TRANSFORMING 3RD WORLD DEBT INTO

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TRANSFORMING 3RD WORLD DEBT INTO MICROFINANCE LIABILITIES: THE. ODIOUS DEBT BECOMING AN OPPORTUNITY. Dipl.Kfm. Tomáš Hes, Ph.D.
TRANSFORMING 3RD WORLD DEBT INTO MICROFINANCE LIABILITIES: THE ODIOUS DEBT BECOMING AN OPPORTUNITY Dipl.Kfm. Tomáš Hes, Ph.D. Student Czech University of Life Sciences Prague, Institute of Tropics and Subtropics, Agricultural economics specialization in sustainable rural development in tropics and subtropics. Kamýcká 129, 165 21, Prague 6, Czech Republic. E-mail: [email protected] Tel.: +420 224382164

Assoc. Prof. Karel Srnec Ph.D. Czech University of Life Sciences Prague, Institute of Tropics and Subtropics, Agricultural economics specialization in sustainable rural development in tropics and subtropics, Kamýcká 129, 165 21, Prague 6, Czech Republic. E-mail: [email protected] Tel.: +420 +420 224382161

Ing. Martina Drašarová, Ph.D. student Czech University of Life Sciences Prague, Institute of Tropics and Subtropics, Agricultural economics specialization in sustainable rural development in tropics and subtropics. Kamýcká 129, 165 21 Prague 6, Czech Republic. E-mail: [email protected], Tel.: +420 224382503

Ing. Alena Neradová, Ph.D. student Czech University of Life Sciences Prague, Institute of Tropics and Subtropics, Agricultural economics specialization in sustainable rural development in tropics and subtropics. Kamýcká 129, 165 21 Prague 6, Czech Republic. E-mail: [email protected], Tel.: +420 224382503

Keywords: microfinance, funding, debt, HIPC, swap, development, public private partnership

Biographical notes: Mr. Dipl. Kfm. Tomáš Hes, PhD. Student, is a Czech economist focused on development of financial systems, with focus on microfinance investment, graduated in Internationales Hochschulinstitut in Zittau, Germany. His career entails work in consulting, currency exchange, banking, MFIs and education NGOs in Brazil, Germany, Czech Republic, Romania and Mexico. Currently, he pursues the build-up of myELEN.com infrastructure, Czech peer to peer on-line lending platform, through innovations and 2.0 technologies. Mr. Doc.Ing.Karel Srnec, PhD., is a Czech development specialist focused on development of financial markets through microfinance, graduated in Czech Agricultural University in Prague. Currently, Mr. Srnec researches and teaches banking, development finance and microfinance on the Institute of Tropics and Subtropics affiliated to Czech Agricultural University in Prague, being member of the board of the institute, with broad experience spanning from agricultural development, Middle East and Africa focused consulting, commercial banking as well as membership in the Czech-Israel chamber of commerce. Ing. Martina Drašarová, PhD. student at the Institute of Tropics and Subtropics (ITS) in Prague, focuses on the sustainability and improvements relating to the poverty alleviation through the financial systems, acquired her bachelor degree at the University of Hradec Králové and received scholarships at the University of Dong Hwa in Taiwan and University of Hull in England. Currently teaches at University of Life Sciences and undertakes investigation of microfinance markets in Mexico. Ing. Alena Neradová, Ph.D. student, graduated in Faculty of Economics and Management in Czech University of Life Sciences Prague. At the time of studies she spent two semesters at ESDES, Ecole de management in Lyon, France – marketing and management specialization. Currently, Mrs. Neradová researches and teaches Banking and finance, Microfinance and rural economics and Economics of agriculture and natural resources. Within her work experience she participates in marketing projects and in developing of banking system.

Abstract The international debt relief programs did not encounter decisive solution to the 3rd world indebtedness. The major concerted relief schemes, organized by World Bank and IMF, are ignored by number of creditors. The present forgiving paradigm does not incite creation of sustainable infrastructures nor helps to consolidate the indebted economies on grass root level, assuring halt to debt renewals. Despite the traditional view of the debt as a burden, the situation can be considered an opportunity for erection of sustainable structures in 3rd world countries. This paper proposes a new complementing concept to the old forgiving paradigm, under which the debt is converted into microfinance portfolio liabilities possessed by creditors. The Debt repayment is ensured through stream of revenues generated by a single national microfinance funding source, nursed by diverted debt service payment, eliminating foreign financing and converting creditors into shareholders.