June 27, 2014

Dear Sir,

After reading today’s Royal Gazette article about shadow banking I was intrigued by a few observations of my own.

The international business that we have come to know as part and the mainstay of our current economy, began as an innovation. There are claims and predictions that reinsurance as we have known it is up against future risk as a product for investors. One of the tragedies of success is that too often people become reliant on a construct that in the world of evolving opportunity is a variable.

I credit innovation as being the core of our success. 30 years ago, it was that look at the world of insurance as was practised and coming up with more effective ways of insuring and one that had an enticement for those large companies of yesterday who were paying huge premiums to enter into the insurance market.

Captives was an innovative idea that has gone into the $$$ ionosphere. Today, while investors become complacent sitting around the table enjoying what seems as a perpetual dividend, real potential opportunity is being lost as a result of lack of vision and hence a lack of innovation.

KPMG last year held a conference and disclosed a figure of $57 trillion of infrastructural matters around the globe. The banking model is broken insofar as being able to underwrite these massive infrastructural needs. Yet there is capital bundled up in deposits fearful of the risk.

Emerging markets is the area where growth can occur if managed properly. So the idea expressed in today’s headline about shadow banking, where insurers use their capital to provide financing, has great potential and validity if explored.

There is so much potential for growth and real returns. Yes, there are issues such as terrorism corruption and a host of other risk. Yet there are also opportunities obscured by the smell of such risk, but can be safely administered and achieved.

The old saying “don’t throw the baby out with the wash or the other one “don’t go near the water until you learn how to swim”, come to mind when thinking of what I see as a stuck in routine IB sector.

Time to shift the paradigm and look at underdeveloped continents as new frontiers, and not simply as obstacles of risk. Seventeenth century Europe, particularly England, rose to become the new world power in the 20th century because it invested in a new venture which was full of risk but outweighed by potential. Continents like Africa can, in less time, become the new world economic power before the end of this century if managed properly.

KHALID WASI