Media Development Loan Fund Bonds With Swiss Bank

Michael Hedges May 12, 2006

When times are tough, the clever get creative. Times are certainly tough for independent media in transitional economies. Marking World Press Freedom Day, the Media Development Loan Fund (MDLF) and Swiss partners launched a clever investment instrument designed to support independent press in developing countries.

For the first time a socially responsible investment product will be listed on a major stock exchange, said the announcing press release.

Media development in developing and transitional regions typically brings to mind hand-outs, either from governments or benevolent foundations. Two things happen: independence is questioned and hand-outs end. MDLF has worked for more than a decade to change that equation.

“Why wouldn’t investors want to fund the press freedom deficit,” mused MDLF Managing Director Sasa Vucinic, “if they are willing to fund the US deficit?”

Vucinic has up close and personal experience with independent media in countries undergoing, shall we say, change. Prior to joining MDLF, he managed Belgrade radio station B92, now viewed as a success story.

The new financial product – called “Voncert responsAbility Media Development” – is what those with MBA’s in finance call a “swap note.” Dust off the old textbook and look up “derivative” – if the book isn’t too old.

MDLF’s press release makes the creative part perfectly clear:

“The central element of the Voncert responsAbility Media Development is a loan at 1% to MDLF. Bank Vontobel merged this loan into a structured interest product (VT Swap Note Open End CHF, five years). The resulting product corresponds to a bond investment with a social component. In collaboration with the Swiss Agency for Development and Cooperation (SDC), Bank Vontobel ensures that the investment in MDLF is tradable at all times and that investors can resell the product before maturity if necessary. This allows investors to invest in independent media at moderate risk via a conventional investment form.”

Derivative investment products conjure up high risk, “blue smoke and mirrors” and other notions that terrify investors. At a time when wealthy investors are driving up the price of gold in search of safety, buying a ”creative” financial product can be likened to being boiled in oil. Inject here the clever part: Switzerland.

Ah, to whisper in Hans Vontobel's ear...

The most utterly risk-averse humans on the planet are Swiss bankers, one reason these folks manage a quarter of the worlds’ wealth. MDLF’s partners in this offering are Swiss private bank Vonobel Group, responsAbility – a social investment service provider founded by Swiss bankers and the Swiss Agency for Development and Cooperation. Bank Vonobel AG markets the product, responsAbility manages it and the Swiss government provides the guarantee. The product will be listed on the Zurich Stock Exchange from May 18th.

Funds raised will join MDLF’s pool of funding – nearly always loans - available to publishers and broadcasters in developing countries for structural investment. 

Vucinic sees MDLF’s model of private finance as a “blueprint” for other “social projects around the world.” It certainly has the media development, financial and socially responsible investors on the same page.

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