Tag Archives: design
Financing by the people
Financing by the people Sarah Young / 26 August 2013 The crowdfunding craze continues to gain momentum overseas … But will it follow suit and take off here? As crowdfunding expert and lead associate at Booz & Company Jihad Khalil points out, the phenomenon is not new — look back to 1885, when cash from over 120,000 Americans helped build the pedestal for the Statue of Liberty in the United States. And today, digitised crowdfunding, a model of financing projects or ideas by individual contributions which originated in the US, is continuing to diversify and grow — as are the level of funds involved. In 2012, the crowdfunding market grew more than 80 per cent by gaining over $2.7 billion in funds worldwide, a number expected to almost double to more than $5 billion this year, according to Khalil’s blog. And it is no longer just the domain of films and other creative projects, with a growing shift towards funding start-ups and small businesses. USA Today reported recently that American Olympians and athletes were now using the model, such as speedskater Emily Scott who raised nearly $48,000 in less than a week, while a technology project on one of the newer American sites, Indiegogo, recently set a record for funds raised, hitting about $11.5million early last week. Meanwhile, US and German students had started using crowdfunding to finance their studies, while locals in the UK were turning back to private donations to revamp parks, playgrounds and public areas in response to cash-strapped municipalities and town councils slashing budgets, Khalil told Khaleej Times . Why not in the Middle East? So what about here in the UAE, and the wider Middle East region? Searching some of the main sites in the Middle East — zoomaal.com and aflamnah.com for creative projects, and Eureeca, for equity investing — the number of current projects from Dubai are few. UAE project owners jump on the bandwagon Project owners say it’s all still a learning curve at the moment, but they are confident crowdfunding will be the way to go in the UAE. Dubai designer Moussa Beidas is looking for $5,000 on crowdfunding platform Zoomal.com to bring his Solar Banners project, “a series of engraved mirrors reflecting typography across every major time zone on the planet”, to life. His proposal closes on August 25, and so far, he’s raised $307. His project was originally a winner in the Design as Reform competition organised by Traffic in 2010. After competition organisers faced delays in funding the project, Beidas decided to seek funding himself after meeting Zoomal founders at the ArabNet conference in Beirut. His three donors so far have come from Greece and Lebanon, while the most views were from Washington DC (783), followed by Dubai (157) , Beirut (137) and Greece (7). Crowdfunding in the UAE was still just starting out, and on a massive “learning curve” at the moment — but at least it was out there, he said. “The crux of the matter is people’s apprehension at putting banking information online…but the UAE has demonstrated it can adapt quickly.” He also believed the insurgence of young people due to political instability in the wider region would help, as they would be more willing to go online, have a look and donate to these types of projects. It was too early to tell whether investors would get on board or not, but he believed what would attract them would be project-specific, he said, citing the example of Lebanese band Mashrou’ Leila which raised $67,000 via the crowdfunding site. “The cool thing about (it was) the Arab and Lebanese community really felt a camaraderie towards this band — they grew up with it, and it’s a bunch of cool young people doing something they love, and reshaping Arab music for the modern era. “People are much more attuned to backing something like that than something they might not know about. This is different to the US — their social build is more confident, open-minded… they will read anything and if they can see it will work they will fund it regardless of what anyone else says.” The most successful projects would be those that “moved with the punches”, understood what their audience liked — and were not “cookie cutter approaches” imported from the US, but had a local flavour. “I think it’s those ideas that investors are much more looking out for to succeed, rather than ones that mimic what succeeds overseas, and just try to see what happens here.” If he doesn’t reach his target, he will repackage it and try again, based on audience feedback, he said. Meanwhile, Dubai-based design and manufacturing company DGrade, which specialises in recycled products made from plastic bottles, is looking for $200,000 — 10 per cent of the company — to help grow the business on equity crowdfunding platform Eureeca.com. CEO and founder Kris Barber said they had lowered their target from $300,000 due to the volume of interest, and a new partnership with the main supplier, and extended their time period another two and a half months. This was the first time he had used crowdfunding, and he did think there were fewer willing investors here than overseas, although they probably had more disposable income than anywhere else, he said. “Certainly the individual investors here seem to be better off than others…(but) whether we can get the volume of people as per other regions still is to be proven. “(But) things here tend to follow on from other countries and I think if it can be illustrated it has worked…I don’t see why it shouldn’t take off here. I think initially it’s quite difficult for some people to get their heads around it but long-term it offers a good way for smaller (investors to invest in SMEs) from an early stage.” It also gave companies free marketing given the network of investors talking about the project, which was not the case if borrowing off the bank — something not always easy for SMEs to do in the early stages of business anyway, he said. sarah@khaleejtimes.com What’s holding us back? Khalil said he was not sure how quickly project owners would get on board during the early stages of a project, given the fear of failure common here, compared to the US where people were more comfortable putting themselves out there and testing their ideas within their social networks. “Unlike in the Middle East, failure is not a shame; it’s just a necessary (albeit painful) step on the road to success.” However, the need and potential drivers were there, Khalil said. Getting finance was becoming more and more difficult and expensive, especially for smaller businesses and entrepreneurs. Many project owners and types such as social, humanitarian and arts projects could not afford “the exorbitant rates of micro-financing, let alone banks”, he said. Meanwhile, the MENA region had one of the highest unemployment rates in the world — and in many other developed countries, this was one of the precursors to a spike in small business creation, he said. Crowdfunding could push this along by supporting new ideas and initiatives as financing became more expensive, and, through the “wisdom of the crowd”, help to validate ideas before they even went to market. There was also a “huge Middle Eastern market of philanthropic giving” which could be leveraged if platforms did the right things to appeal to these types of donors, he said. However, project owners would have to come up with “their own local ideas based on specific local needs”, which fitted the local market and added value to a critical mass of backers in order to succeed, he said. Risks and protection And despite these positive indicators, there was no guarantee the crowdfunding model in its current format would work in the Middle East. Examples of ideas that had not taken off such as the businesses similar to Groupon which “mushroomed a few years back” and were “now all reduced to a couple that adjusted their original approach” had showed the region there was room for failure if businesses did not make necessary changes quickly. “So until the Arab platforms prove their regional worthiness and reach a critical adoption rate, nobody can pretend that crowdfunding has more than even odds in this part of the world.” And the risks were aplenty — scams, broken promises and crowd disappointment. However, given crowdfunding was a public platform which demanded a great deal of transparency from project owners, it also had the ability to “publicly fame or shame” any participant, and the reputational risk was large if they did not follow through once funded, he said. Studies had also showed 90 per cent of the donors to successful projects were friends, family or part of the project owners’ extended social circle. “Coming to the crowdfunding market as a first-time fundraiser in the Middle East will be extremely hard for those who do not have an actual backing or following in the real world and who don’t run their own parallel “offline” campaign… let alone (for) the scam artist or those with little commitment who will be quickly weeded out by the keen and connected crowd.” Platforms still needed to conduct proper due diligence to ensure they “protect(ed) their own ecosystem from the bad apples” — and their users. “Until we see the first few successes and hear their positive stories spread virally, trust will be a hard sell and will simply need to be earned little by little. It is imperative that platforms, who are the prime curators of this new financing model, support project owners in following through and ensuring backers are protected from the possible negative outcomes.” Still, despite these risks and cautions, it was important any new regulations did not stifle smaller new platforms and ‘overregulate’, he said. “As the industry emerges quickly, support from regulators will be key. The fear is, though, that if regulatory oversight deem(s) this new form of democratisation of financing as dangerous to the system for one reason or another, they might take far too conservative and disparate measures across the region.” He pointed to the example of the equity crowdfunding law approved by Banque du Liban (central bank) in Lebanon requiring an equity crowdfunding platform to put down close to $700,000 in reserves before it could start to operate. And what about the donors? Unlike the West, where tax breaks and incentives, along with an established sense of social and civic duty, have cultivated a culture of charity giving, no such financial incentives existed for investors here, Khalil said. It remained to be seen what would draw the Arab digital consumer to donation models — whether that was the emotional appeal of humanitarian, social or environmental initiatives, or a sense of religious obligation. These types of appeals were evident in Zoomaal’s recent successes, which included a short film, an education project and an album from Lebanese band Mashrou’ Leila, he said. Models with donation in exchange for goods or equity, such as Eureeca.com, were not moving as fast, although online skills marketplace Nabbesh.com, which raised $100,000, was one success story. While Khalil said he was not aware of any “super-supporters” in the region, he was sure they existed and would support quality local projects if they saw them. “And let’s not forget how much potential ‘angel’ money there is in this region… the Gulf States have some of the highest densities of dollar millionaires in the world. “So we can safely assume that if the industry gets built on sound principles and foundations, the money will come.” In fact, one of the biggest donors to American platform Kickstarter is from Abu Dhabi — Sultan Saeed Al Darmaki, chairman of Al Darmaki Group, who has this month launched a film company focusing on horror, sci-fi and fantasy films. The Wall Street Journal recently reported he had given to 90 Kickstarter campaigns, and often at the higher ends of the donating spectrum. His website also picks out hot Kickstarter projects to invest in, and provides tips for project owners. sarah@khaleejtimes.com Continue reading
UK Seeks “Best” Biofuel
Posted on August 12, 2013 by Joanna Schroeder According to an article in The Guardian , the United Kingdom (UK) is willing to pay for the best biofuels. The UK government is hosting a competition to come up with the most viable demonstration plants for biofuels made from waste organic materials, such as wood waste or straw. Many groups, especially environmental groups, have begun to lobby in favor of “better biofuels” or ones they consider to be both better for the environment or for society. Within this context, groups are opposed to first generation biofuels – or those that can be used for “food-” aka the food versus fuel debate. In light of this trend, focus has shifted to biofuels made from other feedstocks, especially waste materials – things that would end up in landfills. Attempts to manufacture biofuels from waste have been going on since the late 1960s; however, until now, research has been limited to the lab have have not met with great success. Yet growing concerns about the environment has brought more attention to the transportation sector and a resurgence in waste-to-energy technology has evolved. Today, the industry is beginning to see some success at demonstration level . In the UK, Ministers believe that research has now reached a stage where advanced biofuels are commercially possible. The department for transport said indications from the biofuels industry have demonstrated there are potential projects with a modicum of interest. The Ministers believe there will be several “high quality” bids for the 25m on offer, which must be matched by private sector investment. Norman Baker, the Liberal Democrat transport minister, told the Guardian, “It’s hugely important that we decarbonise transport. We have been up hill and down dale on biofuels in the past few years. What we need to do is distinguish between good biofuels and bad biofuels, and this competition will produce good biofuels.” The first step of the prize will involve a feasibility study detailing the design of the competition and the criteria that needs to be met by any bidder. This stage is expected to take four or five months, after which bids will be accepted. A winner could be announced within a year, but the process could take longer depending on the bids received. The prize will accept a bid for a project using any methodology or feedstock as long as they can be proved to produce carbon savings over conventional fuels and come from feedstocks that are environmentally sustainable. Continue reading
Can Cutting Trees Curb Emissions And Improve Incomes In Mexico?
Source: Thomson Reuters Foundation – Wed, 24 Jul 2013 A member of the Mayan indigenous community of San Antonio Tuk climbs a gum tree with a machete in hand to score its bark for extraction of the resin that gives Mexican chewing gum its name: chicle. THOMSON REUTERS FOUNDATION/Talli Nauman SAN ANTONIO TUK, Mexico (Thomson Reuters Foundation) – Not far from the site of the Cancun 2010 U.N. climate change summit, indigenous people in rural southeast Mexico are doing their part to staunch global warming. They are perfecting Community Forestry Enterprises (CFEs) to establish long-term profitability through tree farming and related agricultural practices that protect the environment. “Climate change is a serious problem in the world, caused by bad habits,” says Miguel Cante Chuc, president of the Ya’ax Sot Ot’ Yook’Ol Kaab Environmental Service-Providers Network. “We as Mayan people want to be sure it is reversed.” The 9-year-old network consists of 12 Mayan jungle villages in the state of Quintana Roo on the Yucatan Peninsula, with the specific objective “to mitigate climate change and obtain financial resources.” For all their good intentions, however, a big obstacle to success – one that they face together with hundreds of other communities like theirs across the country – is lack of access to loans for logging equipment and operations. To ease that problem, Mexico’s government has created a Forest Investment Plan that will extend cut-rate credit lines from foreign lenders to support Community Forestry Enterprises . The plan allows the Inter-American Development Bank (IDB) to administer a novel $6 million, 5-year technical assistance and micro-loan pilot project for local forest production projects. Now in the design phase, Mexico’s trend-setting small-business loan assistance pilot aims to boost timber industry profits, foster community socio-economic stability, and ease problems associated with climate change. Bank representatives hope the endeavor will be an example to the country and the world. “It’s an innovative project offering the possibility to have something new and successful that’s never been done before,” says IDB Senior Climate Change Specialist Gloria Visconti. It promises at least 60 CFEs will average a 6-percent increase in annual profits, garnering higher income for the 4,900 people involved in them, and providing indirect benefits to 10,680 community members. At the same time, it is expected to result in the capture of the equivalent of 28,610 tons of carbon. WHY MATCH TREE FARMERS WITH BANKERS? To understand why something like this was never done before and how it will work, it’s vital to consider Mexico’s peculiar land-tenure legacy. After the hacienda system provoked peasant rebellion in the Mexican Revolution, the ensuing Constitution of 1917 provided safeguards against plantation exploitation by advancing one of the largest systems of communal land tenure in the world. Land reform defined common property holdings for comunidades (traditional indigenous ancestral territories) and ejidos (parcels distributed to dispossessed peasants). In each of these units, community members elect officials and hold general assemblies to vote on land-use questions. Today, communal landholders control the rights to a whopping 60 percent of Mexico’s forest lands, according to independent Mexican CFE specialist David Bray. Some 13 million people live off these lands, about half of whom belong to the country’s 62 indigenous groups, according to the IDB. Extensive research by Bray and other scientists has established that the local governance of many of Mexico’s forests has made community forestry undertakings more successful than either corporate concessions or protected areas in conserving natural resources, providing employment, and ensuring environmental services that combat global warming. The combination of legal rights, traditional knowledge, and economic self-interest in Mexico’s community forestry model has made it a beacon for other countries seeking to stem poverty, deforestation and greenhouse gas proliferation. Timber production in comunidades and ejidos generally is a community-wide endeavor. Alternatively, smaller groups form inside these communities to extract and market timber. They are now learning that their natural resources could afford significantly more economic dividends to their mostly low-income residents, while helping compensate for industrialised countries’ failure to adhere to mandatory international commitments to reduce carbon emissions. “Through a program of carbon capture, we can provide economic sustenance to our families, live in the jungle, use it, and produce more environmental services,” Cante Chuc says. Looking over his shoulder he can see one of the 159 members of the Mayan indigenous community of San Antonio Tuk climbing a gum tree with a machete in hand to score its bark for extraction of the resin that gives Mexican chewing gum the name chicle . The work of the chicleros , who harvest and make gum, complements softwood lumbering and a protected area set-aside in San Antonio Tuk’s diversification and management plan for a robust woodlot and for greenhouse gas reductions. Tapping the gum tree and processing the product provides income to relieve economic pressure to fell precious and endangered tropical hardwoods like mahogany. BREAKING WITH ‘BUSINESS AS USUAL’ The principle climate changing greenhouse gas, carbon dioxide, is absorbed by healthy jungles and forests, partially offsetting emissions released by burning fossil-fuels elsewhere. Contrary to popular belief, managed cutting of forest for timber can actually increase the carbon-absorbing capacity of the trees, because lumber products store the carbon absorbed from the atmosphere (as long as they are not burned), and new growth replaces felled trees, Bray notes. Yet the efforts of communal landholders have rarely been met with offers of credit, partly because the ejidos and comunidades by definition hold their properties in trusts that have not been considered equity or collateral. What’s more, Visconti notes, “Asking for credit is a cultural issue.” CFE operators “need consultation so they can be involved and ready to receive credit,” she says. The IDB project, called Support for Forest Related Micro, Small, and Medium Enterprises in Ejidos and Communities, proposes to bring the lenders and the borrowers to the same table to resolve these issues. Since neither the CFEs nor the banks have a history of loans for lumber business development, $4.2 million of the project disbursement will go just to technical assistance and $1.8 million will go to loans. “It’s an innovative project,” Visconti says. “It’s not business as usual. If it was, it wouldn’t be part of the Climate Investment Funds,” she adds. The Climate Investment Funds (CIF) were established in 2008 to provide scaled-up climate financing to developing countries, with the aim of creating new climate resilient, low-carbon development models. CIF funds are channeled through five multilateral development banks, including the IDB. Though the Forest Investment Program , one part of the CIF, the Inter-American Development Bank is supporting Mexico’s Forest Investment Plan, including the pilot forestry project in Mexico, and similar projects in Peru and Brazil. The Forest Investment Program aims to reduce emissions from deforestation and forest degradation, promote sustainable management of forests and enhance forest carbon stocks. Mexico’s project “is expected to develop models for future global replication,” the approved proposal for IDB administration states. FIRST PRIVATE-SECTOR LOANS It is the first time that the bank’s Multilateral Investment Fund will work with the private sector in a project of this type, it notes, “and the lessons learned from its implementation will be important contributions to the national policy for the Reducing Emissions from Deforestation and Forest Degradation in Developing Countries ( REDD++ ) program currently being developed.” Findeca, a private lender that has experience financing shade-grown sustainable coffee plantations in southern Mexico, has signed on to the project. It will be in charge of delivering the Multilateral Investment Fund money to the landholders. It will kick in loans only after the non-profit Mexican Fund for the Conservation of Nature (FMCN) has rounded up the technical assistance and consultants to build community acceptance and capacity to use and repay loans. “We’re still in negotiations for the project,” said FMCN spokesman Juan Manuel Frausto. He expects a final contract with IDB in September, after which the first step will be to identify an initial batch of communities to take part. The project will focus first on five of the eight states with the highest net forest loss — Oaxaca, Yucatán, Quintana Roo, Campeche and Jalisco. These states have 1,768 forestry communities with a total population of more than 500,000, average poverty rates of 75 percent and a 40 percent indigenous makeup. The limited experience with private sector investment in Community Forestry Enterprises in Mexico requires the “demonstration approach” being taken in this project. The money will not start to flow until 2014, Visconti says. Loans will be in the range of $800 to $3,000. The CFEs could use the micro credits to buy equipment such as tractors or inputs such as seeds “to facilitate efficient production and to make them more sustainable,” Visconti says. The small amounts are viable for all but the largest and most sophisticated CFEs, Bray says. “There are many forestry communities in Mexico who need additional support to improve their logging or to move into logging,” Bray says. “Community forestry is a very mature sector with lots of successes, and there are a lot of opportunities in communities that are struggling with lack of support,” he adds. Talli Nauman is co-director of the consulting firm Journalism to Raise Environmental Awareness, based in Aguascalientes, Mexico. This article is part of a series funded by the Climate Investment Funds . Continue reading
