With the UK government's roadmap out of lockdown being recently announced, the promised land of normality draws ever closer. But COVID-19 is seemingly yet to receive the memo, with its continued shaking of mature economies in each and every corner of the world.
Even so, life trundles on and finance specialists still need find new avenues to ensure they secure a return on their own investments, without sacrificing on their supporting of ethical global growth.
For all the disruption of the pandemic, frontier and developing markets are set to outperform their developed counterparts in 2021. Because of the volatility of economies around the world, you'd expect this to present a prime opportunity for investors.
But developing markets also bring added risk. And it is increasingly clear that there are currently a aren't currently enough tools for fund managers to invest in developing countries. Alternatively, it might be the case that updating existing tools for such volatile changing market conditions is simply too time intensive to be considered viable by investment firms. Challenges like these are preventing many economies from reaching their potential.
Instead, hedge money is faced by a variety of high investment barriers to these developing markets. Led, in no small part, by the fact that legacy financial software platforms and consultants have forgot to supply the solutions.
Fortunately, all is not lost and there's a world of technology and tools out there to overcome these barriers. In this article, I'll uncover some of the most effective means to help investors better navigate the opportunities that developing markets can offer.
Key barriers to investment
Of the many barriers facing fund managers, data – in other words a lack of data in relation to developing markets – is one. In this digital age, data became one of the world's most valuable recycleables and resources in business.
So, the scarcity of the commodity for frontier markets presents a distinctive challenge. For example, nearly all major market and investment news outlets don't list rates of interest for longer maturities in countries for example Myanmar.
Other issues include a lack of environmental, social and corporate governance reporting, with a failure to enable compliance on European Market Infrastructure Regulation (EMIR) and reporting requirements set through the European Securities and Markets Authority (ESMA).
Combined, these factors can lead to gaping blind spots and increased risk when fund managers are looking where best to invest, that is only amplified by political turmoil and the opacity of these nations' financials systems .
In extreme instances – like that of Venezuela – there's not even a be certain that local markets will stand the exam of time. This is due to factors for example extreme inflation rates, endemic corruption, economic and political instability, government intervention and a restrictive legal framework.
If you merge the above mentioned with legacy financial software woes (they may be inflexible and often costly to change), you would have it we've got an investment recipe for disaster – and fund managers only will have to pass up the opportunities of these potentially fruitful markets.
Or can they?
Low code as a solution
Legacy systems are a thorn in the side of financial markets. Some have been around for decades which makes them difficult to do without – despite their inefficiency, increased security risks and incompatibility with technology. This aside, legacy systems may also be increasingly costly and time consuming to replacement – making this option less attractive.
In response, low-code addresses the requirements of fund managers and funds with capability to devise or build in comprehensive functionality and specialised reporting tools that can spur investment in a growing multibillion-dollar market.
Furthermore, low-code solutions allow for platforms to be easily configured and versatile enough to address the fast-paced, rapidly changing world of frontier markets and allows a person with limited technical skillsets to develop a business application in days.
A recent just to illustrate that highlights the benefits of low-code is DLM Finance. Utilising the expertise of Mendix, the financial services provider used low-code to create Trade Manager: a purpose-built, global financial software platform for fund managers to create investments in developing countries.
Due to the relatively smaller market capitalisation in these nations, traditional financial software providers have less interest in developing market-specific tools – using the high costs and length times associated with customising legacy software not an option for many funds.
But Trade Manager is purpose-built to fulfil the needs of parties in these underserved markets.
Overall, the complete application to address EMIR reporting was devised and developed in just two months on the Mendix low code platform by Finaps, a Mendix partner specialising in financial applications, in collaboration with DLM Finance.
Today, both fund managers and developing countries have already benefitted from its creation, using its attracting of capital for emerging economies. However this is just one isolated case where low-code has led to emerging markets, with a wave of success stories now expected to follow.
In a pandemic-disrupted world, software, with its ability to support rapid changes in business conditions, is the new lifeblood of our daily lives and the connective tissue holding together the global economy. And owing to innovations like low-code, we may just emerge on the flipside without a lot of scars.