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Messages - Maliha Islam

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136
Renewable Energy / Benefits of Renewable Energy Use
« on: March 16, 2018, 11:54:26 PM »
Benefits of Renewable Energy Use

Less global warming
Human activity is overloading our atmosphere with carbon dioxide and other global warming emissions. These gases act like a blanket, trapping heat. The result is a web of significant and harmful impacts, from stronger, more frequent storms, to drought, sea level rise, and extinction.

In the United States, about 29 percent of global warming emissions come from our electricity sector. Most of those emissions come from fossil fuels like coal and natural gas .

In contrast, most renewable energy sources produce little to no global warming emissions. Even when including “life cycle” emissions of clean energy (ie, the emissions from each stage of a technology’s life—manufacturing, installation, operation, decommissioning), the global warming emissions associated with renewable energy are minimal .

The comparison becomes clear when you look at the numbers. Burning natural gas for electricity releases between 0.6 and 2 pounds of carbon dioxide equivalent per kilowatt-hour (CO2E/kWh); coal emits between 1.4 and 3.6 pounds of CO2E/kWh. Wind, on the other hand, is responsible for only 0.02 to 0.04 pounds of CO2E/kWh on a life-cycle basis; solar 0.07 to 0.2; geothermal 0.1 to 0.2; and hydroelectric between 0.1 and 0.5.

Renewable electricity generation from biomass can have a wide range of global warming emissions depending on the resource and whether or not it is sustainably sourced and harvested.


Different sources of energy produce different amounts of heat-trapping gases. As shown in this chart, renewable energies tend to have much lower emissions than other sources, such as natural gas or coal.
Increasing the supply of renewable energy would allow us to replace carbon-intensive energy sources and significantly reduce US global warming emissions.

For example, a 2009 UCS analysis found that a 25 percent by 2025 national renewable electricity standard would lower power plant CO2 emissions 277 million metric tons annually by 2025—the equivalent of the annual output from 70 typical (600 MW) new coal plants .

In addition, a ground-breaking study by the US Department of Energy's National Renewable Energy Laboratory (NREL) explored the feasibility of generating 80 percent of the country’s electricity from renewable sources by 2050. They found that renewable energy could help reduce the electricity sector’s emissions by approximately 81 percent.

Improved public health
The air and water pollution emitted by coal and natural gas plants is linked with breathing problems, neurological damage, heart attacks, cancer, premature death, and a host of other serious problems. The pollution affects everyone: one Harvard University study estimated the life cycle costs and public health effects of coal to be an estimated $74.6 billion every year. That’s equivalent to 4.36 cents per kilowatt-hour of electricity produced—about one-third of the average electricity rate for a typical US home .

Most of these negative health impacts come from air and water pollution that clean energy technologies simply don’t produce. Wind, solar, and hydroelectric systems generate electricity with no associated air pollution emissions. Geothermal and biomass  systems emit some air pollutants, though total air emissions are generally much lower than those of coal- and natural gas-fired power plants.

In addition, wind and solar energy require essentially no water to operate and thus do not pollute water resources or strain supplies by competing with agriculture, drinking water, or other important water needs. In contrast, fossil fuels can have a significant impact on water resources: both coal mining and natural gas drilling can pollute sources of drinking water, and all thermal power plants, including those powered by coal, gas, and oil, withdraw and consume water for cooling.

Biomass and geothermal power plants, like coal- and natural gas-fired power plants, may require water for cooling. Hydroelectric power plants can disrupt river ecosystems both upstream and downstream from the dam. However, NREL's 80-percent-by-2050 renewable energy study, which included biomass and geothermal, found that total water consumption and withdrawal would decrease significantly in a future with high renewables .

Inexhaustible energy


Strong winds, sunny skies, abundant plant matter, heat from the earth, and fast-moving water can each provide a vast and constantly replenished supply of energy. A relatively small fraction of US electricity currently comes from these sources, but that could change: studies have repeatedly shown that renewable energy can provide a significant share of future electricity needs, even after accounting for potential constraints .

In fact, a major government-sponsored study found that clean energy could contribute somewhere between three and 80 times its 2013 levels, depending on assumptions . And the previously mentioned NREL study found that renewable energy could comfortably provide up to 80 percent of US electricity by 2050.

Jobs and other economic benefits



Compared with fossil fuel technologies, which are typically mechanized and capital intensive, the renewable energy industry is more labor intensive. Solar panels need humans to install them; wind farms need technicians for maintenance.

This means that, on average, more jobs are created for each unit of electricity generated from renewable sources than from fossil fuels.

Renewable energy already supports thousands of jobs in the United States. In 2016, the wind energy industry directly employed over 100,000 full-time-equivalent employees in a variety of capacities, including manufacturing, project development, construction and turbine installation, operations and maintenance, transportation and logistics, and financial, legal, and consulting services . More than 500 factories in the United States manufacture parts for wind turbines, and wind power project installations in 2016 alone represented $13.0 billion in investments .

Other renewable energy technologies employ even more workers. In 2016, the solar industry employed more than 260,000 people, including jobs in solar installation, manufacturing, and sales, a 25% increase over 2015 . The hydroelectric power industry employed approximately 66,000 people in 2017 ; the geothermal industry employed 5,800 people.

Increased support for renewable energy could create even more jobs. The 2009 Union of Concerned Scientists study of a 25-percent-by-2025 renewable energy standard found that such a policy would create more than three times as many jobs (more than 200,000) as producing an equivalent amount of electricity from fossil fuels .

In contrast, the entire coal industry employed 160,000 people in 2016.

In addition to the jobs directly created in the renewable energy industry, growth in clean energy can create positive economic “ripple” effects. For example, industries in the renewable energy supply chain will benefit, and unrelated local businesses will benefit from increased household and business incomes .

Local governments also benefit from clean energy, most often in the form of property and income taxes and other payments from renewable energy project owners. Owners of the land on which wind projects are built often receive lease payments ranging from $3,000 to $6,000 per megawatt of installed capacity, as well as payments for power line easements and road rights-of-way. They may also earn royalties based on the project’s annual revenues. Farmers and rural landowners can generate new sources of supplemental income by producing feedstocks for biomass power facilities.

UCS analysis found that a 25-by-2025 national renewable electricity standard would stimulate $263.4 billion in new capital investment for renewable energy technologies, $13.5 billion in new landowner income from? biomass production and/or wind land lease payments, and $11.5 billion in new property tax revenue for local communities .

Stable energy prices
Renewable energy is providing affordable electricity across the country right now, and can help stabilize energy prices in the future.

Although renewable facilities require upfront investments to build, they can then operate at very low cost (for most clean energy technologies, the “fuel” is free). As a result, renewable energy prices can be very stable over time.

Moreover, the costs of renewable energy technologies have declined steadily, and are projected to drop even more. For example, the average price to install solar dropped more than 70 percent between 2010 and 2017 . The cost of generating electricity from wind dropped 66 percent between 2009 and 2016 . Costs will likely decline even further as markets mature and companies increasingly take advantage of economies of scale.

In contrast, fossil fuel prices can vary dramatically and are prone to substantial price swings. For example, there was a rapid increase in US coal prices due to rising global demand before 2008, then a rapid fall after 2008 when global demands declined . Likewise, natural gas prices have fluctuated greatly since 2000 .


Using more renewable energy can lower the prices of and demand for natural gas and coal by increasing competition and diversifying our energy supplies. And an increased reliance on renewable energy can help protect consumers when fossil fuel prices spike.

Reliability and resilience
 Wind and solar are less prone to large-scale failure because they are distributed and modular. Distributed systems are spread out over a large geographical area, so a severe weather event in one location will not cut off power to an entire region. Modular systems are composed of numerous individual wind turbines or solar arrays. Even if some of the equipment in the system is damaged, the rest can typically continue to operate.

For example, Hurricane Sandy damaged fossil fuel-dominated electric generation and distribution systems in New York and New Jersey and left millions of people without power. In contrast, renewable energy projects in the Northeast weathered Hurricane Sandy with minimal damage or disruption .

Water scarcity is another risk for non-renewable power plants. Coal, nuclear, and many natural gas plants depend on having sufficient water for cooling, which means that severe droughts and heat waves can put electricity generation at risk. Wind and solar photovoltaic systems do not require water to generate electricity and can operate reliably in conditions that may otherwise require closing a fossil fuel-powered plant. (For more information, see How it Works: Water for Electricity.) 

The risk of disruptive events will also increase in the future as droughts, heat waves, more intense storms, and increasingly severe wildfires become more frequent due to global warming—increasing the need for resilient, clean technologies.

Source: https://www.ucsusa.org/clean-energy/renewable-energy/public-benefits-of-renewable-power#.WqwCsh1uZqM

137
Renewable Energy / Types of Renewable Energy
« on: March 16, 2018, 11:44:25 PM »
Types of Renewable Energy

Solar shingles are installed on a rooftop. Credit: Stellar Sun Shop
The United States currently relies heavily on coal, oil, and natural gas for its energy. Fossil fuels are non-renewable, that is, they draw on finite resources that will eventually dwindle, becoming too expensive or too environmentally damaging to retrieve. In contrast, the many types of renewable energy resources-such as wind and solar energy-are constantly replenished and will never run out.

Most renewable energy comes either directly or indirectly from the sun. Sunlight, or solar energy, can be used directly for heating and lighting homes and other buildings, for generating electricity, and for hot water heating, solar cooling, and a variety of commercial and industrial uses.

The sun's heat also drives the winds, whose energy, is captured with wind turbines. Then, the winds and the sun's heat cause water to evaporate. When this water vapor turns into rain or snow and flows downhill into rivers or streams, its energy can be captured using hydroelectric power.

Along with the rain and snow, sunlight causes plants to grow. The organic matter that makes up those plants is known as biomass. Biomass can be used to produce electricity, transportation fuels, or chemicals. The use of biomass for any of these purposes is called bioenergy.

Hydrogen also can be found in many organic compounds, as well as water. It's the most abundant element on the Earth. But it doesn't occur naturally as a gas. It's always combined with other elements, such as with oxygen to make water. Once separated from another element, hydrogen can be burned as a fuel or converted into electricity.

Not all renewable energy resources come from the sun. Geothermal energy taps the Earth's internal heat for a variety of uses, including electric power production, and the heating and cooling of buildings. And the energy of the ocean's tides come from the gravitational pull of the moon and the sun upon the Earth.

In fact, ocean energy comes from a number of sources. In addition to tidal energy, there's the energy of the ocean's waves, which are driven by both the tides and the winds. The sun also warms the surface of the ocean more than the ocean depths, creating a temperature difference that can be used as an energy source. All these forms of ocean energy can be used to produce electricity.

Source: http://www.renewableenergyworld.com/index/tech.html

138
What's the difference between a capital market and the stock market?

Capital market is a broader term that includes the stock market and other venues for trading financial products. The stock market allows investors and banking institutions to trade stocks, either publicly or privately. Stocks are financial instruments that represent partial ownership of a company. These documents are used extensively by companies as a means of raising necessary capital. Within the stock market itself are primary and secondary markets that trade among banks underwriting stock and public investors trading stock, respectively. Capital markets may trade in other financial securities including bonds, derivative contracts such as options, various loans and other debt instruments, and commodity futures. Other financial instruments may be sold in capital markets and these products are becoming increasingly sophisticated. Some capital markets are available to the public directly while others are closed to everyone except large institutional investors. Private trade, mostly between large institutions with high-volume trades, occurs via secured computer networks at very high speeds. These markets all trade financial securities, so they are all capital markets. The stock market is a very significant portion of the total volume of capital market trades.

The stock market has several very popular markets available for public trading. The Nasdaq, Dow Jones, and the S&P 500 trade in considerable volume every day within the United States and are the most significant stock markets. Other countries have popular stock markets, such as the Nikkei 225 in Japan. Each market has specific times during the day when it remains open. By trading through different markets, it is possible for investors to actively trade stocks throughout the day.

Source: https://www.investopedia.com/ask/answers/021615/whats-difference-between-capital-market-and-stock-market.asp

139
Islamic Finance / Beginners’ Guide to Islamic Finance
« on: March 16, 2018, 11:29:58 PM »
Beginners’ Guide to Islamic Finance


Islamic Finance is a method of financing and banking operations that abides by Sharia Law. With the help of Bank of London and Middle East we outline the rules that all sharia-compliant financial products have to adhere to.

What are the main rules for Islamic finance?

Bank of London and the Middle East (BLME), a Sharia compliant bank, says the main principles of Islamic Finance is the avoidance of all haram (harmful) activities such as charging interest. In addition to the prohibition on charging interest, Islamic financial institutions must ensure that ambiguity (gharar) or gambling/speculation (maysair) is minimised in transactions and contracts. Complying with Sharia law also means that Islamic Financial Institutions are not permitted to invest in alcohol, pork, pornography or gambling.

How does Islamic finance work?

The overarching principle of Islamic finance is that all forms of interest are forbidden.

The Islamic financial model works on the basis of risk sharing. The customer and the bank share the risk of any investment on agreed terms, and divide any profits between them.

The main categories within Islamic finance are: Ijara, Ijara-wa-iqtina, Mudaraba, Murabaha and Musharaka.

* Ijara is a leasing agreement whereby the bank buys an item for a customer and then leases it back over a specific period.

* Ijara-wa-Iqtina is a similar arrangement, except that the customer is able to buy the item at the end of the contract.

* Mudaraba offers specialist investment by a financial expert in which the bank and the customer shares any profits. Customers risks losing their money if the investment is unsuccessful, although the bank will not charge a handling fee unless it turns a profit.

* Murabaha is a form of credit which enables customers to make a purchase without having to take out an interest bearing loan. The bank buys an item and then sells it on to the customer on a deferred basis.

* Musharaka is a investment partnership in which profit sharing terms are agreed in advance, and losses are pegged to the amount invested.

How long have these products been on offer?

Savings and deposit banks that complied with Sharia were launched in the 1960s, says BLME. However, it was not until the mid 70s that commercial banks began to emerge. The last 20 years has seen the expansion both geographically and across financial services of Islamic Banking. In 2004 the first UK Islamic Bank was authorised by the Financial Services Authority. Conventional banks also identified the potential of Islamic Banking and many have opened Islamic ‘windows’ over the last ten years.

Humphrey Percy, CEO of BLME, says: “Since its establishement in 2007, BLME has witnessed a growing demand among medium to high net worth individuals for a banking option that incorporates the transparent and ethical principles inherent in Islamic finance with competitive returns. With the financial climate improving, individuals are looking to diversify their investments that were previously solely held by UK high street banks.”

Who offers them?

There are over 500 financial institutions offering Islamic Finance in over 80 different countries, these range from retails banks to investment banks and asset managers. A recent estimate puts the Islamic Finance industry $1 trillion worth of assets and predicts that it will grow at between 10-15 per cent per annum.

Lloyds TSB offers a current account together with a home-financing scheme. The Islamic Bank of Britain offers a Sharia compliant current account, mortgage and also a personal loan. HSBC offers a Islamic current account and mortgage.

Bank of London and the Middle East offers a premier deposit account for investors with a minimum deposit of £50,000.

A handful of other banks also offer financial products in the UK tailored for Muslims.

Can anyone else benefit from these products?


Both Muslims and non-Muslims can benefit from Islamic Finance as, by principle, it aims to be a more transparent and fairer system of finance. Many of the instruments or investment methods that have contributed to the financial crisis are not permitted by Sharia, such as short selling or non-asset backed derivatives.

BLME makes the point that there is no difference between how an individual or business would approach identifying an Islamic Bank or financial institution compared to a conventional one. Individuals should check that the Islamic Bank is authorised and regulated by the FSA to ensure they receive the same protection as they would with a conventional bank. It is important that individuals and business ask what benefits and terms they would receive and ensure that they select their provider on how they can meet these.

How do the banks make any money?


Although they cannot charge interest, the banks can profit from helping customers to purchase a property using a ijara or murabaha scheme. With an ijara scheme the bank makes money by charging the customer rent; with a murabaha scheme, a price is agreed at the outset which is more than the market value. This profit is deemed to be a reward for the risk that is assumed by the bank.

Source: https://www.ft.com/content/8c9bc2fc-8845-11df-a4e7-00144feabdc0

140
Islamic Finance / Working With Islamic Finance
« on: March 16, 2018, 11:26:10 PM »
Working With Islamic Finance

Islamic finance refers to the means by which corporations in the Muslim world, including banks and other lending institutions, raise capital in accordance with Sharia, or Islamic law. It also refers to the types of investments that are permissible under this form of law. A unique form of socially responsible investment, Islam makes no division between the spiritual and the secular, hence its reach into the domain of financial matters. Because this sub-branch of finance is a burgeoning field, in this article we will offer an overview to serve as the basis of knowledge or for further study.

The Big Picture of Islam Banking
Although they have been mandated since the beginning of Islam in the seventh century, Islamic banking and finance have been formalized gradually since the late 1960s, coincident with and in response to tremendous oil wealth that fueled renewed interest in and demand for Sharia-compliant products and practice.

Central to Islamic banking and finance is an understanding of the importance of risk sharing as part of raising capital and the avoidance of riba (usury) and gharar (risk or uncertainty).
Islamic law views lending with interest payments as a relationship that favors the lender, who charges interest at the expense of the borrower. Because Islamic law views money as a measuring tool for value and not an asset in itself, it requires that one should not be able to receive income from money (for example, interest or anything that has the genus of money) alone. Deemed riba, such practice is proscribed under Islamic law (haram, which means prohibited) as it is considered usurious and exploitative. By contrast, Islamic banking exists to further the socio-economic goals of Islam.

Accordingly, Sharia-compliant finance (halal, which means permitted) consists of profit banking in which the financial institution shares in the profit and loss of the enterprise it underwrites. Of equal importance is the concept of gharar. Defined as risk or uncertainty, in a financial context it refers to the sale of items whose existence is not certain. Examples of gharar would be forms of insurance, such as the purchase of premiums to insure against something that may or may not occur or derivatives used to hedge against possible outcomes.

The equity financing of companies is permissible, as long as those companies are not engaged in restricted types of business, such as the production of alcohol, pornography or weaponry, and only certain financial ratios meet specified guidelines.

Basic Financing Arrangements
Below is a brief overview of permissible financing arrangements often encountered in Islamic finance:

Profit-and-loss sharing contracts (mudarabah). The Islamic bank pools investors' money and assumes a share of the profits and losses. This is agreed upon with the depositors. What does the bank invest in? A group of mutual funds screened for Sharia compliance has arisen. The filter parses company balance sheets to determine whether any sources of income to the corporation are prohibited (for example, if the company is holding too much debt) or if the company is engaged in prohibited lines of business. In addition to actively managed mutual funds, passive ones exist as well based on such indexes as the Dow Jones Islamic Market Index and the FTSE Global Islamic Index.
Partnership and joint stock ownership (musharakah). Three such structures are most common:

a. Declining-balance shared equity: Commonly used to finance a home purchase, the declining balance method calls for the bank and the investor to purchase the home jointly, with the institutional investor gradually transferring its portion of the equity in the home to the individual homeowner, whose payments constitute the homeowner's equity.

b. Lease-to-own: This arrangement is similar to the declining balance one described above, except the financial institution puts up most, if not all, of the money for the house and agrees on arrangements with the homeowner to sell the house to him at the end of a fixed term. A portion of every payment goes toward the lease and the balance toward the purchase price of the home.

c. Installment (cost-plus) sale (murabaha): This is an action where an intermediary buys the home with free and clear title to it. The intermediary investor then agrees on a sale price with the prospective buyer; this price includes some profit. The purchase may be made outright (lump sum) or through a series of deferred (installment) payments. This credit sale is an acceptable form of finance and is not to be confused with an interest-bearing loan.

Leasing ('ijarah/'ijar): The sale of the right to use an object (usufruct) for a specific time period. One condition is the lessor must own the leased object for the duration of the lease. A variation on the lease, 'ijarah wa 'iqtina provides for a lease to be written where the lessor agrees to sell the leased object at the lease's end at a predetermined residual value. Only the lessor is bound by this promise. The lessee is not obligated to purchase the item.
Islamic forwards (salam and 'istisna): These are rare forms of financing, used for certain types of business. These are an exception to gharar. The price for the item is prepaid and the item is delivered at a definite point in the future. Because there is a host of conditions to be met to render such contracts valid, the help of an Islamic legal advisor is usually required.

Basic Investment Vehicles
Here are some permissible types of investments for Islamic investing:

Equities Sharia law allows investment in company shares (common stock) as long as those companies do not engage in lending, gambling or the production of alcohol, tobacco, weaponry or pornography. Investment in companies may be in shares or by direct investment (private equity). Islamic scholars have made some concessions on permissible companies, as most use debt either to address liquidity shortages (they borrow) or to invest excess cash (interest-bearing instruments). One set of filters excludes companies that hold interest-bearing debt, receive interest or other impure income, or trade debts for more than their face values. A further distillation of the aforementioned screens would exclude companies whose debt/total asset ratio equals or exceeds 33%, companies with "impure plus non-operating interest income" revenue equal to or greater than 5%, or companies whose accounts receivable/total assets equal or exceed 45% or more.

Fixed-income funds

Retirement investments. Retirees who want their investments to comply with the tenets of Islam face a dilemma in that fixed-income investments include riba, which is forbidden. Therefore, specific types of investment in real estate, either directly or in securitized fashion (a diversified real estate fund), could provide steady retirement income while not running afoul of Sharia law.
Sukuk. In a typical ijara sukuk (leasing bond-equivalent), the issuer will sell the financial certificates to an investor group who will own them before renting them back to the issuer in exchange for a predetermined rental return. Like the interest rate on a conventional bond, the rental return may be a fixed or floating rate pegged to a benchmark, such as LIBOR. The issuer makes a binding promise to buy back the bonds at a future date at par value. Special purpose vehicles (SPV) are often set up to act as intermediaries in the transaction. A sukuk may be a new borrowing, or it may be the Sharia-compliant replacement of a conventional bond issue. The issue may even enjoy liquidity through listing on local, regional or global exchanges, according to an article in CFA Magazine titled, "Islamic Finance: How New Practitioners of Islamic Finance are Mixing Theology and Modern Investment Theory" (2005).

Basic Insurance Vehicles
Traditional insurance is not permitted as a means of risk management in Islamic law. This is because it constitutes the purchase of something with an uncertain outcome (form of ghirar), and because insurers use fixed income - a form of riba - as part of their portfolio management process to satisfy liabilities.

A possible Sharia-compliant alternative is cooperative (mutual) insurance. Subscribers contribute to a pool of funds, which are invested in a Sharia-compliant manner. Funds are withdrawn from the pool to satisfy claims, and unclaimed profits are distributed among policy holders. Such a structure exists infrequently, so Muslims may avail themselves of existing insurance vehicles if needed or required.

Conclusion
Islamic finance is a centuries-old practice that is gaining recognition throughout the world and whose ethical nature is even drawing the interest of non-Muslims. Given the increased wealth in Muslim nations, expect this field to undergo an even more rapid evolution as it continues to address the challenges of reconciling the disparate worlds of theology and modern portfolio theory.

Source: https://www.investopedia.com/articles/07/islamic_investing.asp

141
ROI - Return on Investment / Marketing ROI Key Concepts & Steps
« on: March 16, 2018, 11:20:59 PM »
Marketing ROI Key Concepts & Steps

Before you begin
It’s a good idea to measure ROI on all of your marketing investments – after all, you’re in business to earn a profit. If your sales process is long and complex, you may choose to modify or simplify your ROI calculations, but a simple calculation is more useful than none at all.

Confirm your financial formulas
There are several figures you’ll need for your ROI calculations:

Cost of goods sold (COGS): The cost to physically produce a product or service.
Marketing investment: Typically you’d include just the cost of the media, not production costs or time invested by certain employees; however, in certain cases it may be better to include all of those figures.
Revenue: It can be tricky to tie revenue to a particular campaign, especially when you run a variety of campaigns and have a long sales process. Your finance team may have some suggestions for estimating this figure.
Companies calculate these figures differently, so confirm the formulas your company uses — your finance team or accountant can guide you.

Establish an ROI threshold

Set an ROI goal for your entire budget and individual campaigns; set a floor as well. By doing so, you gain more power over your budget. If you project that a campaign won’t hit the threshold, don’t run it; if you can’t get an ongoing campaign over the threshold, cut it and put your money elsewhere.

Set your marketing budget
When you have an ROI goal and annual revenue/profit goals, you can calculate the amount of money you should spend on marketing – just solve the ROI formula for the “investment” figure. You’ll be more confident that you’re spending the right amount of money to meet your goals.

Calculate ROI on campaigns; track and improve your results
Tracking ROI can get difficult with complex marketing campaigns, but with a commitment and good reporting processes, you can build solid measurements, even if you have to use some estimates in the process.

Use your ROI calculations to continually improve your campaigns; test new ways to raise your ROI and spend your money on the campaigns that produce the greatest return for your company.

After Marketing ROI

The more you understand ROI, the more power you have over your investments. Continue to learn, improve your reporting capabilities and use ROI to improve your campaigns and generate more profit for your company.

142
ROI Formula, Calculation, and Examples of Return on Investment


ROI Formula
There are several versions of the ROI formula, the most common two all listed below:

ROI = Net Income / Cost of Investment

or

ROI = Investment Gain / Investment Base

The first version of the formula (net income divided by the cost of an investment) is the most commonly used ratio.

The simplest way to think about the formula is taking some type of “benefit” and dividing it by the “cost”.  When someone says some has a good or bad ROI it’s important to ask them to clarify exactly how they measure it.

Example of ROI calculation
An investor purchases property A which is valued at $500,000; two years later, the investor sold the property for $1,000,000.

We use the investment gain formula in this case.

ROI = (1,000,000 – 500,000) / (500,000) = 1 or 100%

The Use of ROI Calculation
ROI calculations are simple and help the investor decide whether to take or skip an investment opportunity. The calculation can also be an indication of how an investment has performed to date. When an investment shows a positive or negative ROI, it can be an important signal to the investor about their investment.

Using an ROI calculation, the investor can separate low-performing investments from high-performing investments.  With this approach, investors and managers can attempt to optimize their portfolio of investments.

Benefits of ROI
There are many benefits to using the return on investment ratio that every analyst should be aware of
 

#1 Simple and Easy to Calculate

The return on investment metric is frequently used because it’s so easy to calculate.  Only two figures are required – the benefit and the cost.  Becuase a “return” can mean different things to different people it makes the formula easy to use as there is not a strict definition of “return”.

#2 Universally Understood
Return on investment is a universally understood concept and so it’s almost guaranteed that if you use the metric in conversation people will know what you’re talking about.

Limitations of ROI
While the ratio is often very useful, there are also some limitations that are important to know about.  Below are two key points that are worthy of note.

#1 Disregards the Factor of Time
A higher ROI number does not always mean a better investment option. For example, two investments have the same ROI of 50%; the first investment is completed in three years, while the second investment needs five years to produce the same yield. The same ROI for both investments blurred the bigger picture, but when the factor of time was added, an investor can easily see the better option.

The investor needs to compare two instruments under the same period and same circumstances.

#2 Susceptible to Manipulation
An ROI calculation will differ between two people depending on what formula is used in the calculation. A marketing manager can use the property calculation explained in the example section without it accounting for additional costs, such as: maintenance costs, property taxes, sales fees, stamp duties, and legal and inspection cost.

When presented with different investment ROIs, the investor needs to take the true ROI, which accounts for all possible costs incurred when each investment increases in value, into consideration.

Annualized ROI
As mentioned above, one of the drawbacks of the traditional return on investment metric is that it doesn’t take into account time periods. For example, a return of 25% over 5 years is expressed the same as a return of 25% over 5 days. But obviously, a return of 25% in 5 days is much better than 5 years!

To overcome this issue we can calculate an annualized ROI.

Formula:
= [(Ending Value / Beginning Value) ^ (1 / # of Years)] – 1

Where;

# of years = (Ending date – Starting Date) /  365

For example, an investor buys a stock on January 5th, 2017 for $12.50 and sells it on August 24, 2017 for $15.20. What is the regular and annualized return on investment?

Regular = ($15.20 – $12.50) / $12.50 = 21.6%

Annualized = [($15.20 / $12.50) ^ (1 / ((Aug 24 – Jan 5)/365) )] -1 = 35.5%

Alternatives to ROI
There are many alternatives to the very generic return on investment ratio.

The most detailed measure of return is known as the Internal Rate of Return (IRR) which is a measure of all the cash flow received over the life of an investment, expressed as an annual percentage (%) growth rate. The metric takes into account the timing of cash flow, which makes a preferred measure of return in sophisticated industries like private equity and venture capital.

Other alternatives include Return on Equity (ROE) and Return on Assets (ROA).  These two ratios don’t take into account the timing of cash flow and represent only an annual rate of return (as opposed to a lifetime rate of return like IRR), however, there are more specific the generic return on investment since the denominator is more clearly specified.  Equity and Assets have a specific meaning, while “investment” can mean different things.

Source: https://corporatefinanceinstitute.com/resources/knowledge/finance/return-on-investment-roi-formula/
 

143
ROI - Return on Investment / Return On Investment - ROI
« on: March 16, 2018, 11:11:39 PM »
Return On Investment - ROI

Return on Investment (ROI) is a performance measure, used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. ROI measures the amount of return on an investment, relative to the investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the cost of the investment. The result is expressed as a percentage or a ratio.

The return on investment formula:

ROI = (Gain from Investment - Cost of Investment)/Cost of Investment

In the above formula, "Gain from Investment” refers to the proceeds obtained from the sale of the investment of interest. Because ROI is measured as a percentage, it can be easily compared with returns from other investments, allowing one to measure a variety of types of investments against one another.

BREAKING DOWN 'Return On Investment - ROI'
ROI is a popular metric because of its versatility and simplicity. Essentially, ROI can be used as a rudimentary gauge of an investment’s profitability. The calculation is not complicated, relatively easy to interpret, and has a range of applications. If an investment’s ROI is not positive, or if other opportunities with higher ROIs are available, these signals can help investors eliminate or select the best options.

For example, suppose Joe invested $1,000 in Slice Pizza Corp. in 2010 and sold his shares for a total of $1,200 one year later. To calculate his return on his investment, he would divide his profits ($1,200 - $1,000 = $200) by the investment cost ($1,000), for a ROI of $200/$1,000, or 20%.

With this information, he could compare his investment in Slice Pizza with his other projects. Suppose Joe also invested $2,000 in Big-Sale Stores Inc. in 2011 and sold his shares for a total of $2,800 in 2014. The ROI on Joe’s holdings in Big-Sale would be $800/$2,000, or 40%. (See Limitations of ROI below for potential issues arising from contrasting time frames.)

Limitations of ROI
Examples like Joe's (above) reveal some limitations of using ROI, particularly when comparing investments. While the ROI of Joe’s second investment was twice that of his first investment, the time between Joe’s purchase and sale was one year for his first investment and three years for his second.

Joe could adjust the ROI of his multi-year investment accordingly. Since his total ROI was 40%, to obtain his average annual ROI, he could divide 40% by 3 to yield 13.33%. With this adjustment, it appears that although Joe’s second investment earned him more profit, his first investment was actually the more efficient choice.

ROI can be used in conjunction with Rate of Return, which takes in account a project’s time frame. One may also use Net Present Value (NPV), which accounts for differences in the value of money over time, due to inflation. The application of NPV when calculating rate of return is often called the Real Rate of Return.

[ There are a range of metrics used to evaluate a company's financials and to determine if it is a sound investment. Investopedia Academy's Fundamental Analysis course walks you through this process and leaves you equipped to decide if a certain stock is will make a smart addition to your portfolio. Learn more today! ]

Developments in ROI

Recently, certain investors and businesses have taken an interest in the development of a new form of the ROI metric, called "Social Return on Investment," or SROI. SROI was initially developed in the early 00's and takes into account broader impacts of projects using extra-financial value (i.e. social and environmental metrics not currently reflected in conventional financial accounts).

Source: https://www.investopedia.com/terms/r/returnoninvestment.asp

144
Credit Rating / Credit Rating
« on: March 16, 2018, 11:07:10 PM »
Credit Rating

A credit rating is an assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation. A credit rating can be assigned to any entity that seeks to borrow money — an individual, corporation, state or provincial authority, or sovereign government.

Credit assessment and evaluation for companies and governments is generally done by a credit rating agency such as Standard & Poor’s (S&P), Moody’s, or Fitch. These rating agencies are paid by the entity that is seeking a credit rating for itself or for one of its debt issues.

BREAKING DOWN 'Credit Rating'
A loan is essentially a promise, and a credit rating determines the likelihood that the borrower will pay back a loan within the confines of the loan agreement, without defaulting. A high credit rating indicates a high possibility of paying back the loan in its entirety without any issues; a poor credit rating suggests that the borrower has had trouble paying back loans in the past, and might follow the same pattern in the future. The credit rating affects the entity's chances of being approved for a given loan or receiving favorable terms for said loan.

Credit ratings apply to businesses and government, while credit scores apply only to individuals. Credit scores are derived from the credit history maintained by credit-reporting agencies such as Equifax, Experian, and TransUnion. An individual's credit score is reported as a number, generally ranging from 300 to 850 (for details, see What is a Good Credit Score?). Similarly, sovereign credit ratings apply to national governments, while corporate credit ratings apply solely to corporations.

Credit rating agencies typically assign letter grades to indicate ratings. Standard & Poor’s, for instance, has a credit rating scale ranging from AAA (excellent) and AA+ to C and D. A debt instrument with a rating below BBB- is considered to be speculative grade or a junk bond, which means it is more likely to default on loans.

History of Credit Ratings
Moody's was the first agency to issue publicly available credit ratings for bonds, in 1909, and other agencies followed suit in the decades after. These ratings didn't have a profound effect on the market until 1936, when a new rule was passed that prohibited banks from investing in speculative bonds, or bonds with low credit ratings, to avoid the risk of default which could lead to financial losses. This practice was quickly adopted by other companies and financial institutions and, soon enough, relying on credit ratings became the norm.

Why Credit Ratings Are Important
Credit ratings for borrowers are based on substantial due diligence conducted by the rating agencies. While a borrowing entity will strive to have the highest possible credit rating since it has a major impact on interest rates charged by lenders, the rating agencies must take a balanced and objective view of the borrower’s financial situation and capacity to service/repay the debt.

A credit rating not only determines whether or not a borrower will be approved for a loan, but also determines the interest rate at which the loan will need to be repaid. Since companies depend on loans for many start-up and other expenses, being denied a loan could spell disaster, and a high interest rate is much more difficult to pay back. Credit ratings also play a large role in a potential investor's determining whether or not to purchase bonds. A poor credit rating is a risky investment; it indicates a larger probability that the company will be unable to make its bond payments.

It is important for a borrower to remain diligent in maintaining a high credit rating. Credit ratings are never static, in fact, they change all the time based on the newest data, and one negative debt will bring down even the best score. Credit also takes time to build up. An entity with good credit but a short credit history is not seen as positively as another entity with the same quality of credit but a longer history. Debtors want to know a borrower can maintain good credit consistently over time.
 
Credit rating changes can have a significant impact on financial markets. A prime example is the adverse market reaction to the credit rating downgrade of the U.S. federal government by Standard & Poor’s on August 5, 2011. Global equity markets plunged for weeks following the downgrade.

Factors Affecting Credit Ratings and Credit Scores
There are a few factors credit agencies take into consideration when assigning a credit rating to an organization. First, the agency considers the entity's past history of borrowing and paying off debts. Any missed payments or defaults on loans negatively impact the rating. The agency also looks at the entity's future economic potential. If the economic future looks bright, the credit rating tends to be higher; if the borrower does not have a positive economic outlook, the credit rating will fall.

For individuals, the credit rating is conveyed by means of a numerical credit score that is maintained by Equifax, Experian, and other credit-reporting agencies. A high credit score indicates a stronger credit profile and will generally result in lower interest rates charged by lenders. There are a number of factors that are taken into account for an individual's credit score including payment history, amounts owed, length of credit history, new credit, and types of credit. Some of these factors have greater weight than others. Details on each credit factor can be found in a credit repo​rt, which typically accompanies a credit score. For a more detailed description of each credit factor, read The 5 Biggest Factors That Affect Your Credit.

Short-Term vs. Long-Term Credit Ratings
A short-term credit rating reflects the likelihood of the borrower defaulting within the year. This type of credit rating has become the norm in recent years, whereas, in the past, long-term credit ratings were more heavily considered. Long-term credit ratings predict the borrower's likelihood of defaulting at any given time in the extended future.

Source: https://www.investopedia.com/terms/c/creditrating.asp

145
From Pre-Seed to Series C: Startup Funding Rounds Explained


PRE-SEED
Seed rounds are typically regarded as the first type of fundraising round available to founders. But in an increasingly competitive marketplace, huge growth in the number of startups has allowed “traditional” seed investors to become far more discerning in how they choose their investments — raising the threshold required to attract “traditional” seed funding.

A typical pre-seed round sees a founding team (often pre-product) receive a small investment to hit one or more of the milestones they’ll need to ready themselves for “true” seed investment: from hiring a critical team member to developing a prototype product.

Led by many of the same investors that lead seed rounds, pre-seed financing is often used to bridge the gap to the next round.

Average Funding Amount: <$1 million

Typical Company Valuation: $1–3 million

Common Investors: Friends and family, early-stage angels, startup accelerators


SEED
Capital from a seed round often fuels a startup’s move beyond its founding team, funds product development, and in some cases, even facilitates early revenue generation.

Wrapped-up within seed investment are expectations that strong signs of Product/Market Fit and some some degree of traction (in the form of a growing wait list, or month-on-month revenue growth) will begin to emerge, paving the way for later fundraising.

Traditionally, seed rounds were the reserve of angel investors, but the proliferation of cash-rich VC funds and a huge range of startups to invest in has attracted more venture capital firms into seed round investment.

This has created a huge variance in seed sizes: the median angel-funded seed size is around $150,000, but the median VC-led seed size is closer to $1.5 million. The involvement of VCs leads to seed rounds ten times larger than those led by angels — with the largest seed round in 2015 a staggering $10 million.

Average Funding Amount: $1.7 million

Typical Company Valuation: $3–6 million

Common Investors: Angels, early-stage VCs, startup accelerators

SERIES A

Revenue growth is the name of the game in Series A. By this point, a startup is expected to have clear and growing evidence of Product/Market Fit, translating into significant revenue growth from new customers and increasing ARPA (Average Revenue per Account).

It’s also here that SaaS marketing and sales become more important. Until this point, growth has often been driven by a single (and not always scalable) channel. To keep growing at a rapid rate, it’s necessary to develop new sales and marketing processes, identify new channels, and get to grips with your ideal customer.

Angels (often referred to as “super” angels) will sometimes invest in Series A rounds, but it’s usually the venture capital organisations that dictate this round. The increasing involvement of VCs also means that Series A rounds are rapidly increasing in size (in 2015, ride comparison SaaS Karhoo raised a Series A worth $250 million).

Average Funding Amount: $10.5 million

Typical Company Valuation: $10–15 million

Common Investors: VCs, “super” angels

SERIES B
The previous rounds have been fuelled by relatively tentative signs of progress, from a promising idea, through leading indicators of Product/Market Fit, to early traction and the first signs of revenue growth.

In Series B, investors are looking for the next stage of growth: the ability to take everything you’ve learned, and make it work at scale.

In practical terms, Series B investment might allow a startup to make expansive hires (across business development, strategic accounts, marketing and customer success), expand into different market segments or experiment with different revenue streams, and in dramatic instances, even buy-out businesses that offer a competitive advantage.

Average Funding Amount: $24.9 million

Typical Company Valuation: $30–60 million

Common Investors: VCs, late-stage VCs



SERIES C+
Series C rounds are raised to fuel large-scale expansion, like moving into a new market (commonly international expansion), or to fuel acquisitions of other businesses.

After Series C, there’s theoretically no limit to the number of investment rounds a startup can raise: some companies will go on to raise investment through Series D, E and beyond. Given the relatively low number of startups that make it to this point, there’s also a huge amount of variance in the amounts raised, with investment determined on a case-by-case basis.

At this late stage, the business is also de-risked enough for financial institutions to involve themselves in investment. These players often bring huge chequebooks to bear on financing rounds, generating truly staggering round sizes. In February of 2016, “cinematic reality” startup Magic Leap raised an unbelievable $793.5 million Series C — possibly the biggest round in venture history.

Average Funding Amount: $50 million

Typical Company Valuation: $100–120 million

Common Investors: Late-stage VCs, private equity firms, hedge funds, banks

Source: https://medium.com/the-saas-growth-blog/from-pre-seed-to-series-c-startup-funding-rounds-explained-f6647156e28b

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How Startup Funding Rounds Differ: Seed vs. Series A


Seed Round vs. Series A: What Startups Need to Know


Before we get started, let's review the basic definitions of the two terms:

Seed Round: Refers to a series of related investments in which 15 or less investors "seed" a new company with anywhere from $50,000 to $2 million. This money is often used to support initial market research and early product development. Investors are typically rewarded with convertible notes, equity, or a preferred stock option in exchange for their investment.

Series A: Refers to a smaller number of angel investors or VCs who contribute an average of $2-10 million in exchange for equity. The fund is named after the type of equity investors hope to eventually receive: Series A Preferred shares. This implies they will be the first group of investors to receive preferred shares.

Now that we have reviewed the terms, let's take a deeper dive into the differences:

Raising a Seed Round
A great analogy for understanding the functionality of a Seed Round is that of planting a tree. Trees don't grow overnight; they start out as small seedlings that form strong roots, laying the foundation for the majestic masterpieces that eventually grow.

Similarly, Seed Rounds are meant to supply startups with the capital they need to build the kind of foundation that yields a profitable business. Seed Round funding is typically used for things like hiring instrumental team members, market testing ideas, and further developing MVPs.

Once a startup has raised a Seed Round they can use that capital to iron out the kinks of business models and product-market fits. Arguably, the most important opportunity given to founders during the Seed Round is the freedom to fill in their "knowledge gaps" with key players. No founder is expected to know everything, and having access to experienced investors who can troubleshoot is almost as important as the cash itself.

Unfortunately, once a startup jumps to Series A, the ownership requirements of much larger funds leave less negotiating room to bring on knowledgeable investors whose expertise might be needed later on. Thus, most tech startups would do well to take their time forming the right Seed Round partnerships, before moving on to Series A.

Key Benefits of Raising a Seed Round:
More time to fine-tune your business model.
More time to connect with instrumental business partners.
Supports lower dilution and more capital for future rounds.
More flexibility to pivot and change course, according to market demand.
If a Seed Round signifies planting the tree (and rooting the company with a strong foundation), a Series A signifies sprouting branches...

Raising a Series A
Once a VC, or group of VCs, has poured significant funds into your startup to form a Series A, you are expected to grow FAST. Thus, the primary question to ask oneself before pursuing a Series A is essentially: Do we have both product-market fit and proven systems that will allow us to easily multiply our revenue within the next 18 months?

Though not typical, it is not unheard of for startup founders to completely skip the Seed Round and go straight to Series A. In such instances, a prominent VC has usually extended an offer before the startup expected to receive one. Considering the significant jump in capital, saying no to such an offer can be challenging.

Why would anyone ever say 'no' to more capital? Surprisingly, there are many reasons why most early-stage founders are better off taking a Seed Round.

As Rob Go, cofounder of NextView Ventures, notes:


Seed rounds allow you to put some wins on the board for your company, and then run a process to really maximize your Series A round and the firm and person that you would want to work with. When jumping 'straight to A,' entrepreneurs usually do need to sell a large chunk of their company to make it worth the while of a large VC to write a big check.
According to Go, the dilution in such instances is typically greater than the often advised 20 percent! That means the capital raised will have to last the founder through the next two value accretive inflection points so they can justify raising more cash during subsequent rounds.

With that said, there are some instances where skipping the Seed Round in favor of Series A makes sense. For example, say your startup genuinely needs significant amounts of cash to prove its business model. It's not uncommon for enterprise projects to require more product development than the $1 to 2 million a Seed Round can provide.

Otherwise, as Matt Turck, VC at FirstMark suggests: Straight-to-As are often serial entrepreneurs who either already have experienced a large exit with a previous company, or already have proven significant success in the industry of their current project.

Key Benefits of Raising a Series A:

Ability to scale faster with larger partners and more cash.
Increased notoriety, prestige, and name recognition within the community.
The bottom line: The pressure to perfect product-market fit and build a scalable marketing blueprint that comes along with a Series A is too intense for most early-stage startups. Fail to deliver on both fronts and an otherwise promising startup might be closing its doors all too soon.

Seed Round vs Series A: Which Should You Raise?
Pursuing a Seed Round before a Series A is the best option for most startups.

Jump “Straight to A," and you will most likely have to sell a larger equity portion in exchange for that larger check. As previously discussed, more funding translates to increased pressure to scale and less time to fine-tune the kind of factors that ultimately make or break companies (i.e. Product-to-Market Fit, Customer Acquisition Rates, Customer Lifetime Value).

In exchange for the $2 to $10 million provided by your Series A, you should already have optimized your distribution, determined a working business model, and assembled the key players your team needs for success. Don't yet have these things in place? You are probably better off raising a smaller amount of cash in a Seed Round.

Regardless of what you decide, your ultimate success will depend just as much on cash flow management as anything else. Raise too much capital, and you're parting with precious equity you may need to negotiate with later on. Raise too little, and you risk feeling frustrated by an inability to hire top talent, a loss of momentum and a slower path to growth.

Source: https://www.rocketspace.com/tech-startups/how-startup-funding-rounds-differ-seed-vs.-series-a

147
Difference Between Seed Funding & Early-Stage Funding

A startup may require several rounds of financing before it can generate sufficient cash flow from sales to finance operations. The amounts and sources for each round vary by company and industry. The earliest funding rounds are seed and early-stage funding. Companies need these funds to support operations, such as product development, administration and marketing.


Basics

"Inc." magazine defines seed funding as the earliest round of capital for a startup company. FundingSavvy, a funding resource website, defines early-stage funding as a startup company's first round of substantial funding. Early-stage funding usually consists of two parts, commonly known as Series A and Series B financing. Seed funding allows a startup to develop a prototype product and generate sufficient investor interest for successive financing rounds. Early-stage funding allows additional operational flexibility over the medium to long term.

Sources
The sources of seed funding include the founders' personal savings and investments from family and friends. Banks usually do not lend to startup companies because of the high risks, and venture capitalists tend to stay away from seed funding. However, a startup entrepreneur might have more success with angel investors and private equity funds. Angels are former entrepreneurs and other wealthy investors who get involved in some startup companies. Private equity funds pool money from individuals and institutions to invest in high-growth companies. Early-stage funding typically comes from venture capitalists, who may also bring experience and industry contacts that can help a startup rapidly grow its business.

Amounts
Montreal-based venture capitalist Ben Yoskovitz suggests that seed funding typically ranges from $25,000 to $1 million. A common funding structure is convertible debt, which is debt that is exchangeable for stock within a specified period. FundingSavvy.com suggests that early-stage Series A funding is in the $2 million to $5 million range, while Series B funding is in the $5 million to $10 million range. The high-risk nature of seed funding increases the cost of capital, which means that investors may demand a larger share of the startup. Therefore, startups should secure only enough seed funding to continue operations and develop a viable prototype, thus preserving enough equity in the company to satisfy the founders and the early investors.

Considerations: Valuation
Startup valuation is important because it determines the return on investment. If a startup company's valuation were $1 million before seed funding of $1 million, then the founders and seed investors would each own 50 percent of the company. If the company raises additional funds, the founders' share would diminish further. Several ways to increase a startup company's valuation include placing a fair market value on physical assets and assigning values to paid professionals and patent applications. Investors generally estimate what a startup could be worth in five years and then divide that amount by 10 to arrive at the current valuation.

Source:http://smallbusiness.chron.com/difference-between-seed-funding-earlystage-funding-33038.html

148
Seed Investment / What is seed funding and how does it work?
« on: March 16, 2018, 10:43:42 PM »
What is seed funding and how does it work?

Seed funding, taken from the word "seed" is the capital needed to start / expand your business. As you can see from the picture below it often comes from the company founders' personal assets, from friends and family or other investors.

The amount of money is usually relatively small because the business is still in the idea or conceptual stage.

This type of funding is often obtained in exchange for an equity stake in the enterprise, although with less formal contractual overhead than standard equity financing.

Lenders often view seed capital as a risky investment by the promoters of a new venture, which represents a meaningful and tangible commitment on their part to making the business a success.


How does it work?
There are some musts need to be done if you want to successfully raise seed financing as follows:

1) Proof of Concept (need to prove that is a market for it + monetization methods)

2) Get your first customers

3) Obtain feedback

4) Change/ Improve

5) Bootstrap

6) Pitch to potential Lenders


Source: https://www.quora.com/What-is-seed-funding-and-how-does-it-work

149
The Landscape for Impact Investing in South Asia: Bangladesh

Highlighting impact investing trends in Bangladesh


This paper develops an understanding of the impact investing market in Bangladesh. It covers key supply-side themes such as the current status and trends in terms of the types of active investors, capital deployment, and opportunities for and challenges to investing. The paper also evaluates the demand for impact capital, challenges to accessing capital and opportunities for enterprise growth, and the vibrancy and scale of the supportive ecosystem necessary for the industry. The paper finds that Bangladesh has the third most active impact investing market in South Asia after India and Pakistan. An estimated USD 955 million of impact fund is currently deployed in the country. Other key findings include:

-Bangladesh’s large population and shifting demographics make the country appealing to investors;
-Investor optimism has led to sharp increases in FDI inflows since 2009;
-There are at least 15 impact investors currently active in Bangladesh;
-DFIs are responsible for the largest portion of impact capital through investments directly in enterprises;
-Institutional investors largely operate on a commercial basis as lenders;
-70% of the total impact capital currently deployed has been through debt;
-Sectors receiving most of the impact investing capital are high-growth sectors such as ICT, manufacturing, and energy.

Source: https://www.microfinancegateway.org/library/landscape-impact-investing-south-asia-bangladesh

150
How can the design be ameliorated to improve the impact?

Impact investment seeks to achieve social or environmental outcomes that would not occur if the investment were not made (additionality). The impact can be exemplified by improvements in healthcare services, access to financial services, access to clean water, and employment/income generation in rural or poor communities. For example, Root Capital-a non-profit social investment fund that fosters rural prosperity–enabled Fruiteq to buy higher quality mangoes from 830 farmers in Burkina Faso at three times the local price, increasing farmers’ income by 43 percent. Similarly, with the support of the Calvert Foundation, the EcoEnterprises Fund (EcoE2) has invested US$5.5 million in three fair trade companies committed to habitat protection and restoration, responsible forest management, and community service in Latin America. Through these investments, EcoE2 has preserved over 800,000 hectares of land, maintained 300 full-time employees, and supported over 5,000 suppliers. The acumen investment fund alone has created over 58,000 jobs worldwide with an investment portfolio of US$100 million.

In addition to investment- specific impact, the impact movement can help to transform markets structurally. By channelling capital to productive activities in developing countries, nascent sectors, and innovative social enterprises, impact investment can drive larger and significant impacts, by increasing local income levels, supporting job creation and building local markets via imitation effects. The acumen investment fund estimates that it has enhanced over 189 million lives through its activities.

The value of impact investment can be enhanced by:

    Mission lock-in: The mission of an impact investor or investee should define the intended impact it seeks to achieve. The latter should be embedded explicitly in the company’s charter or investment strategy. For example the W.K. Kellogg Foundation’s mission-driven investment policy ties portfolio allocation to supporting vulnerable children. Similarly, the RSF Social Enterprise Lending Program offers mortgage loans and construction loans to both non-profit and for-profit social enterprises that meet a set of stringent criteria.
    Greater accountability: A commitment to transparency and rigorous reporting is essential. The resources devoted to demonstrating impact should be proportional to the liabilities. Reliable metrics should allow investors to understand if the performance of the investment is consistent with its impact mission. Setting industry standards for measurement can help establish trust and compare products, such as the Impact Reporting and Investment Standards (IRIS) and the Global Impact Investment Rating System.
    Multi-layered capital structures: the public sector, DFIs and foundations can play different roles along with impact and traditional investors. Public entities can provide the “first layer” investment or extend credit enhancement services (e.g. guarantees) in order to crowd-in private investment. For example the Deutsche Bank’s Microfinance Consortium–a US$80 million microfinance fund–became viable thanks to an initial grant that provided the initial operating income and mitigated the investment risk.
    Supportive regulations: regulatory changes can create incentives–fiscal incentives, subsidies, mandatory certification–to attract an even broader range of investors. An example is the European Commission Communication, Social Business Initiative: Creating a favourable climate for social enterprises, key stakeholders in the social economy and innovation and the related Regulation 346/2014 establishing the labelling of European Social Entrepreneurship Fund. In addition, it might be necessary to relax regulations that prevent social sector organizations from being engaged in profit-making ventures.
    Continue to improve the measurement of impact: reporting can be carried out with a mix of qualitative and quantitative techniques and enriched by the use and sharing of best practices (e.g. about 5,000 firms from 148 countries report their social and environmental performance to the IRIS initiative).
    Manage the potential trade-offs between commercial viability and social and environmental impact. Participation of stakeholders and independent verifiers is key to establish accountability.

Source: http://www.undp.org/content/sdfinance/en/home/solutions/impact-investment.html

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