MoneyGram returns to year-over-year revenue growth in June in Q2 2020

Esan Bolaji
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MoneyGram returns to year-over-year revenue growth in June in Q2 2020

MoneyGram International, Inc. (NASDAQ: MGI) today reported financial results for its second-quarter ending June 30, 2020.

Second Quarter 2020 Business Highlights 

“We had a very strong quarter and materially outperformed on both the top and bottom-line, despite the continued global uncertainty from the COVID-19 pandemic,” said Alex Holmes, MoneyGram Chairman and CEO.

“In June we returned to year-over-year revenue growth on strong money transfer transaction growth of 10%. This return to growth was driven by the rapid expansion of our digital business as well as the continued improvement of our walk-in business.

Additionally, the resurgence of growth from the money transfer business, along with agile management of the business throughout the crisis enabled us to deliver year-over-year Operating Income and Adjusted EBITDA growth for the quarter.”

Holmes added: “We’re excited about the underlying momentum in our business driven by our digital transformation.

The investments that we have made over the past few years have allowed us to build a fast-growing digital business which not only has higher customer retention and productivity rates but also surpassed the walk-in business during the quarter delivering higher margins on average.

With digital now representing 27% of money transfer transactions, the business is providing a significant contribution to our bottom-line results.”

  • MoneyGram achieved 106% year-over-year digital transaction growth in the second quarter – a significant acceleration from the first quarter of 2020 where the company reported 57% growth.

Overall digital growth was driven by the following components:

    • MoneyGram Online, the Company’s direct-to-consumer channel, delivered 104% year-over-year transaction growth driven by strong consumer demand for the MoneyGram app, high customer retention rates, and increasing productivity rates
    • Digital partnerships, driven by key partners in the Middle East and the Asia Pacific, accelerated from 25% year-over-year transaction growth in the first quarter to 97% growth in the second quarter
    • Account deposit and mobile wallet transactions increased 148% which is an acceleration from the first quarter where the Company reported 80% year-over-year transaction growth
  • Digital transactions accounted for 27% of all money transfer transactions in the second quarter
  • The Company remains focused on executing the long-term strategy while managing through the crisis. During the quarter, the Company achieved a number of important milestones:
    • Expanded the loyalty program to new markets and launched product enhancements to improve the customer experience
    • Launched new wallet and account deposit partnerships in rapidly growing regions of the world
    • Strengthened the Company’s leading position around the world by signing and expanding partnerships, specifically overhauling key receive markets

Second Quarter 2020 Financial Results, Year-Over-Year

  • Total revenue was $279.8 million, a decline of 14% or 13% on a constant currency basis primarily driven by the impact of COVID-19 on the first part of the quarter as the Company reported positive revenue growth in the month of June
    • Money transfer revenue was $253.1 million, down 10% or 9% on a constant currency basis related to the impact of COVID-19 on the first part of the quarter
      • The Company reported positive money transfer revenue growth in the month of June on the strength of double-digit cross border transaction growth
    • Investment revenue was $4.3 million for the quarter due to lower prevailing interest rates
  • Total operating expenses of $257.8 million, improved $51.7 million or 17%
    • Compensation and Benefits were flat including a $5.9 million special compensation plan accrual to potentially restore compensation withheld during the quarter as part of the Company’s proactive response to the COVID-19 pandemic
    • Transaction and Operations Support expenses were down over 60% primarily driven by efficiencies and operating reductions previously disclosed as part of the Company’s proactive response to the COVID-19 pandemic
    • Included an $8.8 million net benefit from Ripple market development fees of $15.1 million, partially offset by related transaction and trading expenses of $6.3 million
  • Operating Income was $22.0 million which was an increase of 54%
  • Net loss was $4.6 million for the quarter
  • Diluted loss per share was $0.06 and diluted adjusted income per share was $0.01
  • Adjusted EBITDA increased 4%, or 5% on a constant currency basis, to $56.4 million
    • Adjusted EBITDA margin improved 340 basis points to 20%
  • Adjusted Free Cash Flow was $24.7 million, an increase of 24%

“As the ongoing COVID-19 crisis continues to impact countless lives around the world, the health, safety, and livelihoods of our customers, employees, and partners remain our top priorities.

I’m extremely proud of how we’ve come together as a company over these last few months to exceptionally serve our diverse customer base of tens of millions of people who rely on our essential services,” concluded Holmes.

Balance Sheet Highlights

Cash and cash equivalents on hand at quarter-end were $130.6 million compared to $146.8 million at the end of 2019. As of June 30, 2020, the Company had repaid all outstanding borrowings under its revolving credit facility. Second-quarter interest expense was $22.7 million and capital expenditures were $9.8 million.

As announced earlier this week, MoneyGram has signed an amendment with the DOJ to defer the final $55 million payment to the end of the DPA in May 2021. The Government has agreed to extend the $55 million payment to provide additional time to consider the basis for potentially reducing the final payment amount.

The recent amendment also reduced the frequency of MoneyGram’s DOJ reporting from a monthly to a quarterly reporting cycle.

Third Quarter 2020 Outlook Update

As a result of continuing economic uncertainty created by the COVID-19 pandemic, the Company is not providing a specific third-quarter outlook. However, if revenue trends remain in their current range, then the Company would anticipate sustained Adjusted EBITDA growth in the third quarter.

Audi Group in H1 2020: Effects of COVID-19 pandemic still very significant

Esan Bolaji
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Audi Group in H1 2020: Effects of COVID-19 pandemic still very significant
  • Deliveries to customers: stabilization in the markets
  • Continuing along the electrification course: Audi e-Tron is world market leader for all-electric vehicles from German premium manufacturers
  • Audi Group: €20,476 million revenue, €643 million operating loss before special items, operating return on sales before special items of minus 3.1 per cent
  • The net cash flow of €1,953 million mainly due to sales of equity interests, investment discipline and inventory reduction
  • CFO Arno Antlitz: “We are starting the second half of the year with robust liquidity and are consistently implementing our product roadmap”
  • Outlook: Significant recovery expected in the second half of the year, but key financials for 2020 as a whole remain adversely affected by corona

Results of the first six months:

In the first half of this year, deliveries, revenue and operating profit were below the previous year’s figures. As expected, the consequences of the corona pandemic are presenting major challenges for the entire economy and for Audi as well.

The second quarter, in particular, featured an orderly restart of production and a significant recovery in customer demand.

A positive trend is evident in in-car deliveries:

At minus 22 percent, Audi is significantly better positioned than the market as a whole with minus 28 percent. As a result, the Audi Group’s revenue in the first half of 2020 totaled €20,476 million and its operating loss before special items was €643 million.

“The effects of the corona pandemic are also reflected in our key financial figures. We responded quickly to the corona pandemic and optimized our short-term expenditure without compromising our long-term product plans. We are starting the second half of the year with robust liquidity,” says Arno Antlitz, Member of the Board of Management of AUDI AG for Finance and Legal Affairs.

 

A worldwide decline in demand and interruptions in the supply chain led to global production suspensions and short-time working at Audi’s German plants. All Audi plants have been producing again since end-June.

In the first half of the year, the Audi Group’s revenue fell to €20,476 million as a result of lower unit sales (2019: €28,761 million). The good revenue development of the all-electric Audi e-tron had a positive effect: By the middle of the year, 16,898 Audi e-tron cars had been delivered to customers (2019: 9,444).

This makes the Audi e-tron the global market leader among all-electric vehicles from German premium manufacturers. Since May 2020, the Four Rings also gradually launch the Audi e-tron Sportback.

The markets present a mixed picture: In Europe (minus 29 percent) and in the USA (minus 22 percent) the deliveries of the Audi brand were still significantly negative in June. In China, a significant recovery in demand has been apparent since March.

The Four Rings achieved record figures there in May and June. Cumulative sales in our most important single market are still slightly down on the prior-year period, by 3 percent. Key growth drivers in China in the first half of the year were the new Audi A6 L, Audi Q2 L and Audi Q5 L.

In the first half of the year, the Audi Group’s revenue fell to €20,476 million as a result of lower unit sales (2019: €28,761 million). The good revenue development of the all-electric Audi e-tron had a positive effect: By the middle of the year, 16,898 Audi e-Tron cars had been delivered to customers (2019: 9,444).

This makes the Audi e-Tron the global market leader among all-electric vehicles from German premium manufacturers. In May 2020, the Four Rings also gradually launched the Audi e-Tron Sportback.

Against the backdrop of the difficult market situation caused by the pandemic, the operating loss was €750 million (2019: operating profit of €2,300 million) and the operating return on sales was minus 3.7 percent (2019: plus 8.0 percent).

Extensive measures on the cost side only partially offset the declining volume. The remeasurement of hedging transactions also had a negative impact on the development of earnings.

Adjusted for special items of €108 million in connection with the diesel issue, the operating loss amounted to €643 million (2019: operating profit of €2,300 million). The adjusted operating return on sales was minus 3.1 percent (2019: plus 8.0 percent). The sale of Autonomous Intelligent Driving GmbH within the Volkswagen Group had a positive effect on operating profit.

For the reporting period, the Audi Group’s profit before taxes amounted to €86 million (2019: €2,580 million). This includes financial income of €836 million (2019: €280 million). A major reason for the increase is the higher income from investments as a result of the intra-Group sale of Audi Electronics Venture GmbH.

Despite a difficult market environment, the Audi Group’s net cash flow and net liquidity remained strong: The net cash flow amounted to €1,953 million, especially against the background of the sales of a company (2019: €2,253 million).

Net liquidity remains at the high level of €19,875 million (end of December 2019: €21,754 million). In the context of the corona pandemic, Audi has set up a liquidity task force to systematically reduce cash outflows and help to secure Audi’s long-term ability to act.

All non-product-related costs and investments are systematically scrutinized. Thanks to its strengthened investment discipline, the Audi Group has achieved a ratio of capital expenditure to revenue of 2.4 percent (2019: 3.0 percent).

“Despite initial positive signals from the markets, the year 2020 remains extremely challenging. We are steering through the Corona crisis in a highly concentrated manner and with the necessary flexibility.

Although we have thoroughly reviewed our short-term expenditure in recent weeks, we are keeping a close eye on our long-term projects and are implementing them consistently,” says Arno Antlitz.

“Our strategic decisions define the agenda for the coming years. At the heart of this is the electrification and digitalization of our model range.” One example is Artemis. This new unit will accelerate the development of additional electric models.

In addition, Markus Duesmann, Chairman of the Board of Management of AUDI AG, is taking charge of software in the Volkswagen Group Board of Management as part of his responsibility for research and development, and will, therefore, manage the new Car. A software-Organization unit within the Volkswagen Group.

For the year 2020 as a whole, the company assumes that demand in global car markets will be significantly lower against the backdrop of the ongoing corona pandemic. The Audi Group, therefore, expects deliveries of the Audi brand and revenue to be significantly lower than in 2019. The result of operations is also expected to be substantially down on the previous year, but clearly positive. Net cash flow is expected to be below the prior-year level.

Nokia’s continued improved execution drives strong margin and cash performance for Q2 and H1 2020

Esan Bolaji
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Nokia’s continued improved execution drives strong margin and cash performance for Q2 and H1 2020
  • Nokia Strong margin expansion, primarily driven by Mobile Access
  • Clear roadmap progress, particularly related to our 5G mid-band portfolio
  • Confidence in resilient customer base and strong liquidity position
  • 11% decrease in net sales, largely driven by COVID-19 and China
  • Strong growth in Nokia Enterprise
  • Positive operating profit, on a reported basis, in both Q2 and half the year 2020
  • Within previously provided Outlook ranges for full-year 2020, adjusted the non-IFRS mid-points for EPS to EUR 0.25 and operating margin to 9.5%
  • Delivered strong free cash flow year-to-date and raised 2020 recurring free cash flow guidance to be clearly positive

RAJEEV SURI, PRESIDENT AND CEO, ON Q2 2020 RESULTS

Nokia delivered a strong improvement in Q2, with better-than-expected profitability, significant improvement in cash generation, clear indications of a return to strength in mobile radio, and a year-on-year increase in earnings-per-share, despite the challenges of COVID-19.

These results show that our execution has improved as planned and that we are well-positioned to end the year with a significantly stronger financial position. As a result, we are adjusting upward both the midpoint of our full-year 2020 non-IFRS EPS and operating margin guidance within our previously disclosed outlook ranges.


RAJEEV SURI, PRESIDENT AND CEO, NOKIA CORPORATIONS | www.wordpress-1516176-5827464.cloudwaysapps.com

Profitability gains in the quarter were supported by a 4.5 percentage point year-on-year improvement in Networks gross margin, building on a 3.5 percentage point gain in the first quarter, and driving Nokia non-IFRS gross margin to 39.6%. Nokia Enterprise also grew year-on-year constant currency sales by 18% compared to one year ago and expanded margins.

Nokia-level revenue was down in the quarter, with the majority of that the result of COVID-19 as well as a sharp decline in China based on the prudent approach we have taken in that market. We also saw a reduction driven by our proactive steps to reduce the volume of the low margin services business. We expect that the majority of sales missed in the quarter due to COVID-19 will shift to future periods.

At the start of the year, we said we would have a sharp focus on our Mobile Access business and improving cash generation. In both areas, we continue to make good progress.

Free cash flow in the quarter was positive €265 million, versus negative €1.0 billion one year ago, and Nokia ended Q2 with €1.6 billion of net cash, and €7.5 billion in total cash. Given our strong first-half improvement, we now expect free cash flow for full-year 2020 to be “clearly positive” compared to our earlier guidance of “positive”.

In Mobile Access, we saw healthy improvements in our radio portfolio, where roadmaps are strengthening, costs are coming down, and product performance is rising.

We have a particularly powerful portfolio in mid-band mobile radio, with proven products deployed with 55 customers, and the first live C-Band network demonstrated in the U.S. during the quarter.

Pleasingly, our “5G Powered by ReefShark” shipments continue to increase and we believe we remain on track to reach 35% or better by year-end. And, we now have 83 5G deals.

Our continued momentum was demonstrated by the progress we announced after the quarter ended. These included the availability of a software upgrade that allows millions of Nokia 4G/LTE radios deployed to more than 350 customers to be migrated seamlessly to 5G; and plans to accelerate leadership in Open RAN.

Nokia is the only global supplier fully committed to O-RAN with commercial 5G Cloud-RAN networks. We also announced an expansion of our IP routing business into the data centre market and highlighted that Apple was deploying our technology at its data centres.

This is my last quarterly announcement as CEO of Nokia and I want to close with a note of thanks: thanks to our shareholders, thanks to our customers, thanks to our many other stakeholders, and a particular thanks to the great employees of Nokia.

You have constantly made me proud and I expect that you will continue to do so in the many years to come. Thank you all. It has been a pleasure and an honour.

NOKIA FINANCIAL RESULTS

  • Both non-IFRS and reported net sales in Q2 2020 were EUR 5.1bn, compared to EUR 5.7bn in Q2 2019. On a constant currency basis, both non-IFRS and reported net sales decreased by 11%. Excluding one-time licensing net sales in Q2 2020 and Q2 2019, net sales decreased 10% on both a non-IFRS and reported basis.
  • Q2 2020 net sales were impacted by COVID-19 and unique dynamics in China. In Q2 2020, we estimate that COVID-19 had an approximately EUR 300 million negative net impact on our net sales; with the majority of these net sales expected to be shifted to future periods, rather than being lost.
  • In Q2 2020, Nokia’s gross and operating margin both expanded year-on-year, primarily driven by broad-based strength in Networks, particularly in Mobile Access, with IP Routing and Fixed Access also contributing positively.
  • In addition, reported operating margin benefitted significantly from lower amortization of acquired intangible assets, as well as lower restructuring and associated charges. Non-IFRS gross margin was 39.6% (reported 39.4%) and non-IFRS operating margin was 8.3% (reported 3.3%).
  • Non-IFRS diluted EPS in Q2 2020 was EUR 0.06, compared to EUR 0.05 in Q2 2019, primarily driven by higher gross profit in Mobile Access within Networks, continued progress related to our cost savings program and a net positive fluctuation in financial income and expenses.
  • This was partially offset by higher investments in 5G R&D to accelerate our product roadmaps and cost competitiveness in Mobile Access and a net negative fluctuation in Nokia’s venture fund investments.
  • Reported diluted EPS in the first six months of 2020 was EUR 0.00, compared to negative EUR 0.11 in the first six months of 2019.
  • The change was primarily driven by lower amortization of acquired intangible assets, lower restructuring and associated charges, continued progress related to our cost savings program, a net positive fluctuation in financial income and expenses and higher gross profit, partially offset by higher investments in 5G R&D to accelerate our product roadmaps and cost competitiveness in Mobile Access and a net negative fluctuation in Nokia’s venture fund investments.
  • Q2 2020 was the fourth quarter in a row of solid cash performance. Since establishing a program in 2019 to focus on free cash flow, we have made great progress driving sustainable operational improvements, particularly in networking capital management.
  • During Q2 2020, net cash increased by approximately EUR 0.2 billion, resulting in an end-of-quarter net cash balance of approximately EUR 1.6 billion.
  • During Q2 2020, total cash increased by approximately EUR 1.2 billion, primarily driven by the successful issuance of EUR 1.0 billion of debt, resulting in an end-of-quarter total cash balance of approximately EUR 7.5 billion.

AB InBev takes $2.5bn write-down in South Africa, as Covid-19 impacts Q2 2020

Esan Bolaji
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AB InBev takes $2.5bn write-down in South Africa, as Covid-19 impacts Q2 2020

AB InBev’s performance in the second quarter was materially impacted by the COVID-19 pandemic, as expected. As the quarter progressed, however, the brewer saw considerable improvement. April volumes declined by 32.4%, May volumes declined by 21.4% and June volumes grew by 0.7%, demonstrating the resilience of the global beer category.

In Africa excluding South Africa, AB Inbev’s breweries remained operational throughout the quarter in most of its key markets.

In Nigeria, the brewer saw a rapid recovery following the easing of restrictions in May, leading to volume growth in the month of June. We saw a similar trajectory in the rest of our markets in Africa, with April the most impacted month of the quarter, followed by improving volume trends in May and growth in many markets in June.

AB InBev | www.wordpress-1516176-5827464.cloudwaysapps.com

KEY FIGURES

  • Revenue: Revenue declined by 17.7% in 2Q20 with a revenue per hl decline of0.6%, driven by restrictions related to the COVID-19 pandemic. In HY20, revenue declined by 12.0% with revenue per hl growth of 1.6%.
  • Volume: Total volumes declined by 17.1% in 2Q20, with own beer volumes down by 17.2% and non-beer volumes down by 15.5%. In HY20, total volumes declined by 13.4%, with own beer volumes down by 14.0% and non-beer volumes down by 7.6%. The decline was primarily driven by the impact of the COVID-19 pandemic.
  • Global Brands: Combined revenues of our global brands, Budweiser, Stella Artois and Corona, declined by 16.6% globally and by 12.6% outside of their respective home markets. In HY20, the combined revenues of our global brands declined by 14.1% globally and by 14.9% outside of their respective home markets.
  • Cost of Sales (CoS): CoS decreased by 4.9% in 2Q20 and increased by 15.2% on a per hl basis, driven primarily by operational deleverage resulting from the impact of COVID-19 on our volumes, particularly in markets where our beer operations were shut down within the quarter. In HY20, CoS decreased by 2.5% and increased by 12.9% on a per hl basis.
  • EBITDA: EBITDA of 3 414 million USD represents a decrease of 34.1% in the quarter, with EBITDA margin contraction of 825 bps to 33.2%. In HY20, EBITDA declined by 24.7% to 7 363 million USD and EBITDA margin contracted by 585 bps to 34.6%.
  • Net finance results: Net finance costs (excluding non-recurring net finance results) were 1 044 million USD in 2Q20 compared to 1 004 million USD in 2Q19. Net finance costs were 4 204 million USD in HY20 compared to 1 370 million USD in HY19. The increase in HY20 was primarily driven by a mark-to-market loss of 1 724 million USD linked to the hedging of our share-based payment programs compared to a gain of 1 124 million USD in HY19, resulting in a swing of 2 848 million USD.
  • Income taxes: Normalized effective tax rate (ETR) decreased from 26.0% in 2Q19 to 16.8% in 2Q20. Excluding the impact of gains relating to the hedging of our share-based payment programs, our normalized ETR was 18.8% in 2Q20 as compared to 27.4% in 2Q19. The decrease in our normalized ETR excluding mark-to-market gains and losses linked to the hedging of our share-based payment programs is primarily driven by country mix and the positive impact of tax attributes, with taxes applied on a lower base as a result of the COVID-19 pandemic. Normalized ETR increased from 22.9% in HY19 to 66.6% in HY20 and, excluding the impact of losses relating to the hedging of our share-based payment programs, normalized ETR decreased from 27.4% in HY19 to 22.8% in HY20.
  • Non-recurring items: Normalized EBIT excludes negative non-recurring items of 832 million USD in 2Q20 and 877 million USD in HY20, mainly related to a 2.5 billion USD non-cash goodwill impairment charge that was partially offset by a 1.9 billion USD gain on the disposal of our Australia operations.
  • Profit: Normalized profit attributable to equity holders of AB InBev was 921 million USD in 2Q20 compared to 2 319 million USD in 2Q19 and was 76 million USD in HY20 versus 4 714 million USD in HY19. Underlying profit (normalized profit attributable to equity holders of AB InBev excluding mark-to-market gains linked to the hedging of our share-based payment programs and the impact of hyperinflation) was 790 million USD in 2Q20 compared to 2 143 million USD in 2Q19 and was 1 805 million USD in HY20 compared to 3 593 million USD in HY19.
  • Earnings per share (EPS): Normalized EPS in 2Q20 was 0.46 USD, a decrease from 1.17 USD in 2Q19. Normalized EPS in HY20 was 0.04 USD, a decrease from 2.38 USD in HY19. Underlying EPS (normalized EPS excluding mark-to-market gains linked to the hedging of our share-based payment programs and the impact of hyperinflation) was 0.40 USD in 2Q20, a decrease from 1.08 USD in 2Q19, and was 0.90 USD in HY20, a decrease from 1.81 USD in HY19.
  • Deleveraging: Net debt to normalized EBITDA was 4.86x on 30 June 2020.
In view of the economic uncertainties caused by the COVID-19 pandemic, we performed an impairment review considering different scenarios: a base case, a best-case and a worst-case. No impairment was warranted under the base and best-case scenarios.
However, we were exposed to a risk of impairment for the South Africa and Rest of Africa cash-generating units under the worst-case scenario and concluded that it was prudent to recognize a 2.5 billion USD non-cash goodwill impairment charge applying a 30% probability of occurrence of the worst-case scenario.
This charge is partially offset by a 1.9 billion USD gain on the disposal of the Australian operations. Please refer to page 12 for the additional disclosure.
We have been investing behind capabilities such as B2B platforms, e-commerce channels and digital marketing for several years. These trends have accelerated over the past few months, positioning us well to capture growth.
We have taken significant actions to maintain strong liquidity in a more volatile and uncertain environment, while proactively managing our debt profile. We also implemented several initiatives that drove a meaningful reduction in SG&A, while we continue to invest effectively behind our brands and commercial strategy, preparing for a strong recovery.
The fundamental strengths of our company remain unchanged. We have a clear commercial strategy, diverse geographic footprint, the world’s most valuable portfolio of beer brands, industry-leading profitability, a strong team and an incredibly deep talent pool.

COVID-19 fighter: Don’t miss out with Việt Nam News’ new app!

Media Outreach
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HA NOI, VIETNAM – Media OutReach – 31 July 2020 – While countries around the world are struggling with the COVID-19 pandemic, Vietnam is confidently dealing with new cases, keeping the situation under control, and is one of few nations recording positive growth in the first half of 2020.

Vietnam, now still one of the safest countries in the world and a favourite destination for investors, is striving to soon bring tourists back to its rich land and sea with eight World Heritage sites, 13 intangible cultural heritages and three Global Geoparks recognized by UNESCO.

Việt Nam News, the only national English language daily, is committed to providing an accurate and up-to-date insight into the country.

We have been always on hand for truthful, factual, complete and reliable information about Viet Nam and the world for almost 30 years.

In order to bring Việt Nam News closer to our valued readers, especially amid difficulties during the COVID-19 pandemic, when most of our geographic connections are hampered, we are proud to introduce our most recent product, the Vietnam News Daily application. All our printed issues are published in PDF format in the app, including the Việt Nam News Daily newspaper and Sunday Việt Nam News.

Our dear readers may access the app at the links below:

Apple’s App Store: https://apps.apple.com/us/app/epaper-vietnam-news/id1511690781?l=it&ls=1

Google Play Store: https://play.google.com/store/apps/details?id=com.paperlit.android.vietnamnews2

Please contact us at:

Việt Nam News

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Note: The newsstand items can be downloaded free in August and September, 2020

About Viet Nam News:

From a national newspaper published by the Vietnam News Agency that was first available on the newsstands in 1991, Viet Nam News has extended its standing to a regional publication, and finally to a continental posture as a member of the prestigious Asian News Network comprising 21 publications in Asia. It can be said that Vietnam News is the most influential English language newspaper in Vietnam.

With steady development over almost thirty years, the newspaper is now a full-size, 28-page daily, in addition to a Sunday edition. We attract numerous foreign readers, from politicians, economists, investors and tourists, to overseas Vietnamese and other people interested in Vietnamese and regional lifestyle and culture.

Our printed newspaper provides comprehensive coverage of the latest domestic and international developments in all areas including politics, business, culture, and sports. It also carries commentary, analysis and reports on the environment, science and technology, lifestyle and key social issues. Sunday’s edition of Việt Nam News features various aspects of Vietnamese culture, society and attractive tourist destinations.

Our other media channels are constantly evolving, giving readers the most up-to-date, reliable, and relevant news.

Our constantly updated website at https://vietnamnews.vn has drawn huge attention thanks to its comprehensive coverage of numerous sectors, from business, science, education, the arts and culture, to other social activities.

http://bizhub.vn provides readers with the latest news on companies, M&A activities, business laws, new products and commentary from industry insiders. We commit to providing the most reliable channel of business news and analysis on local issues, allowing users to exchange ideas and make valuable contacts in a variety of fields.

http://ovietnam.vn/ aims to provide readers with the country’s latest developments in culture, fashion, travel and entertainment. We are also proud to present in-depth feature stories, thoroughly presented with historical and cultural background on various aspects of life in Việt Nam.

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With Việt Nam News and its comprehensive channels, a world of information is at your fingertips.

Start-ups get insights into overcoming challenges

Media Outreach
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Futurist sheds light on ‘new normal’ at E-Day seminar

 

HONG KONG, CHINA – Media OutReach – 30 July 2020 – Local
start-ups have been rising to the challenges presented by the COVID-19 pandemic
with agility and creativity. This year’s HKTDC Entrepreneur Day (E-Day),
organised by the Hong Kong Trade
Development Council (HKTDC), underwent a transformation in terms of
format and content, with a series of seminars broadcast live on 16 and 17 July
giving start-ups valuable insights into finding a path forward during this
difficult time.

 

Running under the theme “Revive‧ Redefine“,
the 2020 E-Day invited a high-powered panel of speakers to speak at 19
online seminars, offering insights into areas such as entrepreneurship,
regional opportunities and technological developments to equip start-ups for
future challenges. Virtual business matching sessions were
also arranged, connecting local start-ups with companies in Japan, Korea,
Thailand, Malaysia, Singapore and the United States to help them continue to capture
business opportunities amid the current economic adversity.

 

Renowned futurist Gerd Leonhard (Centre) addressed the
“T-Chat: Futurising Your Business: Renaissance from the Age of
Digitalisation” seminar

 

Insights into the future: four “bigs” and 10
“game changers”

Broadcasting from Switzerland, globally renowned
futurist Gerd Leonhard, CEO of The Futures Agency,shared in “T-Chat:
Futurising Your Business: Renaissance from the Age of Digitalisation”
the trends for entrepreneurship and opportunities for start-ups to thrive in
the “new normal”. Mr Leonhard explained that there would not be a
post-COVID-19 return to normality, and that the new normal would be very
different.

 

The world is undergoing a Great Transformation, he said,
with four “bigs” playing a leading role — Big Tech, Big Media, Big
State and Big Health. “Technology is everywhere. Without technology, we
wouldn’t be working from home, we couldn’t find new ways to address the crisis.
We couldn’t analyse all the data. Without the AI (artificial intelligence), we
couldn’t have early warning systems,” Mr Leonhard said. He added that the
state helps to figure out how to restart the economy and to support the people,
and that healthcare is becoming the number one issue. “We are going to
have to put more money, more research into healthcare development and
biotechnology,” he said, “We all are addicted to the media now because
we are at home. Big media is exploding. These four things together have huge
opportunities.” The result, he said, would be “HellVen”,
explaining it could be heaven or it could be hell, depending on how it is
handled.

 

The future presents utter uncertainty, Mr Leonhard posited.
Businesses needed to abandon traditional, pre-COVID ways of doing things and
adapt to the VUCA normal — volatility, uncertainty, complexity and ambiguity.
He advised entrepreneurs to flip VUCA and turn around the threats of the
pandemic with “velocity, unorthodoxy, co-creation and awesomeness — to
respond with speed and come up with new ideas, to work together, and to create
solutions that can make a difference.”

 

Technologies are developing extremely fast, and the COVID-19
pandemic is accelerating this further. The crisis and technological potential
would drive extremely rapid and very disruptive change, he said, with more
progress over the next decade than the world had seen over the previous
century.

 

Mr Leonhard said 10 game-changers would shape developments
over the coming decade, with the COVID-19 pandemic accelerating the impetus for
change. The first game-changer would be “data everything” — with
data as the “new oil”, businesses need to have the numbers at hand to
go forward. “Lots of start-ups in Hong Kong and all over the world are
dealing with data,” he said. This leads to the second game-changer —
“cloud everything”, with vast amounts of data calling for copious
storage space. The next game-changer would be “connected everything”
— through the Internet of Things (IoT) not just everyone but everything, be it
appliances or vehicles, will be connected through the internet.

 

Another game-changer would be “compute
everything”, with quantum computers that are virtually unlimited in
computing power. The next game-changer is “understand anything”,
whereby natural language processing will enable us to speak to machines as if
they were humans. “Smart everything” will see machine learning
greatly increasing the ability of machines and systems to adapt to change.
Transactions will join communications as a game-changer, as blockchain
technologies greatly expand the scope for, and reliability of, transactions.

 

Mr Leonhard said another game-changing development that will
have great relevance to anyone trading in goods is the distribution of
production. Improvements in the scope and quality of 3D printing mean items can
be produced anywhere. “We will be able to print anything, from our tennis
shoes to our wrist watches,” he explained. Massive increases in the power
of media technologies will expand the scope of media offerings, enabling people
to “see everything” in the future through technologies such as
virtual reality — and the current trend for working from home had given this a
big boost. Improvements in genetic engineering mean it will be possible to
“change anything” — a development that has massive ethical
implications.

 

Panellists who appeared alongside Mr Leonhard at the seminar
included Karena Belin, CEO & Co-founder of WHub; Toa
Charm, Associate Professor, Business School, the Chinese University of
Hong Kong; and Herbert Chia, Venture Partner at Sequoia Capital
China. Mr Charm said that many Asian conglomerates rejected technological
innovation in the past, and it was only when faced with growing competition
that they began to open their doors to change. Referencing the current rapidly
transforming business environment, hesaid: “All Asian
conglomerates are opening up their doors to new technologies. They are
thinking: ‘I don’t know about this, but I need it because my shopping malls, my
hotels, my properties — nobody goes there to buy now’. I think this presents a
golden opportunity for all of us — start-ups and technology companies, and
enablers like incubators and accelerators.”

 

In response to a question about leadership and how human
skills are becoming more valuable, Mr Chia, said: “At this
moment, when talking to a lot of CEOs in the field, I find there’s a gap
between the knowledge they already have and the knowledge needed to translate a
business problem into a technology solution. Or, the other way round, where I
have a technology solution, but I don’t know what to fix.” He believes
successful leaders will be those who can bridge this gap and give their
companies a clear direction.

 

Agility and understanding social norms

At the “Revive‧Redefine” plenary
session, William Ip, Managing Director of Carousell Hong Kong,
and Crystal Pang, Co-founder of Pickupp, shared tips on
entrepreneurship and their personal experiences of turning creative ideas into
viable business ventures.

 

Mr Ip shared three tips with the audience: be agile, be a
good listener and keep your business alive. Quoting celebrated scientist
Stephen Hawking, who said that intelligence is the ability to adapt to change,
Mr Ip highlighted the importance of agility for start-ups and
entrepreneurs, especially in a challenging climate. He said that business
drivers will change, and that development teams must be ready to adapt.
“Being a start-up, we need to act very quickly and stay very close to the
market. Sometimes you make decisions that seems to be correct at the time, but
we also have to be prudent, agile, and humble — if that decision doesn’t turn
out to be the right decision, we need to change quickly,” Mr Ip explained.

 

His second tip was to be a good listener.
Businesses have to listen to their target audience and address the needs of the
market segment, he said. As the retail sector has been hit hard by the COVID-19
pandemic, Carousell has been leveraging its platform to help small and
medium-sized enterprises get online and connect with more customers. Lastly, Mr
Ip said the most important goal for start-ups must be to stay alive as
a business. Enterprises need to prepare for an uncertain future and think
ahead to understand what the world will be like tomorrow.

 

Ms Pang offered insights into the classic question of how
both technology and understanding social normscan be used to
improve services. Customers want things cheap, flexible and traceable. She
noted that while it is now very inflexible to operate a traditional logistics
fleet, crowdsourcing was a viable option. “There is a lot of idle capacity
in the city, and a lot of people with downtime,” she said. “Students,
maybe they work until 3pm then have four or five hours of downtime.
Semi-retirees, they are still very healthy and can run around and do
neighbourhood deliveries. Are we able to utilise them effectively, as long as
there is good technology to trace and do quality control?”

 

Ms Pang also explained how advanced computerised systems
were necessary when employing a more flexible and dynamic delivery system. For
Pickupp’s platform, thousands of deliveries will go out at any given time, all
with different weights and dimensions, which need to be bundled together at the
lowest cost.

 

Creating happiness can lead to growth

Katherine Cheung, Chief Marketing Officer at online
education platform Snapask, shared on how the start-up has been able to grow
its business in a difficult environment at a seminar titled “From
Crisis to Chances: Unleashing Opportunities in Challenging Times“. She
described online education as “hard to start, harder to win”.

 

With the goal of offering the best online learning
experience, the Snapask team conducted in-depth research and ran numerous
surveys to identify what would make users happy. They found that an instant
experience and instant support were important for online learners, especially
during the COVID-19 pandemic. In response, the start-up made one small product
change, to move all the fast-responding and always-online tutors to every
single page possible whenever users log in so they can offer immediate support.
Ms Cheung said that faster matching of students and tutors has resulted in more
referrals and retentions, so “creating happiness means growth,” she
said.

 

Photo download: https://bit.ly/334i18E

 

Photo 1: Running under the theme “Revive×Redefine“,
the 2020 E-Day invited a high-powered panel of speakers to speak at 19
online seminars

Photo 2: Renowned futurist Gerd Leonhard addressed
the “T-Chat: Futurising Your Business: Renaissance from the Age of
Digitalisation” seminar and was joined for the discussion by (from
left) Karena Belin, CEO & Co-Founder of WHub, Toa
Charm, Associate Professor, Business School, the Chinese University of
Hong Kong, and Herbert Chia, Venture Partner at Sequoia Capital
China

Photo 3: At the “Revive‧Redefine” plenary session, Crystal
Pang, Co-founder of Pickupp, shared tips on entrepreneurship
and their personal experiences of turning creative ideas into viable business
ventures

Photo 4: Katherine Cheung, Chief Marketing
Officer at Snapask, shared on how the start-up grows business in hard times
during the “From Crisis to Chances: Unleashing Opportunities in
Challenging Times” seminar

To view press releases in Chinese, please visit http://mediaroom.hktdc.com/tc

About HKTDC

The Hong
Kong Trade Development Council (HKTDC) is
a statutory body established in 1966 to promote, assist and develop Hong Kong’s
trade. With 50 offices
globally, including 13 in Mainland China, the HKTDC promotes Hong Kong as a
two-way global investment and business hub. The HKTDC organises international
exhibitions, conferences and
business
missions to create business opportunities for
companies, particularly small and medium-sized enterprises (SMEs), in the
mainland and international markets. The HKTDC also provides up-to-date market insights
and product information via trade
publications, research
reports and digital
news channels. For more information,
please visit: www.hktdc.com/aboutus.
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Kerry Logistics Receives “Most Honored Companies” Accolade from Institutional Investor for the Fifth Consecutive Year

Media Outreach
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HONG KONG, CHINA – Media OutReach – 30 July 2020 – Kerry
Logistics Network Limited (‘Kerry Logistics’; Stock Code 0636.HK) has received
the “Most Honored Companies” accolade in Institutional
Investor‘s annual All-Asia Executive Team ranking for the fifth year
running, in addition to placing in the top three in six categories under the
Transportation sector.

 

Among the 41 companies in the
sector, Kerry Logistics and its key executives ranked in the top three in the
following categories, based on votes from buy-side
analysts, money managers, and sell-side researchers at securities firms and
financial institutions across the globe:

 

  • Most Honored
    Company
  • Best CEO —
    William Ma
  • Best CFO —
    Ellis Cheng
  • Best Investor
    Relations Professional — Iris Tsang
  • Best Investor
    Relations Team
  • Best Investor
    Relations Program
  • Best ESG SRI
    Metrics

 

William
Ma, Group Managing Director of Kerry Logistics, said, “We are delighted to be
honoured again for our dedicated efforts in maintaining a proactive investor
relations strategy. As the global pandemic brings disruptions and uncertainties
to our everyday lives, we believe it is more important than ever for us to
provide transparency and support bilateral communication with the investor
community. We place high priority in keeping our shareholders and investors
abreast of Kerry Logistics’ latest corporate development, as well as our
resilience and adaptability to changing conditions. Once again, we would like
to thank Institutional Investor for
the recognition and reaffirm our commitment to upholding global standards and
adopting international best practices in investor relations.”

 

Kerry
Logistics has been named one of the “Most Honored Companies” since 2016. The 2020
All-Asia Executive Team ranking was based on the votes from 1,921 portfolio managers and
buy-side analysts, and 611 sell-side analysts. For
the Best Investor Relations Program category, companies were evaluated on nine
performance attributes, namely, accessibility, strategy, IR team is well
informed, productivity of NDR/conferences/calls, responsiveness, business &
market knowledge, consistency & granularity, ESG information and
timeliness.

About Kerry Logistics Network Limited (Stock Code 0636.HK)

Kerry Logistics is an Asia-based, global 3PL
with the strongest network in Asia. Its core competency is providing highly
customised solutions to multinational corporations and international brands to
enhance their supply chain efficiency, reduce overall costs and improve
response time to market. Kerry Logistics has a network covering 55 countries
and territories, and is managing 75 million sq ft of land and logistics
facilities worldwide, providing customers with high reliability and flexibility
to support their expansion and long-term growth. Kerry Logistics Network
Limited is listed on the Main Board of the Hong Kong Stock Exchange and is a selected
Member of the Hang Seng Corporate Sustainability Index Series 2019-2020.

About Institutional Investor

Now entering its fifth decade,
Institutional Investor has
consistently distinguished itself among the world’s foremost financial
publications with groundbreaking journalism and incisive writing that provides
essential intelligence for a global audience. In addition, Institutional Investor offers a host of proprietary research and
rankings that serve as respected industry benchmarks.

Hashstacs Co-Develops Blockchain Project with Bursa Malaysia for Its Bonds Marketplace

Media Outreach
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0

SINGAPORE / KUALA LUMPUR, MALAYSIA – Media OutReach – 30 July 2020 – Singapore’s Fintech technology provider, Hashstacs Pte
Ltd (“STACS“), today announced
that it has partnered with Bursa Malaysia Berhad (“Bursa Malaysia“) on a
Blockchain Proof-of-Concept (“POC”) project dubbed “Project Harbour” for its
Bonds marketplace.

 

Project Harbour is centred around the usage of
Distributed Ledger Technology (” DLT”) as a register in facilitating  the growth of Labuan’s bond marketplace. The
project will take place in Malaysia’s offshore market, Labuan, in collaboration
with the Labuan Financial Exchange (LFX), a wholly-owned subsidiary of Bursa
Malaysia.

 

Mr Benjamin Soh, Managing
Director of Hashstacs Pte Ltd, said: “Hashstacs will develop a blockchain
solution to issue, service, trade and clear bonds on the platform. The creation
of an industry wide ecosystem will allow for a complete solution in
origination, servicing, trading, clearing and settlement, allowing Malaysia to potentially
have the first mover advantage in attracting regional and international bond
listings.”

 

Bursa Malaysia, alongside the
Securities Commission of Malaysia, Labuan Financial Services Authority, CIMB
Investment Bank Berhad, Maybank Investment Bank Berhad and China Construction
Bank Corporation Labuan Branch, will utilise the Trident Platform built by
Hashstacs to test and manage the end to end trade lifecycle management of
digital bonds. The blockchain based platform will facilitate issuances of
digital bonds seamlessly, while providing a single source of truth to maintain
the integrity of investors’ holdings and track transactions. In addition, smart
contract technology automates the movement of funds and securities, amplifying
asset servicing and the provision of liquidity to market participants.

 

Datuk Muhamad Umar Swift,
Chief Executive Officer of Bursa Malaysia, said: “The Exchange closely follows
current trends in innovation and new technologies with a view to remaining
relevant in this competitive landscape. One of the ways to achieve this is
through collaborations with innovative companies. The POC conducted in
partnership with Hashstacs presents an opportunity to provide a valuable
learning experience to build knowledge and obtain insights that will allow us
to grow the bond marketplace. The POC aims to increase operational efficiency,
driving down the cost of operations as well as the cost of issuing bonds.  We will continue to tap into emerging
technological innovations to further develop the marketplace and improve the
effectiveness and accessibility of the Exchange”

 

Project Harbour is aimed at exploring
and harnessing the opportunities enabled by blockchain and tokenisation of
assets. The creation of a blockchain powered infrastructure will provide a
single source of information that is kept in a shared distributed database
between Bursa Malaysia and participating banks, providing a registry of
ownership and reducing counterparty risks and reconciliation costs.

 

“Hashstacs has
established a good track record in the capital markets blockchain space over
the past year. The Trident Platform, powered by the STACS Blockchain and
Settlity Infrastructure, is an enterprise grade, end-to-end blockchain solution
designed for capital markets requirements. We are delighted to have an
established institution of Bursa Malaysia’s standing use our Settlity
Infrastructure and STACS Blockchain, which is a testament to our state of
having production-ready solutions.” added Mr Soh.

About Bursa Malaysia

Bursa
Malaysia is an exchange holding company incorporated in 1976 and listed in
2005, and is the national stock exchange of Malaysia. One of the largest
bourses in ASEAN, Bursa Malaysia helps over 900 companies raise capital across
50 economic activities — whether through the Main Market for established
large-cap companies, the ACE Market for emerging companies of all sizes, or the
LEAP Market for up-and-coming SME companies.

About Hashstacs Pte Ltd

Hashstacs is a Singapore
fintech development firm focusing on the digital transformation of the
financial industry. Its vision is to be the underlying Distributed Ledger
Technology on which Financial Market Infrastructure is built upon. For more
information, visit https://stacs.io/

The Settlity Infrastructure
is a next generation blockchain Infrastructure-As-A-Service platform that
allows financial institutions to manage and trade digital financial assets
simply. The Settlity Infrastructure is powered by the Securities Trading Asset
Clearing and Settlement (STACS) Blockchain, a blockchain built specifically for
the capital markets. For more information, visit https://settlity.com/

Union Bank reports N10.8bn PAT in H1 2020

Esan Bolaji
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0
Union Bank reports N10.8bn PAT in H1 2020

Union Bank, one of Nigeria’s longest-standing and most respected financial institutions, announces its unaudited financial statements for the quarter ended June 30 2020.

Bank Financial Highlights:

  • Profit before tax: sustained at ₦11.3bn (₦11.2bn in H1 2019).
  • Gross earnings: up 10% to ₦79.9bn (₦72.4bn in H1 2019); driven by an increase in
    earning assets.
  • Interest income: up 6% to ₦57.2bn (₦53.8bn in H1 2019); also driven by an increase in earning assets
  • Net interest income before impairment: up 21% to ₦28.0bn (₦23.2bn in H1 2019);
    driven largely by a reduction in interest expense.
  • Non-interest income: up 22% to ₦22.7bn (₦18.6bn in H1 2019); driven by robust growth in e-business and revaluation gains.
  • Net operating income: flat at ₦46.5bn (₦46.3bn in H1 2019).
  • Operating expenses: flat at ₦35.4bn (₦35.5bn in H1 2019); notwithstanding inflationary pressures and COVID-19-related costs.
  • Gross loans: up 6% to ₦630.5bn (₦595.3bn Dec 2019); reflecting the opportunities for
    risk asset creation is given economic realities.
  • Customer deposits: up 12% to ₦995.2bn (₦886.3bn Dec 2019); reflecting increased
    demand for our innovative offerings and the continued benefits of our brand growth.

Commenting on the results, Emeka Emuwa, CEO said:

“The impact of COVID-19 and associated movement restrictions on the Bank and the wider economy has been broad. The total lockdown of major commercial centres Lagos, Abuja and Ogun and partial lockdowns across the country, slowed business operations in Q2 2020.

Notwithstanding these significant headwinds, the Bank delivered a 10% increase in its top-line revenue of ₦79.9bn for H1 2020. In addition, net interest income before impairments is up 21% to N28.0bn and non-interest income up 22% to ₦22.7bn.

The slowdown limited growth in key income lines including fees and commissions and cash recoveries. However, we continue to reinforce the use of our digital channels with 90% of transactions completed digitally in H1 2020 (vs. 57% in H1 2019), which translated to a 42% growth in e-business fees from ₦2.5bn in H1 2019 to ₦3.6bn in H1 2020.

We deliberately grew our loan portfolio both in the retail and commercial/corporate banking space resulting in a 6% growth in interest income.

Given the constrained operating environment, we continue to proactively monitor our loan portfolio and support our customers in line with the Central Bank’s guidance on forbearances.

Nevertheless, growing our loan book remains a strategic focus area for us for the rest of the year as we continue to identify new opportunities emerging in the face of the pandemic.

I am pleased that the Bank has been able to support our employees, customers and the wider community through the ongoing COVID-19 crisis. In particular, the #UnionRiseChallenge which we launched in June, recognised and rewarded customers who in spite of the Covid-19 pandemic are rising to support their communities.

The Bank awarded ₦15 million to 90 recipients over a period of 4 weeks and helped amplify the great work of over 1500 community initiatives that were submitted through the campaign.

As we navigate the realities of the pandemic for the remainder of the year, we will continue to focus on increasing transaction volumes on our electronic channels, managing cost and strategic targeting of key customer segments to ensure we end the year well.

We will also continue to prioritise the health and safety of our employees and customers while finding innovative ways to meet and exceed our customer expectations.”

Speaking on the H1 2020 numbers, Chief Financial Officer, Joe Mbulu said:

“Our H1-2020 Bank numbers reflect the performance of our continuing operations for the period.

Notwithstanding increasing inflation and unexpected costs related to the changes to our operating structures during COVID-19 lockdown, we have been able to keep operating expenses under control during H1 2020.

This is indicative of the strength of our Long-Term Efficiency Acceleration Programme (LEAP) which continues to optimise key cost lines.

The continued expansion in the loan book led to enhanced interest income while lower interest rates enabled a reduction in interest expense.

We also grew customer deposits by 12% to ₦995.2bn from ₦886.4bn in December 2019 as a result of increased customer demand for our banking products and the continued positive perception of our brand. We continue to deliberately expand our loan book with a focus on key industry segments.

As impairments began to rise as a result of COVID-19 disruptions, the NPL ratio ticked up marginally to 6.3%, compared to 5.8% in December 2019, while our Capital Adequacy Ratio is at 19.2%, remaining well above the regulatory threshold.

We remain focused on achieving our 2020 objectives leveraging our solid risk management structures and executing our business priorities.”

 

CUHK Business School Research Finds Crowdfunding a Democratising Force in Financing, But Benefited Those with Lower Income and Education Less

Media Outreach
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HONG KONG, CHINA – Media OutReach
– 30 July 2020 – Crowdfunding, which has seen its popularity skyrocket with the rise of high profile platforms the likes
of Kickstarter, GoFundMe and IndieGoGo, has often been hailed as a “democratising
force” in finance, allowing enterprising individuals to launch new and
innovative ventures while bypassing traditional sources of funding they would
otherwise be unable to access. In a recent report, the global crowdfunding
market was valued at US$10.2 billion in 2018 and was forecast to almost triple
by 2025. Clearly, crowdfunding has hit mainstream, but has it lived up to its
promise to give entrepreneurs of all stripes and sorts easier access to
capital?

 

According to a
new research study conducted at The Chinese University of Hong Kong (CUHK),
entitled Crowdfunding and the Democratization of Access to Capital —
An Illusion? Evidence from Housing Prices, the answer is a qualified yes.

 

Conducted by Keongtae Kim, Assistant Professor in the Department of Decision Sciences
and Managerial Economics at CUHK Business School; and Prof. Il-Horn Hann at the
University of Maryland, the study analysed the track record of crowdfunding and
found evidence that pointed to its potential to level the fundraising playing
field for entrepreneurs. However, this result came crouched in an important
caveat — it found that people who lived in areas with lower levels of income
and education were less able to take advantage of it to launch projects.

 

The study arrived
at this conclusion by focusing on one of the most important types of credit for
entrepreneurs — bank financing through housing collateral, looking at how
accessibility to these loans related to crowdfunding by entrepreneurs. Prior
studies had already shown that housing wealth can ease credit constraints for
entrepreneurs, making it a primary factor in financing new ventures.

 

The researchers
obtained data on housing prices and matched this with a data set from
crowdfunding platform Kickstarter. They focused on local housing prices as a
proxy for collateral-based credit availability for entrepreneurs in a local
market. If entrepreneurs living in areas with declining housing prices have an
increasing degree of difficulty in raising sufficient capital, they may be
inclined to use crowdfunding as an additional funding source.

 

The professors
focused on technology-based projects in the technology and games categories,
obtaining data covering April 2009 through December 2013 and accounting for
9,120 projects that attracted more than US$257 million in pledges from
approximately 3.4 million contributors.

Impact of Housing Prices

“We found
that tightened credit constraints imposed because of declines in local housing
prices led to increased use of crowdfunding. This finding supported the idea
that crowdfunding serves as a supplement to traditional sources of financing,”
says Prof. Kim.

 

“We also observed
that a decline in housing prices led to even more people turning to
crowdfunding in areas with a large share of homeowners and in states with
unlimited homestead exemptions,” he adds. Homestead exemptions are legal
provisions that shield homeowners from partial or full seizure of their
properties in the event of a default, and previous studies have shown that
banks are less willing to lend to individuals in states with high or even
unlimited homestead exemptions.

 

“Our
research indicated that crowdfunding can serve as an addition to traditional
financial sources, implying that online crowdfunding has the potential to
democratize access to finance in the sense that it can be an option for
entrepreneurs who have difficulty accessing traditional funding,” Prof.
Kim says.

 

The researchers
did not find a link between a fall in housing prices and whether a crowdfunding
project was successful or not.

 

However, they
also found a stark contrast in the ability to access capital using crowdfunding
between the wealthier and the poor. Specifically, they observed that a decrease
in housing prices led to an increase in successful crowdfunding projects
primarily for areas in high socio-economic status and an increase in
unsuccessful projects primarily for areas of low socio-economic status.

 

“Although
entrepreneurs from areas of low socio-economic conditions have at least equal
access to online crowdfunding, they may still suffer from lower demand for
their projects. This may be partly because of less support of their social
networks,” Prof. Kim says.

 

“The role of
access to financing is essential as difficult access discourages
entrepreneurship, as measured by self-employment surveys and census data, and
entrepreneurship is very important,” he adds.

 

In the U.S. alone,
small businesses employ more than 50% of the private sector workforce and
account for 66% of all net job creation. Most jobs are created by young,
typically small businesses. High-growth start-ups contribute significantly to
job creation in the U.S. economy.

 

Leveling the Crowdfunding Playing Field

Crowdfunding has
the potential to offset a decrease in entrepreneurship. “However,
entrepreneurs need to be strategic in seeking funding from sources that may be
favourable to them,” cautions Prof. Kim

 

The study showed
that while decreasing housing prices made banks reduce credit supply to
entrepreneurs in need, crowdfunders were still willing to back them. “Entrepreneurs
living in disadvantaged areas should exploit crowdfunding aggressively and
attempt to build upon their social networks or improve their projects for
successful funding,” he says.

 

“To help
entrepreneurs from disadvantaged areas in achieving real economic benefits from
crowdfunding, we must understand its underlying mechanisms,” says Prof.
Kim.

He advises that
policymakers should seek to implement policies to help entrepreneurs from areas
of low socio-economic status to obtain sufficient resources to raise money from
online crowdfunding successfully.

 

A shortfall of
their research, he concedes, was that though their ad hoc analysis suggests
that social networks play a considerable role in the socio-economic divide,
they could not explore this in a meaningful way due to data limitation.

 

According to the
professor, another limitation was that their study focused only on
technology-intensive projects, meaning that they have a limited ability to
discuss crowdfunding in other types of projects.

 

“Although we
recognise that bank financing and crowdfunding offer different funding
conditions in terms of funding duration, success rates of funding, interest
charges, and so on, the two channels considerably overlap,” concludes
Prof. Kim, adding that a significant number of creators are potentially able to
use both channels and choose the optimal combination that offers the best terms
and conditions.

 

Reference:

Keongtae Kim,
Il-Horn Hann (2019) Crowdfunding and the Democratization of Access to Capital —
An Illusion? Evidence from Housing Prices. Information Systems Research
30(1):276-290. https://doi.org/10.1287/isre.2018.0802

 

This article was first published in
the China Business Knowledge (CBK) website by CUHK Business School: https://bit.ly/3hcehWv.

About CUHK Business School

CUHK Business School comprises two schools — Accountancy
and Hotel and Tourism Management — and four departments —
Decision Sciences and Managerial Economics,
Finance, Management and Marketing. Established in Hong
Kong in 1963, it is the first business school to offer BBA, MBA and Executive
MBA programmes in the region. Today, the School
offers 11 undergraduate programmes and 20
graduate programmes including MBA, EMBA,
Master, MSc, MPhil and Ph.D.

 

In the Financial Times Global
MBA Ranking 2020, CUHK MBA
is ranked 50th. In FT‘s
2019 EMBA ranking, CUHK EMBA is
ranked 24th in the world. CUHK Business School has the largest
number of business alumni (37,000+) among
universities/business schools in Hong Kong — many of
whom are key business leaders. The School currently has about
4,800 undergraduate and postgraduate students and Professor Lin Zhou is the Dean of
CUHK Business School.

 

More information is available at http://www.bschool.cuhk.edu.hk or by connecting with CUHK Business School
on:

Facebook: www.facebook.com/cuhkbschool

Instagram: www.instagram.com/cuhkbusinessschool

LinkedIn: http://www.linkedin.com/school/cuhkbusinessschool

WeChat: CUHKBusinessSchool

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