Origin Story: The Global Bank for Small States (GBSS)

It was 2013. I was sitting on the home pier on Bonaire in the Caribbean Netherlands as waves lapped my feet. I had already spent a 25+ year global career in technology, finance, and policy. The journey had been exceptionally rewarding and taken me to over 50 countries around the globe, and introduced me to a blue-chip group of industry and global political leaders. But I felt there was more left.

So during my self-imposed sabbatical, the question that I posed to myself was, "What Next?"

I had accumulated an interesting set of experiences.

• I had launched a few start-ups, so I knew about cash flow (and pain!). In the early '90s, with key leaders in Silicon Valley (some famous names today) I jointly pioneered the world's first electronic investment marketplace and rode the early boom of the Internet and the Web. When "Blockchain," the "Internet-of-Value," and "Unicorns" showed up, these were phenomena that I understood reasonably well.
• I was familiar with investments, economic development, government regulation, and scaling ventures via bureaucracies. I had been a senior executive of the World Bank Group in Washington, D.C, advising the President and eventually serving 3 terms on the Board of Directors, including the International Finance Corporation, the world's largest emerging market investor. I had some perspective from approving annual investments of $60 - $100 billion in 400+ projects across 100+ countries, in the company of representatives from nearly 200 Ministers of Finance and Central Banks.
• I had written Euromoney's "Book of the Month" on sovereign funds ("A Practical Guide to Sovereign Funds") and knew about state strategy, geopolitics, and institutional funding dynamics.
• I had been an advisor to some important folks around the world, especially in sovereign funds, and they returned my phone calls.
• I had informally helped some bright entrepreneurs open up their minds to the concept that "great things can come from small places." I could intimately see the links between the 1% and the rest, in a world of unequal globalization that also offered opportunities.

As I gazed across the blue sky and pristine water of "dushi" Bonaire, the question that confronted me was: "How can I distill the lessons learned so far into a "What Next" that harnessed all my human capital and also left the world better than I found it?"

I was reminded of the words of a famous philanthropist when asked by me over a private dinner, why he was giving most of his fortune away. He said: "Adnan, to those that much has been given, much more is expected."

His words stuck with me.

In essence, even rich life experiences are not to be selfishly indulged. They are assets and obligations in custody. Sure, we can enjoy them. But we must add value and then pass them along.

How could I relish my experiences, add something, and then pass it along?

And then it hit.

Of the 20 wealthiest countries (by per capita income) in the world, 17 are small states.

Nearly 50% of the United Nations membership comprises ‘small’ states. Of the nearly 200 countries in the world, there are over to 100 small states (more precisely 142), with populations of less than approximately 10m – often much lower.

In periods of great disruption, being small is beautiful, because one can be nimble -- leaping over legacy systems.

In short, small states have wealth, voting power, and speed, which can lead to influence and innovation.?

In the case of island small states, they also cover a lot of the world's oceans. Their exclusive economic zone (EEZ), prescribed by the United Nations Convention on the Law of the Sea, stretches from the baseline out to 200 nautical miles from their coast. This is where a state has special rights regarding the exploration and use of marine resources, including energy production from water and wind. Add up all the EEZs and you get a significant part of the world's ocean space that is close to land. Not an irrelevant detail in a world concerned about ocean-based trade, geopolitics, raw material, climate change, and other global concerns.

Each small state also has Institutions, Municipalities, and Families ("IMFs") that are in need of services exclusively designed for small state clients. Of the prosperous small states, some are super wealthy (e.g. Liechtenstein, Monaco, Brunei, Qatar); few are economic powerhouses (e.g. Singapore, Norway, Sweden); others are financial centers (e.g. Luxembourg, Bermuda, Bahrain), or offshore jurisdictions (e.g. Cayman Island, Jersey, Cyprus); many are tourist hubs (e.g. Bahamas, Seychelles, Fiji); and some combine all of the above (e.g. Dubai, Malta). Then there are those that are micro-states with moral power (e.g. Vatican City) and others with little influence and poor (e.g. The Gambia).

Despite their diversity of culture and location, small states share much in common. In most small states there are a few major families who provide much of the entrepreneurial momentum. They are also closely tied to local dynamics of policy making. And municipal priorities are intertwined with commercial interests. In this context, a new generation of political and business leaders is emerging who have been trained internationally and operate in a global context. Their aspirations are global, believing that big ideas can come from small places. This new generation is also entrepreneurial.

But small states also have challenges and frustrations.

There are unintended consequences of policy decisions. Enhanced regulatory burdens, heavy capital requirements, and high operating costs are forcing the largest financial institutions – often located in big states – to deleverage and de-risk away from smaller markets. In some cases, long-term lines of credit have been closed to worthy clients, and clearing facilities were withdrawn from even central banks of small states.

Like ‘canaries in the mine’ they are the first to be affected by adverse impacts of human development, whether it is climate change or regulatory restrictions on the movement of goods, finance, and services. They really haven't been given the tools to harvest their opportunities. To overlook them is to ignore the well-being of all humanity. And to address their challenges is to make the world a better place for all.

A root cause of failure is that the global system focuses on issues and interests of ‘big’ states, with an inherent bias towards louder voices. Decision-making worldwide is increasingly centralized among elite governance bodies, both for both policy-making and matters of finance. Through global entities like the G20, rules are set up by dominant players.?Fundamentally, the trade and risk issues that global regulators focus upon are those driven by narrow big country systemic interests. Ultimately this bias trickles down to how the system responds to crisis. A disaster or an opportunity in big states gets attention in a different manner than in smaller ones. If problems in small states get attention, the attention dissipates once the media leave. There is no institutional focus solely on the challenges faced globally by small states. Small state concerns are afterthoughts. And they have accepted this neglect with surprising equanimity, showing a shocking lack of initiative.

The inherent bias is not just among those responsible for development issues or in the public consciousness. It also exists in the world of private commercial finance. Big business doesn’t focus on small issues. Corporate decision-makers at financial giants are forced by size and circumstances to focus on major markets and big picture efforts. Given their cost structures and incentive systems, large firms logically focus on large opportunities. For individual project managers, a few large projects in big countries are more efficient than many projects in small countries, sometimes irrespective of return from even bankable projects. Large projects are also a source of managerial reward. This is true even if risk-adjusted rates would justify pursuing diversity of opportunity from multiple sources.

While having enough similarities between them, and despite this being the age of technology and globalization, no one has ‘horizontally’ networked IMFs from small states into a single financial and knowledge global network. These developments are creating a gap in the market for serving eligible small state IMFs. An opportunity is available for those who can leverage the moment. This can be done by a global bank exclusively designed for the needs of small state IMFs. Such a global small state institution would address market failure. It will provide tailored services, promote financial inclusiveness, and constructively deepen and broaden the process of globalization. It would correct for a gap, where local players don’t have enough depth to serve this market. And regional players don’t have the global reach to get economies of scale.?

Most importantly, today it is possible to use advances in technology to provide an innovative single integrated FinTech platform (especially Blockchain-based tools and digital assets) to small states. This would spread the benefits of scale in a world where geography should have less meaning, and small size should be an asset due to the nimbleness of movement.

The answer is the establishment of a commercially oriented "Global Bank for Small States (GBSS)." Such a bank -- or more properly an "eco-system," with a mix of investment, development, and impact objectives -- would serve selected global citizens and institutions from small states – those that are pioneering municipal organizations, leading corporate institutions, or forward-looking families. These are the natural clients of the GBSS. By providing finance, advice, and networks to a new generation of entrepreneurs, GBSS will also turn brain drain into brain gain. In setting up GBSS, history would be made and the world would be a better place. And that is inspiration enough.

In short, I had found my answer to "What Next?" It was the establishment of GBSS.

Over the last few years, some leading global advisors and I have been consulting informally with central banks, ministers of finance, business leaders, fund managers, and technology providers to refine the GBSS concept and to build support for its launch. The effort has been funded by my family office, but the formal step of a broader launch is coming closer.

GBSS will be a public-private global venture. It will be commercial at its core, but with developmental impact. More than a product, it will be a movement, an applications platform, an ecosystem, and a "club." GBSS will leverage small states' advantages to contribute to global transformation. It will also create an alternative asset class that is geographically diverse. On a geopolitical level, it will end up also being a voting bloc that has collective heft. GBSS will provide a standardized technology platform as an outlet for 3rd parties, who are developing digital assets aimed at small states. It will be an ecosystem for leading small state peer institutions, wanting to leapfrog their legacy competitors (the GBSS annual gathering of institutions, municipalities, and families will become the "Davos-for-Small-States"). Financing, networking, and intellectual solutions will be customized for small state environments. GBSS will be more competitive than larger global players and have a faster response than legacy players.

For the technically minded, GBSS will build on various technical solutions, exploring how a blockchain-based distributed eco-system can be formed for an entirely new global transactions platform. Think of it as a financial and advisory platform meeting a secure operating system (OS). Basically Apple-type OS but dedicated to finance networking, and advisory services for small states -- but on a blockchain foundation and designed for institutional end users, not retail.?GBSS will include refined versions of venture capital, project finance, debt, mergers & acquisition advice, wealth management, crowdfunding, diaspora (and green, orange, blue) bonds, etc. It will provide customized and personalized value at each stage of the value cycle of transactions. GBSS will make money as financial, intellectual, and social networks are facilitated. Tokens will be used to allow value to be preserved and transferred within the GBSS ecosystem.

Seeds for this distributed network to flourish have been planted over the past few years and the use-cases have been explored. GBSS will not just be disrupting but reinventing the global way of doing business. In essence, creating a 'clean' environment for a decentralized yet interconnected world. With multiple nodes of influence, we believe that the ensuing framework will be far more resilient. Philosophically, GBSS will also broaden and deepen globalization, in a way that is sustainable and inclusive.

Our vision is clear. Now we execute. Keep an eye out for us, as we unveil the Global Bank for Small States (GBSS)!