FLUID FINANCE

Problem Definition

Investors in developed markets are constantly dealing with low returns on fixed-income securities in their
domestic markets due to the less risky nature of these economies. For instance, a recent threat of
recession in the global economy has resulted in a further reduction in interest rates and a decline in yields
in developed markets. While most individual investors are fully aware of the major investment
opportunities in their home markets, many investors in developed markets are oblivious to investment
opportunities abroad. This situation is further compounded by the difficulties in transferring funds
between developed markets and emerging markets. To address this challenge, we are creating an
investment platform that will be strictly focused on enabling investors in developed markets such as
Canada conveniently invest in high-yield fixed-income securities in emerging markets such as Nigeria.

Aspirations

1. Primary Point of Contact: Fiyin Oyewo, foyewo@ivey.mba2020.ca

2. Market Expert – Chau, Industry Expert – Fletcher Solution; Expert – Vridhi; Financial Expert – Fiyin
and Siyang; Ecosystem Expert – Josh

3. Team Profile:
Chau Vu (251092156): Prior to joining Ivey, I worked at XLE Group, a sports marketing start-up in
Vietnam, where I helped revamp the entire back operations for the Company and launch VBA, the
first professional Vietnamese Basketball Association. XLE has now become the premiere sports
training, entertainment, and Media Company while VBA is one of the most watched and followed
events in Vietnam, helping to build personality and change lifestyles of many young adults. As I
helped XLE group with its transition into a large company with multiple stakeholders and complex
business models, I found my passion for helping companies set a solid foundation and ethical
business mindset to drive their growth journey to the next level. In the long run, I want to start
my own consulting firm to help start-up businesses establish a strong foundation for growth
locally and internationally and in turn prepare themselves to attract venture funding from
investors around the globe

Fiyinfoluwa Oyewo (251064385): Growing up I supported the operations of my mother’s cassava

processing factory by providing financing and marketing support. Prior to joining the MBA
program, I worked in the new business unit of an energy company that was seeking to diversify
into renewable energy and finance. In my role as the company’s economist, I was actively involved
in the business case development, project development, and financing of the company’s new
businesses. In the future, I aspire to launch a venture capital fund focused on promising
businesses in Africa.

Fletcher Courage (251078239): My entrepreneurial experience is primarily rooted in hospitality

and the beverage industry. I have taken part in several restaurant openings and operate a sole
proprietorship that focuses on wine tastings, fundraisers, assisting with new product marketing,
and pairing food and wine. Within that world, I have seen firsthand how a lack of capital can
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cripple a great idea that would fill a clear market need. Looking forward I intend to continue
helping entrepreneurs achieve their dreams.

Josh Cochrane (250274676): Upon graduating and starting a new job, I used my savings from my
internship as a down payment for a house. I specifically looked for a house that would be
convenient to both live in and rent out bedrooms to contractors. After I saved another down
payment I bought a rental property in London to rent bedrooms out to students and use Airbnb
when rooms are empty during the summer.

Siyang He (251063207): Prior to MBA, I worked in banks, focusing on issue loans to companies.
From my experience of dealing with business owners, I have learnt that most of the time their
needs of financing has not been met and banks as a financial intermediary has not been very
efficient. The stringent screening process in banks has ruled out many small and medium
businesses that are in desperate need of money just because they have a small scale. Through
this project, I want to leverage my experience in financing companies and deepen my
understanding of how SME raise capital. In the future, I want to continue my path in banking
industry and I want to use what I leaned in this project to help SME to raise money to help them
grow.

Vridhi Tuli (251064396): I have worked in some startups in the past, for example, Heysan which
is a mobile startup based in Silicon Valley. I have also taken a course on Global Entrepreneurial
Marketing at Stanford University. While I have not created a startup before, my aspirations are to
work in consulting and create an education and technology startup in five years from now which
produces mobile learning solutions for underserved economies.

4. Our entire team would like to continue to pursue this idea if we are selected for the Accelerator
that starts in April.
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Work Plan and Scope Write Up

Our workplan highlights the steps to be executed by the team in developing a business plan that is
acceptable to a third-party investor. We have separated our workplan into three distinct phases – the
research phase, the pilot phase, and the pitch phase.

Research Phase

As a first step to developing our business plan, thorough research will be carried out by all members of
the team to determine the size of the market interested in our solution, the regulatory requirements for
the solution, the technological and structural requirements for the investment platform and the most
suitable countries for the pilot phase of the solution.

In accessing the market size for the solution, primary and secondary research will be carried out to
determine potential investors that will be interested in making use of our proposed platform and the most
suitable destinations for potential investments. This research will be led by Josh and Fiyin. As part of the
initial market research, Fletcher will be leading research to assess the initial threats and the regulatory
environment for the solution. Vridhi will also be considering cybersecurity and technological requirements
for the solution. The technology-related research will consider the encryption requirements for the
development of a prototype investment platform. Due to the cross-country nature of our proposed
solution, currency risks will need to be accessed using the PCMLTFA and FINTRAC compliance documents.
Siyang will be taking the lead on this research. Chau will be carrying out an assessment of the external
environment for the proposed solution using the P.E.S.T.L.E. framework and Porter’s 5 forces to evaluate
and analyze the competition and potential partners for the solution. A final step in the research phase will
be the development of a financial model for the solution. This will involve determining the fixed and
operating cost for the solution as well as expected pricing and revenue. This research will be led by Fiyin
and Siyang but will involve all members of the team.

At every stage of the research phase, the team will be consulting the EIR to determine if the research that
has been done is sufficient for the development of a bankable business plan.

Pilot Phase

The second stage will focus on launching a prototype platform for the project and testing the MVP for the
solution. Vridhi will be creating a minimal viable prototype using inVision app. Fletcher and Fiyin will be
developing a regulatory compliance plan. The compliance plans will be created using the FINTRAC
provided template and discussions with knowledgeable industry advisors. Chau, Josh, and Siyang are going
to develop a commercialization and marketing plan. The commercialization plan will be developed based
on research of other extant fintech solutions. The team will be leveraging on the experience of the EIR in
making decisions around the pricing and features of the prototype solution.

Pitch Phase

We plan to make use of the steps above in developing a business plan and a mock budget. After finalizing
our applications to the OSC Incubator and the CSA Sandbox, we plan to refine our business plan and pitch
deck based on feedback from the process. The entire team will be involved in this stage of the project.
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Figure 1: Project Scoping Diagram

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Preliminary Research Summary

Canada has one of the lowest yields on fixed income securities across the globe

Yield on 1-Year Treasury Bill

17.90%
15.30% 13.80%
7.89% 8.75%
7% 5.82%
4.89%
1.55% 1.87% 2.52% 2.07% 2.42% 2.76%

Source: http://www.worldgovernmentbonds.com

The yield on fixed income investments in most emerging markets are still attractive after adjusting for
exchange rate movements.
EXCHANGE RATE MOVEMENT ( SEPT 2019 VS SEPT 2018)
17.82%

10.11%

9.21%

8.92%
7.34%
7.18%

5.52%

5.53%
1.48%
3%

3%
3%

1%
0%

0%
-1%

-1%
-2.58%
-5%
-8%

-9.63%
-23%
NIGERIA SOUTH AFRICA GHANA BRAZIL CHILE MEXICO INDIA CHINA BANGLADESH PAKISTAN VIETNAM

Currency Change relative to CAD$ (Appreciation) Total Return (Currency Change + Yield)

Market Size-up
In Canada, Investment funds assets total $1.58 trillion, they account for more than 36.1% of Canada’s
financial wealth. Mutual funds account for 90% of these funds and ETF account for 10%, showing that
most investor are willing to take some risks in hoping for extra return.

Potential Investment Targets

In selecting emerging markets to offer fixed income investments in, the team has considered exchange
rate volatility, available yields, capital repatriation risks and the credit rating of the country’s government
bonds. Nigeria, Ghana, Bangladesh and India have been identified as potential targets for our solution.
The team will be doing more research to select the country for the pilot phase of the solution.

Main challenge and obstacles

he regulatory landscape for investors and institutions is complex with 30 distinct government or
independent regulatory bodies. It appears Fluid Finance will be regulated by the Financial Transaction &
Reports Centre of Canada (FINTRAC), the Ontario Securities Commission (OSC), the Canadian Securities
Administration, as well as the Financial Consumer Agency of Canada. Team will need robust compliance
plan to launch the solution.
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Appendix

For comparing yields, we went with the market standard of the USA 10 Year treasury bond (T-bills), which
is the most representative indicator of the minimum return the market is looking for.
 In developed markets, as in Sep 17th, 2019, the yields of treasury bonds are quite low (United
States: 1.84%, Canada: 1.47%, Japan: -0.15%, Germany: -0.485%), some are even lower than the
rate of inflation
 India’s treasury bond yield is currently 6.728%. Also, India’s economy looks promising: it has a
growth rate of 6.1% annually; by 2022 India will have the world’s youngest labor force.
 Nigeria’s treasury bills currently have yields between 12% to 15%. The Nigerian government has
never defaulted on its domestic debt and, there is free repatriation of capital using the certificate
of capital importation (CCI)
 China’s treasury bond yield is 3.1%. However, China has strict capital flow restrictions: foreign
investors are subject to a quota. Also, the repatriation channel is tight: individuals can only
exchange 50,000 U.S. dollar (or equal value of other currency) every year.
 Eastern Europe has reasonably high yields. However, they possess the following challenges: small
and risky market, institutional corruption, fragile banking industry and rate-locking with ECB for
some countries. Georgia presents a potential opportunity in the future, but the risk of Russia is
high.
 The Vietnamese treasury bond has a yield of 3.984% and the yield has been declining over the
past few years. However, government also puts heavy restrictions on capital flows.
 Brazil and Mexico both has yield rate of 7.3%; however, political instability exists.

References

https://www.investing.com/rates-bonds/asian-pacific-government-
bonds?maturity_from=10&maturity_to=310

https://www.wealthsimple.com/en-ca/learn/investing-in-canada#online_investing_in_canada

https://www.quora.com/What-is-the-population-of-Indians-in-Canada

https://www.ific.ca/en/stats/

https://www.ific.ca/wp-content/uploads/2019/01/IFIC-2018-Investment-Funds-Report.pdf/21611/

http://www.worldgovernmentbonds.com/country/vietnam/

https://uk.practicallaw.thomsonreuters.com/3-515-
9149?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1

https://uk.practicallaw.thomsonreuters.com/3-515-
9149?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1

https://canadaimmigrants.com/vietnamese-immigrants-canada/