I senaste numret av entré skriver journalisten Maria Linde om min avhandling samt om vårt jobb med MTI Investment AS – det nordiska investmentbolaget som investerar i växande små och medelstora företag i Östra Afrika.
För att ladda ner delen som har med min forskning att göra klicka här:
The Norwegian newspaper Vårt Land writes in the Monday issue (October 17, 2016 p. 8-9) about my research in an article with the title “Therefore microfinance is not that effective” (Derfor er mikrofinans lite effektivt). While my findings do find that microfinance does add extra income to an individual´s business, it also shows that size can act as a counterbalancing factor such that income actually is reduced with increased sized. The economies of scale are in other words negative in the early phase of the firm. My research also points to the fact that growth in sales or assets does not seem to be related to taking on microloans. This is not controversial. What is obvious and perhaps more relevant from my research is that the level of financial literacy among poor microentrepreneurs is VERY low, and then one should take into account that the clients I surveyed were not the poorest of the poor, but merely poor. Little research is still however done in this area, and much more is needed. There is even research pointing towards the odd fact that those with more education actually do worse. This
Little research is still however done in this area, and much more is needed. There is even research finding in some informal economies that those with more education actually do worse (Honig, 1998). This is counterintuitive, and much more research is needed here. I am currently working on a paper which looks at the role of Financial Literacy, Role Models and how these two concepts affect firm performance in the informal economy. Research in the left tail of human capital among the poorest individuals on the planet is still in its infancy, but over time we will eventually learn how to effectively lift the human capital and sustain individuals in an improved economic state. The practical example of MTI Investments, and other pioneering firms, financing small and medium-sized firms, may be leading the way in this regard, where more investments are allocated towards small and medium sized firms, rather than mostly microenterprises today.
Here I present my story, connecting the dots of my academic life. I began thinking about pursuing a PhD in 1991, when I was an undergraduate student at Slippery Rock University (SRU) in Pennsylvania, USA, on a Sweden–America Foundation scholarship.
Several informal talks with one of my undergraduate professors helped me weigh the pros and cons of an MBA versus a PhD. Being a bit ambivalent about the decision and wanting to keep both doors open, I elected to go for a bachelor of science degree in economics. Upon graduating summa cum laude in 1994, I was still ambivalent, so I returned to Sweden, where I took a job assisting Professor Lars Oxelheim at the Research Institute of Industrial Economics (IFN, then known as IUI) in writing a book about the deregulation of the Nordic financial markets and its effect on Nordic interest rates as compared to a global interest rate (Oxelheim, 1996). Professor Oxelheim and I also discussed me potentially pursuing a PhD, but back then I did not know what research focus I was interested in, nor did I realize that embarking on a PhD is one of the more entrepreneurial ventures in which a person can engage.
The experience at IFN led to my next job as a researcher at the Boston Consulting Group (BCG), where I specialized in corporate valuations and a corporate performance framework known as Cash Flow Return On Investment (CFROI), developed by HOLT Value Associates (Madden, 1999). The experience at BCG motivated me to take a master of science degree in economics and finance from the Stockholm School of Economics (SSE). This was one of the best career decisions I have made and gave me many valuable contacts with whom I still interact today. In 1998 and 1999, after graduating, I tried starting a couple of businesses. One was an online database for financial analysis services called MIG (Management Information Group) and the other a business promoting stand-up comedians and speakers, called IGNITE Infotainment Professionals. Both firms had high-flying visions (seen in the pluralistic nature of the names) but made meager progress. Despite the tough times, the experience was enjoyable, and I learned more about business in these two years than any school could have taught me. Specifically, I learned that perseverance, along with a strong personal conviction, is important, but that luck is probably also part of the equation. The experience and knowledge gained through these years are also shown throughout this dissertation.
In 2005, having spent five years as a financial advisor on global equities at Credit Suisse, I became a portfolio manager at DNB Asset Management, responsible for global cyclical firms (materials, transportation, automobiles, and commercial services). However, in 2008, this work came to a sharp halt with the collapse of Lehman Brothers and the layoff of many in the financial industry, including those of us at DNB. I discussed with Professor Carl Fey starting a PhD, but I still felt ambivalence about the prospect. I had previously written an academic paper with Professor Fey and Professor Ingmar Björkman based in my master thesis at SSE. The article is today cited 49 times according to Google Scholar (Fey, Engström, & Björkman, 1999). However, I did not pursue the opportunity, as this was not an area of interest close to my heart, and I therefore again missed how incredibly entrepreneurial it is to undertake a PhD.
Instead, I worked for three years as chief financial officer at the Swedish Mission Covenant Church, which not only gave me a better understanding of civil society and organizations based on the popular movements from the late 1800s and early 1900s but also a lot of experience in managing people, creating control systems, and managing a budget process and different type of assets, such as properties and foundations. The job involved a lot of responsibility and creativity, but it was also very entrepreneurial. It gave me a good glimpse at how small businesses are run and governed, since the church was involved in several small and large businesses.
One of the investments the church had made was a small footnote on the balance sheet, Oikocredit, that was not earning any interest for the church. As the financial assets I was responsible for were a guarantee for the future pensions of several employees, I was keen to ensure the assets were managed in the best possible way. Not getting a return on investment was unsatisfactory to me. I therefore investigated Oikocredit and visited an annual general meeting in 2011 in Dar es Salaam, Tanzania, where I learned about microfinance. I observed how controversial the idea of paying investors a market interest rate was; some owners there argued frantically that this was morally wrong. In 2011, the interest investors could receive from lending money to Oikocredit was at most 2%. In a scenario where inflation is running at 3%, I as an investor would lose 1% by investing in microfinance. The argument against a higher return to investors was that there was also a return to society, a social return, upon which investors should look favorably. The return was not close enough to the cost of capital required by the pension fund, which was the foundation of the church assets, and thus microfinance did not seem as a good investment to me at the time. Now, with global interest rates at record low levels, many investors are turning towards microfinance as an alternative asset class, in hopes better returns.
AGM at Oikocredit in 2011
Members of Oikocredit
The experience in Tanzania sparked my interest in this controversial topic, and I immediately contacted Professor Lars Oxelheim again, with whom I had kept in touch with over the years. The decision to contact Professor Lars Oxelheim was also inspired by my friend Klas Palm, who had just initiated his PhD studies on innovation and quality management related issues. My research interest then was how interest rates are affected by the increased rate of return required by investors. My hypothesis was that the interest rate would not change to the end user, as the local market sets the interest rate. What I therefore wanted to research was the degree to which the microfinance investment vehicles like Oikocredit, which operate between the investors and the local microfinance banks, could absorb a higher required rate from investors, and whether this would pressure them to become more efficient in order to preserve a low interest rate. Little did I know that my topic would be completely different a year later.
I believe it is also worth mentioning that about a year prior to me beginning at the University of Agder, I became friends with the beat artist Michael Bowen and his family, who had moved from Hawaii to Sweden (Collin, 2006). On a few occasions, I played the saxophone while Michael spoke or painted. It was inspirational to meet with Michael, who was very positive and encouraging of my talents. Tragically, Michael passed away in 2009. However, his memories live on and are, in fact, scattered all over the University of Agder. He has more than 100 art objects installed at the university and the nearby Kristiansand Cathedral School. I have obtained permission from his widow Isabel Paoli-Bowen to use his paintings as article separators in this thesis. Michael was a pioneer in combining music and painting (art), known as performance art, and building on these ideas, I would like to emphasize the long-standing relationship between research and art, and the inspiration both music and art are to my endeavors.
After my first year of PhD studies, during which I learned about current and historic research and methods and interacted with many students and faculty, my interest had turned to how microfinance impacts the microentrepreneurs. I had experienced being an entrepreneur previously, and the topic of microfinance and the microentrepreneurs seemed a lot more interesting than doing research on the sensitivity of interest rates. “Come on,” as my supervisor Trond Randøy would say. I also had access to unique data, since one of my supervisors, Professor Roy Mersland, had helped build a leading microfinance institution in Ecuador (Banco D-Micro). I am especially grateful to Carolina and Hans Martin Espegren, for a successful collaboration in gathering data in Ecuador. We spent several weeks collecting and analyzing the data together, but we also had fun visiting the coast, surfing, cooking dinner together, or going for an evening run.
I would also like to express my gratitude to my supervisors. First of all, a big thank you to my main supervisor, Professor Trond Randøy. Working together with Professor Randøy has been truly enjoyable from the start, and I am grateful for not only the professional collaborations, but also for the personal friendship we have built over the years, including a few jazz jam sessions, hikes in the mountains, canoeing around Kristiansand, international research conferences, and entrepreneurial ventures in Tanzania. An indirect result and spin-off from this PhD endeavor is the creation of MTI Investment AS (www.mti-investment.com), a venture capital firm investing in the growth of eastern Africa. In MTI, all of my previous undertakings and experiences are combined and maximized, and every person with whom I have ever worked is connected somehow with this business.
“Ut på tur, aldri sur” is a Norwegian saying – “You’ll never be grumpy on a hike”
One of Professor Randøy’s previous PhD students, Professor Roy Mersland, was my second supervisor. He became a professor within five years of obtaining his PhD. I am grateful for having met Professor Mersland and seen the dedication, passion, and focus with which he carries out all work. Professor Mersland was instrumental in getting me access to Banco D-Miro data, which form the skeleton of my PhD. My third supervisor is Dr. Leif Atle Beisland. Dr. Beisland and I had many discussions about performance measurement that were instrumental in focusing the thesis on return on assets. I would also like to express a special thank you to Professor Oxelheim who has followed my academic progress and with whom I have written several debate articles with during these three years (Engström & Oxelheim, 2013a, 2013b, 2014). Professor Oxelheim has an inner energy and passion for research that is truly inspirational. Just like my supervisors did, I wrote this thesis during numerous flights, on various airport buses and trains, sometimes in a hotel room in a foreign country such as in Tanzania, sometimes in the office in Kristiansand, and sometimes in the office at the Stockholm School of Economics (SSE), with which I was affiliated during the last year of my thesis.
I also would like to thank all the faculty members at the University of Agder, in particular Professor Otto Andersen, Dr. Bjørn-Tore Flåten, Dr. Rotem Shneor, Professor Andreas Falkenberg, Professor Joyce Falkenberg, Andre Tofteland, Anne Line Omsland, Dr. Burak Tunca, Dr. Daniel Göller, Daudi Pascal Ndaki, Diana Trydal, Professor Ellen Nyhus, Erik Arntsen, Geir Haaland, Gro Anita Homme, Professor Emeritus Harald Knudsen, Professor Ilan Alon, Irfan Irfan, Professor Jan-Inge Jensen, Dr. Kjetil Andersson, Dr. Kristin Dale, Kristina Walker Pedersen, Bandula Galhena, Amila Sirisena, Harald Stokkeland, Lisa Whitehead, Dr. Naima Saeed, Dr. Neema Mori, Dr. Gibson Munisi, Nertila Stringa, Professor Stein Kristiansen, Dr. Stina Torjesen, Stina Øyna, Stine Bårdsen, Unni Henriksen, Inger-Lise Myrvold, and Målfrid Tangedal.
In addition to the above-mentioned individuals, I also owe a thank you to many of the faculty members and PhD students from other schools, such as Professor Dale Duhan, Professor Arent Greve, Professor Terje Moen, Professor Yaakob Weber, Professor Kirsten Foss, Dr. Gry Alsos, Professor Tommy Clausen, Professor Johan Wiklund, Professor Karl Wennberg, Professor Carin Holmquist, Professor Sara Carter, Professor Hans Lundström, Dr. Espen Isaksen, Dr. Marianne Steinmo, Dr. Maj Munkefjord, Dr. Sølvi Solvoll, Marianne Arntzen-Nortquist, Marit Breivik Meyer, Karin Wigger, Oxana Bulanova, Nhien Nguyen, Thomas Lauvås, Siri Jakobsen, Are Jensen, Dr. Terese Strand, Nedim Effendic, Dr. Nadav Rotemberg Shir, Beldina Owalla, Kajsa Asplund, and Professor Alex McKelvie.
Apart from academia I am also grateful to the Norwegian Alliance Microfinance and their CEO Andreas Andersen for allowing me to work with Banco D-Miro in Ecuador. At Banco D-Miro, I am thankful to all the support and help from the CEO Carlos Viteri and the marketing director John Pacheco in creating the survey instrument and in motivating and instructing the local call center. I am also grateful to Johnny Villavicencio and colleagues for helping me in retrieving longitudinal (historic) data from the Banco D-Miro database. When in Ecuador, I was also fortunate to get to know many wonderful people from the local Alliance Mission group, including Hans Martin and Caroline Espegren,Isak Holmen Sørensen, Maria Andreassen, Rebeckka Andreassen Garcia, Daniel Garcia, Maria Andreassen,Ingunn Skutlaberg Valbø, Bjørnar Valbø, Rita Franco, Lily Macias Ramos, and many more. Gathering data without this group of individuals around would simply not have been the same experience. Thank you all.
Last but not least, I would like to thank my close friends and family for supporting me every step of the way. I wish I could thank my aunt Kajsa Tunér, who is not with us anymore, but she definitely was an influence, and I still to this day remember when she earned her PhD in 1986 when I was 15 years old (Tunér, 1986). The same must also be said about some other important people who are no longer with us, like my grandparents on both my mother’s and father’s sides. My brother Johan Engström has been an inspiration in his hard work to become a radiologist, and also my sister Hedvig Engström Jakobsson, who earned her PhD in 2011 (Engström Jakobsson, 2011). I would like to thank my mother Margareta Dehle for always being very supportive and for helping my family in so many ways. A special thank you is directed to my two daughters Ella and Kajsa who, who during these three years, have had to speak to their father on Skype and Facetime far too many times. A special welcome and thank you to my newborn adorable daughter Leona, who was born in the very last phase of my PhD, a phase when I also lost my dear and greatly missed father, Per Engström, who had been a surgeon. This dissertation is therefore made in memory of my father and dedicated to my three children.
Collin, L. (2006, November 7). Det bor en beatnik i staden. Svenska Dagladet. Stockholm.
Engström Jakobsson, H. (2011). Molecular characterization of the dynamics and development of the human microbiota.
I över två veckor har jag nu varit i Guayaquil som ligger i Södra Ecuador. Det första som möter en på flygplatsen är en varningsskylt om att vara försiktig när man tar en taxi så att man inte blir rånad. Just Guayaquil ligger i en del av Ecuador där den organiserade brottsligheten är väldigt hög. Ja, brottsligheten är hög i hela Ecuador, vilket också ett resultat av den extrema fattigdom och klasskillnad som finns här. Brottsligheten är extra hög i Guayaquil och backpackers undviker gärna den här delen. På löpturen häromdagen med Hans Martin (en volontär från Norge som jag samarbetar med ) sprang jag t.ex. förbi en restaurang där det står en vakt utanför i skyddsväst och med ett rejält automatvapen i handen. För mer information om brottsligheten, se OSAC, Det finns kvarter där man inte bör gå in i, och vid ett annat tillfälle när vi tog en löptur blev vi tillsagda att vara försiktiga av några på gatan. När jag och några volontärer var på stan häromdagen blev vi förföljda av två män, och när en annan av oss som jobbar i det här projektet rörande mikrofinans var ute med en av lånehandläggarna så blev man också nära inpå rånade men lyckades snabbt komma bort från de efterföljande männen. Så faran att man ska råka illa ut ligger där på lur hela tiden. Det har skett att andra volontärer har blivit påhoppade och rånade, i något fall även försök till våldtäkt, så det är helt klart en annan värld. Men hela Ecuador är inte så här. I många andra delar känner man sig mera trygg, berättas det för mig, och vid ett besök vid kusten känns farorna i Guayaquil som bortblåsta.
Mikrofinans handlar om att nå ut med finansiella tjänster till områden där traditionella banker inte når ut. Ett exempel på detta är den ecuadorianska mikrobanken D-MIRO som startats upp av den norska Alliansmissionen, motsvarande Diakonia i Sverige. De har förlagt sin huvudfilial i det allra fattigaste området, La Isla. Dit kör inte alla taxibilar, så vi har ett avtal med en speciell taxifirma som tar oss dit. D-MIRO har vuxit kraftigt och finns nu i flera zoner runt omkring Guayaquil och utmed den ecuadorianska kusten. Nedan några miljöbilder. Förhållandena är ganska odrägliga och det krävs oftast en bil med fyrhulsdrift för att ta sig runt till mikroentreprenörerna. Vissa människor bor i hus av cement och tegel, medan väldigt många bor i enkla bambuhus, där även det lilla egna företaget finns. Hus dessa hus klarar vind och vatten förstår jag inte.
Genomför en studie (del av PhD)
Jag har till min hjälp i projektet volontärerna Caroline och Hans Martin Espegren som tagit ett års paus i sina studier i Trondheim. Ja, vi hjälper varandra, då deras uppdrag är en rapport till banken och mitt relaterar till min avhandling. Vi har lärt känna varandra väl och jag har även lärt känna många andra volontärer som är här liksom anställda vid D-MIRO och norska Misjonalliansen. Genom D-MIRO genomför vi en stor undersökning där vi hoppas på svar från minst 750 mikroentreprenörer som jag hoppas kommer att kunna belysa olika egenskaper och karaktärer hos mikroentreprenörerna. Nedan några bilder från olika besök med mikroentreprenörer i de fattigare områdena runt omkring Guayaquil.
Mobile banking 🙂
Den gröna lastbilen ovan tycker jag är lite fiffig. Det är ett mobilt bankkontor som når ut till alla kunder. Här kan vi tala om “mobile banking“.
Många möten och upplevelser utanför min “komfortzon”
Självklart finns det mycket att reflektera kring och jag känner mig väldigt glad som fått chansen att se allt detta. Ett par historier som jag tycker gjort extra stark intryck är följande två möten: 1. Kvinna med 7 barn, skild och utan arbetslös Första intrycket är en vacker kvinna, men hon saknar sina framtänder av någon anledning. Hon söker lån för att kunna starta upp en verksamhet för att sälja kläder. Hon har idag inget arbete, men hur hon lyckas få sitt liv att gå ihop nu är imponerande. Visar på människans förmåga att överleva, och att det kanske är en grundinställning hos oss alla och som gör alla människor till entreprenörer. 2. Kvinna med två barn, där några tjuvar stulit hennes bil För hennes verksamhet var detta en katastrof. Med bilen kunde hon hämta bröd och annat som hon sålde i sin verksamhet, men utan bil har hon fått problem att betala tillbaka sin skulder. Trots detta upplevde jag att hon skulle klara av att återkomma, och igen visa på människans starka överlevnadsinstik.
Den norska organisationen Misjonsalliansen bedriver diakonalt utvecklingsarbete i Ecuador och många andra länder. För mig framstår den som väldigt lik svenska Diakonia. Till skillnad från Diakonia har även Misjonsalliansen etablerad mikrobanker i ett flertal länder. Här i Ecuador heter banken D-MIRO och det är genom den som jag når ut till alla mikroentreprenörer. Man jobbar i de allra fattigaste områdena. Man jobbar med allt från kyrkor, ledarskapsutbildning, utbildning, mikrofinans, hälsa och även utvecklingsfrågor. Nu har Ecuador börjat få en högre tillväxt så med tiden kommer förhoppningsvis inte Mission Allianza att behövas, om framgångarna även kommer de fattigaste till godo. Men det ligger en bra bit fram i tiden. Idag gör man stor skillnad i folks liv Mikrobanken D-MIRO däremot har en möjlighet att växa betydligt och nå ut till en betydligt större del av befolkningen, med tiden. Nedan en bild på ett center för barn med olika typer av handikapp, ofta med en utvecklingsstörning och andra former av handikapp.
Mikrobanken D-MIRO sponsrar en fotbollsskola med tröjor. Precis som Gothiacup i Sverige anordnas en motsvarande tävling i Norge — PlussbankCup dit barn från Ecuador kan komma cirka vartannat år.
High crime rate
Over two weeks I have now been in Guayaquil , located in Southern Ecuador. The first thing that greets one at the airport is a warning sign to be cautious when taking a taxi so as not to get robbed. Guayaquil is located in a part of Ecuador where organized crime is very high. Yes, crime is high throughout Ecuador, as a result of the extreme poverty and wealth & income differences difference here. The crime rate is particularly high in Guayaquil and backpackers avoid gladly this part . On a run the other day with Hans Martin ( a volunteer from Norway I work with ), we ran past a restaurant where there was a guard outside with a safety vest and a big automatic weapon of some kind. For more information on crime , see OSAC. There are neighborhoods where you should not go into, and on another occasion, when we took a run , we were told to be very careful. When me and some volunteers were in town the other day, we were followed by two men, and when one of us was out with one of the loan officers they were also close to be robbed but managed to quickly get away from the succeeding men. So the danger of getting in trouble is there the whole time. There have been other volunteers mugged and robbed, in some cases even attempted rape, so it ‘s clearly a different world to at least Scandinavia. But throughout Ecuador it is not the same as here. In many other parts, you feel more secure I am told and during a visit to the coast the dangers of Guayaquil vanished .
Microfinance is about reaching out to financial services to areas where traditional banks do not reach out . An example of this is the Ecuadorian micro bank D MIRO started up by the Mission Alliance, corresponding Diakonia in Sweden . They have established their main bank branch in the poorest areas. Here not all taxis drive. D- MIRO has grown substantially and is now available in multiple zones around Guayaquil and along the Ecuadorian coast. The roads are in bad shape and it requires a four-wheel drive to get around to the microentrepreneurs. Some people live in houses made of cement and brick, while many live in simple Bamboo houses, where usually also the small business is found.
Performing a large study
I am working together with two volunteers, Caroline and Hans Martin Espegren, who have taken a year’s break from their studies in Trondheim. We have gotten to know each other well and I’ve also gotten to know many other Norwegian volunteersas well as employees of D-MIRO and Mission Alliance. Through D-MIRO we conduct a survey in which we expect answers from at least 750 micro-entrepreneurs that I hope will be able to highlight different features and characteristics of the micro-entrepreneurs . Above are some pictures from different visit with micro-entrepreneurs in the poorer areas around Guayaquil. Th picture above of a green truck is a form of “Mobile Banking.”
Many meetings and experiences outside my comfort zone
Obviously there is much to reflect on, and I feel very happy to have had the chance to see all this . A couple of stories that I think made extra strong impression are the following two meetings :
1. Woman with seven children, divorced and unemployed. First impression is a beautiful woman, but she’s missing her front teeth for some reason. She’s looking for loans to start up a business of selling clothes . She currently has no work, but how she manages to make ends meet and feed her kids is impressive, showing the human instinct to survive , which makes all people entrepreneurs, to quote Muahmmad Yunus .
2. Woman with two children, where some thieves stole her car For her business, this was a disaster. With the car, she could get bread and other things that she sold in her business, but without a car (they don´t have insurance), she has had problems paying back the debts. Despite this, I felt that she would be able to come back , and again demonstrate a strong surival instict, a drive of entrepreneurship.
Yes, the stories are many, and I can only hope that over time we see a reduction in disparities in not only Ecuador but throughout the world. Huge income and wealth differences are simply not fair and are a sign of an imperfect market. But amidst all the misery we are reminded of our ability to survive, the instinct that makes us all entrepreneurs.
The Norwegian organization Mission Alliance is engaged in diaconal work in Ecuador and many other countries. To me it appears as a lot like Swedish Diakonia. Unlike Diakonia, Mission Alliance has also established micro banks in several countries. Here in Ecuador the bank is known as D-MIRO and it is through this bank that I reach out to all micro-entrepreneurs. Mission Alliance work in the poorest areas that require cars with four-wheel drive to get around. It works with churches, leadership training , education, microfinance , health, and also development issues. Now, Ecuador has begun to have a higher economic development in the last year so over time hopefully Mission Alliance will not be needed, if some of the benefits of the economic development also trickles down to the poorest. But it is probably some years into the future. The Microbank D-MIRO however, has an opportunity to grow significantly and reach out to a much larger segment of the population with time. Above is a picture of a center for children, started by the Norwegian Mission Alliance with different types of disabilities, often mental retardation , but also other forms of disability.