Innovative Financing Schemes Research Articles

The Impact of Economic Recovery Budget and Innovative Disaster Financing Schemes on Indonesia's Sustainability of Disaster-Affected Businesses

This study investigates the impact of implementing an economic recovery budget and innovative disaster financing schemes on Indonesia's disaster-affected businesses' sustainability. Indonesia is one of the countries that has many areas with high risk of natural disasters. Business resilience is crucial so that business institutions can immediately recover after a disaster; some efforts that can be made include the availability of an adequate economic recovery budget and innovative disaster impact financing schemes to adjust to the needs of disaster-affected businesses so that disaster-affected businesses recover quickly. This research was designed using quantitative analysis with a survey through a questionnaire. This study involved 180 MSE actors with sampling techniques using probability sampling. Data analysis was done using multiple linear regression analysis with the help of IBM Statistical software SPSS. The results found that the economic recovery budget significantly affects the sustainability of disaster-affected businesses in Indonesia. Then, the Innovative Disaster Financing Scheme significantly affects the sustainability of disaster-affected businesses in Indonesia. In addition, this study also found that the Innovative Disaster Financing scheme has the greatest effect on the sustainability of disaster-affected businesses in Indonesia. In conclusion, this study successfully investigated the impact of implementing the economic recovery budget and the effect of the innovative disaster financing scheme, which is 18.8 percent, which can contribute to increasing the sustainability of disaster-affected businesses in Indonesia.

Lessons Learnt and Policy Implications from Implementing the POWERPOOR Approach to Alleviate Energy Poverty

Energy poverty is a multifaceted phenomenon that affects many Europeans. Alleviating energy poverty is high in the EU, national, and local policy agendas. Despite the attention the phenomenon has been gaining from a policy perspective, especially after the current energy crisis, there are still some gaps due to the complexity of the issue and its vastly different manifestations across Europe. This manuscript presents the policy implications stemming from the implementation of the POWEPROOR approach in alleviating energy poverty in eight European countries, as co-created with relevant stakeholders in each country. The knowledge gained from empowering energy-poor citizens by promoting behavioural changes and small-scale energy efficiency interventions, as well as by encouraging the uptake of renewable energy sources in the form of collective energy initiatives while leveraging innovative financing schemes, resulted in policy recommendations for national and sub-national governments and lessons for civil society and the private sector.

Optimal combination of platform channel contract and guarantee financing strategy in e-commerce market

With the development of economy and technology, e-commerce platforms can connect consumers and online channel suppliers providing transportation services through third-party logistics (3PL). To help these suppliers, especially small- and medium-sized enterprises (SMEs) with financing dilemmas, this paper proposes evidence on the members of the e-commerce supply chain providing procurement and financial assistance. Many partner enterprises offer various innovative financing schemes, such as guarantee financing. To examine the advantage in practice, we study the guarantee financing in the online channel of e-commerce market, which includes capital constrained SME suppliers, e-commerce platforms, 3PLs and banks. We analyze the equilibrium of the optimal combination strategy with channel sales mode and guarantee financing scheme, and explore the conditions under which this innovative financing scheme will benefit all members. It is more feasible for the SME supplier to seek the e-commerce platform (or the 3PL) guarantee financing with high (low) platform service construction cost compared with bank loans without guarantee. This preference comes from the trade-off between the potential market demand risk in sales season and the financing risk of the debtor. We further determine how the release on the sales mode of platform is affected by the guarantee financing scheme. No matter who guarantees, the platform tends to provide the reselling (marketplace) mode when the market demand risk is flat (high). With the increasing of investment in platform’s service construction, the platform is more (less) willing to switch the role from the non-guarantor to the guarantor in the reselling (marketplace) mode. The reason is that the e-commerce platform and the 3PL prefer to act as non-guarantor to obtain free-riding benefits, especially in the marketplace mode. Results of this paper provide theoretical support for the innovative financial practice of the e-commerce industry. The insights are relevant to the e-commerce platform and the 3PL managers who aim to promote the applicability of financing scheme to debtors under two channel modes and increase the revenue through construction investment and business expansion.

Developing Innovative Financing Scheme for Leveraging Energy Efficiency Deployment in Indonesia

Having great potential, a mechanism that can leverage private involvement in energy efficiency deployment should be developed in emerging markets such as Indonesia. This study aimed to formulate an implementable financial innovative scheme for leveraging energy efficiency deployment in the country. Scrutinizing relevant studies and interviewing relevant stakeholders such as the Ministry of Finance, Ministry of Energy and the Financial Institution, we formulated a blended financial scheme for an energy efficiency project. Main stakeholders will include the scheme, including fund facilitator, trustee, custodian bank and energy user/energy service company. In our proposed scheme, Indonesia Environment Fund (IEF) is obtained the fund from the fund facilitator. IEF will act as a trustee that delivers funds for the Custodian Bank. The bank will disburse the fund to the feasible energy efficiency project or through an energy service company. In this scheme, since banks get lower interest rate funds from the trustee, they will disburse the fund to the customer with a lower interest rate than a commercial rate. Consumers utilize the fund for their energy efficiency projects. Utilizing a proposed scheme to an energy efficiency project case study, it is found that the proposed scheme potentially reduces the interest rate and leverages the project viability in a certain condition. Doing the sensitivity analysis by comparing interest rate and IRR (Internal Rate of Return) in several loan periods, we found that the shorter period of the loan and lower interest rate can improve projects feasibility. For instance, simulating a 5-year loan, it is found that reducing the interest rate from 12% to 7% could improve up to 2% IRR of the project case. Therefore, the scheme can catalyze private-sector investments mobilization for energy efficiency deployment in the country. Furthermore, it can support the country's energy security enhancement.

Evolutionary Game Analysis of Capital-Constrained Supplier’s and Manufacturer’s Financing Schemes

Purchase order financing (POF) and buyer direct financing (BDF) are both innovative financing schemes aiming to help financial constrained suppliers secure financing for production. In this paper, we investigate the interaction mechanism between suppliers’ financing strategy selection and manufacturers’ loans offering strategy adoption under two innovative financing schemes. We developed an evolutionary game model to effectively investigate the interaction mechanism between suppliers and manufacturers and analyzed the evolutionary stable strategies of the game model. Then we used system dynamics to present the performance of the evolutionary game model and took a sensitivity analysis to verify the theoretical results. The main conclusions are as follows: in the supply chain, to deal with the noncooperation among suppliers and manufacturers on innovative financing schemes, the revenue of manufacturers, the rate of manufacturer loan, and the proper financial risk factor should be relatively high.

Spurring Space Industry Development in Malaysia: the Enabling Capabilities

Malaysia’s endeavour to a space program is an important milestone in carving our very own niche in the space sector. This initiative can act as a catalyst, not only to the space industry, but also to the existing thriving local aerospace sector in the country. Science, technology and innovation are the main drivers that will move our nation’s economy forward. Aspects of these enabling capabilities are especially important to the development of the space industry, and are priorities for the success of Malaysia’s space initiative. The authors have identified five specific existing enablers that has Malaysia possessed in order to succeed in this highly competitive business. These enablers are; Supportive Government Policies; Strong and Developed Infrastructures; Innovative Financing Schemes; Vibrant Business Climate; and High Quality of Life. However, this study cautions that these enablers will only facilitate our space endeavour, but not necessarily ensure its success. This paper also dwells on the issue that these factors are not only important enablers to the space industry, but also can be promoters of innovative ideas and applications. Sometimes this is perceived as pushing technology, when, in fact, the entire system works together to provide solutions to delivery policy problems.

Selling to the newsvendor through debt-shared bank financing

Debt-shared bank financing, as an innovative and collaborative financing scheme, allows the supplier to (partially) share the retailer’s bank loan obligation, including principal and interest. We study the operational and financial decisions of a chain with a supplier (Stackelberg leader) selling to a capital-constrained retailer via a debt-shared contract. We derive the equilibrium debt-shared coefficient, wholesale price, order quantity and bank’s interest rate with the retailer in different wealth regions. The very poor retailer always accepts debt-sharing and earns a profit, even if the supplier sets the wholesale price up to the retail price. The medium poor retailer might enter a supplier’s debt-sharing hole (a retailer’s wealth region) and acquire zero profit, by using debt-sharing with a wholesale price up to the retail price. For the medium poor retailer outside the hole or the medium rich retailer, the supplier offers either an optimal debt-shared bank financing contract or an optimal price-only contract at her benefit, mainly depending on the production cost and the retailer’s capital. Under debt-shared bank financing, both the supplier’s profit and the chain’s efficiency improve. The retailer might overstock when the production cost is high. Computational studies show the not very rich retailer’s profit is a bowl-shaped function of his capital and the bottom is the hole. The very poor retailer might earn a larger profit than under the optimal price-only contract. The supplier’s profit is unimodal and it achieves globally optimum in the hole (at the upper bound of the hole if production cost is low).

The model of forming of innovative financing and credit schemes in housing construction and estimation of their financial stability

The authors propose a new approach to the housing lending system based on the creation of building stakeholders as a group of stakeholders. All possible participants in the process are considered, starting from the facility construction and ending with the final consumers of construction products. A fundamentally new financial and credit mechanism is proposed, which is an alternative to a mortgage and, according to the authors, will serve as a catalyst for solving the problem of housing affordability. As part of the study, a stakeholder capital flow chart is proposed, direct and reverse financial flows are considered, a mechanism for forming a stakeholder fund is presented. The financial structure of the stakeholder proposed by the authors is based on the mechanism of direct and reverse movement of capital of the association. The formation of innovative credit mechanisms raises the question of the stability of the financial system in the face of risks. The authors propose a model for assessing the financial stability of a stakeholder based on the robustness theory, which determines the possible effects of risks and analyzes the effectiveness of process protection options.

How to finance energy renovation of residential buildings: Review of current and emerging financing instruments in the EU

AbstractThe Paris Agreement goals require net‐zero CO2 emissions by mid‐century. The European Commission in its recent proposal for climate and energy strategy for 2050 indicated the need for more intensified actions to substantially improve the energy performances of buildings. With the rate of new construction in Europe, the challenge is to increase both the pace and depth of building energy renovations. Several barriers inhibit the wide uptake of comprehensive energy renovations, including the inability or inertia to finance upfront costs of energy renovations. Despite various policies implemented to address some of these barriers, current investments in buildings remain at suboptimal levels. The paper reviews current financing practices for energy renovations and investigates some innovative instruments with a special focus on their applicability to residential buildings. In addition to “traditional” financial schemes such as subsidies, tax incentives, and loans, the paper assesses innovative financing schemes: On property tax and on‐bill financing, energy efficiency mortgages, and energy efficiency feed‐in tariffs. The paper also investigates the concept of one‐stop shops for building renovations and crowdfunding. The paper offers an assessment of the characteristics, benefits, and challenges of each analyzed financing instrument and provides policy recommendations for their successful implementation. In general, as financing instruments involve different stakeholders and due to complex nature of the sector, there is no single solution to accelerate energy renovation investment in buildings. The emerging financial models offer the potential to address the long‐standing barriers to investment in energy efficiency.This article is categorized under: Energy Efficiency > Economics and Policy Energy Efficiency > Climate and Environment Energy and Climate > Economics and Policy

Innovative financial schemes for buildings’ energy renovation

Building energy renovation is a key issue to tackle the high energy consumption of the building stock. Many countries - especially the Mediterranean ones - have been strongly hit by the financial crisis of 2008 which has affected national economies and resulted in market uncertainty. On one hand, the financial resources are very limited and on the other hand, the energy efficiency policy of the European Union (EPBD recast and Energy Efficiency Directive) has become stricter with more ambitious goals in terms of energy efficiency and CO2 emissions, especially of the public building stock. Public authorities are not ready to implement them. Administrative and regulatory obstacles help to maintain an unsuitable environment for this kind of initiatives. The majority of public buildings can significantly improve their energy performance, but to mobilize these investments new financial instruments are necessary (such as Energy Performance Contracting-EPC) that will be negotiated with new market actors (Energy Services Companies-ESCOs).The current work tries to facilitate the decision to implement energy renovation measures in public buildings by the use of a tool. The Subsidy Evaluation Tool (SET) carries out an energy and financial evaluation of Energy Conservation Measures (ECMs) for buildings energy renovation and can be used for various types of public buildings. The main aim of the tool is to find innovative financing schemes that combine public resources with private investments and to create conditions for deep investments in energy efficiency actions for public buildings considered bankable by the market. The paper presents the structure of the tool, its layout, the parameters and formulas utilized, so as to provide with the most appropriate solution for energy retrofitting of buildings from a techno-economic point of view.

Who benefits from online financing? A sharing economy E-tailing platform perspective

The growth of sharing economy platforms is reshaping the boundaries between different market participants and leading to the development of innovative business models, raising numerous questions for both academics and practitioners. In this paper, we consider an online sharing economy system consisting of a powerful e-tailing platform and a budget-constrained small and medium-sized seller (SMS). As a reflection of the current practices adopted by Amazon and Tmall, the seller and platform engage through a consignment revenue-sharing contract, whereby for each successful sale, the platform takes a predetermined cut of the sales revenue. Due to factors such as information asymmetry and high degrees of operational risk, the SMS cannot usually access commercial banking loans, thus lacking working capital for further growth. To bridge this liquidity gap, an innovative financing scheme called platform-based financing has been launched by platforms to alleviate the financing issues that SMSs face. We establish a theoretical model to investigate the value of this innovative platform-based financing scheme and present several findings. First, we show that the optimal sales price can decrease when budget constraints exist. Second, we identify a threshold under which an SMS should accept a loan. Third, a platform should always provide financial aid to a seller who is short on funds, which always benefits the platform itself. Moreover, we show that both a seller and a platform will benefit from this innovative financing plan, improving the performance of the online sharing economy.

A Review of Power Infrastructure Financing: The Brazil and India Approach

Infrastructure development promotes human capital development. Access to quality education and health care are some of the incentives of Infrastructure development. The development of power infrastructure in Brazil and India has greatly facilitated it gross domestic product (GDP) and social-economic development. This study assesses the approach of development of power infrastructure in Brazil and India as a prerequisite for other emerging nationʼs economy to follow. A confirmatory literature involving power infrastructure development in India and Brazil was explored for the purpose of this study. The paper highlights the challenges, policies effects, legislations effects, ways to finance, philosophical approach and the economic benefits involves in power infrastructure development in Brazil and India. Power infrastructure will strive when the challenges involves in its development is addressed. The adoption of this approach of implementing the developmental challenges, better policies, innovative financing scheme and effective legislations that has aided the development of power infrastructure development and should be replicated in emerging nations i.e. sub-Sahara Africa (SSA). In addition, direct implementation of this approach will bring forth the benefits of infrastructure development. This will contribute to the knowledge of power infrastructure development in emerging nations across the globe.

The Ecosystem Services of Marine Aquaculture: Valuing Benefits to People and Nature

As the world's population continues to grow, the way in which ocean industries interact with ecosystems will be key to supporting the longevity of food and social securities. Aquaculture is crucial to the future supply of seafood, but challenges associated with negative impacts could impede increased production, especially production that is efficient and safe for the environment. Using the typology established by The Economics of Ecosystems and Biodiversity Initiative, we describe how marine aquaculture could be influential in supporting ecosystem services beyond solely the production of goods, through provisioning services, regulating services, habitat or supporting services, and cultural services. The provision of these services will vary, depending on functional traits of culture species, biotic and abiotic characteristics of the surrounding environment, farm design, and operational standards. Increasing recognition, understanding, and accounting of ecosystem service provision by mariculture through innovative policies, financing, and certification schemes may incentivize active delivery of benefits and may enable effects at a greater scale.

Financial Pooling in a Supply Chain

Trade credit is often extended by suppliers to buyers who often have easier access to external financing. Moreover, many buyers also delay paying their suppliers beyond the agreed due day. Prior literature attributes this phenomenon to quality assurance or buyer's abuse of market power. In this paper, we show that pooling could be another reason behind this practice. Using a game-theoretic model that explicitly captures the liquidity shocks faced by different supply chain partners, we analyze the total financing cost of the supply chain under endogenous supply contract and working capital policies. We show that the embedded stretching option of trade credit allows supply chain partners to pool their liquidity buffers. Due to this pooling effect, even if the supplier's financing costs are strictly higher than the buyer's, the buyer may still demand trade credit from the supplier in order to lower the total financing cost. The model reveals that trade credit is more efficient than cash on delivery when the supplier's cost for collecting trade credit is low (e.g., when the retailer trusts the supplier) or when the supplier does not have access to a low-cost financing channel when facing liquidity shocks. This pooling effect also dictates that variabilities of firms' liquidity shocks have asymmetric impact on the efficiency of trade credit: while trade credit can only be more efficient than cash on delivery when the supplier's liquidity shock has a sufficiently large variability, it could benefit the supply chain even when the buyer's liquidity shock is deterministic (e.g., an investment opportunity). The benefit of financial pooling increases as the buyer's supplier portfolio becomes more diversified. As an innovative financing scheme, reverse factoring further enhances the efficiency of this pooling effect and, as a result, reduces the overall supply chain financing cost.

Health systems in the SDG era: consolidating and building on the gains

Global health today stands at cross-roads, with unanticipated problems challenging the unprecedented progress achieved over the last two decades. To achieve the targets established for the sustainable development goal 3 of “ensuring healthy lives and promote well-being for all at all ages”, significant resources and comprehensive health systems must play a critical and integral role. World Health Organization’s (WHO) framework for action on “Strengthening Health Systems to Improve Health Outcomes” has well identified the challenges of global health. The Global Strategy for Women's, Children's and Adolescents' Health 2015-2030 states that for women’s and children’s health investments in high-impact health interventions for RMNCH at a cost of US$5 per person per year up to 2035 in 74 high-burden countries, could yield up to nine times that value in economic and social benefits. As global health marches towards achieving universal health coverage (UHC), innovative health financing schemes and health system design will be the major determinants of equity and efficiency in resource allocation and health care delivery. Because we are now in a critical phase, it is imperative that the initial years of the SDGs receive utmost thrust from all relevant stakeholders across countries to initiate and maintain a sustained momentum for achieving the targets. The primary priority for the health-related targets’ therefore’ necessitates the need for formulation of robust, responsive and resilient health systems strategies by all the major policy makers and concerned stakeholders.

Sourcing from Suppliers with Financial Constraints and Performance Risk

Two innovative financing schemes have emerged in recent years to enable suppliers to obtain financing for production. The first, purchase order financing (POF), allows financial institutions to offer loans to suppliers by considering the value of purchase orders issued by reputable buyers. Under the second, which we call buyer direct financing (BDF), manufacturers issue both sourcing contracts and loans directly to suppliers. Both schemes are closely related to the supplier’s performance risk (whether the supplier can deliver the order successfully), upon which the repayment of these loans hinges. To understand the relative efficiency of the two emerging schemes, we analyze a game-theoretical model that captures the interactions among three parties (a manufacturer, a financially constrained supplier who can exert unobservable effort to improve delivery reliability, and a bank). We find that, when the manufacturer and the bank have symmetric information, POF and BDF yield the same payoffs for all parties irrespective of the manufacturer’s control advantage under BDF. The manufacturer, however, has more flexibility under BDF in selecting contract terms. In addition, even when the manufacturer has superior information about the supplier’s operational capability, the manufacturer can efficiently signal her private information via the sourcing contract if the supplier’s asset level is not too low. As such, POF remains an attractive financing option. However, if the supplier is severely financially constrained, the manufacturer’s information advantage makes BDF the preferred financing scheme when contracting with an efficient supplier. In particular, the relative benefit of BDF (over POF) is more pronounced when the supply market contains a larger proportion of inefficient suppliers, when differences in efficiency between suppliers are greater, or when the manufacturer’s alternative sourcing option is more expensive. The online appendix is available at https://doi.org/10.1287/msom.2017.0638 . This paper has been accepted for the Manufacturing & Service Operations Management Special Issue on Interface of Finance, Operations, and Risk Management.

Potential for energy efficiency measures and integration of renewable energy in the European food and beverage industry based on the results of implemented projects

In GREENFOODS existing funding programs were mapped and evaluated concerning their acceptance and suitability in the food and beverage industry. The analysis have shown that most funding instruments were considered not easily available due, on the one hand, to limited budgets for the programs, and/or limits for eligible cost of individual measures and, on the other hand, to the complex and demanding application procedures. Based on this, recommendations were made for future development of programs. A follow-up is the H2020 project TrustEE focusing on innovative financing schemes (e.g. market oriented funds) for EE and RE implementations.

Energy Transition & Geopolitics in Sub-Saharan Africa: Outlining a Legal Framework to Scale the Energy Infrastructure Financing Conundrum

The global energy transition and geopolitics scene paints a picture of uncertainty and anxiety. This is propelled by the increasing need for renewable energy, the disruptive Middle Eastern conflicts and the resurgence of the global political and ideological divide, thereby threatening the predominately conventional hydrocarbon energy sources. Climate change parameters add further complexity, and perhaps an additional burden for sub-Saharan Africa struggling to develop energy infrastructure to meet its increasing demands. Looming energy transition and the abundance of natural resources poses both threats and opportunities for sub-Saharan Africa. The challenges include the lack of significant investment in energy infrastructure, human resources, and technology. The natural resource of sub-Sahara Africa places it in a prime position to effectively exploit and possibly lead in renewable energy transition.At present sub-Saharan Africa’s reliance on biomass is still high and the need to transition from heavy reliance on unsustainable biomass to renewable energy is stark. Equally stark is the optimism to leapfrog the conventional path to energy development and shift directly to renewables, in view of the advances in technology and climate change concerns. Recent trends show a shift in policy by African States towards abolishing energy production state monopolies and creating the platform to successfully overcome the energy trilemma, especially by financing sustainable energy projects.This paper, approached from a legal perspective, examines the recent optimism in Sub- Saharan Africa’s energy transition policies, evaluating the financing patterns, with the aim of assessing how the financing methods have promoted or limited energy projects. This article claims that the adoption of a legal framework that is receptive to innovative financing schemes will reduce the heavy reliance on donor support, worryingly influenced by global geopolitics. It further asserts that sub-Saharan Africa’s energy transition depends greatly on the supplementation of the traditional donor driven, highly politicized funding patterns, to developing specific themed equity and debt financing, including private-public partnerships, securitisation, targeting investors (even within Africa), with political commitments to open market access, thereby democratizing energy access and production.

Human anthelminthic vaccines: Rationale and challenges

Helminth infections are the most common afflictions of humankind, affecting almost every single person living in profound poverty. Through mass drug administration (MDA) we have seen sharp declines in the global prevalence of some helminth infections, including lymphatic filariasis, onchocerciasis, and ascariasis. However, since 1990, there has been no appreciable decrease in the global prevalence of hookworm infection, schistosomiasis, or food-borne trematodiases. Through the activities of a non-profit product development partnerships and two research institutes, a total of five human anthelmintic vaccines for hookworm infection (two) and schistosomiasis (three) have advanced from discovery through manufacture and are now in Phase 1 clinical testing. At least three additional antigens, including two for onchocerciasis and one for schistosomiasis, are also advancing through preclinical development with the intention of moving into the clinic soon. These preventive human anthelmintic vaccines could be used as stand-alone technologies administered to infants as part of the Expanded Program on Immunization (EPI), or together with anthelmintic drugs in programs linked to MDA. Significant hurdles though could hinder the advancement of these vaccines into later-stage clinical and product development and licensure. They include the absence of a major pharma partner (and the resultant access to adjuvants and industrial scale manufacturing expertise), an uncharted roadmap for how to introduce anthelmintic vaccines into appropriate health systems, uncertain global access and regulatory strategies that might need to rely on developing country vaccine manufacturers and national regulatory authorities, and the lack of innovative financing schemes. However, the public health and economic benefits of introducing these vaccines could be massive and therefore deserve international attention and support.

Fuzzy analytic hierarchy process applied to technology credit scorecard considering entrepreneurs’ psychological and behavioral attributes

As an innovative financing scheme for small and medium enterprises, credit guarantee is given for the loan of firms based on their technologies. To screen the applicant-firms, typical technology credit scoring models consider technology-related factors such as level of technology, profitability, and marketability of technology along with management characteristics, firm characteristics, and economic factors. However, psychological and behavioral attributes of entrepreneurs of the applicant-firms have received comparatively less attention, though an entrepreneur’ personal traits are likely to significantly affect the management in a small and medium enterprise. In this paper, we propose a technology credit scorecard that additionally accommodates applicant’s intelligence, personality, integrity, verbal communication, and non-verbal behaviors. Fuzzy analytic hierarchy process allows to determine the relative importance of these attributes. The proposed scorecard is expected to decrease the risk involved in technology credit funding.