This paper attempts to examine specific issues in the delivery of micro financial services and outlines some new approaches towards scaling up. Section I reiterates the crucial role of micro finance in reducing vulnerability and enhancing the prospects of growth for poor households. Section II examines the broad challenges in micro finance; Section III provides an overview of the various micro financial services (insurance, savings and investment, credit and other risk management instruments). Section IV examines the issues specific to Micro Finance Institutions (MFI) in India and Section V concludes the paper by identifying the key areas for further research and debate.
http://www.olsen.ch/center/papers/essentialresource.pdf
Analysis of economic trends and research of economic processes requires access to quality data. Big investments have gone into building extensive databases of macroeconomic data. So far, high frequency or tick by tick market data has not been included in these efforts. Traditionally, economists have been of the opinion that short-term price fluctuations are irrelevant noise and not worthwhile to collect. Recent discoveries in finance have changed this assessment [1]. High frequency data has a high information content and is indicative of long-term trends. This is a plea to expand data collection to high frequency market data as an invaluable source of information.
During the course of the past 20 years, there has been a growing interest in the study of high frequency market data. A rich structure of statistical properties was discovered. Unlike long-term macroeconomic data, which is known to have Gaussian distribution properties, high frequency market data is non-stationary and increasingly fat-tailed over shorter intervals. It has also fractal properties. It is subject to a scaling law, where the average absolute price change increases by the same percentage from a ten to a twenty minutes interval, as from a one to two hour, or a one to two days or one to two month interval. Absolute price changes exhibit long-term autocorrelation properties, where a price shock lasting for only twenty minutes for example has an impact for six or more weeks. There are other properties as well, such as a 24 hour volatility pattern, which is the result of the three time zones of trading in Asia, Europe and America. Classical economics assumes that financial markets are homogeneous and that short-term price movements follow a Gaussian random walk. The complex structure of statistical properties discovered with high frequency data is the result of the heterogeneity of financial markets2. Market participants trade with different time horizons, some take positions for only minutes, others for hours, days, weeks or months. Depending on their trading horizon, they react differently to the same news events. The heterogeneity has the effect of creating a strong temporal interdependence of price moves.
With modern mathematical tools it is possible to analyze high frequency data and extract information of long-term trends and trend changes. We propose to expand data collection and create a global tick by tick market data repository. This repository would also include - synthetic data - for data that is not directly observable, such as yield curves and volatility surfaces. Today, there exists no commercial database that fulfills this task. It has been estimated that such a project would cost anywhere between 10 and 50 Mio USD.
Its usage would be manifold. First of all, it would provide us with a detailed record of how events unfolded. For historians, economists and finance specialists, it would be an invaluable resource to understand the history of events and get a deeper understanding of the diversity of phenomena that occur. Research of market liquidity would play a prominent role. Transparent and liquid capital markets constitute a "public good", which can only be safeguarded, if we have a deeper understanding of how the markets function.
The tick data time series repository could be used to feed a global early warning system that would operate similarly to a weather forecasting system providing predictive information of financial markets and the economy as a whole. Unlike existing market analysis which is fed by macroeconomic data that has a time delay due to the sparse underlying data, the global early warning system would be online and up to date. At the same time, the data repository could fulfill straight forward tasks - it would allow financial institutions to validate the transaction prices of their complex derivatives transactions by an independent third party resource and prevent losses, such as occurred with Allied Irish Bank.
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1 An Introduction to High-Frequency Finance. Michael M. Dacorogna, Ramazan Gençay, Ulrich Müller, Richard B. Olsen, and Olivier V. Pictet. San Diego, CA:Academic Press, 2001. 383 pp., ISBN: 0-12-279671-3
2 Olsen, R. (2000). The Fallacy of the Invisible Hand, in Visions of Risk, edited by Carol Alexander, Pearson Education
Microsoft's new bounty program has all the elements of a classic movie script [1]. In Sergio Leone's 3rd spagetti western, The Man with No Name makes good money as a bounty hunter [2]. Is this another chance for him?
Microsoft's theory is that they can stick up a few wanted posters, and thus rid the world of these Ugly virus writers. Law Enforcement Officers with angel eyes will see this as a great opportunity. Microsoft has all this cash, and the LEOs need a helping hand. Surely with the right incentives, they can file the report to the CyberSecurity Czar in Washington that the tips are flooding in?
Wait for the tips, and go catch the Uglies. (And pay out the bounty.) Nothing could be simpler than that. Wait for more tips, and go catch more Uglies. And...
Wait a minute! In the film, Tuco (the Ugly) and The Man with no Name (the Good) are in cohoots! Somehow, Tuco always gets away, and the two of them split the bounty. Again and again... It's a great game.
Make no mistake, $250,000 in Confederate Gold just changed the incentive structure for your average virus writer. Up until now, writing viruses was just for fun. A challenge. Or a way to take down your hated anti-spam site. Some way for the frustrated ex-soviet nuclear scientist to stretch his talents. Or a way to poke a little fun at Microsoft.
Now, there is financial incentive. With one wanted poster, Microsoft has turned virus writing into a profitable business. All Blondie has to do is write a virus, blow away a few million user installations, and then convince Tuco to sit still for a while in a Yankee jail.
The Man with No Name may just ride again!
[1] http://news.com.com/2100-1083-5103923.html
[2] http://www.amazon.com/exec/obidos/ASIN/6304698798/
http://www.gdrc.org/icm/govern/govern.pdf
As microfinance institutions (MFIs) expand their outreach and increase their assets, and as more MFIs become regulated entities that can capture savings deposits, clear articulation of the functions of their boards of directors is essential for effective governance.
What can you do if everyone has scads of bandwidth?
http://www.cnn.com/2003/TECH/internet/10/15/internet.speed.reut/index.html
I've been thinking about this a bit, and decided that there's only one thing you can do. Video.
Obviously, streaming of movies, because that's what the Hollywood guys have been told will save their bacon.
But, also, calls home to Mum. Watching little daughter when she's at preschool. Video tutoring, Virtual holidays. One-on-one private therapy sessions. Alarm systems, etc etc. Teenagers being teenagers with each other because they like to compete with daddy's bandwidth bill.
Lots of apps.
Now, to get scads of video means that there really needs to be some way to pay for it. There will never be enough at a price of zero. So some feedback loop is required, otherwise I'll just leave the camera on mama's plant growth experiment while I go on vacations.
Metered access is very hard though. ISPs can't do it because they can only do their local bit. Telcos can't do it because they bicker too much and charge too much and they never deliver more than a pile of pretty brochures about what you could do if... Plus, they keep going broke.
So some sort of way to market-acquire the bandwidth is required, which means having a money to pay for it, and having an asset to acquire.
Going back to the first application, movies on demand, we can add that there is the fairly regular DRM requirement. That is, you want to show it, not lose it. This means the whole stream needs to be encrypted, and the device that decrypts is close to the monitor. In a nutshell.
If we assume that's all true - DRM is not being debated today, thanks very much! - we can now see that if we are feeding video in gratiutous amounts into people's homes, we need a box.
A box that handles the DRM, and buys the pipe to the other end. A vonage-with-a-video-camera. Or, an Internet Nutshell, because it has everything you need.
Now, institutional-wise, this is all fairly obvious. You can bet your bottom dollar that Microsoft are building one right now. In fact they probably have three nutshells already and have bought out another couple of companies growing them.
But the problem they will face is that everyone is scared of them.
So, other people will build. And try and not be as scary as Microsoft, which is pretty easy, it seems. These new people are more likely to succeed because they can negotiate with Hollywood without having to hire actors to play out the script. And, like it or not, the seller of nutshells probably needs Hollywood as much as Hollywood needs him.
The problem they will have is that they will need a payments solution.
For various reasons they don't want to go with credit cards. Banks can't hack it either, just like telcos.
Which leaves them a choice of - pick a payment system that's out there, or build their own. Now, doing their own is technically easy (for the likes of us here experienced payment system builders at least) but it does have the disadvantage that it makes the company that is bringing the box to the market somewhat stretched.
Hollywood will want an independant money, so that they can audit the flows. Auditing of film revenues is one of the scarier things on the other side of the celluloid. Plenty of games go on there, and it would make a nice script for a movie, except that they don't want to encourage copycats.
(Did you ever see a movie about where the producer got stabbed, and the director was put through the woodchipper? They just don't make those sorts of movies for some reason... OTOH, in films about films, the accountant always comes to a sticky end.
Why is this?)
Imagine how hard it gets when the company selling the film to the consumer is also the company running the payment, and it's all encrypted and protected behind this blah blah handwaving black box thingie?
It won't be scary enough to send Hollywood running off to Bill Gates, but it might send them running out the door.
So we need a payment system, independant of the nutshell.
That immediately means several things. Firstly, it has to be many payment systems. That's because one is never enough for the consumer, and no big rollout of kit is ever going to rely on one little company. This is a group that is investing hundreds of millions on a huge risky play. The payment system must not be strategically risky.
Which means we need multiple payment systems.
Which means we need one standard to talk to them all.
Which means something like XML-X!
(Yeah, you knew I was going to say XML-X, didn't you :-)
More than that, it needs to be solid. Those boxes need to work for up to five years with minimal patches. So you need the full kit. The full development cycle, the real McCoy when it comes to payments. Standards and testing and conformity.
Now, this story is going to be repeated time and time again to our noble Issuers. They will walk into a big hot sale. And they'll walk out again knowing they can't make the credibility grade.
It's for that reason that a common payment standard is needed. So you can go in and say "We will support you all the way to the vault on your project, but if the impossible happens, all your systems can switch across to our preferred backup payments processor..."
Us lot over here on the XML-X team have done our bit, by writing a standard and letting people use it. We even wrote a couple of language bindings for it - the ones we needed.
Pecunix picked it up and used it, and so far it seems to have worked for them.
It's really up to the Issuers if they want to drive this forward, and if they don't, personally, I don't have an issue with that, because there's more:
Think a bit more about the real layout of this new society where everyone has a vonage-with-a-video- camera. This nutshell thing.
Your teenage daughter is doing her chat thing with some anonynous punk on the west coast, and decides to get a little bit bare with it all.
Or, hubby is bored with you, and he needs some ... lift in his life. Or, you are conducting your new revolution for political tyranny by daring to use free speech in a rich democratic country, an increasingly popular crime. Or planning the next Greenpeace mission against the USS Enterprise.
Or, you're just using the system to check your stocks.
What you want is privacy. Which means crypto.
Actually, it means nymous crypto, but I'll not explain why in these brief words (the payments could be bearer or nymous or whatever).
So, the real obvious way to do this box is to pack in the video camera, the display board, the DRM decrypt chip, the fat fibre pipe connection into the box with the whole nymous infrastructure enabled.
It's not that clear how this would all pan out to me, as I don't know anyone who's in the biz of growing nutshells, and big companies that have already written their biz plan tend to be rather convinced that they know what's what.
But it is clear that what is needed in the payments field is a diversity approach.
Either the Issuers can create this commonality within diversity environment, with a common standard for the merchant users of their payment systems, or they will live a fractured, hard and mean life, picking up each and every merchant one by one, at excrutiating cost to each merchant.
And they'll miss out on the big future showing on a big screen in a big living room near them, tomorrow.
iang
PS: I'm also personally somewhat agnostic as to whether XML-X is used. We wrote it partly to help, and partly to solve a real inhouse problem. That problem is solved. So we got our money's worth out of it. Thanks for all the fish, guys :-)
Thierry Meyssan writes a useful summary of the "most optimistic" or the "most pessimistic" case against the dollar, depending on which side of the geo-politico-economic divide one falls. In essence, the move to switch away from the dollar as international unit of account is gaining some momentum. Perhaps surprisingly to some, the notion of an islamic gold unit is also making some ground, so it may be that there are is a triumvurate of currency stability in earth's future:
Dollars, Euros, and gold.
What's this got to do with anything? In essence, money is an application of FC. Only in understanding the way the world is looking at - and pushing - money, can we understand how a new money project might unfold.
(Ed: I added an emphasis to stress the prediction within [and 2004] now confimed in 2006, 2006-2 and 2008)
(interesting but non-financial geopolitical backdrop - snipped, see URL)
Whatever happens, Washington can no longer backtrack. In fact, the survival of the U.S. is menaced - not by an external enemy, but by internal economic weakness and tensions running between its communities. Many are becoming conscious of the fact that U.S. power is based upon a mirage, the dollar. These are only pieces of paper, printed when more are needed, while the rest of the world feels obliged to use them.
For the past three years, Jacques Chirac and Gerhard Schroder have engaged France and Germany in a pitiless war against the United States. They have sent emissaries world wide to convince other States to convert their monetary reserves to euros. The first to accept were Iran, Iraq and North Korea. Precisely the countries described by George W. Bush as those of the "axis of evil".
Meanwhile, Vladimir Putin has begun restoring the economic independence of the Russian Federation. He has reimbursed - ahead of time - the debts that Yeltsin had contracted with the International Monetary Fund and will also make an early repayment, before the end of the year, of the remaining debts to the Club of Paris.
Putin has calmly announced that he plans State control of the natural riches of his country. He has reminded others that the oligarchs made their fortunes overnight by appropriating, with the complicity of Yeltsin, all that belonged to the U.S.S.R. and that the State can demand the return of wealth which should never have been handed over to the oligarchs.
When Gerhard Schroder visited Putin at the beginning of October, Putin intimated that he would begin by regaining control over Russian gas and petrol and that he would convert their trading, now in dollars, to euros.
On his part, the Prime Minister of Malaysia, Mahatir Mohammad, has experimented with the abandonment of the dollar in international exchanges, but in order to replace it with gold. He has signed bilateral agreements with his country's business partners. Malaysian exports and imports will in future be traded in gold.
Buoyed by this, he has suggested to the Islamic Bank of Development a plan that would put an end to U.S. dominance. Inspired by the Arab cartel which created the oil shortage of 1974, he has outlined a decisive monetary assault. The idea is to switch world petrol trading to gold, thereby provoking the fall of the dollar and the collapse of the U.S. economy.
At first, Saudi Arabia, menaced by Washington neo-conservatives, was opposed to this plan, but became agreable to it. The Islamic Bank of Development presented the proposal at the summit meeting of the Organisation of the Islamic Conference (OIC) which was held recently in Malaya, presided over by Dr. Mahatir Mohammad. It was agreed that bilateral agreements for a transition to the gold standard would be prepared between Islamic countries, during the course of next year. At the next summit meeting, to be held in Senegal, the fifty-seven Member-States of the Islamic Conference would be invited to sign a multilateral agreement.
Vladimir Putin who also attended the Islamic Conference, since a large number of the citizens of the Russian Federation are Muslims, encouraged the plan.
Abandoning the dollar presents a long and difficult struggle, for Europe as well as for Muslim countries. While an international campaign accusing Dr. Mahatir Mohammed of ressuscitating anti-semitism has been launched, Henry Kissinger and Condoleeza Rice appealed to the oligarch, Mikhail Khodorkovsky, for help in order to neutralise Putin. Last weekend, however, Putin had him arrested and detained.
Whatever happens, the monetary war has been declared. In the short-term, U.S. domination is menaced.
Thierry Meyssan
Journalist, writer and President of R\xe9seau Voltaire
http://www.reseauvoltaire.net