Papers by Fernando Lichucha
World tax regimes are complex, fragmented and highly competitive ranging from quasi zero tax juri... more World tax regimes are complex, fragmented and highly competitive ranging from quasi zero tax jurisdictions such as Bahamas to high tax jurisdictions led by Argentina with an astonishingly 137.3% total tax rate . The weaknesses of world tax regimes compounded by a lack of effective world tax coordination are conveniently being exploited by MNCs to maximize their profits. The paper attempted to devise a tax plan for a hypothetical MTC operating in the contemporary complex corporate tax environment aiming solely to minimize its corporate taxes. The proposed tax plan consists in shifting all the sales from affiliates in high tax regime countries to affiliates in lower-tax jurisdictions resulting in a substantial reduction in corporate taxes and strengthened by using the tradeoff theory of leverage to identify the optimal debt-to-equity ratio as the level at which the two offset each other (Ağca & Mozumdar, 2004) in high tax jurisdictions and by creating a forth affiliate in a tax haven such as Luxembourg to raise funds at low interest rate and offer loans to other MNC affiliates at intra-corporate high interest rate in order to take tax advantages of affiliates in high tax jurisdictions (Needham, 2013). So, devising a tax plan for MNCs seems to be at least very gawky given the weaknesses of the world tax regimes and world tax coordination permeability.
This paper discusses the international investment diversification. It specifically finds out whet... more This paper discusses the international investment diversification. It specifically finds out whether it is prudent to either the individual or corporate investor. The discussion starts with a brief characterization of international investment diversification as one of the four principal categories of international investment or capital flows. Then, it gives a brief historical overview of the theory of investment diversification including (Markowitz, 1952)´s mean-variance investment diversification theory and (Sharpe, 1964)´s Capital Asset Pricing Model (CAPM). The concept of Prudent Investor Rule is presented. Several experts discussions of current state of international investment diversification are also presented and the summary is given by (Booth & Cleary, 2008) when they noted that although almost all experts agree that diversification in general , and international investment diversification in particular, is one of the most critical components of good portfolio management, evidence suggests the benefits of international diversification have been declining as global markets have become more integrated.
Then, the paper moves on to discuss and analyse international investment diversification facts and issues pointing out that with the financial globalisation, one would expect that investors diversify internationally their portfolios and take advantage of international diversification. However, investors present a strong preference for national assets because of asymmetric information, inflation risk, non-traded assets, transaction costs and segmentation of financial markets (Chkioua & Abaoub, 2012). The paper argues that despite these barriers to international diversification the individual or corporate investor should find strategies to take the benefits from international portfolio investment, namely the participation in growth of foreign markets, hedging of consumption basket, international portfolio diversification, and market segmentation (Bartram & Dufey, 2001).
It concludes that although international diversification poses many problems, it is still prudent for individual or corporate investor to build optimal international asset allocation including stocks and bondsless correlated in different countries taking advantages of their industry structure, resource endowments, macroeconomic policies, and non-synchronous business cycles (Shapiro, 2003).
This paper discusses the causes of the failure of Lehman Brothers. It looks at whether it could h... more This paper discusses the causes of the failure of Lehman Brothers. It looks at whether it could have been prevented and how. The paper starts with a brief history of Lehman Brothers humble beginnings in 1844 in Montgomery to the point it became the fourth-largest U.S. investment bank, with 25,000 employees worldwide in 2008. Then, it moves on to discuss and analyse the causes that led to its failure, namely, a) too big to fail problem, b) moral hazard, c) conflict of interest, d) exploitation of “insider information”, e) bundling of financial services, f) “non-arms-length” transactions (Reinholdson & Olsson, 2012) and (Lau, 2004). And several others such as, a) luck of corporate sustainability reporting by using Repo 105 misleadingly (Ballou, Heitger, & Landes, 2006) or deceptive accounting practices and off-balance-sheet maneuvers (Rezny, 2010), b) Collateralized Debt Obligations (CDOs) and Credit Default Swaps (CDSs) (Heyde & Neyer, 2008) and c) investment bank business model, which rewarded excessive risk taking and leverage (Valukas, 2010). The paper argues that the failure could have been prevented with prudential management and regulation. It concludes recommending that the entrepreneurs and regulators should be conscious of Schumpeters theory of the business cycle (Mee, 2009), specifically the underlying economic fundamentals, and competition that leads to new business models not yet thoroughly tested and creation of sophisticated financial artefacts based on weak economic fundamentals.
Drafts by Fernando Lichucha
Financial inclusion refers to access and widespread use of financial services by the majority of ... more Financial inclusion refers to access and widespread use of financial services by the majority of the population and micro and small enterprises (World Bank, 2008, CGAP, 2011, AFI, 2011) cited in the presentation made by the Bank of Mozambique under the theme "The Role of the Bank of Mozambique in Promoting Financial Inclusion" during the workshop on Inclusion and Financial Training held in Lisbon on July 11, 2013 .
The definition of "financial inclusion" raises four fundamental questions:
1. Does Mozambique have financial services and products that meet the needs of the majority of the population and the production system?
2. Does the majority of the population and the production system stakeholders know how to use the financial services and products available in Mozambique (CGAP and AFI)?
3. Are the financial services and products available in Mozambique relevant to consumer needs (CGAP and AFI)?
4. Will the financial services and products available in Mozambique improve the well-being of consumer life (CGAP and AFI)?
The first question measures the level of geographical and demographic access, the second is related to functional or regressive consumer education, the third addresses the quality of services and financial products available in Mozambique and the fourth examines the impact of financial services and products on the Consumers' lives. This project report is limited to the second question.
Despite the importance of financial education, many citizens lack financial skills not only in Mozambique as well as in many parts of the world (McCarthy & Pugliese, 2015).
Because of the lack of knowledge about finance and financial products, many people - especially the poor and women - are not able to use banking and financial services, and therefore are kept out of financial markets.
The Report on the Survey on Inclusion and Financial Capacity in Mozambique states that "the research results highlight that the levels of knowledge and financial sensitivity of the basic financial concepts and products constitute a significant challenge for Mozambique" (Relatório sobre o Inquérito de Inclusão e Capacidade Financeira em Moçambique, 2014, p. 31).
In order to finance the productive system, financial education and technical training will have to provide knowledge and skills on (i) preparation of investment data, preparation of forecasting maps, fiscal map and working capital needs, evaluation of investment and capital rationing, real options and risk analysis, (ii) the use of long-term sources of financing such as equity , venture capital, bank loans, financial leasing, bond loans, foreign direct investment, and project finance, and (iii) structuring financing of the productive system using corporate finance, project finance, PPP, PFI etc.
The report is based on secondary data collected from published information on financial education, investment and finance decisions that influence the productive system in Mozambique.
The information collected was summarized and analysed in a systematic way to highlight the issues and challenges of financial education and technical training in the context of financing to the productive system in Mozambique.
The project report contributes to the improvement of the levels of knowledge, and competences of financial consumer by proposing themes for financial education and technical training in the context of financing to the productive system in Mozambique.
Thus, the project report outlines the development and implementation process of knowledge and competences required for making strategic financial decisions to invest in productive system by addressing these questions:
The main question answered is
1. Does the majority of the population and the production system stakeholders know how to use the financial services and products available in Mozambique (CGAP and AFI)?
The sub questions are:
1. What key issues / topics should be addressed as a priority in financial education and technical training in the context of financing to the productive system in Mozambique?
2. What stages should be followed in the implementing process of financial education and technical training key issues / topics?
3. What are the social groups most vulnerable and which should be targeted first?
The conclusion is that the situation of Financial Education and Technical Training as depicted by financial inclusion in Mozambique is extremely low, particularly in rural and remote areas, and among micro and small enterprises and poorer people. The precarious situation of Financial Education and Technical Training is further portrayed by indicators showing the district bank coverage is under 50 percent, and formal lending is only available to 3 percent of the adult population. And above of all bank branches are currently only present in 78 of Mozambique’s 150 administrative districts. The absence of institutionalized Financial Education and Technical Training in the rural areas where the majority of the population lives and produces most of the 28.1% contribution of total GDP, constitutes a serious limitation in adopting informed and sound practices in the Context of Financing the Productive System in Mozambique.
Mozambique should model her Financial Education and Technical Training programmes following the OECD Recommendation on Principles and Good Practices for Financial Education and Awareness , namely:
(i) Mozambique should promote financial education programmes that help financial consumers find the facts and understand the pros and cons as well as the risks of different types of financial products and services in the context of Financing the Productive System.
(ii) Mozambique should develop financial education programmes including domestic proved practices and for each population subgroup.
(iii) Mozambique should create and promote different programmes for specific sub-groups of investors/consumers (i.e. young people, the less educated, urban and rural areas groups). Financial education should be related to the individual circumstance, through financial education seminars and personalised financial counselling programmes.
(iv) Mozambique should use all available media for the dissemination of education messages In order to achieve a wider coverage and exposure.
(v) For those programmes which favour use of classrooms, proper education and competence of the educators should be promoted. In this respect, the development of programmes to “train the trainers” and the provision of specific information material and tools for these trainers should be encouraged.
This paper discusses the international investment diversification. It specifically finds out whet... more This paper discusses the international investment diversification. It specifically finds out whether it is prudent to either the individual or corporate investor. The discussion starts with a brief characterization of international investment diversification as one of the four principal categories of international investment or capital flows. Then, it gives a brief historical overview of the theory of investment diversification including (Markowitz, 1952)´s mean-variance investment diversification theory and (Sharpe, 1964)´s Capital Asset Pricing Model (CAPM). The concept of Prudent Investor Rule is presented. Several experts discussions of current state of international investment diversification are also presented and the summary is given by (Booth & Cleary, 2008) when they noted that although almost all experts agree that diversification in general , and international investment diversification in particular, is one of the most critical components of good portfolio management, evidence suggests the benefits of international diversification have been declining as global markets have become more integrated.
Then, the paper moves on to discuss and analyse international investment diversification facts and issues pointing out that with the financial globalisation, one would expect that investors diversify internationally their portfolios and take advantage of international diversification. However, investors present a strong preference for national assets because of asymmetric information, inflation risk, non-traded assets, transaction costs and segmentation of financial markets (Chkioua & Abaoub, 2012). The paper argues that despite these barriers to international diversification the individual or corporate investor should find strategies to take the benefits from international portfolio investment, namely the participation in growth of foreign markets, hedging of consumption basket, international portfolio diversification, and market segmentation (Bartram & Dufey, 2001).
It concludes that although international diversification poses many problems, it is still prudent for individual or corporate investor to build optimal international asset allocation including stocks and bondsless correlated in different countries taking advantages of their industry structure, resource endowments, macroeconomic policies, and non-synchronous business cycles (Shapiro, 2003).
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Papers by Fernando Lichucha
Then, the paper moves on to discuss and analyse international investment diversification facts and issues pointing out that with the financial globalisation, one would expect that investors diversify internationally their portfolios and take advantage of international diversification. However, investors present a strong preference for national assets because of asymmetric information, inflation risk, non-traded assets, transaction costs and segmentation of financial markets (Chkioua & Abaoub, 2012). The paper argues that despite these barriers to international diversification the individual or corporate investor should find strategies to take the benefits from international portfolio investment, namely the participation in growth of foreign markets, hedging of consumption basket, international portfolio diversification, and market segmentation (Bartram & Dufey, 2001).
It concludes that although international diversification poses many problems, it is still prudent for individual or corporate investor to build optimal international asset allocation including stocks and bondsless correlated in different countries taking advantages of their industry structure, resource endowments, macroeconomic policies, and non-synchronous business cycles (Shapiro, 2003).
Drafts by Fernando Lichucha
The definition of "financial inclusion" raises four fundamental questions:
1. Does Mozambique have financial services and products that meet the needs of the majority of the population and the production system?
2. Does the majority of the population and the production system stakeholders know how to use the financial services and products available in Mozambique (CGAP and AFI)?
3. Are the financial services and products available in Mozambique relevant to consumer needs (CGAP and AFI)?
4. Will the financial services and products available in Mozambique improve the well-being of consumer life (CGAP and AFI)?
The first question measures the level of geographical and demographic access, the second is related to functional or regressive consumer education, the third addresses the quality of services and financial products available in Mozambique and the fourth examines the impact of financial services and products on the Consumers' lives. This project report is limited to the second question.
Despite the importance of financial education, many citizens lack financial skills not only in Mozambique as well as in many parts of the world (McCarthy & Pugliese, 2015).
Because of the lack of knowledge about finance and financial products, many people - especially the poor and women - are not able to use banking and financial services, and therefore are kept out of financial markets.
The Report on the Survey on Inclusion and Financial Capacity in Mozambique states that "the research results highlight that the levels of knowledge and financial sensitivity of the basic financial concepts and products constitute a significant challenge for Mozambique" (Relatório sobre o Inquérito de Inclusão e Capacidade Financeira em Moçambique, 2014, p. 31).
In order to finance the productive system, financial education and technical training will have to provide knowledge and skills on (i) preparation of investment data, preparation of forecasting maps, fiscal map and working capital needs, evaluation of investment and capital rationing, real options and risk analysis, (ii) the use of long-term sources of financing such as equity , venture capital, bank loans, financial leasing, bond loans, foreign direct investment, and project finance, and (iii) structuring financing of the productive system using corporate finance, project finance, PPP, PFI etc.
The report is based on secondary data collected from published information on financial education, investment and finance decisions that influence the productive system in Mozambique.
The information collected was summarized and analysed in a systematic way to highlight the issues and challenges of financial education and technical training in the context of financing to the productive system in Mozambique.
The project report contributes to the improvement of the levels of knowledge, and competences of financial consumer by proposing themes for financial education and technical training in the context of financing to the productive system in Mozambique.
Thus, the project report outlines the development and implementation process of knowledge and competences required for making strategic financial decisions to invest in productive system by addressing these questions:
The main question answered is
1. Does the majority of the population and the production system stakeholders know how to use the financial services and products available in Mozambique (CGAP and AFI)?
The sub questions are:
1. What key issues / topics should be addressed as a priority in financial education and technical training in the context of financing to the productive system in Mozambique?
2. What stages should be followed in the implementing process of financial education and technical training key issues / topics?
3. What are the social groups most vulnerable and which should be targeted first?
The conclusion is that the situation of Financial Education and Technical Training as depicted by financial inclusion in Mozambique is extremely low, particularly in rural and remote areas, and among micro and small enterprises and poorer people. The precarious situation of Financial Education and Technical Training is further portrayed by indicators showing the district bank coverage is under 50 percent, and formal lending is only available to 3 percent of the adult population. And above of all bank branches are currently only present in 78 of Mozambique’s 150 administrative districts. The absence of institutionalized Financial Education and Technical Training in the rural areas where the majority of the population lives and produces most of the 28.1% contribution of total GDP, constitutes a serious limitation in adopting informed and sound practices in the Context of Financing the Productive System in Mozambique.
Mozambique should model her Financial Education and Technical Training programmes following the OECD Recommendation on Principles and Good Practices for Financial Education and Awareness , namely:
(i) Mozambique should promote financial education programmes that help financial consumers find the facts and understand the pros and cons as well as the risks of different types of financial products and services in the context of Financing the Productive System.
(ii) Mozambique should develop financial education programmes including domestic proved practices and for each population subgroup.
(iii) Mozambique should create and promote different programmes for specific sub-groups of investors/consumers (i.e. young people, the less educated, urban and rural areas groups). Financial education should be related to the individual circumstance, through financial education seminars and personalised financial counselling programmes.
(iv) Mozambique should use all available media for the dissemination of education messages In order to achieve a wider coverage and exposure.
(v) For those programmes which favour use of classrooms, proper education and competence of the educators should be promoted. In this respect, the development of programmes to “train the trainers” and the provision of specific information material and tools for these trainers should be encouraged.
Then, the paper moves on to discuss and analyse international investment diversification facts and issues pointing out that with the financial globalisation, one would expect that investors diversify internationally their portfolios and take advantage of international diversification. However, investors present a strong preference for national assets because of asymmetric information, inflation risk, non-traded assets, transaction costs and segmentation of financial markets (Chkioua & Abaoub, 2012). The paper argues that despite these barriers to international diversification the individual or corporate investor should find strategies to take the benefits from international portfolio investment, namely the participation in growth of foreign markets, hedging of consumption basket, international portfolio diversification, and market segmentation (Bartram & Dufey, 2001).
It concludes that although international diversification poses many problems, it is still prudent for individual or corporate investor to build optimal international asset allocation including stocks and bondsless correlated in different countries taking advantages of their industry structure, resource endowments, macroeconomic policies, and non-synchronous business cycles (Shapiro, 2003).
Then, the paper moves on to discuss and analyse international investment diversification facts and issues pointing out that with the financial globalisation, one would expect that investors diversify internationally their portfolios and take advantage of international diversification. However, investors present a strong preference for national assets because of asymmetric information, inflation risk, non-traded assets, transaction costs and segmentation of financial markets (Chkioua & Abaoub, 2012). The paper argues that despite these barriers to international diversification the individual or corporate investor should find strategies to take the benefits from international portfolio investment, namely the participation in growth of foreign markets, hedging of consumption basket, international portfolio diversification, and market segmentation (Bartram & Dufey, 2001).
It concludes that although international diversification poses many problems, it is still prudent for individual or corporate investor to build optimal international asset allocation including stocks and bondsless correlated in different countries taking advantages of their industry structure, resource endowments, macroeconomic policies, and non-synchronous business cycles (Shapiro, 2003).
The definition of "financial inclusion" raises four fundamental questions:
1. Does Mozambique have financial services and products that meet the needs of the majority of the population and the production system?
2. Does the majority of the population and the production system stakeholders know how to use the financial services and products available in Mozambique (CGAP and AFI)?
3. Are the financial services and products available in Mozambique relevant to consumer needs (CGAP and AFI)?
4. Will the financial services and products available in Mozambique improve the well-being of consumer life (CGAP and AFI)?
The first question measures the level of geographical and demographic access, the second is related to functional or regressive consumer education, the third addresses the quality of services and financial products available in Mozambique and the fourth examines the impact of financial services and products on the Consumers' lives. This project report is limited to the second question.
Despite the importance of financial education, many citizens lack financial skills not only in Mozambique as well as in many parts of the world (McCarthy & Pugliese, 2015).
Because of the lack of knowledge about finance and financial products, many people - especially the poor and women - are not able to use banking and financial services, and therefore are kept out of financial markets.
The Report on the Survey on Inclusion and Financial Capacity in Mozambique states that "the research results highlight that the levels of knowledge and financial sensitivity of the basic financial concepts and products constitute a significant challenge for Mozambique" (Relatório sobre o Inquérito de Inclusão e Capacidade Financeira em Moçambique, 2014, p. 31).
In order to finance the productive system, financial education and technical training will have to provide knowledge and skills on (i) preparation of investment data, preparation of forecasting maps, fiscal map and working capital needs, evaluation of investment and capital rationing, real options and risk analysis, (ii) the use of long-term sources of financing such as equity , venture capital, bank loans, financial leasing, bond loans, foreign direct investment, and project finance, and (iii) structuring financing of the productive system using corporate finance, project finance, PPP, PFI etc.
The report is based on secondary data collected from published information on financial education, investment and finance decisions that influence the productive system in Mozambique.
The information collected was summarized and analysed in a systematic way to highlight the issues and challenges of financial education and technical training in the context of financing to the productive system in Mozambique.
The project report contributes to the improvement of the levels of knowledge, and competences of financial consumer by proposing themes for financial education and technical training in the context of financing to the productive system in Mozambique.
Thus, the project report outlines the development and implementation process of knowledge and competences required for making strategic financial decisions to invest in productive system by addressing these questions:
The main question answered is
1. Does the majority of the population and the production system stakeholders know how to use the financial services and products available in Mozambique (CGAP and AFI)?
The sub questions are:
1. What key issues / topics should be addressed as a priority in financial education and technical training in the context of financing to the productive system in Mozambique?
2. What stages should be followed in the implementing process of financial education and technical training key issues / topics?
3. What are the social groups most vulnerable and which should be targeted first?
The conclusion is that the situation of Financial Education and Technical Training as depicted by financial inclusion in Mozambique is extremely low, particularly in rural and remote areas, and among micro and small enterprises and poorer people. The precarious situation of Financial Education and Technical Training is further portrayed by indicators showing the district bank coverage is under 50 percent, and formal lending is only available to 3 percent of the adult population. And above of all bank branches are currently only present in 78 of Mozambique’s 150 administrative districts. The absence of institutionalized Financial Education and Technical Training in the rural areas where the majority of the population lives and produces most of the 28.1% contribution of total GDP, constitutes a serious limitation in adopting informed and sound practices in the Context of Financing the Productive System in Mozambique.
Mozambique should model her Financial Education and Technical Training programmes following the OECD Recommendation on Principles and Good Practices for Financial Education and Awareness , namely:
(i) Mozambique should promote financial education programmes that help financial consumers find the facts and understand the pros and cons as well as the risks of different types of financial products and services in the context of Financing the Productive System.
(ii) Mozambique should develop financial education programmes including domestic proved practices and for each population subgroup.
(iii) Mozambique should create and promote different programmes for specific sub-groups of investors/consumers (i.e. young people, the less educated, urban and rural areas groups). Financial education should be related to the individual circumstance, through financial education seminars and personalised financial counselling programmes.
(iv) Mozambique should use all available media for the dissemination of education messages In order to achieve a wider coverage and exposure.
(v) For those programmes which favour use of classrooms, proper education and competence of the educators should be promoted. In this respect, the development of programmes to “train the trainers” and the provision of specific information material and tools for these trainers should be encouraged.
Then, the paper moves on to discuss and analyse international investment diversification facts and issues pointing out that with the financial globalisation, one would expect that investors diversify internationally their portfolios and take advantage of international diversification. However, investors present a strong preference for national assets because of asymmetric information, inflation risk, non-traded assets, transaction costs and segmentation of financial markets (Chkioua & Abaoub, 2012). The paper argues that despite these barriers to international diversification the individual or corporate investor should find strategies to take the benefits from international portfolio investment, namely the participation in growth of foreign markets, hedging of consumption basket, international portfolio diversification, and market segmentation (Bartram & Dufey, 2001).
It concludes that although international diversification poses many problems, it is still prudent for individual or corporate investor to build optimal international asset allocation including stocks and bondsless correlated in different countries taking advantages of their industry structure, resource endowments, macroeconomic policies, and non-synchronous business cycles (Shapiro, 2003).