story:
Olga Tanas in Moscow at
otanas@bloomberg.net;
Anna Andrianova in Moscow at
aandrianova@bloomberg.net

To contact the editors responsible for this story:
Balazs Penz at
bpenz@bloomberg.net
Torrey Clark

Financial makeover: How to plan happy retirement

When the paychecks stop coming, will you have enough money to enjoy your new stage in life?

In a recent survey by the Federal Reserve, 31% of non-retired respondents said that they didnt have any retirement savings or pension. Worse yet, nearly 20% of those respondents were 55 to 64 years old, highlighting a growing concern that many Americans are ill-prepared for their golden years.

Why should I save?
Gone are the days in which pensions and Social Security served as comfortable cushions for retirement. Thanks in part to an increasingly older population, its crucial to start preparing for retirement as early as possible, by contributing to 401(k) plans and Individual Retirement Accounts (IRAs)or thinking about alternative sources of income.

If you havent done so, its not too late to get started. NerdWallet, a company dedicated to helping people save money, recently ran a Financial Makeover Contestin which winners were paired with financial planners to evaluate their retirement savings plans.

Delia Fernandez, a Southern California certified financial planner, went one-on-one with contest winner Jack. He plans on retiring in the next year or two and wants to make sure that he and his wife will be financially comfortable once he stops working.

The conversation between Fernandez and Jack shed light on several important things to consider when building a retirement fund.

Know how much money youll need each year
First things first: Fernandez advises anyone thinking about hanging up their boots to begin by determining how much money theyd like to spend each year during retirement. Consider health costs, mortgages, insurance, and travel costs. Dont hold back: Include anything that you may need or want to spend money on during retirement.

Now, to see if that annual amount is affordable, examine all possible sources of income, such as pensions, savings plans, assets and investments.

Maximize your pension
Although it would be nearly impossible to rely exclusively on your pension during retirement, its important to make the most of what you have.

Jack, for example, has two pensions from the two main jobs that hes held in his career. The larger of the two will pay about $300 a month if he starts taking monthly distributions at age 62.

When thinking about how you want to receive your pension, youre probably going to decide between a lump sum distribution and monthly installments.

It comes down to whether both spouses are comfortable managing money, Fernandez says. If so, go with monthly distributions. If, however, one spouse feels like he or she is better at managing money than the other, then a lump sum distribution might make more sense–it would allow the savvier money manager to decide what to do with the pension funds (that is, if and how to invest) while he or she is still in good health.

Factor in 401(k) plans and Individual Retirement Accounts (IRAs)
Ideally, a retiree will be able to withdraw money from his or her 401(k) plan and/or IRA(s) once he or she calls it quits. Regardless of the amount of money in these accounts, the sum needs to be taken into consideration when calculating how much money youll be able to spend each year during retirement.

Its worth noting that there is an early withdrawal tax and penalty for taking money out of a 401(k) plan before age 59½. If at all possible, keep contributing to your account until you reach that age. After decades of smart, careful saving, youll want to avoid unnecessary fees whenever possible.

Consider your assets
Along with savings from 401(k) plans and IRAs, assets like houses, cars, and other pieces of property can be great sources of money during retirement.

Jack, for instance, owns two homes and plans to sell one in the coming years. The money spent on mortgage payments could then be put toward something like medical insurance, which can be quite costly. Jack spends about $2,000 a month on medical insurance for himself and his wife.

Be prepared to shake up your investment strategy
Part of enjoying a financially sound retirement is revisiting – and probably revising – your investment portfolio. Retirees are often advised to shift asset allocation toward bonds, which arent as risky as stocks.

That doesnt mean that you have to stop investing altogether, though.

Jack admits that almost all of his funds are in the stock market. While Fernandez says shes comfortable with how Jack allocates his funds, she also recommends that he adopt a more conservative investment strategy once he retires. According to Fernandez, Jack understands the risks he is taking and can manage [his portfolio].

If you arent quite as comfortable handling your own investments, a financial planner could go a long way toward ensuring your portfolio isnt too risky.

Anticipate change
Its no ones favorite topic. But its crucial to set up a trust in case anything should happen to you or your spouse, Fernandez says.

Jack, for example, does not have a trust in place. That means that, if were to pass away within the next year, that house sale would be delayed. Without a trust, this transfer could cost nearly $15,000 in legal fees. With a trust in place, Fernandez says, Jacks wife could avoid these fees and the transfer process would be much quicker.

Building a robust retirement fund is a multi-step process that involves several different moving parts. The sooner you start thinking about it, the better prepared youll be to relax and enjoy your post-working life.

NerdWallet is a USA TODAY content partner providing general news, commentary and coverage from around the Web. Its content is produced independently of USA TODAY.

Invesco launches senior secured loan product

Fund manager, Invesco Australia has launched a new product – the Invesco Wholesale Senior Secured Income Fund.

The Fund, which commenced on 14th August, focuses on income and preservation of capital and, according to the company, can be considered as a more defensive portfolio with the product ultimately investing in US and European senior secured bank loans.

The companys announcement said the fund would be ultimately managed by Invescos Senior Secured Loans team, one of the worlds largest active investors in senior secured bank loan assets with more than A$32 billion under management.

Invesco Australia chief executive, Martin Franc said the fund would provide investors with a diverse range of benefits including regular income distribution, high liquidity, a strong historical performance track record, a competitive management fee, and importantly, access to the investment expertise and deep resources of our world class senior secured bank loans team.

The launch of the Invesco Wholesale Senior Secured Income Fund forms part of Invescos strategy of providing a diverse array of world class, specialised investment capabilities designed to meet the needs of Australian investors now and into the future, he said.

‘Green Loans’ Help Kenya’s Farmers

ABEDARE MOUNTAINS, KENYA–

A quarter of Kenya#39;s population are farmers. Few of these 10 million have ever received training on how to improve their production or how to expand their businesses with financing. Most of these farmers shun the idea of a loan after seeing neighbors lose livestock or whole farms when they can#39;t keep up with repayments to loan sharks.

Now a new company is offering cash for conservation measures, though, in the hope that so-called green loans will help farmers with better borrowing terms, while teaching them how to protect Kenya#39;s most fertile soils and ensure that the country can keep feeding itself.

Fifty-year-old Samuel Karioki has been farming since he left school, harvesting the same vegetable crop each season.

But this year, Karioki#39;s neat rows of cabbages are bursting into one another, and he is expecting a bumper crop of potatoes.

Micro financing

After years of struggle, his success is thanks to a $90 loan that he used to buy top quality seeds and fertilizer for the first time.

We#39;ve had a lot of problems, he said noting a lack of finances, then a lack of market and then infestations of bugs and diseases. He said he never wanted to take a loan before that because there#39;s always so much collateral.

Karioki has seen farmers in this mountainous region, a couple of hours outside Kenya#39;s capital Nairobi, lose everything to loan sharks after failing to keep up with repayments.

His experience was different, however, because of a new micro finance company called F3 Life. It offers small cash loans starting from as little as $20 to as high as $180 dollars, depending on repayments and the completion of basic conservation practices.

The scheme, designed by conservationist Mark Ellis-Jones, includes free monthly training in farming aimed at boosting productivity.

We also provide a loan where we peg the interest rates to the quality of soil conservation that a farmer is practicing. We ask farmers to build grass strips across the contours of their slopes, which prevents the loss of top soil from their farms, said Ellis-Jones.

As the loans increase, farmers are asked to plant trees to increase the protection of fertile top soils from being washed away. F3 Life said such simple measures can extend the soil life from about 20 years to 1,000 years.

In this area, where vast patches of brown dot the once verdant hillsides, the soils might last only another decade.

Preserving soils

Continuing land degradation could pose serious problems for a growing country#39;s ability to feed its inhabitants. Over the past 50 years, the world has lost one third of its arable soils.

F3 Life agronomist Ngigi Obadiah said he hopes to roll out nationwide the green loans pilot plan in an effort to save Kenya#39;s soils as the population booms.

At the moment we are servicing 52 clients. We are anticipating to increase the number to 350 in one year#39;s time. In two years#39; time we anticipate up to 10,000, and half a million in the next five years, said Obadiah.

Samuel Karioki said his cabbages are the talk of the town, and many farmers already are sold on the idea of green loans that can help the entire community.

As profits grow higher than the tall grasses protecting his plot, he plans to buy a pickup truck. That will enable him to cut out the middlemen who make a small fortune selling farmers#39; produce at a market, which now will soon be in his reach.

SEC adopts rules on loan-backed securities

Commissioners also imposed new conflict-of-interest rules on agencies that rate the debt of companies, governments, and issuers of securities. That vote split 3 to 2 along party lines, with the two Republicans opposed.

Mortgages bundled into securities and sold on Wall Street soured after the housing bubble burst in 2007, losing billions in value. The vast sales of risky securities ignited the crisis that plunged the economy into the deepest recession since the Great Depression and brought a taxpayer bailout of banks.

Requiring sellers of the securities to give information on borrowers credit and income histories will enable investors to better assess the risks of the loans underlying the securities, commissioners said.

lsquo;lsquo;These reforms will make a real difference to investors and to our financial markets, SEC chairwoman Mary Jo White said before the vote.

A recent report by the Federal Reserve Bank of New York said US auto loans jumped to the highest level in eight years this spring, fueled by a big increase in lending to risky borrowers. The banks also said that loans to borrowers with weak credit, or subprime loans, continue to make up a smaller proportion of total auto loans than before the recession.

Still, the rapid increase in subprime auto lending has raised concerns among regulators. Because auto loans are packaged into securities, an increase in auto loan defaults could be amplified.

The new rules on so-called asset-backed securities and credit rating agencies were called for under the sweeping financial overhaul law enacted in 2010 in response to the financial meltdown. The rules take effect in 60 days.

A number of big banks, including JPMorgan Chase, Bank of America, Citigroup, and Goldman Sachs, have been accused by the government of abuses in the selling of mortgage securities before the crisis. Together, they have paid hundreds of millions of dollars in penalties to settle civil charges brought by the SEC, which said they deceived investors about the quality of securities.

Recently, the Justice Department and state regulators have reached multibillion-dollar settlements over mortgage securities with JPMorgan, Bank of America, and Citigroup.

The new rules require credit rating agencies to report to the SEC on their safeguards to ensure that their ratings are fair.
Sales people will be barred from participating in the ratings process. And agencies will have to review ratings if an employee is later hired by a company he or she rated.

Ratings affect a companys ability to raise or borrow money and can influence how much investors pay for securities. Critics say the agencies have a conflict of interest because they are paid by the companies they rate. Moodys, Standard amp; Poors, and Fitch were criticized for giving low-risk ratings to securities sold before the crisis, as they reaped lucrative fees.

Brokers report 63% increase in secured loans

A surge in the number of secured loans has been captured in the latest Broker Stance Survey by The Loans Engine, with brokers reporting a 63% increase over the past 12 months.

Often used as an alternative to re-mortgaging and further advances, the survey also revealed that only 2% of brokers have failed to place a secured loan since January despite the fact that 92% said they did not actively promote secured loans through their website.

Tom Garratt, Head of Intermediary Channel at The Loans Engine, says:

There has been clear growth in the number of secured loans offered as a viable finance solution. Homeowner loans can be a worthy alternative to other personal finance methods, especially for people who have poor credit history or those who are looking to consolidate their debts. The popularity of secured loans shows no signs of slowing, which is due to the fact that they can be extremely beneficial to many people.

Figures come after the FCA introduced tougher mortgage criteria as part of the Mortgage Market Review. Statistics published by the Bank of England in May revealed that remortgage approvals had fallen by 15% in value compared to the previous year, leading to calls for a wider range of lending options.