It is obvious that the world will change deeply the coming years. This financial crisis and the recession that will follow marks the end of many things like the endless capitalism, high bonuses and salaries for 'the happy top', the new position of (inter)national governments. Many things are changing the moment you read these lines. Like improving ones home instead of moving to another; giving the car a better care and wait with buying a new one; second hand websites sell much more then a year ago; businesses are introducing 'longer life' service for all kinds of products. Companies try to establish direct contact with their prospects with sharp priced products; restaurants are less frequently visited, people try to find their 'happiness' at home.
But most of all things will change between the ears:
- living on credits is over: too high risks, unwise cash flow management, no control
- modesty in spending money, complete repositioning of living patterns
- smaller companies, transparent structures
- open house (open mind) attitude in financial reporting, no more 'fooling around with figures'
- a new balance between capitalism and 'belonging together'
- incorporate aspects of' the Islamic way of banking like no speculation (muqarada), securitized debts (sukuk) instead of complex derivatives, direct link between loan and asset, shared profit&loss (mudaraba)
- renewed emphasis on personal relations, family
- re evaluation of the importance of stock markets and too complex products-
- a more long term oriented management attitude
And hopefully:
- an end to extreme salaries and bonuses
- better international relations, we need each other
- more modest western world (it's about time)
- better leaders, fewer managers
- more modest use of planetary resources
- better position for non western countries
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Carel
Why this blog? To form a forum on which everybody can give suggestions. We need good suggestions, simple and to-the-point.
ReplyDeleteThis crisis will go on for some time, together we can find answhers..
Carel
Here I have suggestions. It is written in a very simple story
ReplyDeleteWhat is Recession?
This story is about a man who once upon a time was selling Hotdogs by the roadside. He was illiterate, so he never read newspapers. He was hard of hearing, so he never listened to the radio. His eyes were weak, so he never watched television. But enthusiastically, he sold lots of hotdogs.
He was smart enough to offer some attractive schemes to increase his sales. His sales and profit went up. He ordered more a more raw material and buns and sold more. He recruited more supporting staff to serve more customers. He started offering home deliveries. Eventually he got himself a bigger and better stove. As his business was growing, the son, who had recently graduated from college, joined his father.
Then something strange happened.
The son asked, "Dad, aren't you aware of the great recession that is coming our way?" The father replied, "No, but tell me about it." The son said, "The international situation is terrible. The domestic situation is even worse. We should be prepared for the coming bad times."
The man thought that since his son had been to college, read the papers, listened to the radio and watched TV. He ought to know and his advice should not be taken lightly. So the next day onwards, the father cut down the his raw material order and buns, took down the colorful signboard, removed all the special schemes he was offering to the customers and was no longer as enthusiastic. He reduced his staff strength by giving layoffs. Very soon, fewer and fewer people bothered to stop at his Hotdog stand. And his sales started coming down rapidly and so did the profit. The father said to his son, "Son, you were right". "We are in the middle of a recession and crisis. I am glad you warned me ahead of time."
Moral of the Story: It's all in your MIND! And we actually FUEL this recession much more than we think.
Comments,suggestions?
I completely agree with you Zakir. Exactly this ( a very nice sufi like story) is happening at this very moment. Not only this recession is in our MINDS, everything around us is. Now we can say: "it is all in our minds, lets forget it" and the crisis would be gone instantly. But there we have a problem: that is hardly possible. This crisis is in our minds whether we want it or not. Most people listen to the radio/tv and believe what they hear and see. Later we all see panic around us and then it is 'true'.
ReplyDeleteThat was the reason to send you all my e-mail, to discuss this situation. Things in our minds are not imaginary. How illustrative your story is, they become reality. And that reality comes our way. I can't stop it, I want to discuss it and - together with you - find ways to slow it down or minimize the effects.
Hello everybody. Carel you are absolutely right.There is nothing so much changed in the world that recession i.e. all our index is drastically downing! Yes, it is panic and as well as our mind set. This panic stated from Banking and Financial Institutions sector but now what can we see all sectors what ever rich or poor nation are affected because it is chain reaction. Even those are not at all affected, they also themselves implied recession by fear in their sector by cutting production, firing manpower, etc. Even Warren Buffett's advice would also increase fear which will deepen recession.
ReplyDeleteThere is no clear cut remedies.If we start increase productivity in all sector- it will also increase economic activity and ultimately we may overcome it. Thanks for patient reading!
Hi Zakir,
ReplyDeleteI read an interesting comparision between the 'western' way of banking and the Islamic, Sharia way of banking. Western banks are studying this, because they know they made many mistakes. Some specific points:
- No interest: Mudaraba=bank collects capital, profit and loss is shared
- No speculation: Muqarada=securities (sukuk) for specific projects, covering in real objects/assets
- No virtual products: all loans are covered with real assets
- No derivatives, only securitized depts
- Intangible assets: not existing in Sharia banking
- No subprime loans: Halal mortgage, the bank buys the house and the customer pays monthly charges. After paying these charges the customer owns the house
- Musharaka (partnership), joint venture bank/ private company, profit and loss are shared
There is something strange in Western Banking system. They have huge capital, many resourceful personal, modern equipments, electronic audit system, etc. but no proper control mechanism.
ReplyDeleteCarel you are right. Islamic Banking is different and less risky. They don't provide interest (Interest is forbidden in Islam), they provide profit/loss after operation. As a result, less change of bankrupt. I have some shares of Islamic Banks in Bangladesh. Their profitability ratio is also good They are not 100% computerized and doing some manual works but their financial positions are good. Here I am giving web address of Islami Bank Bangladesh Limited which is biggest bank in private sector.
http://www.islamibankbd.com/home.php
Hope you will get much information regarding Islami Banking.
What's interesting about this is that the most 'western' newspaper, The Telegraph in the Netherlands published an article about Islamic/Halal banking. At this moment many financial institutes in the West are looking into 'the Islamic model' as they call it. I'm afraid that they don't understand the underlying ethical principles. And that's essential, there we find the 'businessrules' of this kind of banking, like profit and loss sharing, care for the community and so on. You end I know that many western citizens are somewhat afraid of Islam, they point at excessive behaviour (of a small group). My suggestion is that the West should look at their own excessive behaviour, like huge bonuses for fraudulent CEO's having received 160 billion bailout money! It's absolutely time that the East and the West talk with each other! There are control mechanisms in Western banks, but a relatively small group of executives play the game by their own rules. They don't care about ethics or the community, they just care about themselves.
ReplyDeleteDorus and I agree that Islamic banking should be included in FM programs in the future. I made a start myself include the basic principles of Islamic banking in my 'Ethics in FM' program. Dorus is interested and want to talk about this subject.
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ReplyDelete