Senior Partner/Chief Executive Officer of the leading emerging markets private equity firm, Actis International, Mr. Paul Fletcher has cautioned banks against short term approach to business especially in their lending practices.
Speaking at the 13th Lagos Business School Alumni conference on “The Global Financial Turmoil: Implications for Emerging Markets in Lagos, Fletcher noted that one of the causes of the on going financial crisis was that banks and financial institutions quest for short term gains.
The world has changed because we lost sight of long term approach to investment practices. The increase in sub-prime lending which occasioned the on going crisis was the result of pressure for short term profit in the stock market on financial institutions.
This led to gradual lowering of credit standards. Unfortunately, the boards and management of these companies were behaving irrationally and succumbed to this pressure and permitted the short term approach. The consequence is mismatch of assets which culminated into the sub-prime lending crisis. According to him, the current crisis would have been avoided if those institutions had taken long term view in their lending practices.
Speaking further, he remarked that Actis places high premium on long term perspectives in its investment activities as it considers short term perspective to be speculative, adding that all over the world one of the major concerns of investors is what happens in the long term.
He stated that in addition to long term perspective, three other factors influence the investment decision of Actis namely the business fundamentals, governance and people. Before investing, we want to be sure of the fundamentals of the business, what drives it and what factors underline its sector.
The issue of governance, he said is key because this has to do with how the business is run and managed, while the issue of people deals with the people that manage the business. These factors, he noted are key to attracting private equity investors to any country as they form the basis of decision to invest or not to invest for most investors.
On the impact of the global financial turmoil on emerging markets, he noted that most emerging market avoided the crisis because they were not exposed to the sub-prime montage, and had little or no foreign bank lending .
He said however emerging markets cannot avoid the indirect impact of the crisis due to the sharp decline in stock markets across the globe which reflects loss of confidence. This couple with fall in commodity prices and drop in export demand from the developed countries will slow economic growth in the emerging markets, he added.
Write Comment
Please keep the topic of messages relevant to the subject of the article.
Personal verbal attacks will be deleted.
Please don't use comments to plug your web site. Such material will be removed.
Just ensure to *Refresh* your browser for a new security code to be displayed prior to clicking on the 'Send' button.
Keep in mind that the above process only applies if you simply entered the wrong security code.
Copy This Idea and Start Making N650,000+ monthly beginning from today!
This simple business has made me N650,00+
in one month by learning where to find unique
information and making it available to
particular groups of people.
Easy,Simple, Quick Setup.
Completely legitimate.No scam!
Get report for FREE Here!
FxPro.com - Trade Forex Like a Pro
Flexible leverage up to 1:500
Low spreads from 1.8 pips www.FxPro.com
MyNaijaNews
Naija entertainment, lifestyle, sports, music reviews, fashion, technology, mobile phone reviews, books, classified ads, greeting cards, etc....It's your content. go get it......
Be the first to comment on this article
