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Strengthening Management Capabilities In The Developing WorldAuthor: “Giordano dell’Amore” Foundation The Foundation'Giordano Dell'Amore' Foundation's goal is to provide technical, professional and managerial training, technical assistance and advisory services in the fields of economics, finance and banking to government agencies and public and private entities of developing countries or to countries where institutional and economic changes require international support action. Originally the attention was given to the African Continent. The decision to create, in Milan, the Centre for Financial Assistance to African Countries (FINAFRICA), in 1967, by Prof. Giordano Dell'Amore, Chairman of the Cassa di Risparmio delle Provincie Lombarde (Cariplo), was perfectly consistent with the history of Cariplo, which allocated an important part of its yearly profit for social and cultural purposes and represented the most important step in a series of initiatives implemented for the benefit of the developing countries. Professor Dell'Amore, besides being a renowned banker, was also an eminent scholar of business and financial systems. As a banker, he had led Cariplo to become the largest savings bank in the world and one of the most successful and solid Italian banks - today a key component of the Intesa Bank Group. As a scholar he has made rich contributions to the understanding of the role of financial systems in the development and management of banking institutions. A prestigious academic group of professors in Italian and foreign universities belonged to his school. The rich fruits of his experience in the position of Chairman of Cariplo and Rector of Bocconi University soon emerged. The setting up of FINAFRICA was due to the capacity of Prof. Dell'Amore to react with exceptional speed to the calls for a change, in the sixties, in those countries of the African continent which had recently acquired independence and were trying for the first time, to develop an economic system to satisfy directly the needs of the local population. Since the beginning, some important basic concepts inspired FINAFRCA's doctrine. The first one being the importance of local savings mobilisation, a concept which, only after many years, became a basic tenet of development and is currently shared by the entire international co-operation community; the second basic concept relates to the role of rural areas in the developing world, where the dualism between urban and rural development was emerging. Also, in this instance with a great foresight, the leading idea was awareness of the enormous social impact of the development of rural areas in respect of urban ones. Finally, attention to the rural areas was followed by that given to small and medium-sized industries, to handicrafts and to commercial businesses which form the basic fabric on which is created the real capacity to organise, on a widespread basis, the economic and entrepreneurial activities producing wealth. Prof. Dell'Amore created FINAFRICA because he was of the view that, in order to make investment attractive in Africa, it was necessary to develop a strong managerial class. In the second half of the sixties, the first courses were started in Milan for the training of bank and financial operators coming from African countries that had recently become independent. The first courses were on 'Agricultural credit in developing countries' (1965) and the 'Specialisation course in banking for African countries' (1967). Practical experience in Cariplo branches and case studies enriched the classroom lectures and found natural connection with research activities in which, at an early stage, the students found themselves working alongside professional teams of researchers. At the same time, young Italian university researchers were engaged in the preparation of the teaching material and in writing research papers on the economic/financial systems of developing countries, based on field experiences. Collaboration was encouraged with leading international centres of advanced research. Many follow-up seminars were organised in different countries to offer an occasion to alumni to meet and to work on a specific subject of interest for their profession. The objective was to inculcate the formation of a modern banking culture and the creation of a managerial class capable of restructuring and reinforcing the banking system so that it could contribute to the general development. Since the beginning, courses were diversified: from very practical and basic to highly specialised ones. The Master in Banking and Finance for Development - for developing economies - and the Master in Banking for Eastern Europe are very well known internationally. Since its creation, the Foundation has trained more than 4,000 participants from different continents. The initial focus on Africa, in fact, was subsequently extended to other geographical areas: Asia, Latin America and, more recently, Eastern Europe. In the latter respect, since 1991, as the changes in the political and economic set-up- of Central and Eastern European countries created a widespread need for human resource development and re-training to master the transition from a centrally planned to a market economy, the Foundation, in co-operation with other institutions and with the financial support of its founder (Cariplo), developed a series of training programmes specially designed to meet the needs of Central and Eastern European credit institutions. The Foundation is also currently involved in technical assistance projects for this geographical area. According to this shift in focus, the Foundation changed its name from FINAFRICA into 'Giordano Dell'Amore' after the name of the founder. The start of the first courses was, in fact, accompanied by technical assistance in the field, for setting up or consolidation of financial institutions aimed at raising savings and extending loans in areas lacking banking and commercial activities. The projects implemented in the Sudan, Somalia and Ghana during the early seventies fully reflected this philosophy. To set up or transform savings banks operating in rural areas, local bank employees were backed up by experienced Italian bank operators so that they could later assume positions of responsibility. The Foundation's Technical Assistance has always aimed to improve the existing financial institutions and to establish new ones as required by the development of the country concerned. The Foundation has mainly operated on behalf of International Development Agencies and donors, such as the World Bank, the European Union, FAO or the Italian Ministry of Foreign Affairs. The interventions covered different fields of banking: from general banking policies and structures, to operating practices, to restructuring of a bank or of specific operational areas (such as developing collection products, lending policies and procedures, foreign operations) or on functional aspects (control systems, information systems, marketing). Lending policies and procedures represented an area of particular importance. Managing credit risk is a difficult task in both developed and developing economies; this issue is affected by the specific context of operation. In the many rural areas of the African continent, for instance, credit risk derives mainly from informational problems as standard data usually required by banks for their creditworthiness evaluation are seldom available or reliable. In this respect, therefore, training and technical assistance must focus on reinforcing the abilities of bankers to 'read and interpret' the productive environment in which they operate, also through non-conventional, qualitative indicators of performance that replace the standard quantitative information. This task is easier if the bank becomes acquainted with the local environment (this, for instance, was not the case for many banks that first moved to rural areas in Africa). On the other side, training is also beneficial to the bank's potential customers: if small and medium sized entrepreneurs improve their internal information systems, banks would be encouraged to work with them. The Foundation, therefore, is active on both sides and offers its technical support to bankers and to entrepreneurs. The institutions benefiting from technical assistance were able to profit from the resources of Foundation's training courses and, more in general, from its expertise in training. The Foundation believes that technical assistance must necessarily include training as a key component, and is aware that the final scope of training, by upgrading the education and know-how of executives, is to improve the operation of the institution or administration concerned. On the other side, the Foundation's training activity strongly benefited from the experience gained in technical assistance and was therefore better tailored upon the beneficiaries' needs. The Foundation's specific expertise is linked to the cultural heritage of the founding institution, Cariplo, which boasts of traditions of success both as a savings bank and as a commercial bank. In the past 30 years, the Foundation has carried out more than 40 or so technical assistance interventions for the establishment, transformation and restructuring of savings banks, commercial banks, development banks, central banks, financial ministries, and other financial institutions. The Foundation's Technical Assistance capitalised also on the experiences and know-how accumulated through the Research Department of the Foundation; technical experts were very often flanked by university researchers, which resulted in stronger conceptual elaboration of the different issues as well as in enlarged international connections and publishing activity. Up to now, 32 volumes have been published by the Foundation and, since the seventies, one of the most famous international reviews on financial development: 'Savings and Development' is published. Key elements of successAs we have shown, the Foundation's approach to executive development is based on a strong interaction between practical experience in technical assistance, conceptualisation through wide research and scientific activity, and training, paying much attention to the feed-back on each of these aspects. On a more general basis, however, there are some important basic objectives and principles characterising the Foundation's interventions that can be considered substantially responsible for its success. They are: sharing of expertise, adaptation, usefulness, responsibility. First of all, it is important to stress that sharing does not only mean showing a definite interest in working and co-operating with the developing world, but also means having some specific skills to share with these economies: in the case of the Foundation the skills pertain to the banking profession and, more in general, to the issue of finance for development. The second element is adaptation, which develops through practical experience and field research: looking for successful projects, constructing upon field experience, sharing experience in training classes, promoting open dialogue with participants and using this feed-back to re-orient action are the main pivots for a fruitful sharing of expertise. Usefulness has always been considered crucial in the Foundation's activities. In fact, projects are always designed having in mind the ultimate goal to have the widest possible impact. This means not only focusing on practical issues but also paying attention to transferring concepts that can be replicated in a context different to banking. For instance,bank management techniques, from organisation to marketing, accountancy or control, can be tackled by dealing with the general principles that can be easily adapted to any kind of enterprise. This issue is very important in the developing world where the precariousness of institutions and personal position lead us to take into account the possibility that the trainees may need to use their knowledge in a context other than banking. The fourth basic element is responsibility. Training has always been inspired by the idea that its main goal must be the reinforcement of the good judgement ability of trainees, who are expected to be given increasing responsibilities in their countries. In fact, course participants being executives or public officers, belong to the ruling class and, in this position, they have to make their training experience the more fruitful. As a result of this approach, the Foundation can count among the participants of its technical assistance and training programmes a great number of top managers of financial institutions, as well as central banks' governors, ministries of economy or finance and very successful entrepreneurs. As a matter of fact, besides the very crucial basic principles that have led the Foundation's activity and are responsible for its great impact on managerial strengthening in the developing world, its success is also related to the innovative ideas promoted by the Foundation in the specific field of finance and banking. These ideas can be summarised in three main statements:
These statements are now shared by most parts of the international scientific and co-operation community because experience has shown their validity, but they were considered very innovative when the Foundation started operations. Finance matters in the development of the real economy because, other conditions being equal, a larger flow of savings made available by the financial market allows for an increase in investment and in productivity. Of course, the beneficial effects are larger if the markets and the intermediaries are efficient. Financial development is consistent and functional to economic development only if the intermediaries are managed having in mind the financial equilibrium constraints and according to efficiency criteria. On the contrary, the prevailing policies followed to implement financial development projects have shown many weaknesses in this respect and ended up in deceptive performances of these projects. The Foundation played an important role in the critical evaluation of these projects. Common measures affecting banks' performance were related to the administrative control of financial prices and quantities which, acting against market forces, produced artificial and ineffective flow of funds. Furthermore, in this way banks were disregarding the most important constraint in bank activity, ie. financial equilibrium, while they were not stimulated to develop creative managerial skills and active market strategies to reach the target clientele. Banking entrepreneurship, on the contrary, entails that banks should orient themselves towards new and challenging market segments. Nowadays there is a growing interest towards what is defined as microfinance (i.e. financial markets and intermediaries serving the micro-entrepreneurs and, more in general, the low-income sectors of the economy),because of the recognised potential contribution of these segments to the overall development of an economy. In these markets, where very often informal intermediaries play the major role, the organisational structures, policies and procedures, particularly on the lending side, differ very much from the traditional banking customs. Transactions are usually smaller, based on flexible conditions and procedures; personal knowledge between the bank and the borrower is crucial for the success of the operations. For the traditional banking sector, approaching the marginal segments of the economy may become a challenge and a very interesting business, and the innovation required to deal with this potential market can learn substantially from the micro-finance procedures, though they need to be adapted. In this respect, the Foundation has been very active since its establishment, far before this new wave of micro-finance supporters was born. This precious and foreseeing sensitiveness to the importance of the marginal sectors was nourished by the invaluable experience that many Italian banks gained in working with the low-income sector in the past century. Cariplo was among these banks, very active in small savings mobilisation and in small and medium-sized enterprise financing. The Foundation's perspectivesThe Foundation's past experience is full of encouraging success stories. In the African continent, where the political turbulence keeps changing the environment and the national setting, the Foundation gathered much feed-back from people and institutions that were able to survive and efficiently display their action, notwithstanding the mentioned instability. If the basic approach of the Foundation has to be confirmed for future action, the need was felt to progressively modify the structure of training in order to keep it always consistent with the changing environment. The major change that has occurred over time relates to the shift from standard courses to a more tailored-made approach. In the sixties and seventies, the training needs of bankers and executives in countries in their first stages of economic development were more uniform and basic. With the development of domestic institutions and markets and their increase in complexity, specific needs for different institutions and countries emerged. For this reason, it is now preemptory for a training institution to, first, understand the training needs and help the institution to recognise them and, then, develop ad hoc training programmes answering these specific needs. This approach does not just apply to one institution but can be used in dealing with a whole country. In 1998, for instance, the Foundation carried on a training programme for Lithuanian bankers, designed in accordance with the Lithuanian Banking, Finance and Insurance Institute (with the sponsorship of the Italian Ministry of Foreign Affairs). The programme foresaw a package of four courses tailored to the specific needs of different target participants. It was very successful and there are hopes of being able to offer a follow up of the programme. Of course, 'this tailored-made approach is also the leading policy of the Technical Assistance activity, and is always supported by research.
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