Author: itsupport

The hidden risks in private credit’s $3trn boom

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Early in 2025, the private credit market surpassed $3trn in assets under management (AUM) and has been one of the “fastest-growing segments of the financial system over the past 15 years,” according to an article by McKinsey. This meteoric rise has seen the industry grow by a factor of 10 between 2009 and 2023, adding $1trn in the past 18 months alone. The leading cause? Bank retrenchment. Traditional banking was forced to pull back following the global financial crisis in 2007–08, shifting away from traditional lending and becoming more reliant on debt markets and shadow banking.

Since then, of course, we have witnessed global economic uncertainty in the form of the pandemic, the Russia-Ukraine war, ongoing conflict in the Middle East and more recently, whenever the US President leaves a comment on social media or gets in front of a camera. Recent retrenchment isn’t solely driven by market volatility but also by tightening regulatory pressure, including Basel III Endgame proposals, which would require banks to increase their capital reserves in a range of lending areas and introduce liquidity rules that would reduce banks’ appetite for longer-term loans, according to McKinsey.

With the banks sensitive to market shocks and stymied by policy, private credit has moved in, with a recent EY report estimating that “Europe accounts for roughly 30 percent of the private credit market.” There are plenty of key drivers for growth across the continent, including investment in infrastructure and energy. Private credit is expected to play a leading role in the global green energy transition “with estimates suggesting that between $100trn and $300trn will be necessary by 2050,” according to EY. Private credit appears now to be a mainstay of the financial landscape, a counter-cyclical champion in times of economic turbulence, but what happens when private capital meets geopolitically unstable jurisdictions, and how exposed are financial markets to risks they can’t see coming?

The private credit explosion
Post-GFC, the failure and near-failure of several ‘too big to fail’ banks helped trigger the Great Recession, the most severe downturn in the global economy since the Great Depression. Millions lost their homes, their savings and their jobs. While the economic downturn did have an effect on private credit, the data shows that “historically, private equity portfolios have generally experienced shallower peak-to-trough declines than the public markets,” according to a study on return patterns during economic downturns by Neuburger Berman (see Fig 1). While the banks had to limit their exposure, the private deal-making landscape bounced back during the later part of the recession, in 2009. The post-GFC environment was private equity’s first real stress test and it passed, albeit narrowly. A recent report on private equity during the Great Recession discusses how fund managers in private equity missed opportunities “to acquire high-quality assets at steep discounts” despite the surge in deals.

Analysts attribute the historic rise of private credit to three key characteristics. In stark comparison to the banks, PE has better access to capital and more freedom to deploy it, allowing it to increase market share and experience higher asset growth during crisis. Most global funds also have active management with a heavier focus on value creation. This provided decisive support for funds to develop new capabilities and drive transformation projects. Lastly, private equity is relatively illiquid, meaning that during economic downturns it can help insulate investors from panic selling, which typically comes with higher losses. With higher yields, bespoke terms and less oversight, the appeal of private credit cannot be overstated.

The past 15 years has seen private credit explode, but buried within this success story are reasons for caution. The most obvious is the illiquidity risk. While helpful during a downturn, the ability to get money out of an investment quickly is generally considered to be a good thing. Coupled with the fact that geopolitical instability is rarely priced in adequately, cracks could quickly form.

In comparison to market risks, geopolitical risks are incredibly difficult to hedge against. The effects of political instability, trade disputes, war, cyberattacks, climate change and natural disasters can be sudden and severe.

Not long before Russia’s invasion of Ukraine, Horizon Capital, Ukraine’s largest private equity group, had just launched its fourth flagship fund. Sarah de St Croix, head of private funds at law firm Stephenson Harwood, commented on the importance of having provisions in place to help fund managers respond to geopolitical developments. In this instance “affected managers were able to rely on their generic right to forcibly withdraw an investor from the fund where their continued participation breaches law or regulation.” Even though these clauses were drafted without a clear sense of when they might be needed, funds were able to “manage the problem of having a sanctioned investor in a commingled pool following the broad imposition of sanctions on Russian individuals in 2022.”

Private credit went global after the GFC, during a time when geopolitical risk wasn’t front of mind. Weijian Shan, executive chairman and co-founder of investment firm PAG, says “the geopolitical risks are very real nowadays. You used not to have to think very much about it. Now you really need to think about decoupling risks; you really need to think about restrictions to international flow of goods, people and capital.”

Resource nationalism
And this comes rather sharply into focus when you consider things such as sanctions risks, political unrest or local capital controls trapping foreign investments, or populist governments overturning investor protections.

The past 15 years has seen private credit explode, but hidden within its success story are reasons for concern

Indonesia, which produces 37 percent of the world’s nickel and is a major global exporter of coal, palm oil, copper, gold and other minerals, has been engaged in a decade-long programme of resource nationalism. Indonesia’s programme has coincided with heavy demand from China and as Dr Eve Warburton of the Australian National University notes, “over this same period, the Indonesian Government introduced more and more nationalist policies – new divestment obligations for foreign miners, a ban on the export of raw mineral ores, stringent new local content requirements and restrictions on foreign investment in the oil and gas sector.” Additionally and perhaps most tellingly, “observers noted an increase in court cases and popular mobilisation against foreign companies.” This is particularly significant given nickel’s essential role in electric vehicle batteries and renewable energy storage, placing Indonesia at the heart of the global energy transition.

Weighing up the risks
The private credit market must navigate considerable obstacles if it is to avoid becoming a victim of its own success. Rapid growth has increasingly pushed funds into new niches, often in emerging and frontier markets where the yield – and the risk – is highest.

In Geopolitical Influence and Peace, a report by the Institute for Economics and Peace, they state that “geopolitical risks today exceed levels seen during the Cold War, driven by heightened military spending, stalled efforts at nuclear disarmament and a diminished role for multilateral institutions like the United Nations.” At the same time, we are witnessing active wars in Ukraine and Gaza, the US-China decoupling, increasing political instability and polarisation, the spread of misinformation, and a rise in the use of cross-border sanctions and capital controls.

The risk of financial contagion is also a concern for the industry. Anyone who has loaded up on private credit – think pension funds, sovereign wealth funds or insurers – increasingly has their capital tied up in opaque, illiquid private deals.

Investors run the risk of being exposed to losses they neither anticipated nor adequately priced for. Any crisis in the private credit market could have a significant knock-on effect with the broader financial system. As private credit funds stretch further into higher-risk jurisdictions to meet yield expectations, the potential for sudden, severe losses rises dramatically.

Private credit’s success has been built on access to capital, flexibility, and the ability to go where banks won’t. But those advantages can quickly become liabilities in an unstable world. As geopolitical risk surges, private credit managers and their investors must rethink how they assess the rapidly changing modern landscape. The next market crisis may not start on Wall Street or in the bond markets – but in a foreign ministry, a war room, or a populist parliament. Private credit needs to be ready.

Europe’s neobanks eye American wallets

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As one of Europe’s leading digital banks, Bunq hoped for quick approval when it applied for a US banking licence in 2023. One year later, the Amsterdam-based fintech firm withdrew its application due to a misalignment between US and Dutch regulators. The company is now making a second attempt, filing in April for a broker-dealer licence that will allow its US users to invest in stocks, mutual funds and ETFs. This is only the first step in an ambitious American adventure, says a Bunq spokesperson, adding that it will “start by making investing effortless and fully transparent, with no hidden fees,” possibly a jab at its US competitors and their practices. Bunq, which boasts 17 million European users, plans to reapply for a banking licence later this year.

Growth above all
Bunq is not the only European digital bank that is seeking expansion across the Atlantic. UK digital banking leaders Revolut and Monzo have also been eyeing the US market, riding a wave of renewed interest from investors following a post-pandemic funding crisis. The strategy is a no-brainer, given slower customer acquisition in Europe after a decade of manic growth and intensifying competition that compresses margins. A sense of urgency is also taking over the fintech market as it matures and fewer digital banks (also known as neobanks) are expected to become dominant globally. Some are in the black after years of losses; 2024 was Bunq’s second consecutive year of profitability.

One problem for neobanks is that they lag behind incumbents in the quintessential banking business: credit extension. Their lending operations are relatively small, meaning that revenue has to come from payment fees and premium accounts.

Regulation has also become stricter. “Europe has become increasingly hostile ground for fintechs, with tighter funding conditions and tougher regulations throttling growth,” says Carrie Osman, founder of Cruxy, a UK growth consultancy working with fintech firms. A wave of regulatory reform across the Atlantic, including the recent ‘1033 rule’ that has unlocked access to consumer financial data, has put the US on their radar, she adds. “The upside is that because they operate under more stringent regulations and thinner margins in Europe, they are better placed to innovate in transparency, cost efficiency and cross-border functionality,” argues Alessandro Hatami, former chief operating officer of digital banking at Lloyds Banking Group and author of Inclusive Finance: How Fintech and Innovation Can Transform Financial Inclusion.

A regulatory minefield
Despite these reforms, navigating the country’s Byzantine regulatory landscape remains an obstacle to conquering the $24trn US market. Obtaining a banking licence requires approval from state and federal regulators, while state-by-state money transmission licences are necessary to operate in several states. On top of a banking charter, aspiring lenders need to secure deposit insurance and proof of sufficient funds. Rising US protectionism adds an extra barrier, says Hatami: “Current instability in engagement with foreign providers is possibly making the rollout of a European fintech in the US problematic.”

Previous attempts faltered due to underestimating the complexity of US regulation

Dealing with US payment infrastructure can also be tricky. In Europe, neobanks benefit from interbank payment systems that enable customers to make transactions seamlessly, whereas US banks have been slower in adopting similar technologies. European entrants who view the US as a single market have struggled, says Dave Glaser, CEO of Dwolla, a US payment service provider, whereas opportunities exist for those who recognise that modernising their payment infrastructure involves adapting to America’s complex financial backbone.

Past attempts to crack the US market have proved traumatic. Monzo withdrew its banking licence application in 2021 when regulators warned that approval was unlikely. Berlin-based neobank N26 closed down its US operations in 2021, having failed to offer there its profit-making membership deals. Revolut’s delay in obtaining a UK banking licence made a US application practically impossible.

Without a banking licence, digital banks are unable to generate revenue through credit products. “Previous attempts faltered due to underestimating the complexity of US regulation, overestimating brand pull and launching without a compelling local value proposition,” says David Donovan, head of financial services North America at digital transformation consultancy Publicis Sapient.

For fintechs unable to obtain their own banking charter, partnering with a US bank is a no-brainer. Monzo has partnered with Sutton Bank to hold users’ deposits. Cleo AI, a UK fintech which offers personalised financial assistance through a chatbot, has partnered with Thread Bank and WebBank and boasts seven million customers in North America. The downside is that partners retain a share of card transaction fees, a major revenue source since they are significantly higher in the US. “It eats into your margins; you have less autonomy around product decisions; and you are often tied to the maturity of the partner bank’s risk and compliance processes, which can feel very outdated,” argues Stephen Greer, banking industry consultant at analytics platform SAS, adding: “This means the entry point to the US market is building services on top of a simple demand deposit account, which is a very low-margin product and typically doesn’t outpace your cost to acquire new customers.”

The recent collapse of Evolve Bank, triggered by its partner Synapse’s mismanagement of customer funds, has also intensified regulatory scrutiny of such partnerships. More ambitious neobanks have decided that going it alone is a bet worth taking. Revolut offers its card through its partner Lead Bank, but also has a US broker licence and is now seeking its own banking licence.

“The best strategy for a European fintech is to create a US entity and nurture this by tapping into the US investor markets, from venture capital all the way to IPO. And to play down its European roots as far as possible,” says Hatami.

Fierce competition
US retail banking is a competitive market, with over 3,000 institutions including regional banks, savings banks and credit unions, meaning that European fintechs must be prepared for slower growth and higher customer acquisition costs. US fintechs like Venmo, SoFi, Zelle and Chime have massive marketing budgets. “Word of mouth and referrals can only get you so far in the US,” says Dylan Lerner, a digital banking analyst at Javelin Strategy & Research, a US market intelligence provider. “You might have to spend some serious money to establish yourself – from heavy spending on advertising to naming rights on stadiums and sports sponsorships.”

The flipside is that new entrants can focus on niche markets that are large enough to be profitable. European neobanks can offer one-stop banking solutions to customers hungry for digital-first experiences with fancy add-ons on top of savings accounts, such as investing tools and real-time spending analytics. “Many US fintechs are built on banking-as-a-service models that limit control and innovation. European firms, having built more of their stack, can differentiate on both cost and customisation,” says Donovan.

Remittances is one potential revenue stream, notably offering cross-border and multicurrency services to around 20 million US-based immigrants. A case in point is the success of Wise, a platform that “addresses international money movement with a clarity and fee structure that is still uncommon in the US,” Hatami says. Bunq is also targeting digital nomads, “especially the nearly five million European expats who struggle with banking bureaucracy while pursuing a location-independent lifestyle,” according to the firm’s spokesperson.

Most companies want to list on Nasdaq or NYSE, raise a tonne of money and cash out

Cultural differences also come into play. American customers are more credit-focused than Europeans and are constantly offered customer rewards and loyalty deals, meaning that new entrants must provide expensive perks to lure them. Their loyalty to traditional banks is also rock-solid. “Americans are largely satisfied with their financial institutions. They are not eager to switch banking relationships,” says Lerner from Javelin Strategy & Research.

A recent survey by the firm found that 77 percent of consumers were unlikely to switch away from their primary financial institution. Foreign neobanks focused on business-to-customers solutions face an uphill battle due to relatively high customer acquisition costs, argues Kevin Fox, chief revenue officer at Thredd, a UK payments processor that recently expanded into the US and has helped several neobanks scale internationally. “Without a pivot to some differentiated credit product, prepaid and debit offerings often don’t generate enough revenue to warrant those costs,” Fox notes, adding that fintechs moving to a business-to-business model by providing solutions to SMEs, such as expense management services, have a better chance of US success.

Surprisingly enough, the biggest opportunity for European fintechs may be disrupting the technological backwardness of the US banking system. Perhaps the starkest example is the persistence of cheques, still widely used by banks and corporations, in a digital era. “What they [European neobanks] bring is primarily tech: fast onboarding, seamless user experience, a fully digital experience. That is not something the US banking system excels at yet,” says Arthur Azizov, founder of fintech alliance B2 Ventures.

Going public
For European fintechs, the biggest prize that comes along with US presence is the possibility of a public listing. US IPOs typically achieve higher valuations and provide access to the world’s biggest investment pool. Revolut and Monzo are expected to go public by the end of the decade, and their leadership has indicated preference for a US listing. Such decisions, however, have a political dimension that can cause friction at home. “Revolut was recently granted a banking licence – probably in part because of a promise to list in London, not in the US. Most companies want to list on Nasdaq or NYSE, raise a tonne of money and cash out. But governments want to keep their unicorns close to home,” says Azizov, adding: “For a serious US expansion, they will need to go all in: full teams, full infrastructure, full commitment. They may even need to move their HQ.” For sceptics though, going public might be a premature step without a clear US-orientated strategy and profitability model – the latter being the holy grail that will seal their position in the banking world.

“The real endgame is profitability at scale. This is something that has eluded most fintechs, regardless of listing venue,” says Donovan from Publicis Sapient. “It would prove that a digital-native, product-led model can work even in the world’s most competitive and entrenched banking market.”

Saudi cuts spark global ripples

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When the Public Investment Fund (PIF) sneezes, a very large number of companies catch colds. And plunging oil prices have given Saudi Arabia’s massive sovereign wealth fund a definite case of the sniffles, with serious implications for a huge swathe of concerns.

The PIF was worth $941bn in 2024, according to its latest annual report, making it the sixth largest sovereign wealth fund on the planet. Its assets rose almost fivefold in the eight years since 2016, a compound annual growth rate of 22 percent. It has a stated aim of seeing its assets under management pass $1.1trn by the end of 2025 and hitting $2trn by 2030 (see Fig 1). PIF has four global offices, and more than 2,500 employees.

Right now, however, the PIF is slowing down and cutting back, with serious implications for the more than 13 million foreign workers in Saudi Arabia and the many hundreds of companies that rely on the Saudi economy to keep going.

The fund, which was founded in 1971, has around 170 subsidiaries, and has been credited with stakes worth hundreds of millions of dollars at a time in household name companies including Facebook owner Meta ($522m), Disney ($500m), BP ($830m), Boeing ($700m), Uber ($2.7bn) and Citigroup ($520m).

The biggest single slice of its investments is in the energy sector, at 23 percent, followed by property, at 17 percent, IT at nine percent and financials and communications services are at around seven percent each.

It invested more than $100bn in the US alone between 2017 and 2023, generating, according to its own estimate, 103,000 US jobs and $33bn in GDP. By 2030, PIF claims, it and its portfolio companies will have invested $230bn in the US and supported the creation of more than 440,000 US jobs.

Controlling budgets
In the first half of 2024 the PIF was the world’s highest-spending state-owned investor, according to the consultancy Global SWF, and it was expected to raise its annual spending to $70bn in 2025, a year earlier than previously announced, according to the International Monetary Fund.

Another way to raise money in the face of falling oil revenues is to tap the bond markets

But this spring the PIF, which is chaired by Crown Prince Mohammed bin Salman, the de facto ruler of Saudi Arabia since 2015, ordered spending cuts of at least 20 percent across those parts of its portfolio where it can exercise control over budgets, which covers investments in around 100 different companies ranging from the Saudi start-up airline Riyadh Air to Newcastle United Football Club. The result has been layoffs, hiring freezes and project delays.

Some budgets have been cut by as much as 60 percent, according to the web-based business news service Arabian Gulf Business Insight (AGBI). The five so-called ‘giga-projects,’ massive real estate schemes such as Neom, a planned $500bn new city meant, eventually, to cover more than 10,000 square miles in the north-east of Saudi Arabia, and Red Sea Global, a huge effort intended to massively boost tourism to the country through plans such as a 1,500 square mile new tourist destination including 25 new hotels, have been particularly badly hit by the cuts.

A $5bn contract at Neom was cancelled the day before the signing ceremony was due to take place. A central part of the Neom project is a linear city called ‘the Line,’ originally billed as 170km long. After a host of delays, and amid claims reported in the Wall Street Journal of huge salaries for imported management and a toxic work culture, the initial stage of the project has been scaled back to just five kilometres to be completed by 2030.

There have also been reports of cash flow problems leading to payment delays for contractors, particularly in the construction sector, with one leading international contractor reportedly claiming it was owed $800m by Saudi clients. The company blamed prolonged payment delays as a significant factor in its decision to scale back operations in the kingdom. One big European construction company has allegedly withdrawn from the Saudi market altogether, blaming payment risks and financial uncertainties.

Oil prices decimated
The big problem, on the financial side, is the plunging price of oil. The International Monetary Fund has declared that oil needs to be $91 a barrel to balance Saudi Arabia’s budget. But oil has not been above $90 a barrel since August 2022. At Easter this year the price of Brent crude was down below $67, and the US crude benchmark, West Texas Intermediate, had fallen to less than $64, some 30 percent below that Saudi break-even price. Soon after, at the beginning of May, Brent had dropped to $61.63, which is 30 percent down on its 12-month high, and WTI to $58.56, also 30 percent down. The result is that the country’s giant state-owned oil company, Saudi Aramco, has already slashed its estimate for its total dividend payout for 2025 by almost a third, to $84.5bn, and may not even hit that. The PIF owns 16 percent of Aramco, and will thus see its own income from Aramco dividends drop by at least $6bn.

The PIF wants to, for example, spend money on the resorts being built along the Red Sea coast to eventually bring in 19 million tourists a year as part of Saudi Arabia’s ‘Vision 2030’ project to reduce its reliance on oil revenue. The main objective is to raise the private sector’s contribution to the country’s GDP from 40 percent to 65 percent by the start of the next decade. But the irony is that Saudi Arabia needs the oil revenue to fund the developments that are meant to eliminate the need for oil revenue.

Pat Thaker, editorial director for Middle East and Africa at the Economist Intelligence Unit, told FDI Intelligence that she expected “several large-scale initiatives may be re-evaluated, postponed or even scrapped due to financial limitations.”

World Cup commitment
One answer is to try to get more foreign investment into PIF projects. Money is required for several big and prestigious projects in the coming decade that Saudi Arabia has committed itself to, including international events such as the Asian Winter Games in 2029, Expo 2030 and the football World Cup in 2034. The country appears to be currently struggling to attract overseas interest: overall FDI flows in the third quarter of 2024 were down by 21 percent on the same period a year earlier, at $4.27bn, Saudi Arabia’s General Statistics Authority said.

However, in March, the PIF signed a memorandum of understanding (MoU) with Goldman Sachs to create funds to invest in Saudi Arabia and the wider Gulf region. The same month it struck an agreement worth $3bn with Italy’s export credit agency, Sace, saying that the deal provided “support for co-operation between Italian companies in the private sector and PIF and its portfolio companies.” It has also signed MoUs with Japanese financial institutions including Mizuho Bank, MUFG Bank and Sumitomo Mitsui Financial Group worth up to $51bn to help support funding via its local capital markets.

Another way to raise money in the face of falling oil revenues is to tap the bond markets. In January this year, the PIF unloaded $4bn of bonds in a sale that was four times oversubscribed, after attracting investors with credit spreads 95 and 110 basis points above US Treasury bonds. At the end of April the fund shifted $1.25bn in seven-year sukuk, or shariah-compliant bonds, with the offer more than six times over-subscribed. The eagerness with which investors have snapped up the bond issues at least eases fears that the news of enforced budgetary cutbacks could hit investor confidence in the giga-projects and the broader Saudi economy.

Phenomenal job creation
The PIF’s importance as a generator of employment cannot be exaggerated. By 2024, it is reckoned to have contributed to the creation of more than one million jobs in three years and supported the establishment over the same period of almost 50 companies in 13 strategic sectors. However, the effect of falling oil prices, a report by the consultancy JLL Middle East predicts, will be that employment growth in Saudi Arabia will plunge after hitting a high of nearly 10 percent in 2022, slowing to three percent by 2026 as the kingdom reins in spending.

This will affect a host of countries in the Middle East and South Asia that have been sending surplus workers to Saudi Arabia, and enjoying the wages they send back home. Nearly two million expatriates, skilled and unskilled, have joined the Saudi workforce in Saudi Arabia over the past two years. The country’s construction industry has more than doubled in size. But the slowdown means that workers are now looking for jobs elsewhere in the region, even if it means taking a pay cut to relocate or shift to other PIF-backed companies, according to Shyam Visavadia, the founder of WorkPanda Recruitment, a specialist in construction hiring based in Dubai.

In addition to the plunge in oil revenues, Visavadia told AGBI, “Giga-projects are scaling too quickly without long-term planning or clear strategy.” Now, future phases are “either postponed, remastered, or not receiving budget approvals,” he said.

Yet another problem is that the scale and complexity of the various giga-projects means that costs can easily exceed initial estimates. It appears the PIF may now be looking to prioritise projects with more immediate economic returns, and/or those that are further along in development.

The corporate cost of misinformation

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Until recently, the chances of a company suffering any lasting damage due to a deliberate misinformation campaign were so low as to not even be included on the corporate risk register. But not anymore. Now, companies can see their share value nosedive overnight if a lie gains enough traction that customers boycott a company’s products and services over fabricated fears that they are unsafe, are made unethically, are of poor quality, or even linked to extremist groups.

The seriousness of the spread of false information should not be downplayed. The World Economic Forum’s (WEF) latest Global Risks Report cites government misinformation and disinformation as one of the key leading short-term risks that could fuel instability and undermine trust in authority. But it also warns that this growing trend could have a negative impact on corporates: for example, misinformation and disinformation around some industries could stifle growth and sales. For sectors like biotech, this is a serious problem, with biohackers and other non-medical professionals touting ‘unproven’ health remedies or performance-enhancing procedures and slamming ones that actually work, are regulated and are safe.

Furthermore, the WEF warns that some governments may foment aggressive misinformation and disinformation campaigns about goods and services from targeted countries, hardening public perception that could lead to more frequent consumer boycotts of products – hardly a welcome development in an era of increased geopolitical tension that has already spilled over into trade wars and spiralling tariffs. AI could exacerbate consumer boycotts further, it warns, as algorithms programmed to highlight trending or popular content could prioritise reader engagement over accuracy and unintentionally promote misinformation in the process.

Deliberate deception has the potential to destabilise or create financial or reputational damage

Unfortunately, companies can’t necessarily count on the law to correct falsehoods, remedy reputational damage, or regain financial loss, as it is supremely difficult to hold any person or company to account for spreading misinformation via the internet or social media sites. In the US, for example, online platforms are immune from civil liability for content provided by their users under Section 230 of the US Communications Decency Act. It also shields them from moderation activities that they undertake in good faith to remove certain content. And pursuing defamation claims in the US – or anywhere else – to try to right wrongs and gain financial redress is another costly gamble that not many organisations can consider.

Deliberate sabotage
“At its worst, deliberate deception has the potential to destabilise or create financial or reputational damage,” says Ant Moore, a senior managing director in strategic communications at business consultancy FTI Consulting. “Where misinformation is often fuelled by false information (a doctored photograph or an impersonated voice, for example), disinformation is characterised by a more deliberate attempt at sabotage. In all cases, literacy around determining fake content isn’t always where it should be.”

There are a range of ways misinformation can threaten companies. Besides consumer boycotts, false narratives can quickly shape public perception and erode brand trust, leading to loss of investor confidence and reputational harm. It can also lead to disengaged and polarised workforces, resulting in employees leaving or refusing to join organisations they believe are misaligned with their values. Misinformation campaigns that target specific industries can also create increased legal and regulatory scrutiny as authorities, shareholders and stakeholders demand increased assurance.

Some high-profile companies have already experienced problems. In 2016 the sportswear company New Balance faced considerable backlash on social media after misinformation circulated that the brand was closely aligned with far-right movements. Similarly, in 2022 Eli Lilly’s stock price fell by 4.37 percent after a fake Twitter account impersonating the pharmaceutical brand falsely announced that insulin would be given away for free (as opposed to the $1,000 monthly pricetag it could cost some US citizens without health insurance at the time). In 2023 the CEO of brewer Anheuser-Busch InBev Michel Doukeris blamed misinformation on social media for stoking a conservative consumer boycott of Bud Light that saw sales drop by a quarter after the best-selling US beer was promoted by transgender influencer Dylan Mulvaney.

“When it comes to the risk posed to corporates, the only surprise is that this hadn’t come sooner,” says Chris Clarke, co-founder of strategic comms agency Fire on the Hill. “Companies have been operating in an increasingly complex and globally connected landscape, with new forms of media growing in prominence. It makes information impossible to control and makes identifying trustworthy information from reliable sources harder than ever.”

Clarke continued: “In the current information environment – chaotic, fragmented and lacking in trust – the ground is fertile for misinformation to go viral and bad actors to purposely spread misleading and false information. Whether those bad actors are foreign governments targeting the economic interests of other states, activist groups, or competitors, deploying strategies to mitigate risks should be a top priority.”

Get ahead of the spiral
Given the speed at which false stories can be created with AI and proliferate and spread on social media, experts say companies need to learn how to proactively monitor for malicious stories in real-time before they spiral out of control. The challenge, however, arises in how companies currently monitor for these sorts of malicious attacks. “Historically, communications and PR teams have focused their attentions on tracking comments and trends across mainstream social media such as X, Instagram or TikTok,” says Rebecca Jones, associate director of client accounts at business intelligence firm Sibylline. “However, that is not where these disinformation campaigns begin, and arguably, by the time disinformation hits these sites, the issue has already gone viral and you are in crisis.”

You need to build a strong community of fans who love and support your brand

More often than not, says Jones, disinformation begins on alternative social sites, where the audience is more likely to react to a story that may seem a little unbelievable, but which triggers emotions: indeed, an issue can sit in this ecosystem slowly being refined and gathering momentum over the course of hours, days or even weeks before it migrates to mainstream and goes viral. Monitoring these sites for potential threats can be a game changer, as it can help teams to get ahead of a potential crisis before it takes place.

“Even if it can’t be stopped – which is usually the case – hopefully such an early warning mechanism enables teams to have a plan of action in place for when it does hit the mainstream: your executives are prepped, the press team is ready to respond, and perhaps you have even taken steps to pre-bunk the story,” says Jones.

Chris Walker, managing director of Be The Best Communications, says companies should make sure they control their own narrative. “Facts are more impressive than fiction. Gather your evidence which disproves the claim and which highlights your organisation’s commitment to doing the right thing,” he says. Companies should also challenge the source of fake news to reveal what evidence they have to back up their claim: if they can’t ‘put up,’ they may ‘shut up.’

Alice Regester, Co-founder and CEO at specialist communications agency 33Seconds, agrees that it is increasingly important for companies to control and have access to channels of communication to quickly debunk falsehoods. “The value of information companies are sharing via their owned channels is increasingly important,” she says, adding that this is a good way to “ensure they are building a voice of trust and authenticity on both websites and blogs, as well as social media channels, so consumers know they can come directly to the brand for the truth.”

Collaborate and amplify
Having friends is also a very useful weapon to deflect malicious claims, say experts: it can certainly pay for companies to identify potential spokespeople outside of their organisations who can be called upon to help push back against false narratives. Businesses can collaborate with customers, fact-checking organisations, consumer advocacy groups, and trusted media to amplify credible information. Building an influencer programme can also be a good way for companies to protect themselves, says Adam Blacker, PR director at website hosting information site HostingAdvice.com. “It is really hard to do everything yourself. You need to build a strong community of fans who love and support your brand. They in turn become brand ambassadors,” he says. So-called ‘social listening’ tools – essentially, software applications that companies can use to continuously scan social media sites for mentions of their name, brands, and industry trends – are also fast becoming critical solutions. By analysing conversations in real time, companies have the advantage of being able to verify and fact-check claims early enough to take action.

Andy Grayland, CISO at threat intelligence tech company Silobreaker, says traditional crisis management approaches are no longer sufficient – companies must transition from reactive damage control to proactive defence.

“Cyber threat intelligence (CTI) solutions provide that necessary early-warning system. By continuously monitoring brand-related risks across open-source intelligence (OSINT), including news sites, forums, social media, and the deep web, organisations can detect and neutralise threats before they escalate,” says Grayland. “AI-powered tools are now essential for cutting through the noise, identifying real risks, and flagging coordinated disinformation campaigns before they gain traction,” he adds.

As an example, such monitoring would detect and alert a pharmaceutical company if an anti-vaccine movement that normally averages 50 mentions of a particular drug brand a day suddenly increases that number to 500. By tracking the influencers behind these kinds of movements in real-time and identifying shifts in narratives relating to a company or brand, companies have a better chance of either engaging strategically or correcting the narrative.

Early detection translates into real business value, says Grayland. “With real-time visibility into emerging threats, businesses can mitigate financial losses, prevent reputational crises, and stay ahead of regulatory and shareholder concerns. In a world where disinformation spreads at the speed of social media, CTI tools provide the radar and response capabilities needed to protect brand integrity and the bottom line,” Grayland says.

While experts say that misinformation and disinformation are hardly new challenges, they add that their impact on companies has become far more acute – thanks to the scale and speed at which they can spread. “Businesses have always been vulnerable to false narratives, but the digital age and AI has turbocharged that risk,” says Ryan McSharry, crisis specialist at international PR agency Infinite. The difference now, he says, is the sheer volume and immediacy with which misinformation can erode trust and disrupt markets, making it a much more potent threat to a company’s reputation.

“The question isn’t whether companies should be concerned – it is how they should be responding,” McSharry warns.

Flight path to autonomy

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The global aviation industry has seen a number of developments in the last few years, such as more sustainable and green travel, electric aircraft and better maintenance, repair and overhaul (MRO) technology. The International Air Transport Association (IATA) expects total global airline industry revenues to reach $1.01trn in 2025. If so, this will be the first time that the industry’s revenues surpass the $1trn barrier, while also being a 4.4 percent rise from 2024.

Passenger numbers are likely to touch 5.2 billion this year, which would be an increase of 6.7 percent from last year. Cargo volumes are estimated to rise 5.8 percent on an annual basis and hit 72.5 million tonnes as well. This expected growth in the global aviation sector has led to several aerospace and tech companies attempting to develop autonomous airplanes.

At the moment, major sector giants such as Boeing, Airbus, Lockheed Martin and Northrop Grumman, as well as innovative tech start-ups such as Whisk, Joby and Elroy Air, are working on developing autonomous flight technologies and systems. Countries with strong government funding, sophisticated aerospace ecosystems and strategic defence priorities, such as China, the US and some EU nations, are leading this development.

The timescales involved
Although vehicles with varying degrees of autonomy have become more common recently, fully autonomous cars (level five) are not commercially available to the general public as yet. Similarly, fully autonomous airplanes could still take several years to be available on the open market, although related technologies such as automatic target recognition have been operational for a while now. Autonomous military and speciality unmanned aerial vehicles (UAVs) or drones have also been functional for years. Dan Bubb, aviation historian and associate professor in residence, UNLV Honors College, noted: “There is no doubt aviation technology continues to make giant leaps including in automation. Some businesses predict that autonomous aircraft will dominate aviation by the 2040s. I can envision that in the military, cargo, and general aviation sectors.”

Fully autonomous airplanes could still take several years to be available to the open market

Dr. Walter Stockwell, vice president of Engineering at ANELLO Photonics, also expects autonomous aircraft versions to be more adopted in surveillance, specialised missions and cargo in the near term, with broader commercial passenger applications likely to happen in the next 10–15 years. “Hybrid models combining autonomy with human oversight could be dominating the skies by the early 2030s,” Stockwell said.
The Covid-19 pandemic, ongoing Russia-Ukraine war and Middle Eastern tensions have all contributed to a surge in supply chain bottlenecks and constraints in the last few years. These have led to long shipping delays and detours, a shortage of certain products, as well as significant financial losses.

Autonomous cargo and logistics aircraft have the potential to largely reduce many of these constraints. As such, these could likely be ready for large-scale operations as soon as the next five to 10 years, according to Sylvester Kaczmarek, chief technology officer at OrbiSky Systems. However, one of the main factors affecting the timeline for autonomous aircraft is how long it takes to properly understand the risks around artificial intelligence and autonomy, as well as to bring about the appropriate legislation to regulate this technology.

Disrupting the aviation sector
Autonomous aircraft can enhance decision-making and situational awareness, especially when analysing data with AI. They can also make hazardous area and remote operations easier, while slashing operational costs and having the potential for 24/7 operations. These aircraft could drastically increase efficiency as well, mainly through optimised fuel consumption and flight routes.

Bill Irby, the CEO of AgEagle Aerial Systems, explained: “The potential payoff is huge. Airlines and military organisations have gone through many periods of shortages and surplus of pilots and flight crews. Implementing autonomy could help even out the staffing surges.”

Autonomy could mean that more AI technicians and remote operators are required, rather than pilots, significantly changing the landscape of the aviation labour market. Smaller airline crews overall may become the norm. New business models from urban air taxis to high-frequency cargo drones could potentially transform the aviation industry at every level, according to Stockwell. Other business models include rapid middle-mile cargo and specialised delivery and surveillance airplanes.

Michael Healander, CEO and co-founder of Airspace Link, believes that the immediate impact of autonomous aviation will be seen through drones in areas such as infrastructure inspection, emergency services and agricultural monitoring.

“As the digital infrastructure matures, we will see integration with traditional aviation that will eventually extend to autonomous air taxis that move people as well as goods, revolutionising urban transportation networks while generating new revenue streams for airports and municipalities,” Healander explained. On the other hand, autonomy will also affect air space management, while requiring the entire industry to bring in more regulations relating to safety, security and fair use of technology.

Crunching the numbers
According to a recent report by McKinsey, a number of companies developing autonomous aircraft could potentially need anywhere between $1bn and $2bn for the development, prototyping and testing needed for type certification alone.

Irby noted that some of those investments were already underway. “Several Advanced Air Mobility (AAM)-focused organisations are already investing many millions of dollars in this emerging area. Government offices are engaged as well, and given what has been underway for the last few years in combat zones, it is evident that government tech investments need to increase to develop and field these technologies at a faster pace,” Irby said.

According to Healander, the US is now in a prime position to lead in the higher-value segments of autonomous systems and airspace management infrastructure. However, more investments from US tech giants, logistics and aerospace companies will be needed to speed up this transition. New models of declaring airworthiness and new equipment standards from both government and industry are critical too.

“The countries that will ultimately lead this space will be those that best balance innovation with appropriate regulatory frameworks – creating safe systems for autonomous operations at scale rather than just manufacturing the hardware,” Healander said. To launch autonomous aircraft on a large scale, along with regulatory frameworks, investment also needs to focus on public acceptance and technological infrastructure.

The private sector needs to keep working on detect-and-avoid systems, aircraft design and command-control solutions, among other things. Along with that, public-private partnerships will be key in accelerating this transition. One of the other things required would be advanced inertial navigation systems (INS), which includes next-generation optical gyroscopes. Better AI and autonomous decision-making systems are also needed, which are capable of safety-critical and real-time judgements across the aviation ecosystem.

Looking at the challenges
Along with the significant financial investment needed, one of the main challenges with developing and scaling autonomous aircraft is creating strong detect-and-avoid capabilities that will ensure safety in dynamic and complex environments. Developing the robust digital infrastructure needed to handle millions of daily flights remotely is also difficult.

Irby highlighted: “True machine-learning and autonomy are very complex areas that require tremendous computing power. This is one pacing limitation if edge-autonomy is the intent, given the size-weight-power tradeoff for aircraft.”

With autonomous aircraft, I think it will take longer to convince the public

Irby added: “The other complex area is moral clarity and moral application of autonomy. Nations have differing views on the technologies’ application, especially when considering the preciousness of human life.” Navigating the changing regulatory landscape while retaining public trust can be tricky too, especially when vehicles already offering some autonomous features, like Tesla, continue to face issues.
Bubb said: “How do we regulate autonomous aircraft to ensure they are safe? Given the recent spate of crashes that have taken place, and the deep concern the public has about aviation safety, how do we overcome that concern? With autonomous aircraft, I think it will take longer to convince the public, and we will have to work even harder than we are now.”

However, he pointed out that rapid developments in aircraft technology such as better navigation instruments, aerodynamic efficiency and cabin design are very encouraging.

Real-world testing is also much more difficult for autonomous aircraft than it is for autonomous cars, despite some of their similarities. “A UAV cannot just pull over to the side of the highway if there is a problem – so access to airspace for testing and acceptance of test failures are critical to advancing the technology,” said Stockwell.

Another major issue is cybersecurity protection of autonomous systems, as well as a risk management plan in case of technical issues and outages, especially given the widespread impact of the recent Microsoft and Crowdstrike outage. Cybersecurity can ensure that key tools such as navigation, command links and onboard systems are protected from attacks.

Air traffic integration, which involves managing mixed airspace with manned and autonomous aircraft safely, can be difficult too. “We believe the foundation of successful autonomy lies in navigation technologies that are fault-tolerant, precise, and independent, ensuring autonomous flight is not just possible, but safe and scalable in all environments,” Stockwell concluded. n

From oil to opportunity

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Project finance in the Gulf Cooperation Council (GCC) region is shifting. Hugh Morris, Senior Research Partner at Z/Yen, thinks this is because the market is maturing – particularly in terms of how political risk is seen in the region. This maturity has supported the creation of a pipeline of projects and funding because investors perceive that the geopolitical risks in the region are reducing, which permits more competition.

As a market the GCC is also attractive to them because in comparison the West offers lower risk and yields, and around the world there is a lack of low-risk, high-yield assets. Higher risk and higher yields tend to be available in the East. However, the Gulf sits in the middle of the two both geographically and from a risk profile perspective.

Morris therefore comments that lower risk makes it easier to finance projects, and so this is leading to an increased collaboration between international banks. While they have access to funds and the expertise in project finance, local GCC banks have the local market expertise and local contacts to ensure that a project is successful.

Risks nevertheless still exist. Some project finance contracts can last 20 years at least. Yet while repayments can take 12–25 years to complete, and while the duration of project finance deals is getting longer around the Gulf, many projects are refinanced early. As for debt financing, project owners do not guarantee repayment. That tends to come from any revenue that is generated from a completed and fully functional facility.

Repayment therefore depends on each project succeeding. This increases risk, and so banks expect to be paid a premium in return for accepting the high risks associated with it. To be competitive, lenders are offering better value deals. That is a hard prospect to achieve when they need to factor in industry rules on how much capital banks must hold. So, whenever the perceived or actual risk of supporting a project is high, banks understandably want to charge a premium in order to obtain a return.

Working collaboratively
With an eye on the increasing opportunity in the region, international banks, local banks, and credit agencies are working collaboratively to provide both short- and long-term financing. To get projects off the ground, project managers are opting for short-term financing, and over a longer period of time they typically replace bank financing with longer-term bond financing. “This enables them to lock in lower rates of interest and match long-term liabilities with long-term asset revenues,” Morris explains. It also permits the matching of revenue and costs to generate a return over the lifetime of an asset.

Saudi Arabia and the United Arab Emirates lead the pack in the Gulf, Morris says, because the largest finance projects are typically in one of those countries. A key driver is the “diversification away from oil and gas to build a post-oil and gas economy in Gulf countries,” and Morris suggests the nature of the centralised directives that emanate from their ruling families creates a short chain of command from political leaders to infrastructure projects.

For example, Morris reveals that “Saudi Arabia is investing in green hydrogen, and the UAE is investing in nuclear power. There are also major urban development projects, such as – in Saudi – the substantial development of Al Diriyah under the At-Turaif District Development Plan consisting of $50bn investment near Riyadh. The aim is to create a major cultural and tourist destination which will tap into the tourism market and replicate in Saudi Arabia what Dubai has achieved on the coast.” Nevertheless, a spokesperson for Bank ABC – Arab Banking Corporation, suggests that not everything is all rosy. It says there is allegedly a $5trn annual investment gap for clean energy and there are some COP29 shortcomings. The bank therefore feels that there is a need for financial institutions to take on a leadership role. This view highlights why so many of them are concentrating their investments on energy transitioning.

Project financing shift
However, there has also been a shift to financing projects such as hospital and education infrastructure. Ehab Nassar, a director at Fitch Ratings, comments: “It is coming on the back of the strategic shift away from oil dependency, and the governments are financing the projects as Public-Private Partnerships (PPPs).”

Banks expect to be paid a premium in return for accepting the high risks associated

Initially, before 2019, project finance was limited and GCC countries such as Saudi and the UAE began to develop their PPP frameworks in the GCC region’s bid to diversify away from oil and gas, while maintaining course with renewable energy and while moving towards social infrastructure.

Nevertheless, Christiane Kuti – a senior director at Fitch Ratings – says the Barakah nuclear plant in Abu Dhabi was not financed using a PPP structure. Instead, the finance involved a combination of debt and equity, including loans of $16.2bn from the Department of Finance of Abu Dhabi, and $2.5bn from the Export-Import Bank of Korea (KEXIM). There were also equity investments of $4.7bn from Emirates Nuclear Energy Corporation (ENEC) and Korea Electric Power Corporation (KEPCO) to establish the Barakah One Project Joint Venture Company.

The UAE recognised the project as being given a green loan because it is perceived by the authorities as playing a role in decarbonising the power grid, and for its contribution to the UAE’s green economy. Moreover, the project was refinanced in July 2023 by two leading Emirati banks: Abu Dhabi Commercial Bank (ADCB) and First Abu Dhabi Bank (FAB). They took over the loan facilities previously held by KEXIM.

Financing evolution
Abbas Husain, Head of Infrastructure and Development Finance at Standard Chartered, says there is a financing evolution in certain infrastructure projects in the GCC region. This is because re-financing is increasingly borne by the off-taker – the buyer of the product or service produced by a project. While structured on a ‘hard mini-perm’ basis, with a shorter date, they benefit from a long-term concession agreement.

The aim is to create a major cultural and tourist destination

Husain explains why this is invaluable: “Key benefits include lower financing cost that results in tariff competitiveness as well as an increase in liquidity to finance these projects. Deals are re-financed by project bonds or long-term commercial debt.” However, Husain adds that infrastructure projects, where the re-financing risk is not covered, “continue to be financed by long term commercial debt, including ECA financing which provides stability and cost-effective financing over the tenor.”

Credit agency support, from either export credit agencies or development finance institutions, is available to enhance the credit profile of projects. The aim is to make them more attractive to long-term investors. “This structure also facilitates access to alternative capital sources such as infrastructure funds and institutional investors that may otherwise be wary of early-stage construction risk,” Husain suggests.

Refinancing period
Mazen Singer – Partner in Infrastructure Finance at PwC Middle East, says that most project owners (sponsors) tend to want to refinance after a project has been operational over a period of five to eight years because the project will be at a stage where construction is complete, operations are stable, and at a point where revenue flows are more predictable.

Singer remarks: “At that point, the project’s risk profile has improved significantly, opening the door to more favourable financing terms, and this gives sponsors an opportunity to lower the overall cost of capital, optimise their debt structure, and in some cases, release capacity to fund future development.”

Singer warns that waiting longer could dilute some of the refinancing benefits, particularly as the remaining debt tenor shortens, and because this can reduce the positive impact of refinancing once a project is self-sustaining. However, Singer is seeing a broadening of the financing landscape in the region. For example, more export credit agencies are active. Singer says this reflects the scale of infrastructure investment there. This includes infrastructure funds that are “drawn by mature, cash-generative assets, and capital markets are increasingly receptive to well-structured opportunities.”

The Gulf is well-placed to be among the leaders of the next phase of global infrastructure financing

Husain adds: “As the Gulf has matured as a project finance destination, with better regulatory and governance frameworks, clearer procurement processes, and higher-quality sponsors, banks have become more comfortable with the risk.” Husain believes this is complemented by the region’s strong sovereign backing as the off-take risk is typically emanating from a state-owned utility “or back-stopped by a Ministry of Finance, which has reduced perceived credit risk, allowing banks to price more competitively.”

Morris suggests there are a sufficient number of completed projects in the GCC region to see a “pipeline of successful financing, and so the projects look sensible to invest in one after another.” The projects and the collaborative nature of financing and investing in them, Morris says, demonstrate the determination of the governments in the region to build a post-oil future that involves well-run infrastructure projects as they can be a very good class of asset for investment.

However, Morris warns, there is a need to maintain tight control of what investors take out in equity returns because they can be accompanied by debt loading. Morris argues this is what the regulator in the UK failed to do with that country’s water industry. This action left the industry saddled with debt, while investors took out handsome equity returns.

Still some work to do
Nassar and Kuti think there is still a lack of case history, which brings uncertainty. For example, the enforceability of security in the Gulf region and a higher level of transparency in the sharing of information are much needed. So there is still some work to do to reduce risk by enforcing laws, and by developing appropriate regulatory frameworks across the GCC.

Regulatory frameworks are key to boosting project finance across the region, as they will bring in the capital markets at a time when the funding needs are significant. This stage of development differs materially across the GCC, with the UAE and Saudi being the most advanced markets.

Husain concords with industry analysts that progress in project finance transformation is nevertheless significant within the Gulf. However, Husain would like to see a greater standardisation of PPP frameworks across jurisdictions to enhance bankability, and deeper secondary markets to support refinancing and portfolio diversification. If refinancing risk were borne by the off-takers, there would be an enhancement of liquidity for financing infrastructure projects.

Husain ends by saying that with continued regulatory innovation and stakeholder collaboration, the Gulf is well placed to be among the leaders of the next phase of global infrastructure financing.
To achieve this end, Singer concludes that the region needs to continue to attract and develop the necessary expertise and institutional capacity. That can be done by fostering national and regional champions in project finance.

How banks are shaping the AI age

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AI has transformed the financial services industry at speed. From fraud detection and customer onboarding to trading powered by AI insights, it is already reshaping infrastructure and competitive dynamics. According to the Bank of International Settlements, 70 percent of global banks are already deploying or piloting AI in core business functions.

But global AI regulation remains fragmented. The US still lacks comprehensive federal laws and the EU AI Act is redrawing the compliance landscape. For the financial services industry, navigating this picture is a strategic challenge. Many banks are choosing not to wait, moving faster than lawmakers. Evident’s ‘Responsible AI in Banking’ report found that 41 of the world’s 50 largest banks now have dedicated RAI risk and ethics specialists.

What does responsible AI look like?
The real story isn’t banks surging ahead of regulators though – it is that they have recognised the need to do so. AI is both a potential competitive advantage that cannot be ignored and a different type of risk – one that extends beyond traditional model governance into the systems, structures, and culture that support its use. In a high-stakes environment where trust, compliance, and competitiveness are converging, the most advanced banks are redefining what good governance looks like in anticipation of regulation, rather than waiting and reacting. A consensus is emerging: the core principles of RAI must include accountability for outcomes, explainable AI development, and a clear alignment with company ethics and standards. But this is not a checklist; it is becoming a set of strategic imperatives for banks.

A global race for talent
Nowhere is this shift clearer than in hiring. RAI-related recruitment has surged 41 percent year-on-year, even in an otherwise cautious hiring environment. That isn’t just a data point, it is a signal of priorities. Where the talent goes, strategy follows. The number of RAI roles is growing across territories, but the drivers vary. While anticipation of new AI regulations and standards is universal, exposure to EU regulatory pressure may be an accelerator for European and UK banks, which have seen fastest growth in talent.

With governance in place, banks can move quickly on high-potential use cases

North American banks are still signalling that they are taking RAI seriously. Four of the top five banks publishing research papers on RAI-related topics like control mapping and explainable AI are headquartered in the US or Canada, with JPMorgan Chase leading the way. Hiring is not limited to technical teams. Banks are recruiting across AI risk compliance, policy, ethics and more. This means oversight is needed too. Already, 18 of the 50 banks tracked publicly in our AI Index have formed a cross-functional AI Risk or Governance Committee. The rapid growth in RAI hiring in the UK means that ‘Head of Responsible AI’ positions are more common there, though it is likely we will see more of these roles appearing elsewhere alongside broader AI growth.

Despite regional differences, the message is clear: Responsible AI cannot be retrofitted. The leading banks are applying RAI principles not only at the end of the line in model validation or compliance review, but earlier on in problem definition and data selection too. This full lifecycle approach is noticeable in high-impact areas such as credit scoring, lending, and fraud detection, where trust is particularly essential.

Having strong guardrails in place doesn’t need to be a brake – it can be a catalyst to innovation. With governance in place, banks can move quickly on high-potential use cases – like accelerating document processing, improving customer service, and enhancing fraud detection – without fear of backtracking later. First hand experience from leaders quoted in our recent RAI report shows that embedding risk management and ethics into a company’s culture as part of the early development lifecycle is crucial to avoid the loss of invested cost – not to mention to avoid potential damage to customer trust. The smarter approach is to build resilient systems now.

Shaping the future
First movers are also in a better position to shape future regulation, not just follow it. These banks can bring real-world insight into consultations as lawmakers define what best practice looks like. For the customer, RAI ensures fairer, more transparent decision-making. Younger consumers in particular are embracing AI-powered tools to help support their financial wellbeing, but their expectations are high. Good governance is needed to make sure models are explainable and that bias is mitigated.

Banks know they can’t afford to wait. Being ahead of regulation isn’t about avoiding oversight, it is about setting a higher standard. Embedding responsible practices early will allow banks to innovate, protect customers, and stay ahead of future compliance challenges. Responsible AI is no longer a final checkpoint. It is fast becoming the foundation for how banks operate, compete, and create lasting trust. Those leading the charge aren’t just ready for the future, they are helping to build it.

The subscription economy slowdown

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For more than a decade, the subscription model has reigned supreme. From streaming giants like Netflix to SaaS start-ups and direct-to-consumer services, recurring revenue has become the holy grail for business models across sectors. Investors love the predictability, companies value the customer loyalty it fosters and consumers, at least initially, embraced the convenience.

Now it appears that subscription fatigue is setting in. The term coined to describe consumers’ growing reluctance to engage with an ever-expanding roster of recurring payments is fast becoming a concern for business leaders and investors. With consumers re-evaluating their digital wallets and churn rates on the rise, it is time to ask: Has the subscription economy peaked? Or is this merely a necessary recalibration in a maturing market?

From innovation to saturation
The success of the subscription model was once considered a sign of forward-thinking business acumen. The model delivered steady income streams, customer loyalty and higher lifetime value. It transformed product categories, turning everything from software and entertainment to pet food and razors into services. Between 2012 and 2022, the subscription economy grew by more than 435 percent, according to data from Zuora’s Subscription Economy Index. SaaS companies like Salesforce and Adobe became household names. Traditional businesses rushed to pivot. Even carmakers began experimenting with subscription-based access to vehicle features.

But as the model scaled, cracks began to show. What started as a convenience, a single-click, monthly bill for services we used regularly has become, for many, an overwhelming tangle of micro-payments. The average consumer today manages anywhere from six to 12 paid subscriptions, depending on geography and age group. The mental load is growing. And so is the frustration.

A fatigue-driven reversal
A recent academic paper published at the Proceedings of the third International Conference on Optimisation Techniques in the Field of Engineering (ICOFE–2024) takes a deep dive into the subscription phenomenon. Titled ‘Statistical Analysis of Subscription Fatigue: A Growing Consumer Phenomenon,’ the study by Sunori, Mittal and Gangola investigates the psychological and behavioural triggers behind subscription fatigue.

As more companies adopt subscriptions, the uniqueness of the model has eroded

The authors identify three key drivers: lack of perceived value, hidden or unpredictable fees and loss of control. As more companies adopt subscriptions, the uniqueness of the model has eroded. Many users now feel they are paying regularly for content or services that deliver little incremental benefit. Consumers also increasingly report frustration with tiered pricing, automatic renewals and freemium models that lead to unexpected charges.

Finally, the inability to manage or track multiple subscriptions easily contributes to a growing sense of overwhelm, leading to attrition. Combined, these factors erode loyalty and trust, two foundational elements of the subscription promise.

The numbers behind the trend
While full-scale collapse is unlikely, the subscription economy is clearly entering a more mature and arguably more volatile phase. A 2024 report from Antenna, a subscription market analytics firm, revealed that churn rates for video-on-demand services reached an all-time high of 44 percent in Q4 2024. SaaS businesses, too, are seeing rising customer acquisition costs and declining net revenue retention, a double hit that undercuts the long-term profitability of the model.

Consumer surveys tell a similar story. According to the UK’s Department for Business and Trade who have launched a consultation on measures to crack down on what they call ‘subscription traps,’ nearly 10 million of 155 million active subscriptions in the UK are unwanted, costing consumers £1.6bn a year.

Business Secretary Jonathan Reynolds said: “Our mission, which is tackling subscription traps that rip people’s earnings away, is an important part of that. Everyone hates seeing money leave their account for a subscription they thought they had cancelled, or a trial that unexpectedly gets extended. We are looking to hear from as many businesses, consumer groups and other interested groups as possible to allow us to set fair regulations that stop this corporate abuse of power while retaining the benefits of subscriptions for consumers and businesses.”

Deloitte’s 19th annual ‘Digital Media Trends’ report also found that consumers are increasingly dissatisfied with the value of paid streaming services. Even though 53 percent of consumers surveyed say that streaming video on demand services are the paid media and entertainment services they use most frequently, almost half (47 percent) say they pay too much for the streaming services they use, and 41 percent believe the content available on these services is not worth the price (up five percent from 2024). A price hike of $5 would be likely to make the majority (60 percent) of consumers cancel their favourite service.

And while the cost-of-living crisis in parts of Europe and North America certainly contributes, the deeper issue is structural: subscriptions are no longer novel, and consumers are becoming more discerning about where they spend their monthly budgets.

Winners and losers in the next phase
Importantly, not all subscription businesses are experiencing the same levels of fatigue. Some have weathered the storm better than others. The difference lies in how well the service aligns with customer value and how flexible the business is in responding to changing expectations. Services that are truly integral to daily life, such as productivity tools like Microsoft 365 and Dropbox, health and wellness platforms like Strava, or high-engagement entertainment like Spotify or Disney+ tend to maintain stronger retention. These companies have invested heavily in clear pricing and cancellation policies, personalised content or features and frequent, visible product updates. Crucially, they make it easy for customers to understand what they are paying for, and why it is worth it.

On the other end of the spectrum, many niche services or companies with minimal product differentiation are struggling. Despite having 45 million subscribers, Apple TV+, for example, reportedly incurs over $1bn in annual losses. The platform captures less than one percent of total US streaming viewership, lagging behind competitors like Netflix. High production costs and limited audience engagement contribute to this subscription model’s financial struggles.

Amazon Prime is also struggling. The introduction of additional advertisements in 2025 has led to subscriber dissatisfaction. Users now need to pay extra to avoid ads, prompting some to consider cancelling their subscriptions. Companies like Garmin and Polar have introduced subscription fees for features that were previously free, also leading to user backlash. Consumers have expressed frustration over paying for functionalities that were once included with device purchases.

The era of ‘everything-as-a-subscription’ from digital fitness classes to premium recipe apps is being ruthlessly culled by consumer pragmatism. Likewise, businesses that rely on passive engagement (the assumption that users will forget to cancel) are seeing that strategy backfire. With fintech tools and banking apps now offering subscription tracking and cancellation features, the days of accidental renewals are coming to an end.

Is this the end of recurring revenue?
Not quite. But it is the end of blind faith in the model. The golden era of subscriptions was driven by novelty and investor enthusiasm. But like all financial trends, the hype curve eventually levels off. What is left is a need for quality and sustainable economics.

Investors, once obsessed with monthly recurring revenue, are now scrutinising unit economics more closely. What is the actual cost to acquire and retain a subscriber? How long does it take to recoup that investment? And is the model still viable without aggressive discounting?

The subscription model is entering a new phase where survival depends on depth, not breadth

Subscription businesses are being pushed to evolve. In many cases, that means offering hybrid models that combine one-time purchases with added subscription perks and creating modular pricing tiers that better reflect real usage patterns. Rather than chasing pure subscriber volume, companies are increasingly focusing on metrics like net retention and user engagement. This evolution mirrors a broader shift in the digital economy, from a growth-at-all-costs mentality to a more responsible, resilient approach to long-term success.

A recent study by research agency 2CV highlights growing consumer frustration with subscription models and how to build trust and long-term loyalty, suggesting that providers must focus on clear and consistent communication.

As the report notes: “Subscription providers need to properly understand their subscribers, what are their expectations, their preferences, wants and needs? Really knowing your audience and aligning subscription plans to their preferences can help retain consumers, build loyalty and prevent them from cancelling in preference for more appealing offers elsewhere.”

For financial professionals and corporate strategists, the implications are significant. Key questions for subscription-based businesses today include whether their model genuinely reflects real consumer value or if it is simply propped up by customer inertia. They must also consider what safeguards are in place to protect against churn shocks, particularly during economic downturns. Agility in adjusting pricing and packaging is critical, as is ensuring that KPIs and dashboards measure the quality of retention, not just the number of subscribers.

It is also a moment to re-assess valuation models. Recurring revenue still offers stability, but the premium investors have placed on the model may need recalibrating. In short: it is no longer enough to have subscriptions; you must have subscribers who stay.

What comes next?
Much like the evolution of e-commerce or mobile apps, the subscription model is entering a new phase where survival depends on depth, not breadth. Companies will need to earn their recurring revenue every month, not assume it. The future of subscriptions lies in trust, transparency and tangible value. Those who listen to consumer signals and respond with clarity, flexibility and innovation will not only survive this phase, but thrive in it. And for the rest? The unsubscribe button has never been easier to find.

The new geopolitical battleground

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If money is politics in an era of shifting geopolitical sands, central bank digital currencies (CBDCs) and the underlying infrastructure will be a crucial chip in the competition between China and the West, claims Brunello Rosa, head of consultancy firm Roubini & Rosa Associates, in his book Smart Money: How Digital Currencies Will Shape the New World Order. A former Bank of England economist who teaches at the LSE and Bocconi University and advises a UK parliamentary committee on CBDCs, the Italian thinker has an inside view of how technology shapes the emerging monetary order. In an exclusive interview with World Finance’s Alex Katsomitros, Rosa argues that China’s digital renminbi is part of a ploy to undermine the western monetary system in tandem with its Belt and Road Initiative, whereas President Trump’s digital dollar ban and culture wars over privacy and ‘programmability,’ the ability of CBDC issuers to automatically set conditions for their use, may set the US back.

Why has a technical topic such as CBDCs become so politicised?
They are indeed a technical adjustment to the liability side of central banks’ balance sheets. But there is also a geopolitical dimension, because this is how China can internationalise the renminbi. There are also concerns over privacy, an inherently political issue. Finally, flags, national anthems and currencies are symbols of sovereignty. Once you start altering them, politicians want to have a say.

Are concerns over privacy and programmability warranted?
The ability to track transactions raises concerns, but banks and credit card issuers already do that. Central banks provide stronger privacy guarantees. An authoritarian government could use this information against you. But the problem is the authoritarian state, not the instrument. They could abuse any technology. So this concern is not entirely warranted. Plus, there are ways to minimise the problem, although not completely eliminate it. It is different with programmability. People believe that governments and central banks will control how they spend money.

You want to buy cigarettes and the state forbids that. But the probability is low. Programmability allows money to do things it couldn’t do before due to embedded smart contracts. This feature could be used for good or bad purposes. Think of nuclear energy: you can have unlimited energy or a nuclear bomb. It is not the technology that matters, it is the way it is used.

The new US administration supports cryptocurrencies, but President Trump has banned the digital dollar. What is your take on US policy?
The US has a different tradition from China’s, so instead of a state-backed CBDC, they chose a private-sector solution: stablecoins. They will just regulate stablecoins and other cryptos. Eventually they will realise, possibly after a crisis, that the system only works well with a CBDC as the foundation of trust. Without it, the digital asset environment is inherently unstable.

Some think that stablecoins could help the dollar remain the global reserve currency in the digital era. Do you agree?
I do. China has made its move with a state-backed solution that will facilitate the international use of the renminbi. The US decided to go the other way with stablecoins. Even with the narrower definition of stablecoins, issuers will need to keep a large amount of liquid assets to guarantee the one-to-one peg with the dollar. Those dollar-denominated assets are almost certainly US Treasuries, which helps sustain demand for them despite reduced confidence in US assets amidst a trade war. The US response is a smart move, but their success depends on how acceptable these stablecoins will be worldwide.

Would a retail CBDC pose a threat to commercial banks?
People fear it could lead to disintermediation and ask: Why should I keep my money in a commercial bank deposit account, when I can keep it in a safer central bank account? There is only limited risk, because in a two-tier system, the central bank would have liabilities, but commercial banks would maintain the customer relationship, issuing the wallets.

You can introduce – and Europeans want to do that – holding limits on the amount of CBDC held by individuals. Eventually banks will continue to extend credit, not central banks. If you want a loan, you will still have to go to the bank. But banks will need to adapt to the new reality. Making money out of payments to people and companies may not be possible. They need to find new revenue streams. For example, they can issue their own stablecoins or tokenise their deposits and add functionalities to their liabilities.

What is the link between smart money and the global race for resources?
It is the same geopolitical dimension at play when we talk about rare earths, tariffs, seizing territory, say Greenland or Taiwan. China has launched the Belt and Road Initiative, its sister project called Digital Silk Road, its CBDC and also agenda 2025. So there is a continuum of projects bringing China to the next level of technological development. Once you start building infrastructure for bridges and ports, you also build digital infrastructure: payment centres, data centres, 5G, telecommunication satellites, e-government in various countries. Part of this is the payment system where the digital renminbi will run. All these things are closely related.

Is de-dollarisation their endgame?
After WWII, to turn the dollar into the global reserve currency the US decided to run a current account deficit, which is what the current administration is worried about. Well, they wanted it in the first place! They also accepted having an open capital account, meaning that they had to send dollars overseas to pay for imported goods, but also to be converted into other currencies. China does not want to do that. China wants to remain an export-led economy, not a consumption-led economy like the US, and therefore it has a current account surplus, meaning that more renminbi comes in the country than goes out. They do not want to open their capital account. That would cause a massive outflow of money because people fear that the government can seize their money. So how can the renminbi become a reserve currency? Well, technology is the answer. If China builds the rails on which digital payments are run, it wouldn’t matter whether it has a current account surplus. What matters is who builds and controls that infrastructure, and it’s China. That is the way for China to establish a reserve currency in its sphere of influence.

Are there any risks for China?
If China does not achieve these goals peacefully, it may become more aggressive geopolitically. Instead of focusing on economic prosperity, it may get into foreign adventures, something it has avoided over the last 100, if not 1,000 years. China has never been expansionist. They might be tempted to do so, but I don’t see this as the most likely scenario.

Can the West catch up, given China’s 10-year head start?
It is difficult. If you are 10 years behind, you can’t catch up in 10 months. But the EU has shown that if you put your mind to it, you can achieve remarkable results relatively quickly. They started working on it around 2018. They are now finishing their investigation and preparation phase and implementation starts in October, which could lead to a 2027 launch. You cannot catch up, because meanwhile China will have progressed. But you can partly recover the lost ground, if you are consistent. For the US, the problem is the presidential ban. It will be difficult to catch up, because they will waste four more years. They bet that private solutions will do the job, and a public safe asset won’t be needed. That is not a safe bet. The US should adopt a public safe asset for its citizens’ digital wallets.

What will be the differences between liberal and authoritarian CBDCs?
The technology offers the issuer plenty of control. Potentially, you can track or at least reconstruct ex post every transaction, which could be a significant control tool. The challenge is having good governance that makes the system less pervasive.

You can’t provide full anonymity; only cash guarantees that. But you can make sure that people’s identity cannot be discovered without a judicial warrant and they can spend money without government interference. Programmability will only be used when you receive money so that governments can implement targeted fiscal policies focusing on specific groups or even individuals, but there will be no control of how money is spent. Authoritarian CBDCs could be used as instruments of surveillance to prevent people from doing what they want. But it is the country’s leadership, not the technology, that matters. Authoritarian regimes will choose authoritarian solutions.

Doesn’t that lead to a fragmented global monetary system?
The system needs to be interoperable, meaning that solutions adopted by individual countries should be integrated internationally. If not, instead of having a homogeneous monetary system whereby money can flow instantaneously, we will have a more balkanised system where money meets more obstacles. Countries need to cooperate and find common protocols, but in the current fragmented geopolitical environment, this might be a challenge.

Is a global CBDC, like a digital version of Keynes’s Bancor, a viable solution?
Keynes proposed Bancor in Bretton Woods, knowing that history could repeat itself with protectionism, trade wars, authoritarian regimes and eventually war. He thought that reducing trade imbalances was important to avoid a repeat of history. The IMF was established to do that and make sure that no country could exploit the exorbitant privilege a reserve currency offers – first to Britain, then the US. But he lost the argument to Harry Dexter White, the US envoy, on the grounds that the dollar could serve as a reserve currency. Could we see a digital Bancor? As it was not accepted back then, it is unlikely to be accepted now. Which central bank will issue and manage that currency? Theoretically speaking, perhaps the IMF. But there is no consensus for making them an international currency issuer. Bretton Woods institutions are under attack, even from the US where they are based. So I do not see a digital Bancor emerging anytime soon. If anything, we are moving in the opposite direction: a plethora of private-issued stablecoins that may mark the return of ‘free banking’: institutions issuing their own liabilities. This is the risk the Bank for International Settlements has identified and why they do not like stablecoins.

The rise of eco-commerce

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The climate crisis has rightly or wrongly become a multi-billion-dollar marketing opportunity, but for individual consumers, the simple decision to ‘buy green’ can in fact be fraught with challenges. What use is buying an item marketed as eco-friendly but purchasing it from well-known polluters like Temu, which mass-produce thousands of tons of plastic per day, wrap it in more plastic, and ship to your door from thousands of miles away? And can we expect the everyday consumer to know and understand the implications of every single purchase in order to arrive at a decision that feels good but actually does good too?

For decades, small-scale, profitable eco-initiatives that blended environmental messaging with commercial success have launched, grown, become darlings of the market, and been snapped up by multinationals or, worse, had a crash down to earth after initial success. Big names that seemed to get this right for a long time were Tesla (at the vanguard of the EV sector until the recent catastrophic market consequences of Musk’s entry into politics), the Body Shop (independent for decades, bought by L’Oréal in 2006, and barely survived administration in 2024), Innocent Smoothies (famously now owned by Coca-Cola) and Wild plastic-free deodorant (recently acquired by Unilever).

Buying green and feeling seen
Ethical start-ups capture the hearts and minds of consumers who want to ease their conscience, but is it ‘selling out’ when those brands are acquired by big players, even if they are offering the capacity and resources to make the large-scale impact founders dream of? With every small start-up product that gets snapped up, fans of the original complain vehemently, but it also speaks to the willingness of corporates to pay attention and respond to consumer demand.

Certainly, big companies are buying the disruptors’ reputations that they could not generate organically, but it also speaks to an awareness of market trends towards that which is sustainable, low-carbon, and scalable as well as lucrative. It is a tricky route to navigate; maintaining the authenticity of these brands after acquisitions is crucial, as that often serves as their key differentiator. The moment that unique appeal fades, the brand risks becoming just another product, leading to disillusioned customers going elsewhere. But the reality is that customers who buy these products are often prepared to pay a premium, and big brands know this. They can market the product as a way for consumers to ‘do their bit’ and charge more accordingly, often because higher-quality, low-carbon emissions products genuinely do cost more to make and distribute, but also because there is a healthy profit margin that can be built in when such production happens at the scale that the big brands can access.

The cost of overconsumption
Anything and everything we purchase takes some sort of resource from somewhere, and that can feel difficult to grapple with for large, research-heavy purchases like cars, let alone dozens of times per week in your average supermarket shop.

Customers who buy these products are often prepared to pay a premium, and big brands know this

No one can claim ignorance of the crisis at hand: buying any item in 2025 means stewardship and responsibility of that item, including its packaging, carbon footprint, air miles, and disposal at the end of its useful life. That should be considered when making the decision to buy.

It is easy to simply say ‘buy less,’ but even that requires a level of diligence and determination to beat the algorithms slickly designed to sell, sell, sell, no matter the environmental cost. We can, and should, take a moment before spending our money anywhere to think – do I really need this? Where is my money going? Can I afford it, and what is the impact?

However, from making the items that are available in the first place, to considering options for environmentally friendly disposal at the end of their life, every consumer is operating within an imperfect system. Those of us privileged enough to be able to choose can do so in a way that strikes a balance between ethical and convenient. But the poorest in society, those who cannot access high-quality organic foods, plastic-free household items, electric vehicles and so on, must also operate within such a system, and with less privilege and bandwidth to allocate to such decisions. It is how the system supports itself, and us, to do better, that makes a bigger difference. While green consumerism is a step forward, vigilance is needed to ensure real impact, not just profit or empty promises.

Africa’s missed opportunity?

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Historically, Africa has been consistent in creating a pattern of pursuing integration through grand masterplans. Many have remained just plans on paper due to mediocre implementation. A similar trend is shaping up with the African Continental Free Trade Area (AfCFTA), an agreement that was touted as the holy grail in revolutionising trade, investments and economic development.

On May 30, the continent marked the sixth anniversary of the signing of the AfCFTA agreement. Like many other grandeur treaties, AfCFTA is at the risk of losing its allure. Granted, only Eritrea has openly called the agreement pointless and opted to keep away. Burkina Faso, Niger and Mali have been suspended after military juntas instigated coups. In essence, 45 countries of a total of 48 that have ratified the agreement believe in the principles of AfCFTA. In reality, this is as far it goes – belief in the ideals of the agreement.

Africa Kiiza, PhD Fellow at Germany’s Universität Hamburg, captures the picture. “The aspirations and ambitions of AfCFTA are brilliant. The problem was in putting the cart before the horse,” he says. He explains that, in desperation, African leaders rushed in signing a ‘shell’ of an agreement hoping to resolve a mountain of obstacles along the way. Evidently, tackling the hurdles amid shifting internal and external geopolitical and economic landscapes is proving herculean.

On aspirations, the continent did paint a rosy picture. First was the elevation of AfCFTA to the pinnacle of Agenda 2063, putting the agreement as one of the flagship projects. The expectation was that the agreement would be the ultimate solution in resolving fundamental economic problems bedeviling the continent, namely low levels of integration, overreliance on commodity exports and limited market access for African businesses. By creating a single market for goods and services, the agreement would solidly lay the foundations for the establishment of a continental customs union. Notably, these are key preconditions for the establishment of the African Economic Community.

Boosting intra-Africa trade
For AfCFTA, the goals are clear-cut, at least on paper. The overriding goal is the creation of a single market of 1.3 billion consumers with a combined gross domestic product of $3.4trn. It has other vast benefits. Most prominent is boosting intra-Africa trade by 53 percent, growing the manufacturing sector by $1trn, generating income worth $470bn, creating 14 million jobs and lifting 50 million Africans – or 1.5 percent of the continent’s population – out of poverty.

The fact is that Africa’s future is being imagined through frameworks imported from elsewhere

Six years down the line, the realities of putting the cart before the horse are glaring, with some bordering on absurdity. A case in point is the fact the AfCFTA Secretariat, which was established in 2020, continues to be financed by the German development agency GIZ, which also finances negotiations besides offering technical assistance. Thanks to GIZ, progress has been achieved on the legal construct of the agreement cutting across rules of origin for some sectors, dispute settlement mechanism and digital trade, among others.

GIZ’s support cannot be underestimated. However, it has exposed Africa on two fronts, one being administrative inefficiency and the other being the tendency to cling to the dependence of the ‘economy of borrowed institutions.’ “The fact is that Africa’s future is being imagined through frameworks imported from elsewhere,” observes Prof Dunia Zongwe, Associate Professor of Law at the University of Namibia. He adds that the situation is complicated by deep-running historical ideological tensions between Africa’s neoliberal and Pan-Africanist doctrines that have catalysed the continent’s integration curse for decades.

Slower than expected trading levels
The impact has been a slow implementation of AfCFTA. Prior to the signing of the agreement, total formal trade within the continent totaled between 12 and 18 percent. In 2022, the Guided Trade Initiative was launched to kick start actual trading under AfCFTA. Yet, intra-Africa trade remains at below 20 percent. Last year, trade between African countries rose by 7.7 percent to hit $208bn, according to the African Export-Import Bank. The level of value addition remains lacklustre, with total value of exports standing at $682bn and imports $719bn.

By the end of 2024, 31 countries out of the 45 had initiated some form of trade, albeit quite negligible. The growing number, a significant increase from seven in 2023, coupled by the adoption of three new protocols on investments, intellectual property and competition, are a demonstration that Africa is committed to building momentum in deepening the goals of the framework. The ultimate hope is to increase intra-African trade to 53 percent, putting it on par with other continents where intra-trade is booming. In Europe, it stands at 68 percent, Asia at 59 percent and North America at 51 percent.

“The fruits of the trading bloc are low-hanging, but they will ripen incrementally depending on the implementation of the agreement,” observes Prof Zongwe. He adds that, so far, the continent is performing dismally, with a low policy implementation rate of only seven percent. Even the Africa Union (AU), the highest governing body, has admitted that so far, it has been a case of misses rather than hits on AfCFTA.

A number of obstacles to overcome
The reality is emerging that to make AfCFTA work and for Africa to realise the full benefits, the difficult task lies in tackling the myriad structural, logistical, political, economic and other obstacles facing the agreement.

Addressing these challenges is proving to be slippery mainly because most countries, particularly the least developed, peg their development on inward looking as opposed to outward integration. Most aver that AfCFTA is ultimately designed to benefit the big economies that are in desperate need of new markets for their goods and services. For them (small economies), the agreement is a pursuit of profits as opposed to equality.

Kiiza gives practical examples. A US citizen has the luxury of traveling to 24 African countries without a visa. For a Uganda national, the same applies to only nine countries. This sorry state of affairs has come about by the deliberate refusal by countries to ratify the AU’s protocol on free movement of persons. Only four countries have ratified the protocol.

It gets worse. Despite being a major producer of cocoa, only second to Côte d’Ivoire and accounting for a quarter of global production, chocolate exports from Ghana to South Africa attract 30 percent in tariffs. For Switzerland, chocolate exports to South Africa attract zero tariffs.

If that is not preposterous enough for a continent craving integration, the economic disparity gives context. Burundi, whose economy is worth $3bn, is expected to open 97 percent of its market. The same applies to Nigeria, with a $487bn economy.

“The idea that liberalisation and tariff removal before building the capacity of small nations will automatically increase trade is flawed,” notes Kiiza. He adds that the continent must apply brakes on political expediency and focus on the fundamental blocks that will make AfCFTA work.

In fact, the inability of the various regional economic community blocs to flourish, despite being the foundations on which AfCFTA stands, offers vital lessons. The East Africa Community (EAC), for instance, is disintegrating due to political and economic rivalry.

Expensive barriers in the way
Top on the list of enablers that need fixing is the infrastructure conundrum. Undoubtedly, poor transportation networks, inadequate logistics systems, and inefficient border procedures are huge obstacles to trade. The physical barriers make it more expensive for businesses in Africa to trade with each other than with partners outside the continent. It is not hard to see why. In sea trade, for instance, 98 percent of shipping lines are foreign owned. For them, it makes economic sense to flood Africa with foreign-made goods that struggle to fill a container with goods produced in the continent. The challenge extends to rail transportation, where low investments have bred insignificant connectivity at a mere 0.1 percent.

While poor connectivity is a major factor in the high costs of goods produced in Africa, non-tariff barriers (NTBs) have become the toys of trade in pursuing political interests and entrenching protectionism. Subsidies, import bans, complex customs procedures, regulatory inconsistencies, corruption and other administrative hurdles continue to impede cross-border trade. In EAC, for instance, the direct cost of NTBs was estimated at $17m in 2023. Considering that AfCFTA lacks any prohibition on subsidies, which together with dumping cases count among the most litigated issues before the World Trade Organisation, it means Africa can expect NTBs to continue being used to undermine fair competition.

On tariffs, the continent has structured a progressive reduction over a 15-year period, with the ultimate goal being to liberalise 97 percent of goods by 2034. This is already proving problematic, with many of the scheduled tariff reductions yet to take effect, yet the deadline is less than a decade away. “Some countries balk at fully opening their markets because they fear losing revenue from tariff reductions or the adverse effects of stiffer competition on domestic industries,” says Prof Zongwe. He adds the fear emanates from the fact that, for most countries, the production structures are largely similar.

As a pain-reducing mitigation on the effects of tariff reduction, the continent has a $10bn Trade Adjustment Fund in place. Apart from mitigating potential negative impacts, such as tariff revenue losses and market disruptions, the fund will also be utilised in addressing the infrastructure deficits and supply chain bottlenecks. This is critical because Africa understands that for AfCFTA to have any semblance of success, the continent must break from the colonial yoke of exporting raw materials and commodities and importing finished goods. Essentially, value addition must become the new mantra.

India rising: the world’s newest growth giant

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With the US doubling down on economic nationalism during President Trump’s second term, multinational corporations are accelerating their ‘China-plus-one’ strategies – and increasingly, that ‘plus-one’ is India. With its tech-savvy workforce, swelling middle class, and pro-business policy incentives, India is fast becoming more than a hedge against China: it is emerging as a standalone growth story. The shifting geopolitical winds, coupled with India’s demographic advantage, are redirecting global capital – and few relationships matter more in this transition than the one between Washington and New Delhi.

According to research by the German financial services multinational Allianz, India’s talent pool and demographic advantages, coupled with lower unit labour costs relative to its Asian neighbours, make it an attractive choice for re-shoring operations. Moreover, economic reforms and initiatives by the government to revitalise the manufacturing sector such as the Production Linked Incentive – a scheme that incentivises firms to increase domestic production – will be contributing factors for multinational firms to choose India to be China’s plus one. The share of high and medium skill-intensive manufacturing sectors out of the total was 64 percent in India in 2022, and grew by five percent from 2016, outpacing China, Malaysia, Indonesia, Thailand and Vietnam in terms of growth. Through knowledge spillovers, efficiency gains and innovation, high and medium skill-intensive manufacturers can further accelerate the manufacturing sector in India.

“India offers what investors seek in the post-globalisation world: scale, stability and strategic alignment with the West,” says Fei Chen, CEO of Intellectia AI, an AI-native investment platform based in Hong Kong. “The macro story is increasingly hard to ignore.”

The making of a strategic economic axis
The evolving bromance between President Trump and Indian Prime Minister Narendra Modi is reshaping economic flows and recalibrating alliances. In February 2025, Modi’s high-profile visit to Washington culminated in an ambitious joint target: to increase bilateral trade from $129bn in 2024 to $500bn by 2030. While recent US tariffs on Indian goods – most notably a proposed 26 percent levy – sparked brief tensions, the measure has been suspended until July, and both sides are actively negotiating a broader trade pact.

If China was once the ‘factory of the world,’ India is now vying to be the world’s innovation lab

“Modi and Trump are politically aligned in ways that make their economic partnership more durable,” says Robert King, CEO of the UK-based Acuity Knowledge Partners. “They are both strong leaders with nationalist platforms, and both recognise the value of deepening commercial ties.”

This alignment has opened the floodgates for foreign direct investment (FDI). In just the first nine months of FY2024, India attracted $41bn in FDI, a 27 percent year-over-year increase. US firms are at the forefront of this shift – part of a larger move to derisk supply chains and diversify manufacturing bases beyond China. Moreover, Indian companies are increasingly becoming exporters of capital themselves. In 2023, India invested $4.7bn in the US – about three percent of all US inbound FDI – with expectations of rapid growth ahead.

India’s tech-driven investment boom
If China was once the ‘factory of the world,’ India is now vying to be the world’s innovation lab and assembly line for the next era of global growth. The sectors attracting capital reflect not only India’s strategic ambitions but also investors’ desire for long-term scalability and resilience. Semiconductors sit at the heart of this ambition. India’s $10bn semiconductor mission is luring global chipmakers like Micron, AMD and Tower Semiconductor to set up shop with generous subsidies, land grants, and infrastructure support. Electric vehicles (EVs) and renewables are another fast-rising pillar. Tesla’s ongoing talks with the Indian government, including proposals for a local gigafactory and supply chain localisation, reflect the sector’s momentum. The Production-Linked Incentive (PLI) schemes are helping India compete with China in batteries, solar components, and other clean-tech hardware.

“India is becoming a magnet for clean energy hardware, and the PLI incentives are game-changers,” says Michael Ashley Schulman, Partner and Chief Investment Officer at a Southern California-based wealth management firm. “From EVs to solar, global firms are following policy tailwinds into the Indian market.” Pharmaceuticals and biotech are also rebounding, as companies seek alternatives to China’s dominance in active pharmaceutical ingredients. India, once known as the ‘pharmacy of the world,’ is seeing renewed investment in healthcare R&D and production.

Meanwhile, digital infrastructure and tech services remain a perennial draw. Global hyperscalers – Google, Amazon and Microsoft – are expanding data centres, AI labs and cloud investments. India’s robust SaaS ecosystem and deep engineering talent pool are helping position it as a global hub for next-generation technology services. Acuity Knowledge Partners, for example, has doubled its workforce in India over the past five years and recently added a new delivery centre. “We are not just investing in facilities – we are investing in India’s future as a knowledge economy,” says King.

According to McKinsey Global Institute, the business and economics research arm of McKinsey, India is the fastest-growing e-commerce market in the world, with its size going from $3.9bn in 2009 to $200bn in 2024, driven by smartphone penetration and the use of digital payments. Online retail represents around 25 percent of India’s total retail market. This is expected to grow to 37 percent by 2030. India also has a strong cohort of local players such as Flipkart (acquired by Walmart) and Meesho, as well as global companies like Amazon and Rakuten.

India’s information technology (IT) industry, valued at around $250bn, already serves many of the world’s leading companies, and its market for AI services is growing rapidly. Moreover, India has an abundance of IT talent, and given the shortage of AI talent globally, this wealth of expertise could be a significant competitive advantage in a market for AI services that could reach $4.6trn globally by 2040.

Further, major Indian companies are diving in. For example, Reliance Industries has launched AI initiatives in high-potential sectors such as energy and telecommunications, and Tata Consultancy Services has announced a $1.5bn investment in its Generative AI project pipeline.

Can India sustain the hype?
While the macro story is compelling, the micro often frustrates. India’s bureaucratic hurdles, regulatory unpredictability, and fragmented federal system can slow even the best-laid business plans. Despite years of reforms, state-by-state inconsistencies in labour laws, tax policy and infrastructure quality persist.

Once seen as just a backup to China, India is now becoming the market others must hedge against

“There is a tendency to weaponise regulations retroactively,” warns Schulman. “Global tech firms have had to navigate everything from sudden data localisation mandates to retrospective tax disputes. That unpredictability adds friction.”

India’s geopolitical positioning, while generally favourable, is also complex. Its strategic alignment with the US coexists uneasily with longstanding relationships with Russia and Iran – and a tense, if economically intertwined, relationship with China.

That said, the broader economic indicators are actually quite promising. Inflation is cooling (projected at four percent in FY2026), the fiscal deficit is narrowing (down to 4.4 percent), and the current account deficit remains modest at 1.1 percent. India’s exports hit a record $820bn in FY2025, and its dependence on exports (only 22 percent of GDP) makes it relatively resilient to global trade shocks. “The fundamentals are solid,” says King. “What investors need is patience and precision – it’s a long game.”

Fei Chen argues that the India pivot is no longer just about derisking from China – it is about embracing India as a standalone growth story. “Investors aren’t expecting frictionless returns,” he says. “They are betting that India’s digital momentum, demographic edge, and policy frameworks will pay off over the next decade.”

Indeed, with a median age of 28, an expanding digital consumer base, and deepening capital markets, India is one of the few large economies with long-term, endogenous growth drivers. Initiatives like ‘Make in India,’ coupled with newer schemes like the Design-Linked Incentive (DLI) for innovation, are helping create a more compelling and beneficial ecosystem for start-ups and multinationals alike. Still, challenges remain. Infrastructure development, while improving, lags behind China’s in scale and execution speed. Inter-state coordination on industrial policy can be clunky. And the lingering perception of ‘policy risk’ continues to spook some long-term investors. Yet, optimism endures. Goldman Sachs forecasts that India will become the world’s second-largest economy by 2075, with a projected GDP of $52.5trn (see Fig 1). That may feel distant, but it is a signal of just how expansive the India bet really is.

India’s investment moment has arrived
Once seen as just a backup to China, India is now becoming the market others must hedge against. The world isn’t just betting big – it is betting forward. The convergence of geopolitical realignment, structural reforms, and digital dynamism has created a moment of genuine opportunity. Whether India can fully seize that moment depends on its ability to translate promise into execution – and maintain the investor goodwill it has worked so hard to earn.

However, Schulman highlights that “corruption is not as endemic as it once was, but navigating bureaucracy still requires local savvy and strong partnerships…and while geopolitical alignment with the US is strengthening, India’s relationships with Russia and Iran, plus its balancing act with China, complicate the narrative,” he said.

In short, India isn’t just a plug-and-play growth story – but rather it is a strategic allocation that requires patience, persistence, precision and a bit of luck.

Exploring AI’s influence on market dynamics

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Artificial Intelligence (AI) exploded into the mainstream in 2023, and its adoption is showing absolutely no signs of slowing down. From technology, health, and manufacturing to customer services, marketing, and even retail, AI is everywhere. And let’s face it, who hasn’t used Chat GPT (other LLMs are available) for a bit of inspiration or help sometimes.

But, AI itself is nothing new. It has been around since the 1950s, and the financial sector was an early adopter back in the early 1980s when James Simons founded quantitative investment firm Renaissance Technologies. Early financial use of AI included power trading and expert programmes, and as computing power has improved over the intervening years, so too has AI’s capabilities, shifting how markets operate from trading algorithms that execute within milliseconds to predictive analytics anticipating market shifts.

The role of AI in financial markets
From machine learning algorithms to natural language processing, AI technology is designed to mimic how the human brain thinks, understands, learns, and remembers, but with one valuable difference, which is especially useful when it comes to finance: it removes emotion. Analysing huge amounts of complex, unstructured datasets and real-time data in a fraction of the time it takes a human agent, AI can spot patterns that the human analyst may overlook, due to various biases, conscious or otherwise, detect data outliers and anomalies, and forecast market trends with pinpoint accuracy. Obviously, this means that this efficiency, speed and accuracy are a few of the key advantages of using AI in market analysis.

However, one of the standout features of AI is in its scalability to work equally as well with large datasets as it does with small, niche ones, making it suitable for both large-scale data analysis and the management of diverse investment portfolios. AI can also help to provide continuous monitoring of market movements, observing trading trends, and anomalies in trades, and flagging suspicious behaviour in real time, making it an efficient way to minimise risk and mitigate fraudulent activity.

As AI’s capabilities have improved over recent years, it has become a significant tool in asset management, specifically generative AI (GenAI). AEIQ, launched in 2017, was the first public AI-driven fund, and many more funds have since also added AI tools and big data into their strategies. PwC’s 2023 ‘Global Asset and Wealth Management Survey’ predicted that the amount of assets managed by algorithm-driven, AI-enabled platforms will double to almost $6trn by 2027 (see Fig 1), while their 2024 survey revealed that 80 percent of asset and wealth management organisations say AI will fuel revenue growth, and those organisations adopting ‘tech-as-a-service’ could potentially see a 12 percent revenue boost by 2028. As an example, hedge fund start-up, Minotaur Capital, has replaced traditional analysts with AI and, since its launch in May 2024, has seen a 13.6 percent FYTD increase against a 2.03 percent 12-month increase of the global stock market (MSCI All-Country World Equity Index).

The power of automation
Traditional algorithmic, rule-based trading systems rely on static conditions and predefined rules, whereas algorithmic strategies underpinned by AI and machine learning can help institutional and retail traders adapt, refine, and improve their decision-making process in real-time in an effort to outwit the market. While they can help generate ideas, develop strategies, and even execute trades, they are, however, just tools, and should never be used to replace human judgment, but rather complement it to enhance performance. In general, trading models are built following a structured four-stage process: collecting and analysing market data to recognise patterns, identifying factors that filter out unnecessary noise, training the model with historical data so it learns how different market conditions impact trade volumes, and then testing in the live market and continually monitoring performance.

There is the ethical dilemma of whether AI should make high-stakes financial decisions without human oversight

High-frequency trading (HFT) is one trading method that takes algorithmic execution to the extreme. It uses complex algorithms for lightning-fast analysis of multiple markets and trades are executed in microseconds. And because speed is of the essence, AI and machine learning are vital to HFT success. The algorithms need to process enormous streams of real-time data, order books, price ticks, news feeds, and decide, in fractions of a second, whether to enter or exit positions. Reinforcement learning (RL) and neural networks are often used to optimise execution, manage risk exposure, and identify fleeting market inefficiencies faster than any human could.

Predictive analytics and sentiment
Using statistical and data analysis techniques, predictive analytics is used to forecast future market trends based on historical and current data. AI-driven models are still trained using historical data to identify patterns, relationships, and trends, but the big difference is that while traditional models required manual adjustments and pre-defined assumptions, the AI model continuously refines itself. Machine learning algorithms, deep learning networks, and natural language processing (NLP) work together to analyse and transform vast amounts of data into actionable insights, allowing investors to make better choices, limit risks, and optimise their portfolio.

Additionally, using real-time data sources from social media, news articles and internet sources, AI can measure the sentiment towards a stock, sector, or general market, and detect any movement; positive, negative, or neutral, signalling a potential movement in price, before others flag it. Using this ‘sentiment analysis,’ investors can take better advantage of market unpredictability and make smarter, more data-driven decisions, though it does have its drawbacks. AI-based sentiment analysis is volatile and unreliable for long-term investments: just look at what happened to the share price of GameStop in January 2021, after Reddit investors fuelled the fire. The share price doubled over two days from $4.99 on January 12 to $9.98 on January 14, before shooting up to a high of $120 on January 28 and crashing back down to $10 by February 19. Further fluctuations followed, but on average, the share price has been bumbling along around $20 since then. The other challenge AI-based sentiment analysis has is that it can’t distinguish whether online information is true or false. According to Forbes, 48 percent of all business-related messages contain false or irrelevant information; just because social media is buzzing about something, good or bad, this doesn’t always translate to movement in the stock price.

The uncharted territory of AI in trading
There is no doubt that AI is improving the ability to forecast market movements more accurately and trade quicker, but as systems become more advanced, is there a risk of AI being able to anticipate and reshape market behaviour, simulate entire economies, or even generate trading strategies with minimal human input?

As AI’s capabilities have improved over recent years, it has become a significant tool in asset management

Currently, technologies like RL and GenAI are increasingly being used in financial markets. Through RL, algorithms learn optimal behaviour through trial and error, adjusting strategy according to results, thus improving performance over time, while the possibility of using GenAI for risk assessment and strategic planning is also being investigated. Quantum computing has the potential to supercharge current AI capabilities and solve optimisation problems in seconds, opening new windows for predictive modelling and portfolio management. However, it is still at least a decade away from mainstream adoption. This all sounds wonderful, but by automating more and more of the financial decision-making process, will this create smarter markets, or make them more fragile?

With similar AI models trained on overlapping, or even the same, data, there is a distinct possibility that algorithms could amplify price swings, causing more ‘flash crashes’ than any government spending announcements or mini-budgets could make if the algorithms misinterpret signals or react at the same time. Not to mention, the complexity and speed of these systems also make it hard to predict how they will behave under stress.

Additionally, there is the ethical dilemma of whether AI should make high-stakes financial decisions without human oversight. When billions of trades are at stake, how do you audit a neural network’s decision path? These are the questions that need answering before travelling past the point of no return as they affect regulatory frameworks, risk management strategies, and even the very definition of understanding the market.

For retail and institutional investors, staying informed and adaptable is more important than ever. Moving forward, it may not be enough to understand technical analysis alone; there will probably be a need to understand algorithm ethics, data bias, and AI governance.

At the end of the day, as much as AI is shaping the financial markets, like every other sector, it is how we choose to use it that will shape the outcomes. But the million-dollar question is: will it ever guarantee to beat the market 100 percent of the time?

How leadership can create a culture of success

Posted on by itsupport

Long before I became a CEO I took a temp to perm job as a receptionist at Computacenter in 2006. Fast forward 19 years and I am often asked about my journey from reception to the boardroom, which is still a ‘pinch-me’ moment. I have been lucky enough to work with some incredible leaders in the tech industry, seeing firsthand the styles that lead to success, and, as importantly, those that don’t. My journey has taught me one crucial thing: it is all about the people.

Leadership isn’t static; it is fluid, and how your style is perceived can be a challenge, especially with the diverse personalities around you. But the beauty of it is that by refreshing your approach, you can evolve to become the kind of leader you want to be.

The best leaders make everyone smarter
A tactic that resonates with me is the multiplier effect, a leadership approach that focuses on unleashing the full potential of your team. The idea comes from Liz Wiseman’s book, Multipliers: How the Best Leaders Make Everyone Smarter, and it is one that has had a profound impact on my own leadership style.

Multipliers get people to think for themselves and unlock their potential. They create an environment where people feel empowered to learn and grow, making a huge contribution not only to the business but also to their own personal development. In my leadership journey, I have learned that when I lead like a multiplier, I don’t just give answers, I ask questions, trigger lightbulb moments and encourage those around me to be bigger and bolder. It is critical to encourage growth and continual learning, not just for your team, but for yourself too. I am not afraid to ask for help, and I have my own mentors who will call me out and help me grow. I read, listen to podcasts, and actively seek out new ways to improve because, as any leader will tell you, if you are not growing, you are falling behind.

Working towards a shared vision
When it comes to leadership at Agilitas, creating a culture where everyone can thrive is at the top of my list. We follow a ‘total experience’ approach, which means we believe everything is connected. The way our employees feel impacts the way they interact with our customers, and ultimately, that impacts overall business performance. It is a 360-degree approach to growth and success.

When people feel valued and empowered, they go above and beyond

Part of that culture-building is about creating a team of A-players. But as anyone who has worked in a high-performing team knows, the secret to success isn’t just about having a group of rockstars. It is about ensuring everyone is working towards a shared vision. Setting clear goals and strategies is key to making sure that alignment happens.

Each quarter, the leadership team at Agilitas heads to a farm in the New Forest for an offsite strategy session. It is a great chance to step away from distractions and really focus on setting the direction for the next quarter. These sessions help ensure that everyone understands the goals, the strategy, and how their roles contribute to the bigger picture.

Building a culture of inclusion
When I reflect on my previous role as chair of the diversity and inclusion board, where I helped establish seven employee-led groups, I see how powerful diverse perspectives are in shaping a thriving workplace.

Beyond gender and ethnicity, diversity includes cognitive diversity, championing different ways of thinking, problem-solving, and approaching challenges. This diversity of thought sparks creativity, promotes resilience, and encourages more innovative solutions. Building a culture of inclusion strengthens psychological safety, allowing employees to feel confident in sharing their ideas and taking risks.

I am a firm believer that when people feel valued and empowered, they go above and beyond. When employees feel invested in their work and in the company they are more likely to contribute their best ideas, go the extra mile for customers, and feel part of something bigger. It is the multiplier effect in action: engaged employees lead to satisfied customers, which drives business performance.

Looking ahead, I am excited about the future at Agilitas and the broader tech industry. By focusing on growth, development, and creating an environment where people feel empowered, we can foster a cycle of growth that creates long-term success and makes an impact. As leaders, we have the power to multiply greatness. Let’s make the most of that.

Indonesia’s long-serving finance minister is still standing firm

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Indonesian finance minister Dr. Mulyani Indrawati is the woman the country can’t do without. Regardless of the party in power, she has overseen the nation’s finances for 16 years and it is unlikely that her long-running reign will come to an end anytime soon.

As the Singapore Straits Times wrote recently, she has “long been regarded as one of Asia’s finest finance ministers.” And she is certainly the longest-serving female finance minister. But there is no doubt that the 62-year-old occupies a hot seat. When she first took office 20 years ago, her desk was piled high with much-needed reforms – and it still is. When she was first appointed in 2005, the country’s economy was in tatters. Indonesia had not fully recovered from the Asia-wide financial crisis and had just been battered by a tsunami and earthquakes that required a heavy injection of capital. The cost of reconstruction of the hardest-hit region, Aceh, alone was $4.5bn, albeit some of that amount was funded through grants.

Attracting foreign investment
Natural disasters aside, Dr. Indrawati had plenty on her plate. The biggest bank, state-owned Mandiri, was mired in corruption and the banking sector in general was inefficient. Poverty and unemployment were high. The sprawling finance ministry and Bank of Indonesia was overdue a spring clean. And as the International Monetary Fund reported at the time, one of her top priorities was to implement reforms rapidly and attract foreign investors back to pay for new infrastructure.

Then in 2008 Indonesia was particularly hard-hit by the global financial crisis leading indirectly to the bail-out of an important institution, Bank Century. This turned into one of the longest-running cases in Indonesian financial history. In this highly political event the details are that the privately owned bank was rescued with state funds in a bid to prevent a run on the entire banking sector. It was not until late 2010 that a corruption commission began investigating the rescue amid arguments that, in summary, it may not have been necessary. It was also alleged that some of the $675m rescue funds may have got into the wrong hands. Ultimately, the ruckus led to her departure from office in 2010 for a six-year stint at the World Bank, where she served as chief operating officer and deputy managing director. It was the World Bank’s gain and Indonesia’s loss.

Productivity-driven, private sector-led growth is the cornerstone of job creation in all countries

By then though, Dr. Indrawati had already made a big impression on the economy. In her first five years as finance minister she was fortunate to take office under the reform-minded president Susilo Bambang Yudhoyono, who supported the new broom. As the IMF reported, “the new president has continued and deepened these policies, notably by maintaining a restrained budget stance, replacing managements in state banks in a bid to improve governance, and taking steps to enhance the investment environment.”

Most importantly, Dr. Indrawati knew that the potential of her country of about 285 million people, making it the fourth-highest populated country in the world located in the heart of the fast-growing ASEAN region, was high. It just had to be funded and harnessed.

Nearly 20 years later, she has been back in the job for a decade and the proof is there for all to see. Indonesia’s economy has been thoroughly overhauled. Debt has been slashed and borrowing costs have consequently declined. Meanwhile, the nation’s wealth as measured by gross domestic product has increased six-fold, jumping from $286bn in 2005 and is heading to nearly $1.5trn by the end of 2025. Though still one of Indonesia’s biggest government departments, the finance ministry has been streamlined. And as corruption has declined and opportunities increased, foreign investors have returned.

Challenging landscape
It has been a long and sometimes uphill battle. In 2017, just after Dr. Indrawati returned to the job after her six-year period of service at the World Bank, a research paper from the OECD concluded Indonesia still had some way to go: “The quality of public governance, as measured by the World Bank estimate of government effectiveness, puts Indonesia well behind countries like the Philippines, Thailand, Malaysia, Vietnam and Singapore.”

She ensured that women were at the forefront of dragging a nation out of economic mediocrity

To put things into perspective, Indonesia faced unique challenges. With the population growing by about three million a year, the strain on public finances was considerable – and remains so. Also, people were pouring into the cities at one of the highest rates in the region, which required huge expenditure on infrastructure. Simultaneously, in a far-flung nation, money had to be found for remote poorer communities that needed “basic public services such as sanitation, water, education and health,” the OECD explained.

The dearth of infrastructure was particularly damaging. “Indonesia’s competitiveness (ranked 41st out of 140 countries) is dragged down by the poor quality of its infrastructure (60th),” pointed out a 2016 report by the World Economic Forum, citing shortages of electricity for industry, inadequate transport, insufficient number of airports and sea ports, and congested road and rail networks.

Reach for the stars
An economist with a humane view, Dr. Indrawati identifies with these poorer communities. She hails from relatively humble origins. Born in the Lampung region on the southern tip of the mountainous island of Sumatra to a large family, she attended a mixed public school where, she said in an interview several years ago, the girls never suffered discrimination and were encouraged to ‘reach for the stars.’ And they did; one of her school friends, Retno Marsudi, served for 10 years as Indonesia’s first female foreign minister.

“If one school can produce the first female finance minister and the first female foreign minister in this republic, then our alma mater and its educators must be doing something right,” recalled Indrawati some 40 years later. A diligent student, she went on to obtain a Bachelor of Economics in the University of Indonesia before embarking for the US, where she picked up a master’s degree in policy economics and a PhD from the University of Illinois. She has never forgotten the value of the good start in life that her school gave her – today about 20 percent of the national budget is allocated to education.

A firm believer in private enterprise, Indrawati has done all she can to encourage it in a country that had long suffered from a heavy-handed bureaucracy and state-run companies. And from the outset she ensured that women were at the forefront of dragging a nation out of economic mediocrity. In just one example, when she first took office, she established a simple formula in all new appointments at the ministry: at least one woman must be included in every 10 promotions.

“So they were forced to look for female candidates,” she recalled just before leaving the World Bank and returning to her old job. “Good jobs are the surest pathway out of poverty.” That is partly why nearly half of all Indonesia’s small and medium-sized enterprises were jump-started by women.

“Although women’s participation in the formal sector only reaches 32 percent, their contribution in job creation through SMEs is very significant,” she pointed out. Indonesia likely has more female entrepreneurs than any other country in the world. This is surely a model for other rising nations. As numerous studies show, as much as 30–50 percent of the fall in poverty in the decade to 2025 is attributable to rising wages. However much needs to be done. More than 200 million people worldwide are unemployed and looking for work – and many of them are young and/or female. Echoing Indrawati’s view, one study argued: “Therefore to end poverty and promote shared prosperity we will need not just more jobs, but better jobs that employ workers from all walks of society. Where to start? Productivity-driven, private sector-led growth is the cornerstone of job creation in all countries.”

To make this happen, good infrastructure such as roads, telecommunications and electricity are seen as fundamental. In India, for example, a study showed that “building roads to villages increased the number of people moving from agricultural work to higher-paying jobs by 10 percent.” Indonesia is in much the same position.

Ambitious and expensive plans
Meanwhile there is still a lot to do for Dr. Indrawati and the Indonesian government under new president Prabowo Subianto, the third under whom she has served. And there appears to be tension between the long-serving finance minister and the retired army general. Subianto is in a hurry. He wants the economy to grow at eight percent a year towards the end of his five-year term and has ambitious – and hugely expensive – plans that include free food for 83 million school pupils and pregnant women as soon as the end of 2025 as well as the creation of vast rice and sugar cane farms that would enable Indonesia to be more self-sufficient.

The markets have taken fright at the cost of these programmes and, reportedly, his finance minister is resisting. “Speculation grew that Dr Indrawati could resign, with whispers suggesting that she could be replaced by one of three people, including her deputy at the Finance Ministry – Prabowo’s nephew, Thomas Djiwandono,” wrote the Singapore Straits Times. So far Dr. Indrawati is standing firm. “I am not resigning and will continue my role in safeguarding state finances,” she told a news conference recently. “We are here, we are responsible.”

The president’s office hastily denied any talk she would be replaced. But if it does come to a battle, one of the region’s most able finance ministers surely holds all the cards.