Telling Business Tales from the ‘Wolf of Wall Street’

Telling Business Tales from the ‘Wolf of Wall Street’

 

  • In the recent Hollywood flick, beneath Jordan Belfort’s corruption, there are a number of key lessons that leaders need to learn from his success.
  • Leaders need to attract, engage and tantalize the imaginations of their team members, to get the best out of them.
  • They need to give their team members a compelling reason to take consistent action, through incentives and performance management techniques
  • Big dreams with a strong base of ethics is the right mix for being a strong and successful leader.
Martin Scorseses’ most recent Hollywood blockbuster has the business world talking and a few financial guys on Wall Street ducking for cover. The film unveils a brash lifestyle that claims to depict the real life escapades of Jordan Belfort and along with members of his company selling financial services and wealth management products.
 
Of course, for those who may not have read the book or seen the movie, expect a few spoilers in this article as it would make no sense at all otherwise.
 
Here are the 3 things that Jordan Belfort (The Wolf of Wall Street) did right as a leader:

1. Getting your team engaged in a powerful compelling vision: 

Leaders who are able to attract, engage and tantalize the imaginations of their fellow team members will build a fire of enthusiasm that will power their individual producers forward and spur others using the momentum.

Jordan set examples, led his team, was fearless in engaging in personal performance himself. He effectively got his team to buy into his dream of the future and these team members could begin to paint a picture of their new future with Belfort’s company in return.
 
This daily ritual of getting his team pumped and motivated could be emulated by leaders today provided that they engage in activities of an ethical nature that will provide win-win experiences for both the customer and the business.
 
 2. Creating amazing rewards for team members:
 
Giving them a compelling reason to take consistent action!
 
Telling Business Tales from the ‘Wolf of Wall Street’ 1
 
Leaders today who understand that success is a mix of both inspiration and perspiration can quickly take a page out of Jordan’s book. His leadership style, brazen and wild as depicted in the film, used incentives and performance management techniques that infected some of his team members with incredible drive.
 
As a result, and as preposterous and outlandish as it seemed, he rallied his team performance by creating an eco-system of rewards and incentives within his team that impacted his bottom line. (Pun unintended).
 
3. Dare to Dream Big:
 
The Wolf was not shy about dreaming big, in fact, few people of his age and background could have had the audacity to dream so big. Of course, if you consider that big dreams are not always ethical while considering the late Ronny Biggs of the Great Train Robbery, or Jordan Belfort’s tactics.
 
Telling Business Tales from the ‘Wolf of Wall Street’ 2
Ethical leaders who dare to dream big are contagious and will gather energy and enthusiasm just as a tornado gathers dust, becoming even more powerful at each new collection of souls who buy into the dream. Imagine Martin Luther King without a Big Dream, or Gandhi saying he was ready to give up, Mandela, or Steve Jobs, along with hundreds of other noteworthy examples in human history.
 
In the building of his company, Jordan used three leadership techniques and deployed them perfectly. The only problem was that he had forgotten where the line of ethical practices started and ended.
 
His short-lived rule of being the master of the universe could have been easily predicted by anyone who understands that success can never be measured in the short term trick, but the trick is to enjoy long term success ethically.
 
It is the mantle of the leader’s character that will sustain their attractiveness to others with their real inner enthusiasm, purpose, passion and integrity.
 
To know without question that your boss is honest, would support you, will always strive to do the right thing, to know that your boss does not engage or tolerate in unethical practices or behaviours helps team members sleep much better at night.
 

The article is written by Michael J. Tolan for Arab Business Review

To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review

 

Advertisements

MENA Economy, Investments and the Specter of the Arab Spring

MENA Economy, Investments and the Specter of the Arab Spring

  • The obstinate political instability has weakened the macroeconomic fundamentals of the MENA region.
  • Investor confidence has been severely impacted resulting in a decline in the FDI received by the MENA region.
  • There is an urgent need for structural business and regulatory reforms, infrastructure development, and improvement of the education system, for the region to recover from the Arab Spring and regain its position as an attractive investment destination.

In this article we try and assess the repercussions of the Arab Spring on the MENA region’s macroeconomic and investment climate. In the first half, we discuss the trend of declining GDP growth (5.6% in 2012 to 2.8% in 2013) – a trend which is more pronounced in developing oil exporting countries – and the challenges faced by the region to recover to its historic average growth rate of 4%. We then focus on the falling FDI received by the region in wake of dented investor confidence, and how non-oil manufacturing and services sectors have been impacted more than their resource-rich counterparts, thereby creating a case for structural reforms if the region has to regain its position an attractive investment destination.

  • The unrest created by the Arab Spring is not limited to the political and social spheres only; rather, the persistent political instability has weakened the macroeconomic fundamentals of the MENA region.  An October 2013 report by the World Bank – “MENA: Investing in Turbulent Times” – tracks the on-going political turmoil, and its effect on the economy and the attractiveness of the region as an investment destination.  As per the report, despite the recovery in global macroeconomic conditions, MENA region’s GDP growth is expected to come down from 5.6 percent in 2012 to 2.8 percent in 2013.  The effect of unfavorable political and social conditions is starker in case of the developing oil exporting countries (like Libya, Iran, Syria) experience greater turbulence; as a result, their GDP growth will decline from 9 percent in 2012 to -0.4 percent in 2013.  GCC oil exporters’ efforts to increase oil production will help them outperform the region’s growth in 2013, but their growth will also be lower on y/y basis, as oil production is currently at capacity in both Kuwait and the United Arab Emirates, and Qatar’s growth continues to decline due to the winding-up of its natural gas program and the fall in crude oil prices.

MENA Economy, Investments 1

                                                                        Source: World Bank 

  • Per the report, MENA may revert to its average growth rate (of the past four decades) of 4 percent in 2014, in the event of greater political stability and improved policy measures.  However, we believe that achieving the 4 percent mark will be challenging, especially in the wake of lower credit ratings, rising inflation, weaker currencies, falling exports, inflated current account deficits, and declining tourism receipts in the region.
  • The spill-over effects of the instability also include dented foreign investor confidence, which has resulted in a decline in the FDI received by the region.  It is well known that political stability and favourable policy are among the key drivers of FDI into emerging markets. Therefore, it is not surprising that the onset of the Arab Spring coincides with a decline in FDI inflows into the MENA region.  A comparison of FDI inflows (see chart below) shows that while other developing countries were able to maintain FDI inflows post the financial crisis, MENA countries – developed as well as developing – experienced a huge drop in FDI inflows starting 2011-2012. This period coincides with the phase of extreme political and social turmoil in the region, where governments were overthrown in Egypt, Tunisia, Libya, and Yemen; civil wars erupted in Libya and Syria; and major protests were staged in Bahrain, Jordan, and Lebanon.

MENA Economy, Investments 2

                                                                        Source: World Bank

  • Finally, while FDI inflow into resource rich sectors remains unaffected by the political situation, FDI into non-oil manufacturing and services sectors declined to the political-instability and unfavourable policies. As per FDI Markets data cited by the report, resources & oil manufacturing and non-tradable sectors were recipients of Greenfield FDI worth USD 540 billion from 2003-12, which is ~50 percent higher than the amount received by non-oil manufacturing and commercial services sectors in the same time frame. One of the key reasons for this difference is the lack of democratic accountability, government instability, unstable business environment, and conflicts in the region, which matter more to foreign investors looking at the non-resource tradable and services sectors. Therefore, it is not surprising that while FDI investments focused on resource-rich sectors remained largely unaffected by the political situation, and the already low FDI to manufacturing and services sectors declined further due to the crisis, thereby depriving the region of efficiency seeking investments, which are necessary for job creation, technology enhancement, and sustainable growth of the region.

We believe that the facts above clearly highlight that finding solutions to the political situation should be a priority for MENA leaders.  However, we also believe that the need for structural business and regulatory reforms, law enforcement, infrastructure development, and improvement of the education system is higher than ever now, for the region to recover from the Arab Spring and regain its position as an attractive investment destination.

The article is written by Faisal Hasan for Arab Business Review

To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review

 

Bitcoin in MENA Market

Bitcoin in MENA Market

  • Financial Institutions in the MENA region remain skeptical about bitcoins, despite a slow but steady growth in bitcoin adoption.
  • Small groups and Entrepreneurs are developing platforms to promote the digital currency, which can address the long-standing problem of financial inclusion in the region.
  • Low credit card penetration and difficulty to acquire a credit card or a bank account in the MENA region will drive the demand for the Bitcoins in the region. However, cultural and technological challenges exist.

Bitcoin was created in 2009 by an unknown person, or group of people, using pseudonym Satoshi Nakamoto. It is a decentralized (digital) currency, without any authority, company, website or symbol.

Bitcoins are created by a slow and highly iterative computing process called ‘bitcoin mining’, enabling individuals or companies engage in this activity in exchange for transaction fees and newly created bitcoins. Besides mining, bitcoins can be obtained in exchange for fiat money, products, and services, and users can send and receive bitcoins electronically for an optional transaction fee using wallet software on a personal computer, mobile device, or a web application. Bitcoins can also be bought from bitcoin exchanges by paying through other payment methods including cash.

Currently, 50 bitcoins are generated every 10 minutes; however, the mining process will get slower and complex with time. However, this payment method is getting increasingly popular, especially in the developed world. According to Coindesk.com, as of 26 June, one Bitcoin is worth about USD 570 and on average, 80,000 Bitcoin transactions worth over USD 100 million occur daily. In Dec 2013, daily value of Bitcoin transactions crossed Western Union transactions.

Global Bitcoin Transactions

Bitcoin 1

Source: seconmarket.com

Large number of financial remittances, low level of financial inclusion, and high mobile penetration rates in the Middle East creates a good market for the Bitcoins.

MENA region is home to large number of expats who send significant amounts of salaries back home. The region accounts for nearly 15% of global remittances and the bitcoin being a low cost money transfer option (compared to average 8% transfer fee for other money transfer modes), help save significant amounts of remittance fee.

The low levels of financial inclusion in the MENA region has led to limited access to any sort of financial services. According to Findex, MENA has the lowest percentages of adults with a formal bank account (18%) and of poor people with formal access to financial services (9%). The recent success of mobile banking is an example of how alternative payment methods can make their place in the market.

The mobile and internet penetration is high when compared to the global average. As per the Global Media Intelligence Report by eMarketer, at 525.8 mn, the Middle East and Africa had the second largest mobile phone population in 2013. Also the internet penetration is 37%, which is above the global average. These two channels can facilitate the use of Bitcoin and can help the region address the issue of poor financial inclusion.

Some groups are continually working on new platforms for Bitcoins in the region to make them popular and easy to use. In June 2014, BITBOX launched the Middle East’s first bitcoin ATM in Tel Aviv (Israel). The vending machine allows both purchase and sale of Bitcoins. Although Bitcoin is witnessing significant growth trend in Israel, however, at present all the transactions have to be through a bank, involving lot of bureaucracy. With the launch of the Bitcoin ATM, it will help the users to transact without being hassled by the bureaucracy of the banks. This will encourage the users to exchange Bitcoins for local currency and also create a wallet to store Bitcoins. This platform will enable sending Bitcoins via email and phone and redeeming them at any of the similar ATMs. The ATMs are priced at about $15,000 and includes biometric features which may be activated depending on the local requirements.

Iranians got a Bitcoin Marketplace, CoinAva, which allows people to buy and sell Bitcoin. Bitcoin Exchange is similar to a traditional exchange except that it is entirely online.

Lack of innovation, knowledge and skepticism are the main hindrances for the Bitcoin growth in the region. Although with lot of potential for growth of Bitcoins available in MENA, it is one of the toughest regions to operate and acquire Bitcoins. Some of the reasons that may be pulling down the potential are:

  • Absence of incentives to use bitcoin
  • Lack of innovation as the environment is still more reactive than proactive
  • Lack of confidence in the security and trustworthiness of the currency
  • Broader community in Middle East is still in the early learning phase about bitcoin
  • It was difficult to find options to exchange other forms of local digital money with Bitcoins till Bitcoin Nordic recently introduced CashU as a payment option

The central banks in the region have issued warnings against the usage of the Bitcoins making it tougher for the people to trust this digital currency. 

  • According to the Central bank of Jordan, the virtual currencies are not legal tender and there is no obligation on any central bank in the world or any government to exchange its value for real money issued by them.
  • According to the Lebanese Central Bank, due to its relatively small user base, the value of Bitcoins is subject to intense volatility and as the money is not backed by any central bank, the value of Bitcoin is not stable, and the price can drop to zero.

However, people in favor of Bitcoin argue that the technology is desirable as there is no issuing authority making it a borderless currency on Internet. Anyone having access to the Internet or a phone can access Bitcoin and leverage the financial services around it.

Combined efforts by governments and businesses is needed to drive the growth in the region. There is a lack of trust in online payments in the region leading to low credit card usage and growing but comparatively small e-commerce sector. It has to be tackled by educating people about bitcoin and related terms like wallets and exchanges and addressing issues with the conventional online payments.  Bitcoin entrepreneurs in the region are focusing on education and outreach which will include:

  • Showcasing at events like ArabDigital;
  • Building contacts at other tech start-ups; and
  • Reaching out to the region’s merchants and consumers.

Another challenge is incentivizing the use of the digital currency. However, it is a catch 22 situation because there is a need for more users to incentivize businesses to use it, and more businesses to incentivize users to use it. The region needs more innovators and risk takers, more ideas and solutions as the market is more reactive than proactive.

Bitcoin appears to be destined to grow big in MENA, however, it remains to be seen how long the cultural barriers and lack of technological integration stopping it from penetrating deeper in the region.

Cases of acceptability of Bitcoins in the Region and Warnings issued by Regional Banks

Despite being a favourable market, Bitcoin has a very low presence in MENA region with only two merchants accepting Bitcoin in the entire region: a restaurant in Dubai and a coffee shop in Jordan.

  • UAE homegrown F&B brand “The Pizza Guys” became the first restaurant in the wider region to accept Bitcoin. According to these pizza guys, they are able to accept the volatility in the price of Bitcoin because of their small transaction size
  • According to the owner of the coffee shop in Jordan, accepting Bitcoin payments, there is very low risk of losing money given the small size of the transactions

 

The article was originally published at: Arab Business Review

To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review

Microfinance in MENA

Microfinance Mena

  • Financial inclusion levels are alarmingly low in the MENA region, and the trickle-down effect can be felt on the region’s Microfinance market, which is among the youngest and slowest growing in the world. 
  • Although every country in the region has its unique challenges (use of technology, income levels, etc.), lack of institutional and regulatory support is a common cause for the undergrowth of the microfinance sector in MENA.
  • Growth be achieved if MFIs have the support of Arab governments in the form of good institutional and regulatory framework.

Microfinance in MENA, and the need for a Supportive Institutional and Regulatory Framework

Financial inclusion levels are alarmingly low in the MENA region.  According to Pi Slice, MENA’s first online microcredit platform, the region has a population of 370 million of which at least 26% are estimated to be living on less than USD 2 per day. Also, financial inclusion in the region is very low; as per Findex, MENA has the lowest percentages of adults with a formal bank account (18%) and of poor people with formal access to financial services (9%).

The trickle-down effect can be felt on the region’s Microfinance market, which is among the youngest and slowest growing in the world. World Bank estimates that microcredit accounts for just 0.2% of MENA’s GDP and lending by microfinance institutions currently reaches only 1.8% of the adult population. To put things into perspective, this is half the penetration rate as compared with South Asia or Latin America and the Caribbean. 

Therefore, it comes as no surprise that while there are ~6 million households eligible for a microfinance loan, the underdevelopment of the microfinance market in the region means that there is a gap of about 3 million potential microfinance customers for a total of nearly USD 3.5 billion in Gross Loan Portfolio (GLP), as per Pi Slice. And new research from responsAbility shows that this situation is unlikely to change soon since the growth rate of MENA’s GLP is predicted to lag all other regions, expect Eastern Europe. 

2014 Forcasts for Growth of Regional Microfinace Markets
Region Gross Loan Portfolio Growth Rate 2014
South America 15 – 12%
Central America 10 – 15%
Sub-Saharan Africa 15 – 25%
MENA 10%
Central Asia 15 – 20%
Estren Europe 5 – 10%
South, South East and East Asia 25 – 35%
Total 15 – 20%

Source: Responsability Research

However, within the region, microfinance markets are in different stages of development with Morocco, Egypt, Jordan, and Yemen showing higher levels of maturity as compared to relatively new markets in Iraq, Sudan. The variation in the maturity level of the microfinance market within various MENA countries can be observed by the number of borrowers in each country, as per the Washington-based Microfinance Information Exchange (MIX).

Microfinance Mena information

 Source: Microfinance Information Exchange (MIX)

Although every country in the region has its unique challenges (use of technology, income levels, etc.), lack of institutional and regulatory support is a common cause for the undergrowth of the microfinance sector in MENA. Products offered by MFIs in the region are primarily focused on credits while other financial services, such as saving, insurance or monetary transfer are negligible due to lack of an enabling legal, regulatory and institutional environment in the microfinance sector. While few countries like Sudan, Syria, and Yemen allow for savings mobilizations, the remaining markets are impacted by restrictive regulations and structure of their respective financial sectors, which limit the growth potential of MFIs. As a result, 60% of all external funding is done by local banks, but at high lending rates, thereby negatively impacting borrowers.

The lack of institutional support can also be gauged from that >90% of financial services for poorer households in MENA are provided by non-governmental organizations, with an underdeveloped financial infrastructure and low levels of financial literacy further inhibiting the sector’s growth.

It is abundantly clear that growth of the microfinance sector in MENA can be driven only through institutional support, and some recent developments lend hope. As per a 2013 report by the Economist Intelligence Unit (EIU), regulatory developments in the region point towards an effort to help MFI grow. Most notably: 

  • Morocco updated its Microfinance Associations Law, with an aim to encourage consolidation among smaller microcredit associations (MCAs). While some microfinance professionals have criticised it for assisting MFIs in transforming into commercial banks or NGOs, it should still be viewed as a step in the right direction to grow the microfinance sector.
  • Jordan adopted a microfinance strategy providing for comprehensive legislative reforms.
  • In Egypt, a bill to that effect was introduced to Parliament even before the Arab Spring.
  • In the Palestinian territories, a presidential decree has set the course for standard monitoring of the microfinance sector by the Palestinian Monetary Authority. 

Other positive indicators include:

  • increased diversity of financial service providers (banks, microfinance banks, non-bank financial institutions, service companies, and NGOs);
  • higher and deeper penetration levels;
  • a widening pool of experienced human resources; and
  • improved credit risk systems

The above are but a few steps that have been taken. However, much can still be achieved if MFIs have the support of Arab governments in the form of good institutional and regulatory framework.

The article was originally published at: Arab Business Review

To read more thought-leadership stuff by leaders from Arab Region, please visit Arab Business Review