The Changing Nature of Work: 30 signals to consider for a sustainable future

SIGNAL 26. Access to financial resources

The conventional landscape of capital access has undergone revolutionary changes in the last few decades. Financing options have become much more varied. New flexible models of capital formation are being built, driving innovation within equity and debt structures, and piloting and developing new ways to finance entrepreneurs and deploy capital. They include revenue-based investing, entrepreneur redemption, online lending, crowdfunding and blockchain. Opportunities made possible by modern technologies and financial innovations are likely to sustain the trend.

Technology plays a crucial role in the development of capital markets. A range of new tools including crowdfunding, blockchain and online banking are based on modern computer and Internet technologies. They are making markets more accessible, breaking the rigid frameworks of conventional finance. For example, blockchain-based technologies are eliminating the need for intermediaries by solving the problem of peer-to-peer transactional trust and “starting a process that could revolutionize the core of capital markets infrastructure systems”. Technology is also enabling new ways of equity crowdfunding, bringing “a change in how start‐up businesses raise capital, with the entry of new forces that could potentially change the future of venture fundraising”. As tools such as AI and big data analysis are more widely adopted by financial institutions, we can expect technological disruption in capital markets to continue, thus providing more options and platforms for entrepreneurs to access financial resources.

An important underlying trend in access to entrepreneurship finance is the democratization and decentralization of capital markets as phenomena of technological opportunities, as well as deregulation in the finance sector. Expansion of non-banks and alternative lenders into the domain of legacy banks are good examples of such opportunities. Some of these players are alternative financial institutions that specialize in financial services, and some are tech companies such as Google, Amazon, Apple and Samsung that provide financial products to complement their core business.

Social and cultural shifts are also influencing capital markets. Impact investment, an investing approach that seeks both financial gains and measurable social or environmental benefits, is a relatively new trend, which is gaining momentum. As of the end of 2018, the impact investing market size was estimated at US$502 billion, whereas conservative estimates for impact investment markets in 2013 were US$25 billion. Following this trend, accessing finance for initiatives with positive social and environmental impact will be easier.

Geographical and sectoral spillovers are a common dimension of the above trends. The most innovative and forward-looking practices are spreading through increasingly globalized financial markets. New tools are being adopted in an increasing number of countries. It is also changing conventional banking systems; for example, traditional banking and investment sectors in European countries are looking forward to adopting less risk-averse approaches pushed by competition from American and Asian investors. As a result, European entrepreneurs now have more access to capital. In general, the above trends indicate that an amalgam of technological, social and cultural factors will foster more tools and opportunities for entrepreneurs to access financial resources; however, the expression and magnitude of these trends will be varied in each country subject to country specifics.

Check out the next signal, #27: Entrepreneurship training and education.

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The Changing Nature of Work: 30 signals to consider for a sustainable future

Work helps sustain livelihoods and largely determines the quality of life. Its changing nature is at the frontier of development. This report is the result of a broad horizon scanning by six UNDP Accelerator Labs across Europe and the Commonwealth of Independent States.  They reveal 30 signals that shape the “where, who, how, and why” of the changing nature of work. From the impact of COVID-19 on the workforce to new work models and entrepreneurial ecosystems, the authors explore opportunities and threats, as well as solutions from local contexts that can be scaled up into positive answers to the challenges people around the world are facing.  Download the full report here.