Islamic Banking

After discussing the different principles of Islamic banking, this is an attempt to explore the feasibility of Sharia banking in India. The rise of “interest” as a blood sapping social evil is alarming. To get rid of this menace and save the nation from the clutches of interest, suitable amendments should be made in the Banking Act. Indira Gandhi’s slogan, “Garibi Hatao” and “Roti,Kapda Aur Makaan” as enunciated by Zulfikar Ali Bhutto are still relevant today as it was in the early seventies. Yet even today, horrendous disparities exist between different segments of the Indian society. The majority of the unorganized sector; workers, semi-skilled persons, small farmers are all non-bankable. .Access to finance by the poor and the vulnerable groups is a prerequisite for poverty reduction and social cohesion. Such “financial apartheid" is one of the main causes of exclusion of the majority of the population in terms of growth. Government must provide the disadvantaged classes with the tools they need to improve their condition.The Indian banking sector has opened up considerably in the past decade or so and openness to interest-free banks is a logical next step. Islamic banking is one way to ameliorate the disadvantaged classes. The potential benefits of allowing Islamic banking include; decreased economic disparity between the haves and the have nots, better integration, and consequently accelerated economic growth. Government of India can leap a step closer towards the fulfillment of Indira Gandhi’s much cherished dream of “Garibi Hatao” by reforming its banking sector and allowing the establishment of Islamic Banks.

Crisis revisted

“Irrational exurbence” was the phrase used by the former Fed Chairman Alan Greenspan to define the boom in 1990s. Today this phrase once again, exactly describes the current situation.
The classic explanation of financial crises, going back hundreds of years, is that they are caused by excesses — frequently monetary excesses—which lead to a boom and an inevitable bust. This crisis arose from the unabated housing boom witnessed in USA in the early part of century. It in turn was the outcome of monetary excesses by the Federal Reserve Bank during the Alan Greenpsan’s tenure.

Unfolding of Crisis

The current economic difficulties have a United States origin. The original underlying assets were houses whose prices were falling. The collapse of the securitized US mortgage market and its related derivative products amplified the weakness of the US housing sector, sending a contractionary shock through the US economy and to the rest of the world. Asset backed commercial paper issued by the special purpose vehicles now in trouble brought weakness to the dollar funding market, causing it to freeze up in August 2007. This market provides large US and foreign multinational financial conglomerates with the short-term monies that they need to finance their investments, including those made daily on their trading floors. It has been more or less frozen ever since, with disastrous consequences for the larger financial system. Its complete shutdown in August 2007 crippled the US banking and financial system, causing it to slowly unravel. Matters got worse in September 2008, or rather, matters came to a head. Little new had happened within the core of the financial system itself, for it had already come to a halt, but the general macroeconomy was weakening and pulling asset prices further down. The freeze-up spread from the interbank to the other short-term US money markets, including those controlled by the major money market mutual funds, causing them to freeze up as well. By November 2008, the entire financial system, and not that of just the money markets of the United States or the United Kingdom, became incapable of carrying out even the simplest of steps involved in the conversion of corporate savings into investment or the financing of home building, personal consumption, or development.

Initially the “Decoupling Theory” was cited for the apparent survival of the emerging economies (especially BRIC countries) from the crisis. This immunity did not last long. The slowdown crept into these economies through the trade route and flight of capital. Soon, countries that had
adopted export-led growth strategies and liberalized their capital accounts (China and East Asian countries to a large extent), found that they were suffering from the effects of a reduction of the aggregate demand of the nations to which they exported. Emerging market and developing countries are now suffering from the same vicious circle that is affecting the developed nations: their weakening economies are interacting with weaknesses in their financial systems.

WTO:Resurfacing the Negotiation Rounds

Amidst mayhem of prevalent global crisis, nations whether developed or developing everyone
has been suffering from slowdown. International trades have been largely impacted. In hurry
many nations across globe took rescue measures to save their individual economies. Some
announced bailout packages and some went protectionism way. Global slowdown has shattered
nations so hard that everyone trying individual way to deal with their crisis. The U.S. is planning
retaliatory tariffs on Italian water and French cheese to punish the EU for restricting imports of
U.S. chicken and beef. India is proposing to increase tariffs on foreign steel at the request of its
steel industry. Egypt has imposed duties on sugar, and the U.S. has levied new tariffs on Chinese
goods it contends are being dumped on the market. If international trade is kept un-regulated, it
may deepen the ill effects of global crisis and the situation may go worst. There has been always
a need of regulator for international trades.
The World Trade Organization (WTO) has been established to supervise and liberalize
international trade. The WTO has 153 members, which represents more than 95% of total world
trade. The WTO is governed by a Ministerial Conference, which meets every two years; a
General Council, which implements the conference's policy decisions and is responsible for dayto- day administration. Dispute settlement is the central pillar of the multilateral trading system, and the WTO’s unique contribution to the stability of the global economy. Without a means of settling disputes, the rules-based system would be less effective because the rules could not be enforced. The WTO’s procedure underscores the rule of law, and it makes the trading system more secure and predictable.
Though WTO had been set up with the aim to control international trade, it has not been able to
get tantamount of success as it was expected from it.WTO has yet to play more strong role in
keeping global trade smooth. Cooperation from nations and consensus have been sought the key
drivers for WTO. Looking at the current global slowdown, although the WTO cannot provide
anything immediate to help solve the current crisis, it can provide medium- and long-term
solutions. A WTO deal could help soften the impact of high prices by tackling the systemic
distortions in the international market for food and commodities.WTO has to revive the
international trades across all the industries and once trade has been stabilized, it would in turn
help nations to come out of grave situation in due course.

bond market

Bond Market: Next Big Investment Vehicle In India
Line of differential treatment is very much visible in Bond market with respect to equity market. Indian equity market has shown some encouraging growth in the last decade, the Indian debt market has continued to remain sluggish. In an environment where India is keen to attract foreign investments, it will be imperative to develop the secondary market for debt.
Bond market refers to the environment in which the issuance and trading of debt securities occurs. The bond market primarily includes government-issued securities and corporate debt securities, and facilitates the transfer of capital from savers to the issuers or organizations requiring capital for government projects, business expansions and ongoing operations. The Indian Debt Markets with an outstanding issue size of close to Rs.14640 Billion (or Rs. 14,64,000 Crores) and a secondary market turnover of around Rs 28500 Billion (in 2005) is the largest of the Indian financial markets. For market participants who own a bond, collect the coupon and hold it to maturity, market volatility is irrelevant; principal and interest are received according to a pre-determined schedule.
But participants who buy and sell bonds before maturity are exposed to many risks, most importantly changes in interest rates. When interest rates increase, the values of existing bonds fall, since new issues pay a higher yield. Likewise, when interest rates decrease, the value of existing bonds rise, since new issues pay a lower yield. This is the fundamental concept of bond market volatility: changes in bond prices are inverse to changes in interest rates. Fluctuating interest rates are part of a country's monetary policy and bond market volatility is a response to expected monetary policy and economic changes.
Economists' views of economic indicators versus actual released data contribute to market volatility. A tight consensus is generally reflected in bond prices and there is little price movement in the market after the release of "in-line" data. If the economic release differs from the consensus view the market usually undergoes rapid price movement as participants interpret the data. Uncertainty (as measured by a wide consensus) generally brings more volatility before and after an economic release. Economic releases vary in importance and impact depending on where the economy is in the business cycle
For market participants who own a bond, collect the coupon and hold it to maturity, market volatility is irrelevant; principal and interest are received according to a pre-determined schedule.
But participants who buy and sell bonds before maturity are exposed to many risks, most importantly changes in interest rates. When interest rates increase, the values of existing bonds fall, since new issues pay a higher yield. Likewise, when interest rates decrease, the value of existing bonds rise, since new issues pay a lower yield. This is the fundamental concept of bond market volatility: changes in bond prices are inverse to changes in interest rates. Fluctuating interest rates are part of a country's monetary policy and bond market volatility is a response to expected monetary policy and economic changes.
The Securities Industry and Financial Markets Association (SIFMA) classifies the broader bond market into five specific bond markets.
Government & Agency Bond
A government bond is a bond issued by a national government denominated in the country's own currency. Bonds issued by national governments in foreign currencies are normally referred to as bonds. Government bonds are usually referred to as risk-free bonds, because the government can raise taxes or simply print more money to redeem the bond at maturity Some counter examples do exist where a government has defaulted on its domestic currency debt, such as Russia in 1998 (the "rouble crisis"), though this is very rare.


Municipal Bond
A municipal bond (or muni) is a bond issued by a city or other local government, or their agencies. Potential issuers of municipal bonds include cities, counties, redevelopment agencies, school districts, publicly owned airports and seaports, and any other governmental entity (or group of governments) below the state level.
Corporate Bond
A Corporate Bond is a bond issued by a corporation. The term is usually applied to longer-term debt instruments, generally with a maturity date falling at least a year after their issue date. (The term "commercial paper" is sometimes used for instruments with a shorter maturity.)
Asset Backed Bond
An asset-backed security is a type of debt security that is based on pools of assets, or collateralized by the cash flows from a specified pool of underlying assets. Assets are pooled to make otherwise minor and uneconomical investments worthwhile, while also reducing risk by diversifying the underlying assets. Securitization makes these assets available for investment to a broader set of investors. These asset pools can be made of any type of receivable from the common, like credit card payments, auto loans, and mortgages, to esoteric cash flows such as aircraft leases, royalty payments and movie revenues. Typically, the securitized assets might be highly illiquid and private in nature.
Mortgage Backed Bond
A mortgage-backed security (MBS) is an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans. Payments are typically made monthly over the lifetime of the underlying loans.
However not all securities backed by mortgages are considered mortgage-backed security (MBS). Housing Bonds (Mortgage Revenue Bonds) are backed by the mortgages which they fund, but aren't classified as mortgage-backed security (MBS).
Collateralized debt obligations
Collateralized debt obligations (CDOs) are a type of asset-backed security and structured credit product. CDOs are constructed from a portfolio of fixed-income assets. These assets are divided into different tranches: senior tranches (rated AAA), mezzanine tranches (AA to BB), and equity tranches (unrated).
How We Measure Bond Market performance?
A bond market index is a listing of bonds or fixed income instruments and a statistic reflecting the composite value of its components. It is used as a tool to represent the characteristics of its component fixed income instruments. They differ from stock market indices in their complexity.A number of bond indices exist for the purposes of managing portfolios and measuring performance, similar to the S&P 500 or Russell Indexes for stocks.
Bond Market in Indian Scenario
India’s economy has expanded an average of about 8.5% annually for the past 4 years, driven by rising productivity and investment. After rising sharply in early 2007, inflation has ebbed, and the current account deficit has moderated. India’s bright prospects have attracted record capital inflows, even amid heightened global uncertainty and slowing growth in the United States (US).The Indian financial system is now in a process of rapid transformation marked by strong economic growth, increased market robustness, and a considerable increase in efficiency. Bank and financial intermediation, however, remain undeveloped with respect to lending and deposits, and most banks remain largely controlled by public sector institutions, limiting the development of a true credit culture, the skills to assess credit risks, and a willingness to accommodate any but the lowest risk borrowers.

India has developed a world-class equities market from relatively unpromising beginnings. Since 1996, the ratio of equity market capitalization to GDP has more than trebled to 108%, from 32.1% in 1996. During the same period the banking sector expanded to 78.2% of GDP from 46.3%. In contrast, the development of government and corporate bond markets has not been so fast: the bond market grew to a more modest 43.4% of GDP, from 21.3%. In June 2007, the government bond market represented 38.3% of GDP, compared with the corporate bond market, which amounted to just 3.2% of GDP.
As the major portion of Indian debt market is covered by GOI bonds and it seems it has been attaining a saturation state of development, there is evident need of boosting corporate bond market. Keeping expected reforms from Indian government in the field of Bond market and related financial policies suitable to nurture the same.

Microfinance ventures in emerging economies

Microfinance ventures in emerging economies: Revenues versus social responsibility


Introduction
Microfinance is banking the unbankables, bringing credit, savings and other essential financial services within the reach of.millions of people who are too poor to be served by regular banks, in most cases because they are unable to offer sufficient collateral. In general, banks are for people with money, not for people without. Microfinance is not simply banking; it is a development tool. It has been estimated that there are 500 million economically active poor people in the world operating micro-enterprises and small businesses.

Background
While micro-lending dates back hundreds of years, perhaps thousands, modern microfinance can trace its roots to nearly simultaneous initiatives in Bangladesh and Bolivia in the mid-1970s. The Grameen Bank in Bangladesh has had enormous success over the years in taking its peer-group-based model to rural clients throughout Bangladesh, and has exported that model to several other countries, where it has been repeatedly copied and modified by other Microfinance Institutions (MFIs).
Commercial microfinance, on the other hand, is relatively new. It wasn’t until the early 1990s that a confluence of supply and demand factors drove the provision of some micro-lending into a profit-focused model with a double bottom line – a return to investors and a socially responsible agenda. On the demand side, many MFIs had finally reached a level of efficiency where subsidized loans were not only no longer necessary, but in some cases were a disincentive to the efficient management of commercial microfinance and an obstruction to the social goals of economic development and self-sustainability. Meanwhile, the size of the microfinance industry worldwide had hit a point where subsidized funds from government agencies and multilateral institutions like the World Bank were no longer sufficient to cover demand. Global political and economic changes contributed to the growth in demand, as rapid democratization in Eastern Europe and the former Soviet Republics, along with capitalist reforms sweeping many Latin American and African countries, left hundreds of thousands of rural peasants suddenly dependent on no one but themselves.
Many of them flooded cities, where they couldn’t find work, or became refugees. Around the same time that demand was escalating, the supply side of microfinance was undergoing its own renaissance. The 1980s saw the rise of a Nouveau Riche class of philanthropists, many of whom had made their money in the computing revolution and were now looking for outlets for their charitable donations. Perhaps tired of having library wings named after them, they began to look overseas. Meanwhile, there was a surge in the amount of private sector funds looking for alternative investments. Emerging market investing hit its heyday in the early 1990s. Around the same time, socially responsible investors such as Amy Domini and mutual fund groups such as Calvert and Pax raised the level of awareness of socially responsible investing, and began to show investors that it isn’t all about charity – that investors can help make the world better while still earning a return on their investment. And if the Nouveau Riche of the PC Generation planted the seeds, the overnight wealthy of the Internet Generation grew the garden, raising awareness of labor and human rights issues beyond their home country borders.That brings us to the 2000s, when the dot-com bust and the ensuing economic and stock market downturns in the U.S. and other developed countries sent some investors out of the stock market in search of new, alternative places to put their money.

Commercial Aspects
Microfinance is undoubtedly one of the most diverse sectors of global finance, so it comes as no surprise that there is no single model that covers the institutions that manage commercial microfinance.
Microfinance investors are a mixed breed – they span continents and classes, genders and races, and they are as varied as the investment management institutions they put their money in. Those institutions range from banks and funds to offshore and onshore investment companies and a hodgepodge of other creatively organized and alternatively financed institutions. The microfinance institutions (MFIs) that dole out the loans and other financial products are an assortment of credit unions, cooperatives, NGOs, commercial and private banks, government agencies and a myriad of derivatives of these institutions – every bit as varied as the rural peasants, urban mothers, roadside traders, Arctic fishermen and Slavic seamstresses who borrow their money.
Collectively, however, all of these players have managed to prove that microfinance works. It achieves social agendas such as poverty reduction and economic development, and it can be – when managed properly – profitable. For investors, microfinance is a new and exciting asset class that is already a growing part of the portfolios of some institutional and individual investors the world over.
Before microfinance was commercialized, the process of micro-lending usually began with a grant or a subsidized loan from a government agency or from a multilateral institution. These funds would be made available to any number of different types of MFIs, which in turn would either lend them directly to individuals or distribute them to smaller, village-level MFIs which would in turn make the loans available to individuals. It’s important to note that in almost all such cases, the goal of the original funding source was not to earn a profit but to stimulate economic development and help eradicate poverty.
In commercial microfinance, the process begins on the supply side with an investment
into any number of microfinance -oriented funds, investment companies, cooperatives or
partnerships. The investment might be a securitized or non-securitized share in a fund, an
equity share in a company or partnership, or a share in a cooperative. Microfinance might be the entire focus of the fund, a majority focus, or just a small percentage of the fund’s assets. In many cases, commercial microfinance funds will take a combination of public and private funds, including subsidized loans from multilateral institutions or commercial microfinance loans that are guaranteed by quasi-government agencies – such as the U.S. Overseas Private Investment Corp. (OPIC).
While a few commercial microfinance institutions deal directly with clients in foreign
countries, most invest in carefully selected, profit-driven MFIs, which in turn distribute the loans to individuals and small businesses. The average loan for microfinance as a whole tends to be under $600, while loans from commercial microfinance institutions are on average slightly higher, in the range of $900, although some can go as high as $30,000 or as low as $100.

Private Investors
Investors in commercial microfinance include a who’s who of major philanthropic foundations such as the Ford Foundation and Canada’s Agridius Foundation, as well as individuals, corporations, endowment funds, socially responsible mutual funds, many of the world’s largest commercial banks, and more. Still, the amount of money invested in microfinance by private sources is miniscule compared with other alternative asset classes or other types of Micro-Capital Institute.

ghost of regionalism

Regionalism again hitbacks the indian socio economy structure.This time it is being used by a person of low profile to get a fast recognition in politics.yes i am telling of *** *******
i hope you have got the idea about whom telling about.
we had bitter experience in past ..A popular party in maharashtra used this as their ARM(hatkanda)long back.
If this gets encouragemet from local people of the specific region,then the day is no longer far when we have country not of integrity in diversity but "diversity in diversity"..

democrat vs democrat

here starts race for whitehouse.two famous personalities of different race are ready to face each other before going to actual battle .yes barrack obama and madam hillary clinton are trying all possible means to impress people of world's strongest economy:united states.barrack obama known for his long sighted vision and able to lure new generations and mrs. clinton has the supports of veterans. ll be really important how the people put final stamp on one of two democrats .whole world has kept an eye on it.