Wednesday, July 31, 2019

Isolation of Aspirin

Once the aspirin is prepared, it is isolated from the reaction solution and then it is purified. The aspirin is insoluble in cold water, and it is isolated by filtering the chilled reaction solution. Purification is essential to remove any unreacted salicylic acid and acetic anhydride as well as the acetic acid product and phosphoric acid. Acetic anhydride is caused to decompose by the addition of water once the formation of aspirin is complete. C4H6O3 (Acetic anhydride) + H2O (Water) ————————-> 2C2H4O2 (Acetic Acid) The acetic acid and phosphoric acid are water soluble and it is removed by washing the aspirin with chilled water. Salicylic acid is only slightly soluble in water and is not completely removed in the washing steps. Phosphoric acid can be used instead of sulphuric acid if desired to obtain the higher yield, as sulphuric acid reacts more readily with the organic molecules involved in the reaction than phosphoric acid. However, phosphoric acid does not absorb water in the reaction; therefore it may be a slower process. Final purification is completed by the process of Recrystallisation. By recrystalising the crude aspirin slowly, it was possible to obtain large crystals with an exact structure by allowing the aspirin molecules to join together in a precise way. The regular molecular crystal structure of the final product makes it more difficult for impurities to be included, eliminating impurities present in the formless crude product. The impure aspirin is dissolved in warm ethanol. The solution is then cooled slowly, and the aspirin crystallises out of solution leaving the salicylic acid and other impurities behind. In my experiment, pure aspirin was obtained after filtering out the impurities and excess reagents through the filter paper. A method to check a solid compound’s purity after recrsytallisation is to check its melting point. The melting point of a compound can be used to identify it and also to estimate its purity. Normally an impure compound will show a melting point which is lower than that of a pure compound. Therefore, if the sample of aspirin melts at a temperature below the accepted melting point two possibilities can exist; either the sample is impure or it is not aspirin. A pure substance will melt sharply at 1-20C per minute when nearing the expected melting point in order to get a more accurate range. An impure compound will melt over a wider temperature range.

Tuesday, July 30, 2019

Larsen and Toubro Case Study Essay

Organizational Development (OD) is a planned long term effort led and supported through the top management to improve an organization’s ability and to solve its own problems by continuously working together and on managing the culture using behavioural skills. Thus, there are some certain aspects worth discussing about which are- OD is a planned effort. It requires a lot of effort, patience, and faith and is time consuming. Secondly, OD usually uses outsiders. These ‘facilitators’ as they are called are process specialists and are involved in depth in this process. The pioneers of OD in India were Larsen and Toubro India (L&T). OD at L&T started by calling in 2 eminent professors- Dr Udai Pareek and Dr TV Rao to study the appraisal process at the company. The existing appraisal system had many faults and needed to be corrected. The difficult task started by the professors interviewing some bosses and subordinates from different departments (using Diagnosis or Action Research) and they got a very interesting feedback. Some of the aspects of the feedback were – juniors wanted to know how well they were doing on the job, but weren’t told; people wanted to know what the growth opportunities in the company were; the appraisal form was too lengthy; some bosses had too many subordinates to appraise, etc. After getting the feedback from the employees the professors gave a report to the top management about the actual problem. The appraisal system had to serve not just one but many purposes namely it should help people understand their strengths and weaknesses, their own progress on the job, how they can perform better, and how they could grow in the company. So the appraisal process had to address the issues of appraisal, potential, counselling, career development and training all in one! The top management after reviewing the report gave the go ahead and they did two main things which were the most important which were bifurcating the Personnel department into personnel department and HRD department. This bifurcation was the first sign of ‘structural’ change. Secondly, a team of 6 senior managers was formed which would be responsible for implementing the changes required. The story continues when the 6 task force and the professors decided that the appraisal process had to involve the line managers personally, the performance goals must be set jointly by boss and junior and the appraisals must also involve feedback and counselling to people. Thus, they prepared a Performance Appraisal Manual by involving the departmental heads and other senior managers to analyze what kind of objectives could be set and then added such guidelines in the manual. To address the issue of feedback and counselling, the team identified around 29 senior line managers and some senior staff with a flair for public speaking. These selected people were put through a workshop on how to be good ‘Givers’ and ‘Receivers’ of feedback and then later conducted the same workshop for other employees at HQ and regional offices. Thus, the first workshop was a ‘Train the trainer’ workshop which was cascaded to the other employees. After putting in so much of effort now the management at L&T wanted to know whether the process was working for them or not. So again the professors interviewed some seniors and juniors about how the appraisals were going on. This time different views came into the picture – the goal setting was seen as time consuming, appraisal was becoming a numbers game, and was tending to become ritualistic. The HRD department was asked to conduct a survey (Participant Action Research). The survey also threw new light about the new appraisal process. The bosses now did involve their juniors in the goal setting and there was ‘healthy resolution’ of difficulties and there was a ‘high degree of trust’ between the seniors and juniors which led to ‘increased joint understanding about the job’. After receiving such a feedback, they again tried to simplify the appraisal form by adding the definitions of the attributes listed in the appraisal form. In addition, they held refresher courses in feedback skills for both ‘givers’ and ‘receivers’ of feedback. The facilitators felt that the appraisal system has stabilised when 80 to 85% of the appraisal forms were returned within six weeks of the target date. Also the HRD department started analyzing all the appraisal forms. The data from the analysis was used for listing high and low performers for a certain period; for finalising departmental developmental plans and for preparing the list of department wise employees and the training courses they needed. The above mentioned process took L&T 8 years to complete and stabilise themselves. Thus, I can conclude that OD is a long term process which requires a lot of patience, support from the top management and a vision to a bright future.

Psychological approaches to health practice Essay

Explain different psychological approaches to social care practice In this assignment I am going to look at four different psychological approaches and how they can be linked to health and social care situations, two of the approaches will be linked to health care situations and the other two to social care situations. The first approach that I am going to link to a social care situation is the behaviourist perspective, where psychologists explain all human behaviour as resulting from experience. Two of the major psychologists linked with this approach are Pavlov and Skinner and although these two believed that different processes were involved they agreed that behaviour was the result of learning. I am going to concentrate on the work of Skinner. Burrhus Frederic Skinner was an American psychologist that worked mainly with pigeons and rats to investigate the important principles of learning new behaviours. He was responsible for a very famous piece of equipment, the Skinner box, whi ch was a box that contained a lever that when pressed released a food pellet. This box reinforced lever pressing behaviour. Once the rat was put inside Skinners box it would sniff and move around and at some point push the lever and release the food pellet. When the rat has pushed the lever many times it will learn that this behaviour, pushing the lever, is followed by the release of the food pellet, the consequence. As the rat would like to have more food the pellet is experienced as reinforcing and this increases the chance of the behaviour being repeated. Skinner also investigated negative reinforcement by running a very small electric current on the floor of the box containing the rat and if the rat pushed the lever then the current would be turned off. This action was negative reinforcement. An example of this is taking a painkiller to relieve the symptoms of a headache which results in the headache going away then you have been negatively reinforced for taking a painkiller. Skinner also investigated that punishment happens when behaviour is followed by a consequence which is an unpleasant experience . He did this by having a box where the rat received a small electric shock when it pushed the lever. The consequence of pushing the lever was unpleasant, an electric shock, so the rat learned not to push the lever. The principles of operant conditioning can be used to create more helpful behaviours and remove the  unhelpful ones. The principles of reinforcement and punishment are a very powerful way to alter a person’s behaviour. This process is sometimes known as behaviour modification. My father uses this approach daily at work as he is a senior prison officer at HMP Wayland to maintain order within the regime and my mother uses the same ideas, for classroom management at Wayland Academy, on a daily basis. In both situations, good behaviour is rewarded and poor behaviour is punished but in very different ways. At Wayland Academy, where I have completed my first work placement, there is a behaviour policy called the Red Card Procedure and it is used in every classroom throughout the school. The policy is a four stage policy designed to promote good classroom behaviour and pupils receive consequences for behaviour that disrupts the learning of other students. The procedure is: Step 1 – Consequence 1 (C1) – The student receives a 10 minute detention for a first occurrence of any behaviour that disrupts others learning. This behaviour can include calling out, unnecessarily demanding the teacher’s time and using foul language. Step 2 – Consequence 2 (C2) – The student receives a 10 minute detention for a second occurrence of any behaviour that disrupts others learning. This means that the student now has a total of 20 minutes detention with the class teacher. Step 3 – Consequence 3 (Time out) – After the third occurrence of disruptive behaviour the student is sent outside the classroom and the teacher goes out and speaks to them privately explaining that they have reached their final chance of remaining in the lesson. If their behaviour is not improved after this they will be removed from the remainder of the lesson and have a 60 minute after school detention the following week. Step 4 – Consequence 4 (R ed Card) – If another example of disruptive behaviour now happens the student is removed from the remainder of the lesson and receives a 60 minute after school detention. The Red Card Procedure works on the same basis as Skinners theory that punishment occurs when behaviour is followed by a consequence that is unpleasant. If the student demonstrates disruptive behaviour then they are punished by the removal of their free time, in the form of detention, and it is hoped that this punishment will teach the student to stop the disruptive behaviour. Aldworth, C. Billingham, M. Lawrence, P. Moonie, N. and Whitehouse, M (2010) Health and Social Care Level 3 Book 1 BTEC National  Harlow: Pearson Education Limited – Pages 339-340 The second approach that I am going to link to a social care situation is the cognitive perspective where psychologists believe the brain was like a computer system and much work has gone in to understanding the cognitive processes of attention, memory, perception, information processing, thought, problem solving and language. One of the two main psychologists within this approach, that I am going to talk about, is George Kel ly. He developed a very unique psychological theory known as the Psychology of Personal Construct where he saw the individual as a experimenter, making their predictions about the future, testing them and if they need to they revise them according to new evidence. For example if an individual becomes deaf in their middle age then it might be likely that they withdraw from society and become isolated. On the other hand if they interpret it as a challenge then they may try and find new and exciting ways to work around the deafness and continue with a fulfilling life. Individuals with learning difficulties may experience frustration within their daily lives as they seek to make sense of confusing experiences. The cognitive approach can help individuals with learning difficulties in misunderstood situations, by identifying irrational thoughts, an individual can be a guide to change them, with consequent benefits on their emotions and behaviour. This work can improve an individual’s self-esteem and reduce outbursts which may be caused by a lack of understanding of the requirements that are needed for a situation. While I was on placement at Wayland Academy, I worked with the Year 7 Gold Group, which is a nurture group. The individuals in thi s nurture group all have certain learning difficulties . The group is limited to a maximum of 15 students so the staff have enough time within a lesson to go around and help everyone understand the lesson objectives and stop them from becoming frustrated. For example, one of the students within the classroom has Aspergers Syndrome which is a form of autism but it differs from other conditions on the autism spectrum by its relative preservation of linguistic and cognitive development. The teacher and classroom assistant have certain strategies to allow this student to access learning. While they are sitting and working with him they are continually refocusing his attention on to the required task, and this may involve moving the work into his eyeline if he has become distracted. Another strategy is to repeat and reword the given  task until the student has understood fully. The teacher and the classroom assistant knows when the student has understood because when he has understood he responds to them in full sentences and when he is still struggling he only gives one word answers. Aldworth, C. Billingham, M. Lawrence, P. Moonie, N. and Whitehouse, M (2010) Health and Social Care Level 3 Book 1 BTEC National Harlow: Pearson Education Limited – Pages 350-351 and 359-361 http://www.patient.co.uk/doctor/Asperger’s-Syndrome.htm Now I am going to move on and look at health care situations and the first psychological approach I am going to look at is the humanistic perspective. Humanistic psychology looks at the human experience from an individual’s viewpoint and uses the idea of free will and that everyone is free to make choices. One of the two psychologists I am going to talk about is Carl Rodgers and was very interested in the whole idea concept of self. Self-concept looks at the way each individual views themselves, this includes biological and physical attributes. Self-concept is noticed at a young age, when children internalise other individual’s judgements about them and think it is true. For example if a child gets called naughty or silly throughout their childhood then their self-concept will contain these aspects and possibly shape their future in a negative way. On the other hand if a child is praised and encouraged to succeed then they will have a positive self-concept and will try better at what they do because they start to see themselves as worthwhile. Carl Rodgers is famous for forming a particular type of counselling which is based on unconditional positive regard from the counsellor, to try and help the patient gain a more positive sense of self. Unconditional positive regard refers to the idea that the counsellor supports and validates the individual’s experiences, feelings, beliefs and emotions unconditionally, whether good or bad. Over time this helps the patient accept themselves and think more positively about who they are. One of the features of this approach to helping others is to develop empathy. Empathy is the opposite of sympathy where you would feel sorry for an individual empathy us to really listen to the individual and be in tune with their emotions, and respect them for who they are This is not always easy to do because as we may not understand why the individual feels so bad about themselves about an issue we may be able to easily discharge. Nevertheless, if we try to respect the individual we maybe working with then we might start to understand the importance to them and we can become closer to displaying empathy. True empathy requires us to move aside all judgements we may have and as the saying goes ‘Put ourselves in their shoes’. Like empathy, understanding is of critical importance when applying this perspective to health care practices. Rodgers frequently referred to more then just understanding at an intellectual level: he talks about empathetic understanding which means using your own emotions and sensitivity to become a more effective person to help any individual. A lot of the time many people allow their own personal experiences and personal judgements get in the way of helping the individual by saying â€Å"Well, that’s not a problem – they should just pull themselves together! I have dealt with worse myself.† This can turn into a major barrier between patient and counsellor, instead of creating a barrier counsellors use useful questions like; How does that make you feel? Can you identify what you are afraid of? Could you tell me a little bit more about that? That seemed to upset you? All of these questions enable the individual to break down the problem without realising it so it helps the counsellor what to say and what to suggest for the next step. It has been shown , by a recent study in the Journal of Consulting and Clinical, that cognitive behaviour therapy for adherence and depression can be effective for decreasing depression and increasing adherence to medication in HIV-infected drug users. The intervention group received 9 treatment sessions over a period of 3 months, involving informational, problem-solving, and cognitive behavioral steps. At each step, the participants and the therapist collaboratively defined the problem, generated alternative solutions, made decisions about the solutions, and developed a plan for implementing them. At post-treatment, the intervention group showed significant improvements and showed a significant reduction in symptoms of depression. Depression and substance abuse are the most comorbid disorders associated with HIV-inf ection, and it is suggested that even a small change in adherence can result in improved outcomes for HIV patients. The results of this study suggest that the  integration of cognitive behavior therapy into substance abuse counseling may be useful for decreasing depression and improving adherence to medication (with continued sessions) in HIV-infected patients with a history of injection drug use. Aldworth, C. Billingham, M. Lawrence, P. Moonie, N. and Whitehouse, M (2010) Health and Social Care Level 3 Book 1 BTEC National Harlow: Pearson Education Limited – Pages 348, 349 and 357 http://www.beckinstituteblog.org/2013/03/cbt-is-effective-for-adherence-and-depression-in-hiv-infected-injection-drug-users/ The second approach I am going to discuss in relation to a health care situation is the social learning perspective. The social learning perspective is where influences happen on our behaviour from the environment around us, for example; from peers, siblings, parents, sports personalities, television and other celebrities. According to this theory role models have a huge impact on an individual’s life. While we may learn our behaviour from observing another person behave and imitating what they do, behaviour is strongly influenced by the way we perceive the role model performing the behaviour. Albert Bandura was one of the theorists within the social learning approach and he developed observational learning, which is learning behaviour from watching and observing others such as television personalities. The individual we learn from, known as the role model, and the process of imitating their behaviour is called modelling. However we do not imitate all behaviour we have observed, because it is in our interests to imitate particular behaviour influenced by the actions of the role model. If we see our role model being punished and we do not like the way they have been punished then we as individuals are less likely to repeat that behaviour, on the other hand if they have been positively reinforced and the individual sees that then they are more likely to repeat that behaviour. As above role models play a huge part in influencing behaviour of those who observe them. For example Jamie Oliver the celebrity chef has had a huge impact on primary schools around the UK, with his School Dinners Project he has managed to get local authorities to re-introduce freshly cooked meals rather than pre-cooked because they are far healthier for the human body providing the correct nutrients for a child’s needs. He has also, through his Food Foundation created the Kitchen Garden Project which educates primary school children about the joys of growing and cooking from scratch.

Monday, July 29, 2019

Hands by Sherwood Anderson Essay Example | Topics and Well Written Essays - 500 words

Hands by Sherwood Anderson - Essay Example The story is about Wing Biddlebaum, a fat little old man from Winesburg, Ohio. Wing Biddlebaum was driven out of Pennsylvania, his original hometown, after he was falsely accused of molesting a young boy in a school where he used to teach. This happened because of his habit of caressing the boys’ hairs and shoulders whenever he talked to them. Wing’s seemingly uncontrollable hands manifest his grotesqueness. The central symbol of this story is hands, which figure as agents of conflicting aims of different characters and demonstrate Wing’s helplessness and vulnerability. Discussion We are told that ‘Winesburg was proud of the hands of Wing Biddlebaum in the same spirit in which it was proud of Banker White's new stone house and Wesley Moyer's bay stallion’ (Anderson 16). His hands are a distinguished feature which amazes the citizens of Winesburg, but he seems not to notice and instead is afraid of them. Many citizens, including George Willard, have m any times wanted to ask him about his hands and why he seemed frightened by their power. This fear of his hands shows his grotesque nature. Wing hides his hands in fear that he might repeat the incident at the school. This is despite the fact that he had pure intentions in everything he did. ‘In a way, the voice and hands, the stroking of the shoulders and the touching of the hair was a part of the schoolmaster's efforts to carry a dream into the young minds.

Sunday, July 28, 2019

Issues In Financial Reporting (Questions for the final exam) Essay

Issues In Financial Reporting (Questions for the final exam) - Essay Example There are few assumptions of a financial statement. Such as, a business entity is assumed to carry on its operation forever which refers to a going concern concept. Financial statements should be prepared periodically, basically after a specified interval which is termed as ‘accounting period’. All the transaction recorded in a statement should be at cost, not market price. As per the money measurement concept, the information recorded in the statement should be in monetary terms. The business entity concept says that the legal entity of a corporate business should be different from the owners. The method or the practice that has been adopted by a company initially for presenting an event should be followed life long in order to maintain the consistency. Preparation of financial statements is subject to quite a few regulations. For the purpose, Accounting Standards should be followed. Accounting Standards are issued by Accounting Standard Board (ASB). ASB is a part of Financial Reporting Council (FRC). It is a self -regulatory body in UK and is responsible for promoting quality corporate governance. ASB collaborate with the International Accounting Standard Board (IASB) to ensure the acceptance of Accounting Standard at the international level. UITF plays major role of assisting the ASB while solving a conflicting and unsatisfactory interpretation regarding the requirements of Companies Act. Financial Reporting Review Panel (FRRP) is also a part of FRC, which check the financial statement of private and public companies to ensure that statements are presented as accordance with Accounting Standards and Companies Act, 2006. Accountability and transparency are absolute necessity for maximising long term share holder’s value. The rules and procedures of gathering data must be flexible and consistent; otherwise a scope of misinterpretation of data will

Saturday, July 27, 2019

IB PAPER 1 MARKET FAILURE Essay Example | Topics and Well Written Essays - 500 words

IB PAPER 1 MARKET FAILURE - Essay Example The big six have a great monopoly against smaller producers. The big six maximize profits while passing the cost to the consumer. There occurs a market failure because of the stranglehold caused by big producers. According to The Guardian Tuesday18 October 2013, the big six energy companies supply 99% of British households and make massive profits from a stitched-up market. They control almost all the markets energy supply. The guardian states that consumers are not supposed to pay high prices for energy bills while shareholders pocket greater profits from the situation. The market failure in Britain’s energy supply creates an environment which calls for aggressive competition from alternative energy sources.it also creates the need to diverge to more eco-friendly sources of energy other than fossil fuel energy. Completion amongst the big firms sometimes drives energy prices down. On the other hand competition from the big six producers ensures that there is no fair share of the market for the smaller producers in the market .market rules also make it complex and imposed excessive costs and terms of trade make it hard for the small players. The effect on the energy suppliers is that they always reap big profit margins since there will always be demand for energy. Their domination will ensure that smaller players remain less dominant in the market. Consumers will be forced to pay the high tariffs the producers impose as long as no alternative low cost energy sources are exploited. The competitive market and the interest of consumers can well be met by actions that reduce barriers to engage in energy supply market by the government (complex red tapes, high cost, and terms of trade).the big six Britain producers of energy reaps the most profit from the market failure that exist thus the companies end up maximizing their profit

Friday, July 26, 2019

Ddp week2 Essay Example | Topics and Well Written Essays - 750 words

Ddp week2 - Essay Example This is exactly what this essay seeks to do. Rentschler (2003) opines that â€Å"emotions are the result of a logical appraisal of the probability that a situation will effect a positive or negative change to our physical or psychological well being.† Emotion therefore refers to the reaction that our minds give to an occurrence or event around us. Emotion is a personal feeling that may vary from person to person – thus two people will feel differently towards the same occurrence. Emergence can be said to represent how complex systems result out of relatively simple systems or interactions. To this effect, (Lewes 1875, p. 412) has it that â€Å"every resultant is either a sum or a difference of the co-operant forces; their sum, when their directions are the same -- their difference, when their directions are contrary† (Blitz 1992). Research can simply be said to be the search of knowledge. Research also involves re-learning about a thing or a phenomenon. Research has been made to appear quite complicated and formal because there are a lot of academic theories and conventions surrounding it. To conduct a research therefore, one has to follow some laid down procedure. Keegan (2009) views emergence from an angle where it impacts on the conduct of research rather than emergence having a role in the results or analysis of data. This is indeed unlike he did for emotion, which shall be discussed later. Keegan (2009) posits that â€Å"web communications, crowd behaviour and brand evolution can all be thought of in terms of emergence.† This means that Keegan relates emergence to the point of view where researchers take issues. By this, emergence makes the conduct and manipulation of concepts in research work more complex and complicated. This is because as seen in the definition of term, emergence is characterized complexity out of simple phenomenon. There could however be a

Thursday, July 25, 2019

Hills like White Elephants Coursework Example | Topics and Well Written Essays - 250 words

Hills like White Elephants - Coursework Example The setting is in Spain, and the fact that the man speaks Spanish puts him in a decidedly advantageous position compared to the girl. Jig has to rely on the American while they are in Spain; or, it is likely, she had to rely on him in all the places they visited. Their relationship is one of imbalance and inequality. Jig is dependent on the American, and obviously she feels compelled to abide by his decision to abort their child, even though the man places the moral responsibility upon the woman (he pushes insistently on the operation being simple, but purports to go through the operation only if she wished). Hemingway meant for the setting to contribute to the central theme, which is Jig’s dilemma of undergoing the abortion. The symbolism is clear that the setting contrasted the barrenness of â€Å"this side† with the fruitfulness of â€Å"the other side.† The station is midway between the two. These are evident in the lines: â€Å"Across, on the other side, were fields of grain and trees along the banks of the Ebro. Far away, beyond the river, were mountains. The shadow of a cloud moved across the field of grain and she saw the river through the trees.† The setting is a symbolism for Jig being midway in deciding whether to have the abortion (barrenness) or having her child (fruitfulness). The shadow of the cloud moving across the field of grain shows that she may have considered that deciding to keep her child has become a dim prospect, in the face of the American’s insistence that the abortion is â€Å"an awfully simple operation.† The hills appearing like white elephants symbolizes the child they would have, which is now far off in the distance. The white elephant in Thailand is both blessing and curse – blessing because it is rare and considered valuable, curse because it may not be put to work and thus is fed and cared for

Wednesday, July 24, 2019

Information society Essay Example | Topics and Well Written Essays - 2500 words

Information society - Essay Example The greatest forces behind the creation of an information society are the western civilised nations and various organisations like the UN, EC, IBRD and the OECD. The lessons learnt from the process of industrialisation have shown these groups that the development of information infrastructures and development frameworks is important for the Information Society (Audenhove et. al., 1999). The policies suggested by these groups broadly recommend the creation of opportunities where competition is encouraged, investments from the private and public sectors are to be supported and the free flow of every kind of information is strongly urged (Europa. 2006). While these policies have been lauded for their foresight, they have also been objected upon due to problems with their application especially in the third world and the developing regions. The development of an information society is supposed to include the entire world but the policies are often seen as weak when it comes to their usefulness in places where the basic necessities of life can not be found. Areas like sub-Saharan Africa and some regions of Asia lack basic facilities like water and electricity and there are some analysts who believe that without these basics no information society can ever be created (Audenhove et. al., 1999). It is therefore important to study the strengths and weaknesses of the policies for information society development in the third world since these could very well point to our collective future as a humane society. Since the last decade or so, the creation of an Information Society and the creation of a common Global Information Infrastructure have been on the ‘to do’ list of the G7 nations and their allied organizations. Sociologists and thinkers have been hard at work trying to create the policies which would encourage the development of both the above mentioned systems. As a foundation for this society, the creation and interconnection of high speed data

Mission statment Essay Example | Topics and Well Written Essays - 500 words

Mission statment - Essay Example On the other hand, the differences are the way these organizations included other important details. While Ritz-Carlton specifically states its highest mission as provision genuine care and comfort for the guests - which is service and customer oriented; Four Seasons’ defined goal is to be recognized as a leader in managing hotels. Further, Four Seasons chose to include details that inform the customers on what they believe in, how they behave and how the organization succeeds. Ritz-Carlton included more details that were above mentioned and includes service values, the 6th Diamond, and the Employee Promise (The Ritz-Carlton Hotel). Based on the mission statement guidelines, the mission statement of Four Seasons followed to the following areas: (1) clearly specifying the market segment or geographic scope (â€Å"We have chosen to specialise within the hospitality industry† (Four Seasons: Our Goals par. 1); (2) the organization based its mission on its core competency of offering exceptional service within the hospitality industry (â€Å"We create properties of enduring value using superior design and finishes, and support them with a deeply instilled ethic of personal service† (Four Seasons: Our Goals par. 2)); (3) the mission statement was appropriately structured meeting the requirement of not being too narrow or broad; (4) by stating what they believe in, identified to be its people as the greatest asset, the mission statement followed being motivating and acknowledging its strength (â€Å"Our greatest asset, and the key to our success, is our people† (Four Seasons: Our Goals par. 3)); a nd finally (5) the mission statement, though not indicating in defined terms the time frame within which vision and direction are to be followed, by defining that â€Å"to maintain our position as the world’s premier luxury hospitality company† (Four Seasons: Our Goals par. 2) indicates the long term goal for

Tuesday, July 23, 2019

Letter of Complaint Assignment Example | Topics and Well Written Essays - 500 words

Letter of Complaint - Assignment Example I was put on hold for more than ten minutes. I waited patiently listening to boring adverts while the attendant at the airport looked on. When a Ms. Ann picked the phone eventually, she sounded disinterested and kept shouting at me to repeat myself. We did not have any constructive communication and I heard her curse rudely as she banged the receiver. I had to make other arrangements in order to book the flight. I have been a customer of the bank for the past seven years and I have never witnessed such inefficiencies. Money is important and any delays such as the one I experienced results in the loss of business. Kindly act on my concern in order to prevent similar occurrences in future. I could be voicing the concerns of several other customers who may not have the time and resources to communicate with you. Among the features of your customer service that I want you to address include the fact that you call system is clumsy making customers wait for as long as twenty minutes or more. Kindly note that money and related transactions are important issues that influence the lives of your customers directly. Five minutes or less is adequate for someone to lose his money to swindlers. It therefore surprised me when I had to wait for close to fifteen minutes just for someone to pick the phone. The other issue is the attitude of your customer relation officers especially those working on the call centers. This was a portrayal of poor attitude and disregard to work ethics because I do not believe that a call center agent can ever behave as she did.

Monday, July 22, 2019

Price Elasticity to Identify a Brands Competitors Essay Example for Free

Price Elasticity to Identify a Brands Competitors Essay Firms today are in their perspective industries to maximize consumer satisfaction, increase revenue, and shareholders profits. These tasks require attention to detail when pricing their products. There are always competitors lurking and waiting by the wayside to gain market share and a competitive advantage. When identifying brands competitors, price elasticity is a major determinant. Demand for a product or service constitutes what the company’s price will be and whether the price will be higher or lower than the competitor’s price. In terms of the elasticity, price increases may decrease demand and price decreases may increase demand. However, according to Kotler, The introduction or change of any price may initiate a response (favorable or unfavorable) from customers and competitors† (Kotler, P. and Keller, K., 2012) Ultimately, the concept of price elasticity can identify a brand’s competitors along with marketing research to identify consumer needs, wants, and desires, as well as current industry and competitor’s going- rate pricing. Reference Kotler, P. and Keller, K. (2012). Marketing Management 14E. Upper Saddle River: Pearson Education, Inc. How might marketers use conjoint analysis to improve pricing strategies? When determining pricing strategies marketers must perform research that allows the consumer to voice their opinions in reference to what they need and how important the product or service is to their well-being. One method of doing so is through conjoint analysis. â€Å"Kotler defines this method as a  means to ask customers to rank their preferences for alternative market offerings or concepts, then they use statistic analysis to estimate the implicit value placed on each attribute† (Kotler, P. and Keller, K., 2012). Marketers have their work cut out for them when a firm or pricing department requests their assistance to establish a competitive advantage for their product or service. In order for a firm to know and understand what value or benefits the customer expects when utilizing their products and services the use value propositions is of the essence. According to the strategy and performance coaching company Edborrows,† items that firms need to consider when applying customer value propositions are as follows: †¢ All Benefits †¢ Favorable Points of Differentiation †¢ Resonating Focus †¢ Resonating focus highlights one or two critical differences between the firm’s offerings †¢ Generic Value Propositions †¢ Operational Excellence †¢ Customer Intimacy †¢ Product/Service Innovation (Barrows, 2010) Price elasticity of demand is a way to determine marginal revenue. Optimal revenue and, more importantly, optimal profit will occur to the point when marginal revenue = marginal cost, or the price elasticity of demand The proportion of the total sales of a product secured by one particular company or brand

Sunday, July 21, 2019

How The Vietnam War Changed America History Essay

How The Vietnam War Changed America History Essay The Vietnam War was debated by many people now and then. If it were not for the Vietnam War and the world to would be a different place. The War itself changed America. The Vietnam War began in 1957 and ended in 1975, it was the longest war in which the United States took part in (The World Book Encyclopedia). Vietnam is a small country in Southeast Asia; it is about the size of the state of California with a population during the 1960s of more than 40 million people (Kent). During 1946, a war started between the French and Vietminh, where on December 19, the French bombed the northern city of Haiphong killing some six thousand Vietnamese soldiers and civilians (Kent). May 8, 1954 the Geneva Conference, Vietnam was divided into the Communist Democratic Republic of Vietnam, also known as North Vietnam, and the non-Communist Republic, called the South. The Vietnam War is also called the Indochina War or Second Indochina War (The Encyclopedia Americana International ed). In 1955 the United States started sending money to South Vietnam. President Eisenhower also agreed to help train the army. The War had several stages. From 1957 to 1963, the North aid ed rebels opposed to the government of the south headed by President Ngo Dinh Diem. On Nov. 1st The South generals overthrew the Diem and he was killed on Nov. 2 1963. From 1694 to 1969 North Vietnam and the United States did much of the fighting. President Lyndon B. Johnson sent in U.S. Marines into Da Nang, they were the first ground troops to arrive. Australia, New Zealand, the Philippines, South Korea, and Thailand also helped South Vietnam. In 1969 the United States had more than 543,000 troops. From 1966-1969 the United States paid $28.8 billion a year in war related costs. In June of 1969 President Nixon announced that the U.S. troops would begin to withdraw (The World Book Encyclopedia). In January 1973, a cease-fire was arranged and the last of the American ground troops left Vietnam during the next two months (The World Book Encyclopedia). The war did not end here, for two more years the North and South continued to fight until Saigon, the capital of South Vietnam fell to the Communists on April 30, 1975. A total of 57,605 Americans lost their lives in combat. South Vietnamese military lost 220,357 and the North Vietnamese 499,000 people. An additional 303,700 US military personnel were wounded in the battle (The Encyclopedia Americana International ed). Many people were torn about the war. Some felt that the United States needed to be involved and that it was noble of them. Many others called it cruel, unnecessary, and wrong. This debate still goes on today Americans still do not agree on the goals, conduct, and lessons of the U.S. participation in the war. There were many horror stories from the war, many in which the army tried to hide. In the village of My Lai, soldiers searching for Vietcong suspects, ended up dashing from hut to hut murdering everyone they found. As many as four hundred people died in this spree of senseless violence (Kent). The veterans of most American wars returned as heroes. This was not so with this war. The soldiers that were returning home from Vietnam received no heroes welcome. These soldiers were seen as unbalanced or potential criminals. Other saw them as the unfortunate victims of Americas terrible mistake (Kent). One form of art that came from the Vietnam War was the Memorial. The Vietnam veterans Memorial was designed by Maya Ying Lin, and was created to help heal the emotional and spiritual wounds which the war left as its legacy. The Vietnam Veterans Memorial officially opened on November 11, 1982 almost ten years after the end of the war. In the first five years, it received 20 million visitors (Kent). Still today thousands of people visit the V-shaped monument of glossy black granite which stands on the Capitol Mall in Washington, D.C. The wall, covered with the names of the U.S. men and women who died. In 1966 the Artists Protest Committee organized the Peace Tower, which stood at the corner of Sunset and La Cienega Boulevards. Artist covered the sculpture with over 400 small panels submitted by artist from all around the world. Each panel was an artistic antiwar statement, and artists who submitted works include Philip Evergood, Moses and Raphael Soyer, Robert Motherwell, Jim Rosenquis t, Philip Pearlstein, Arnold Meshes, and Judy Chicago. In May of 1970 nearly 2,000 artist gathered at New York University to organize a day long Art Strike. On May 22nd the actual day of the shutdown, the Jewish Museum, the Whitney Museum, and fifty private galleries shut their doors. The Museum of Modern Art stayed open but ran an antiwar film festival free of charge. Frank Stella closed his exhibit for the strike. The Guggenheim Museum remained open- but waved entry fees and removed all paintings from its walls. Meanwhile, the Metropolitan Museum of Art had been targeted for a major demonstration by artists for refusing to participate in the Art Strike. For nearly the entire day, hundreds of artists carrying signs reading Art Strike Against Racism, War, Repression. (Vallen) Music can say a lot about an era. During the 1960s and 1970s the traditional outlets in classical, instrumental, ballads, swing, jazz, country, folk and pop, as well as the new soul, Motown, rock and roll, and many other sounds. Many of the musical artists from this era are still popular or well know today. The 1960 was another great year for Elvis. In 1961 Tossin and Turnin by Bobby Lewis was the number one hit of the year. Dave Brubeck delivered some of the best jazz ever. Then in 1962 came many dance song still played today, Mashed Potato, Twist and Shout, and Loco-motion by Little Eva. In 1963 the world saw new genres of music when pop came out with the Beach Boys with Surfin, Little Stevie Wonder and Peter, Paul, and Mary. The Birth of the Beatles came in 1964. The Fab Four changed the scene of music in America by introducing the Mersey sound and band like Manfred Mann started to be heard as a result. The Supremes and the Four Seasons also started Motown. The number one hit in 1 965 went to The Rolling Stones with (I Cant Get No) Satisfaction, while the Beatles stayed strong with the number two spot. 1965 also saw Bob Dylan and Sonny and Cher. The number one hit in 1966 was Ballad of the Green Berets, sung by Sgt. Barry Sadler. This song was a reflection of Americas growing involvement in Vietnam. The Monkees also hit the charts this year and the power of the media was soon to sweep away the power of patriotism. 1967 was a wild and wooley year in music. There was a huge mix of styles ranging from ballads to rock to Motown to psychedelia. Aretha Franklin wanted to get a little R-e-s-p-e-c-t. We were born to be wild in 1968 with Steppenwolf. We also saw Simon and Garfunkel go from lyrical strength to catchy strength. No one could forget about the Beatles, as every song they seemed to write would rise right to the top. 1969s number one went to The Fifth Dimension with Aquarius/Let the Sunshine In. Sugar, Sugar took the number two spot, while the top ten also i ncluded the Rolling Stones, The Beatles, and The Doors. 1970 was absolutely huge on the pop music scene, and much of its popularity is still strong today with heaps of real classics from Simon Garfunkel, Stevie Wonder, the Beatles, Aretha and B.B. King still on the pop airwaves. (Vietnam era music top ten hits from each year of the war). During the War many soldiers wrote poetry based on their experiences during the war. Here are a few of my favorites. VIETNAMESE MORNING Before war starts In early morning The land is breath taking. The low, blazing, ruby sun Melts the night-shadow pools Creating an ethereal appearance. Each miniature house and tree Sprouts its, long, thin shadow Stretching long on dewy ground. The countryside is panoramic maze, Jungle, hamlets, hills and waterways, Bomb-craters, paddies, broken-backed bridges. Rice fields glow sky-sheens, Flat, calm, mirrored lakes Reflect the morning peace. The patchwork quilted earth, Slashed by snaking tree-lines, Slumbers in dawns blue light. Sharp, rugged mountain peaks Sleep   in a soft rolling blanket Of clinging, slippery, misty fog. Effortlessly, languidly, it flows Shyly spreading wispy tentacles out To embrace the earth with velvet arms. Curt Bennett Copyright Curt Bennett  © 2003 This shows me what it was that the soldiers saw when they first got to Vietnam; the land was beautiful until the bombs came and burned down everything. PROFANITY When hungry bullets Chew into soft airplane bodies Sending dials and gauges Spinning in whirling circlesà ¢Ã¢â€š ¬Ã‚ ¦ When the little red warning lights Scream in alarm, blink-red, blink-red, blink-red! It is then you discover The beauty of profanity! And the need to know all the words! But in no particular order. Curt Bennett Copyright Curt Bennett  © 2003 This poem takes me to the moment this soldier thinks that he might die. His airplane has been hit with gun fire and he knows that he will go down; he is going to pay with his life for my freedom. BEFORE THE WAR I wonder whats the matter with him. Hes not the way he was before. Hes not the way he used to be. The way he was before the war. He had no way of knowing What horrors were in store. Then communication ceased When he went off to war. He left while only in his teens. Now hes so much older. The warmth of his youth is gone. His spirits so much colder. His eyes look deeply haunted. He has no joy anymore. He doesnt laugh and rarely smiles. He stares down at the floor. He speaks in cryptic code. He talks of blood and gore. Then lapses into silence Since he came back from war. I wonder what he saw there That fills his eyes with fright. All those unknown terrors Keep him awake at night. Certain sounds will startle him And send him out the door. Will he ever have peace again, As he had before the war? He turns away from mirrors. Who he sees must frighten him. Theres no respite in his mind Because all his thoughts are grim. I dont know what to say to him. I cant talk as I did before. Hes not the person that I knew Before he went to war. He doesnt even look the same, So pale and so thin. Its like another person Came back inside his skin. He used to be such fun, So easy to adore. Its like he disappeared When he returned from war. I wonder what became of him. I never see him anymore. Hes not the person he once was. I mean, before the war. Copyright 2003 Penny Rock All Rights Reserved. With this poem I can really see the boy that left to go in to war, he was young and ready to show the world that he was a man. And that he did, but like so many that returned home from the war he change. The fear of death, killing people, seeing friends and fellow American Soldiers die can take a big toll and a person, they will never be the same again. I might not have been alive during the Vietnam War, but though poetry, art and music I can live the experience without leaving my own home. I can get a feel for the way the world was and how it has change as a result of the war.

Impact of Financial Crisis on Islamic Banks

Impact of Financial Crisis on Islamic Banks Chapter 1 Background / Introduction of recent financial crises and Islamic banking system The credit crunch is widely blamed upon the sub prime crisis which originated in America, where banks offered housing loans to those known in the industry as ninjas (no income, no job, no assets). Such people often had poor financial track records. However these loans were subsequently repackaged into financial products known as ‘collaterised debt obligations (CDOs). They were then mixed in with ‘prime loans and sold on to other banks via the wholesale market. In theory, this trading in debts was meant to spread the risk of bad loans amongst many different banks, thereby reducing risk. In fact, it lead to the ‘sub prime problem infecting not just the banks that offered the dodgy loans in the first place, but a far, far greater number of banks who bought the ‘toxic loans via the wholesale markets. The knock-on effect of this was for banks to suddenly become unsure of the value of their ‘toxic assets and as a result to stop lending each other money, or to lend money only at much higher rates. As a result the London Interbank Offered Rate (LIBOR) shot up to unprecedented levels, which in turn massively increased the cost of providing loans to the general public according to Khan (2008). The Western perspective also argues that this initial problem with sub prime debts triggered a secondary problem whereby banks which relied for cash flow principally on accessing funds from other banks via the wholesale market, suddenly found they could no longer borrow enough money to meet their cash flow requirements This is what led to the crisis with collapse of 150 year old Lehman Brothers and take over of Merrill Lynch by Bank of America, which, more than any other bank relied on the wholesale market rather than its own depositor funds to meet the banks day-to-day cash requirements Khan (2008). According to Bashir (2008) the paralysis in interbank lending led in turn to banks drastically reducing the money they lent to customers, as well as dramatically raising the cost of existing loans. This in turn substantially reduced demand for property and led to the ongoing crash in the property market. This is now feeding back to create a yet bigger problem for the banks because property is what they mostly hold as collateral for all the debts people owe them. Evidently this collateral is now worth a lot less than a year ago, and this will inevitably lead to a much higher rate of loan defaults and repossessions Bashir (2008). Having covered a secular analysis, we now turn to Islam, which proposes a very different explanation for these problems. According to Haddad (2008) Islam does not consider money to be a commodity, which can be traded at a profit, that is to say a transaction that is interest (or usury) based. Thus the reality of negating this Islamic consideration provides us with the first part of the problem. Interest, known as Riba in Arabic, is one of the major violations of Gods law, and when it spreads through society becoming an established norm without any condemnation nothing can be expected but divine wrath. Islamic banks do not borrow or lend on international money markets because interest is not allowed, traditionally they have a larger proportion of their assets in reserve accounts with central banks. Islamic banking is based on the principles of risk sharing between depositor and investor in theory, meaning that customers practice greater oversight of an Islamic banks lending performance. Shariah law stipulates that Islamic securities should be asset-based, which means that a trader must own the asset being traded. This, in turn, proscribes most forms of futures trading, as goods that the seller does not own or will not deliver cannot be the subjects of an Islamic contract. Practices such as short selling, consequently, are not a feature of Islamic Banking according to Haddad (2008). According to Siddiqi (2009) Islamic finance is growing in various parts of the world. It has moved from a mere theoretical concept to a practical reality. Islam not only prohibits dealing in interest but also in liquor, pork, gambling, pornography and anything else, which the Shariah (Islamic Law) deems Haram (unlawful). Islamic banking is an instrument for the development of an Islamic economic order. The core principles of Islamic economics system are justice, equity and welfare. Islamic economics seeks to establish a broad based economic well being with full employment and optimum rate of economic growth, it will bring socio economic justice and equitable distribution of income and wealth. Islamic economics will also ensure the stability in the value of money to enable the medium of exchange to be a reliable unit of account and a stable store of value Siddiqi (2009). According to Bagsiraj (2009) in the Islamic economy, Islamic banks act as venture capital firms collecting peoples wealth and investing it in the economy, then distributing the profits amongst depositors. Islamic banks act as investment partners for those who need money to do businesses, becoming part owners of the business. The banks should only be able to recoup their original capital by selling their share of the mortgage/business at the prevailing market value. As real partners, Islamic banks should have no objection to owning real assets and hence should be ready to share the consequential risk. This scheme, although seemingly inconsequential, could constitute a major relief to Islamic banks clients, as they would no longer live under the burden of debt and fear of repossession Bagsiraj (2009). Further more, according to Siddiqi, (2009) Islam neither endorses the capitalist nor the communist financial model. However, both the capitalist and socialist systems share certain elements with Islam, such as encouraging people to work, to be productive and earn as much as they can. Islam promotes an awareness of the hereafter in the hearts and minds of believers and instructs them not to be overcome by greed or excessively attached to money. The Islamic economic and financial system is based on a set of values, ideals and morals, such as honesty, credibility, transparency, clear evidence, facilitation, co-operation, complementarities and solidarity. These morals and ideals are fundamental because they ensure stability, security and safety for all those involved in financial transactions. Islamic Shariah prohibits economic and financial transactions that involve lying, gambling, cheating, gharar (risk or uncertainty), monopoly, exploitation, greed, unfairness and taking peoples mone y unjustly Siddiqi, 2009. The aim of this research is to examine the extent to which the Islamic banks have been affected by the recent financial crisis in contrast with its conventional counterpart. Chapter 2 Literature review 1.1 Detailed history of credit crunch: According to BBC website a credit crunch is an economic condition in which loans and investment capital are difficult to obtain. In such a period, banks and other lenders become wary of issuing loans, so the price of borrowing rises, often to the point where deals simply do not get one. When a National Public Radio journalist asked the famous economists Nouriel Roubini, Kenneth Rogoff, and Nariman Behravesh, their reaction on the monthly report that was just released by the U.S. Department of labor, their answers were â€Å"Its worse then anybody had anticipated†; â€Å"Its pretty disastrous†, and â€Å"I am shocked† Langfitt (2007). Before the report was published, the economic forecasters view was that the report would show the U.S economy increased about 100,000 jobs in August. Instead there was a net loss of 4,000 jobs; there was no growth for the first time in four years. U. S Department of Labor (2007). The forecasters were not done getting it wrong, however, after publication of the jobs data, a number of them predicted the news would bolster the U.S. stock market, because they argued, the employment report practically guaranteed that the Federal Reserve would cut interest rate on September 18, Instead, investor panic over the employment report caused the market, which had been volatile during most of the summer, to quickly lose about 2% on all major indices as per Whalen (2007). The Federal Reserve did eventually cut rates as expected, but it took a number of reassuring comments by U.S. central bank governors on September 10 to calm Wall Streets fears according to Monica (2007). What is now clear is that most economists underestimated the widening economic impact of the credit crunch that has shaken U.S. financial markets since at least mid-July 2007. According to Times online (2009) years of lax lending inflated a huge debt bubble as people borrowed cheap money and ploughed it into property. Lenders were free with their funds, especially in the US, where billions of dollars of so-called Ninja mortgages no income, no job or assets were sold to people with weak credit ratings (called sub-prime borrowers). The informal notion was that if they ran into trouble with their repayments rising house prices would allow them to re mortgage their property as per times online (2009). It seemed a good idea when Central Bank interest rates were low; the trouble was it could not last. Interest rates hit rock bottom in America in 2004 at just 1 per cent, but in June that year they began to rise Bernank (2006). As interest rates jumped, US house prices started to fall and borrowers began to default on their mortgage payments sparking trouble for us all BBC websites (2009). According to Mullan, 2008 easy money conditions made funds available to finance millions of US ‘sub prime borrowers, less well-off people who in earlier times would not have been seen as credit-worthy enough to get a plastic card never mind a home mortgage. These extra homebuyers helped reinforce the pre-existing rise in property prices, producing price hikes in many regional markets across the US. By summer 2007, the market had turned house prices were falling and default levels were raising Mullan, 2008. When the sub prime crisis hit, liquidity froze in the wholesale money markets, not just in the US but also across the Western world nytimes (2008). Following the common pattern of all credit crises, at a certain point never precisely predictable, because of the ‘elastic nature of credit debt becomes too extended for some borrowers when their circumstances change, default levels begin to grow, and the upward spiral of credit expansion and asset price appreciation turns into its unwelcome opposite Mullan, 2008. Just as mortgage issuance and rising US house prices fed on each other for several years, so now price falls and mortgage foreclosures reinforce each other BBC websites (2009). The difference with the credit crisis this time is that the necessity for writing off the bad debts spreads far beyond the original lenders, the banks and the other institutions, which issued the sub prime mortgages, repackaged the debts and sold them on elsewhere into the financial system the process of passing on debt from one institution to another has long been a feature of the financial markets, this activity became so frequent that the terminology of ‘securitization became commonplace, as bank lending was repackaged and sold on as bonds or securities, the same underlying value of a piece of financial paper (or electronic account) becomes reproduced often multiple times elsewhere in the financial system Economichelp.org (2008). In essence, such loans are resold as assets to others so that the same underlying value becomes used many times over, is what the credit system has been about since its early days. This time, in fact since the 1980s, the scale and scope of the repackaging of debt was simply more extensive than ever Mullan (2008). Hence the emergence of trading in ‘derivatives instruments derived from the original credit note that dominates modern financial markets trading. More recently, over the past few years, this practice spawned a number of new acronyms which have been a feature of the terminology for todays crisis: ABSs (asset-backed securities, with the ‘assets often being those home mortgages); CDOs (collateralised debt obligations); and SIVs (structured investment vehicles these are the alternative secondary financial bodies which invested in the new mortgage-backed financial instruments) according to Mullan (2008). 1.2 Causes of credit crunch Inaccurate Credit ratings: According to Acharya, Viral, Bharath, and Srinivasan, (2007) The Collateralized Debt Obligations (CDO) market has grown substantially since 2001 with issuance volume reaching $551.7 billion in 2006. While securitization makes financing more accessible for firms and households1, it also presents regulatory challenges, as rating agencies and institutions struggle to keep up with the rapid pace of financial innovation on Wall Street. According to Coval, Jurek, and Stafford (2008) Since summer 2007, both academics and practitioners have blamed complex CDOs for being, in part, responsible for the current sub prime crisis and credit crunch. While more than 85% of the dollar value of CDO securities issued was rated AAA by either Moodys or Standard and Poors (SP), 3 several major banks and financial institutions eventually had to write-off substantial portions of their balance-sheets related to investments in CDOs, largely those backed by sub prime mortgages. In 2007, Moodys downgraded $76bn in CDO securities and another $150bn remained on credit watch as of January 2008. Downgrades in November 2007 alone numbered 2,000 and many downgrades were severe, with 500 trenches downgraded more than 10 notches.4 The ensuing confusion about the true value of these complicated securities and the extent of exposure by financial institutions, incited a credit crunch with effects beyond sub prime mortgage related investments. In another words the securities, especially the now-notorious C.D.O.s, for (collateralised debt obligations) were probably too complex for anyones good. Investors placed too much faith in the rating agencies which, to put it mildly, failed to get it right. It is tempting to take the rating agencies out for a public whipping. But it is more constructive to ask how the rating system might be improved. Thats a tough question because of another serious incentive problem. Under the current system, the rating agencies are hired and paid by the issuers of the very securities they rate which creates an obvious potential conflict of interest. The following figure shows the typical collateralised debt obligations (CDO) structure and CDO issuances over time respectively: 1.3 Sub prime market collapse: According to Khan (2008) As the housing sector continued to inflate due to the appetite for housing by Americans, the sub prime sector continued to also grow. Commercial banks entered what they considered a buoyant market that could only raise, many Americans refinanced their homes by taking out second mortgages against the added value to use the funds for consumer spending. The first sign that the US housing bubble was in trouble was on the 2nd April 2007 when New Century Inc the largest sub rime mortgage lender in the US declared bankruptcy due to the increasing number of defaults from borrowers. In the previous month 25 sub prime lenders declared bankruptcy, announcing significant losses, with some putting themselves up for sale. Khan (2008) also highlights the crisis that then spread to the owners of collateralized debt who were now in the position where the payments they were promised from the debt they had purchased was being defaulted upon. By being owners of various complex products the constituent elements of such products resulted in many holders of such debt to sell other investments in order to balance losses incurred from exposure to the sub prime sector or what is known as ‘covering a position. This second round of selling to shore up funds and meet brokerage margin requirements is what caused the collapse in share prices across the world in August 2007, with the market getting into a vicious circle of falling prices, leading to the further sales of shares to shore up losses. This type of behavior is typical of a Capitalist market crash and is what caused worldwide share values to plummet. What made matters worse was many investors caught in this vicious spiral of declining prices did not just sell sub prime and related products; they sold anything that could be sold. This is why share prices plummeted across the world and not just in those directly related to sub prime mortgages Khan (2008). International institutes who poured their money into the US housing sector realized they will not actually receive their money that they loaned out to investors as individual sub prime mortgage holders were defaulting on mass on such loans this resulted in all those who took positions in the housing sector not being able to pay the institutes they borrowed money from. It was for these reason central banks across the world intervened in the global economy in an unprecedented manner providing large amounts of cash to ensure such banks and institutes did not go bankrupt Khan (2008). According to bbc.co.uk the European Central Bank, Americas Federal Reserve and the Japanese and Australian central banks injected over $300 billion into the banking system within 48 hours in a bid to avert a financial crisis. They stepped in when banks, such as Sentinel, a large American investment house, stopped investors from withdrawing their money, spooked by sudden and unexpected losses from bad loans in the American mortgage market, other institutions followed suit and suspended normal lending. Intervention by the worlds central banks in order to avert crisis cost them over $800 billion after only seven days. 2.1 Islamic Banking: The beginning of Islamic Banking: The earliest writings on the subject of Islamic banking and finance date back to the forties of the twentieth century Nejatullah (1981) and the earliest practice can be traced to early sixties Mahmud (1995). The literature showed ambivalence between the model of an intermediary designed after conventional commercial banks and one like an investment company serving individuals seeking profits as well as the community needing development. Models of commercial banking based on two-tier Mudaraba came from economists aspiring to build an alternative to a system of banking and finance hinged on interest. Some of them placed the issue in the larger context of the struggle between capitalism and socialism in which Muslim intellectuals projected Islam as having a different approach resulting in a distinct economic system with its own financial institutions. Community initiatives looked forward to something workable while avoiding interest. The nineteen-sixties saw the establishment of an interest-free bank in Karachi, that of Tabung Haji in Malaysia, and saving-investment banks in Mit Ghamr in Egypt, that were based on sharing profits and avoided interest. Only Tabung Haji survived, Haji (1995), thanks to its roots in the community, its narrow focus, official blessings and clear structure as a business. Early in the nineteen seventies came the Dubai Islamic Bank, taking deposits in current as well as investment accounts and engaging in profit-making activities directly as well as through working partners. The Islamic Development Bank, which started operations in 1975, was designed to serve Muslim countries and communities by arranging finance for trade and development on non-interest bases. By late nineteen-seventies there were half a dozen more banks in the private sector in Egypt, Jordan, Kuwait, and the Gulf. The following decade saw a rapid expansion bringing the number of banks to dozens by the end of the decade. To banks were now added non-bank financial institutions, like investment companies and insurance companies IAIB (1997). According Mohammad (1970) till the end of the nineteen-seventies, largely a plea for replacing interest in bank lending by profit sharing. This would change the nature of financial intermediation, making the fund owners as well as the financial intermediaries share the risks of enterprise with the fund users. Early literatures main emphasis was on fairness. Making the fund-user-entrepreneur bear all the risks of business and allowing fund owner and bank claim a predetermined return was regarded to be unjust. The environment in which productive enterprise was conducted did not guaranty a positive return, so there was no justification for money capital claiming a positive return irrespective of the results of enterprise, it was argued. Hadi (1973), Nejatullah (1968). It was also argued that most, though not all, the other problems of capitalism were rooted in the practice of lending on interest. Among these problems were unemployment, inflation, poverty amidst plenty, increasing inequa lity and recurrent business cycles Mohammad (1955), Ala (1961), Mahmud (1972), According to Mohammad (1970) abolishing interest and replacing it by profit sharing could solve these problems. It was not until the next decade that Islamic economists were able to fortify these claims by sophisticated economic analysis, especially at the macroeconomic level. The focus at this stage was largely on pointing out the deficiencies of capitalism and linking them to the institution of interest, among other things. With this went the arguments showing that it was possible to have banking without interest and that it would not adversely affect savings and investment Ala (1961), Ala (1969) Iqbal (1946), Nejatullah (1969). Hasan (2005) The most significant development during the late nineteen-seventies and early eighties was the advent and proliferation of Murabahah or cost-plus financing. What the businessman got from the Islamic bank under this arrangement is the commodity he needed purchased by the bank at his request, with the promise to purchase it from the bank at a price higher than its purchase price, to be paid after a period of time. Each Murabahah transaction created a debt. Compared to funds supplied on a profit-sharing basis, funds invested in Murabahah transactions were safe. Within a couple of years of the introduction of Murabahah in late nineteen seventies, it conquered the landscape of Islamic finance, assigning Mudarabah or profit-sharing to a corner accounting for less than ten percent of the operations. Security of capital invested rather than magnitude of returns to capital ruled the roost, insofar as the fund owners were concerned. However, the proliferation of Murabahah did give a big boost to Islamic finance during the coming decades. Their total number by year 2004 may have exceeded 200, spread over more than fifty countries. Archer and Karim (2002) the seventies also saw Pakistan officially committing to interest-free Islamic banking, followed by Iran and Sudan in the eighties. Meanwhile Malaysia developed a new approach of introducing Islamic banking and finance under official patronage, while the main system continued along conventional lines Indonesia followed in early nineties. This pattern later became the model for certain countries in the Gulf, like Bahrain, Qatar and the UAE. With the spread of Islamic financial institutions across the globe and enlargement of the size of funds managed by them, came the involvement of big players in the international financial arena like Citibank, HSBC and ABN AMRO according to Archer Karim (2002). According to Vogel and Hays (1998) in the development of theory of Islamic finance and banking, the late seventies and the eighties saw many significant contributions. Murabaha or cost plus financing, acknowledged only grudgingly in documents such as the Islamic Ideology Council of Pakistan Report on Elimination of Interest from the Economy, earned full recognition as well as respectable rationale. The controversy around its legitimacy, its efficacy hardly had any impact on the speed with which it conquered the landscape of Islamic finance. Practitioners of Islamic finance report they tried to push through sharing based Finance but the results were not encouraging Attiyah (2007). The laws of the land did not (may be, could not) offer the financier same protection from false reporting of profits by the users of funds, even against outright fraud and deception, not to speak of delay in payment, as was offered to borrowers in a lending contract. There seemed to be no room for collaterals. On top of all this there were projects to be financed that simply defied profit-sharing finance, like long term municipal plans to lay sewage-pipes in a city. In this case, returns to the finance would accrue over many decades in the future while costs had to be met in the present. In the absence of a market on which shares could be floated, even medium term Mudarabah bonds designed to finance development of WAQF property did not succeed Khairallah (1994). Recourse to trade based modes of finance became necessary. This happened with privately established Islamic banks in the Gulf area as well as with the Islamic Development Bank. By the early nineteen-eighties, Murabahah had become the dominant mode of Islamic finance everywhere. As pointed out above, early theory had failed to pay due attention to trade based modes of finance and to the issue of capital protection. Murabahah seemed to fill the gap. According to Khairallah (1994) the macroeconomic implications of Islamic banking were still being worked out on the assumption that it would be largely based on profit sharing. It was argued that financial intermediation based on profit sharing rather than lending will contribute to greater stability in the economic system in general and the financial markets in particular. It was also argued that such a system would be more efficient than the conventional system Khairallah (1994). 2.2 An overview of Islamic Banking and Financial products: The earliest Islamic financial product to appear on the scene was investment deposit with an Islamic bank or investment certificate issued by an Islamic investment company IIBI (1995). Both were based on profit-sharing/ Mudarabah between the depositor/certificate holder (Rabbal-mal) and the bank/investment company (Mudarib). The next to appear were based on sale. Murabahah is sale with a mark-up on purchase price, payment being deferred. Ijarah is sale of usufruct of an equipment or real estate owned by the seller. Murabahah proceeds on the basis of a purchase order by a client who commits to buy the commodity involved. Originally introduced as contracts between two parties both Ijarah and Murabahah ended up in the form of securities. Bypassing controversies around operating leases versus financial leases Nejatullah (2005b) The market seized upon Sukuk. Ijarah bonds are investment certificates indicating ownership of a real asset subject to a lease contract yielding predetermined rent yields, they are very popular in the Gulf, unlike the Sukuk based on Murabahah receivables that are considered valid only in Malaysia. Adam and Thomas (2004). Other sale-based modes in Islamic finance are Salam and Istisnaa Islamic banks started by using them as bases for extending finance to agriculture and industry respectively. As they had no interest in taking possession of the commodities or the manufactured goods involved, there was usually a parallel contract reversing the flow so that the bank ended up with cash, larger in amount than that paid by it in the first contract. In their more developed forms, the Islamic financial market now has Sukuk based on Ijarah, Salam and Istisnaa. The buyers of Sukuk periodically get a predetermined income over and above the privilege of redemption at par on maturity, as in case of conventional bonds. According to (http://www.bankislam.com.my) there are efforts to develop secondary markets on which these Islamic bonds could be traded. If and when these efforts succeed, the same markets could handle variable return Mudarabah bonds or Sukuk based on Mudarabah/musharakah. The big difference would be in there being no guaranteed value on redemption as these investors are vulnerable to losses too, unlike those who invest in fixed income Sukuk mentioned earlier. We have to examine, first how trade based modes of finance got in, and second, how bond-like Sukuk were constructed. Later on, we go on to economics: the impact of fixed income financial products on an economy aspiring to be Islamic. Malaysia introduced sale of debt (Bay Al-Dayn) in Islamic finance. It also brought in Inah, a way of obtaining cash now against a larger amount of cash to be paid after a period of time, on the basis of sale contracts on deferred prices followed by buyback contracts at lower cash prices. The first Islamic bank to come up in Malaysia, Bank Islam Malaysia Berhad, started its operations in 1983. It is now marketing about 50 innovative and sophisticated Islamic banking products and services, comparable to those of their conventional counterparts (http://www.bankislam.com.my). A second Islamic bank, Bank Muamalat Malaysia Berhad commenced operations in 1999. The Central Bank of Malaysia also decided to allow the existing banking institutions to offer Islamic banking services using their existing infrastructure and branches. The long-term objective of BNM is to create an Islamic banking system operating on parallel lines with the conventional system This involves some interaction between the two systems, which is overseen and organized by the central bank, Bank Negara Malaysia, which has in-house National Shariah Advisory Council. An Islamic Inter-bank Money Market launched in 1994 plays a significant role in this regard (http://www.bnm.gov.my). There is also Mudarabah Inter-bank Investment facilitating interaction between deficit and surplus Islamic banks. The backbone of the whole structure seems to be the Government Investment Issue (GII). It was originally based on ‘the Shariah contract of Qard Hasan, the holder being given back only what he/she gave. ‘Any return on the loans (if any) is on the absolute discretion of the government. But, in 2001, the basis of Government Investment Issue (GIIs) issuance was further enhanced to accommodate the need to develop further the secondary market activities of the Islamic money market. An alternative concept of GII based on Sell and Buy Back Arrangement was introduced in June 2001. Under this arrangement, the Government will sell its identified assets at an agreed cash price to the buyer and subsequently buy back the same assets from the buyer at an agreed purchase price to be settled at a specified future date (http://www.bnm.gov.my). Saleem (2006) says besides complying with the prohibitions against interest and the financing of forbidden activities, Islamic banking products are based on the concept of property exchange, profit and risk sharing, and certainty. Uncertainty (gharar) is not permissible, and contracts for banking services must clearly define the responsibilities and rights of the customer and bank as to the ownership of property, fees, and risk sharing. 2.3 Istisnaa The Istisnaa the second kind of sale where a commodity is transacted before it comes into existence. This allows the Bank to order for the goods or equipment required for a construction project according to the choice of the client and delivers them to the client. The client agrees to pay in installments at specified dates. There are two sub types of Istisnaa contracts, which are classified based on the commodity bought or sold Saleem (2006). 2.4 Ijarah Islamic Investments ‘Ijarah is the process by which (Usufruct of a particular property is transferred to another person in exchange for a rent claimed from him/her). It is the equivalent of ‘Leasing in commercial banking. This allows the Bank to order for Capital assets required for the customer against a rental agreement with him. The title Impact of Financial Crisis on Islamic Banks Impact of Financial Crisis on Islamic Banks Chapter 1 Background / Introduction of recent financial crises and Islamic banking system The credit crunch is widely blamed upon the sub prime crisis which originated in America, where banks offered housing loans to those known in the industry as ninjas (no income, no job, no assets). Such people often had poor financial track records. However these loans were subsequently repackaged into financial products known as ‘collaterised debt obligations (CDOs). They were then mixed in with ‘prime loans and sold on to other banks via the wholesale market. In theory, this trading in debts was meant to spread the risk of bad loans amongst many different banks, thereby reducing risk. In fact, it lead to the ‘sub prime problem infecting not just the banks that offered the dodgy loans in the first place, but a far, far greater number of banks who bought the ‘toxic loans via the wholesale markets. The knock-on effect of this was for banks to suddenly become unsure of the value of their ‘toxic assets and as a result to stop lending each other money, or to lend money only at much higher rates. As a result the London Interbank Offered Rate (LIBOR) shot up to unprecedented levels, which in turn massively increased the cost of providing loans to the general public according to Khan (2008). The Western perspective also argues that this initial problem with sub prime debts triggered a secondary problem whereby banks which relied for cash flow principally on accessing funds from other banks via the wholesale market, suddenly found they could no longer borrow enough money to meet their cash flow requirements This is what led to the crisis with collapse of 150 year old Lehman Brothers and take over of Merrill Lynch by Bank of America, which, more than any other bank relied on the wholesale market rather than its own depositor funds to meet the banks day-to-day cash requirements Khan (2008). According to Bashir (2008) the paralysis in interbank lending led in turn to banks drastically reducing the money they lent to customers, as well as dramatically raising the cost of existing loans. This in turn substantially reduced demand for property and led to the ongoing crash in the property market. This is now feeding back to create a yet bigger problem for the banks because property is what they mostly hold as collateral for all the debts people owe them. Evidently this collateral is now worth a lot less than a year ago, and this will inevitably lead to a much higher rate of loan defaults and repossessions Bashir (2008). Having covered a secular analysis, we now turn to Islam, which proposes a very different explanation for these problems. According to Haddad (2008) Islam does not consider money to be a commodity, which can be traded at a profit, that is to say a transaction that is interest (or usury) based. Thus the reality of negating this Islamic consideration provides us with the first part of the problem. Interest, known as Riba in Arabic, is one of the major violations of Gods law, and when it spreads through society becoming an established norm without any condemnation nothing can be expected but divine wrath. Islamic banks do not borrow or lend on international money markets because interest is not allowed, traditionally they have a larger proportion of their assets in reserve accounts with central banks. Islamic banking is based on the principles of risk sharing between depositor and investor in theory, meaning that customers practice greater oversight of an Islamic banks lending performance. Shariah law stipulates that Islamic securities should be asset-based, which means that a trader must own the asset being traded. This, in turn, proscribes most forms of futures trading, as goods that the seller does not own or will not deliver cannot be the subjects of an Islamic contract. Practices such as short selling, consequently, are not a feature of Islamic Banking according to Haddad (2008). According to Siddiqi (2009) Islamic finance is growing in various parts of the world. It has moved from a mere theoretical concept to a practical reality. Islam not only prohibits dealing in interest but also in liquor, pork, gambling, pornography and anything else, which the Shariah (Islamic Law) deems Haram (unlawful). Islamic banking is an instrument for the development of an Islamic economic order. The core principles of Islamic economics system are justice, equity and welfare. Islamic economics seeks to establish a broad based economic well being with full employment and optimum rate of economic growth, it will bring socio economic justice and equitable distribution of income and wealth. Islamic economics will also ensure the stability in the value of money to enable the medium of exchange to be a reliable unit of account and a stable store of value Siddiqi (2009). According to Bagsiraj (2009) in the Islamic economy, Islamic banks act as venture capital firms collecting peoples wealth and investing it in the economy, then distributing the profits amongst depositors. Islamic banks act as investment partners for those who need money to do businesses, becoming part owners of the business. The banks should only be able to recoup their original capital by selling their share of the mortgage/business at the prevailing market value. As real partners, Islamic banks should have no objection to owning real assets and hence should be ready to share the consequential risk. This scheme, although seemingly inconsequential, could constitute a major relief to Islamic banks clients, as they would no longer live under the burden of debt and fear of repossession Bagsiraj (2009). Further more, according to Siddiqi, (2009) Islam neither endorses the capitalist nor the communist financial model. However, both the capitalist and socialist systems share certain elements with Islam, such as encouraging people to work, to be productive and earn as much as they can. Islam promotes an awareness of the hereafter in the hearts and minds of believers and instructs them not to be overcome by greed or excessively attached to money. The Islamic economic and financial system is based on a set of values, ideals and morals, such as honesty, credibility, transparency, clear evidence, facilitation, co-operation, complementarities and solidarity. These morals and ideals are fundamental because they ensure stability, security and safety for all those involved in financial transactions. Islamic Shariah prohibits economic and financial transactions that involve lying, gambling, cheating, gharar (risk or uncertainty), monopoly, exploitation, greed, unfairness and taking peoples mone y unjustly Siddiqi, 2009. The aim of this research is to examine the extent to which the Islamic banks have been affected by the recent financial crisis in contrast with its conventional counterpart. Chapter 2 Literature review 1.1 Detailed history of credit crunch: According to BBC website a credit crunch is an economic condition in which loans and investment capital are difficult to obtain. In such a period, banks and other lenders become wary of issuing loans, so the price of borrowing rises, often to the point where deals simply do not get one. When a National Public Radio journalist asked the famous economists Nouriel Roubini, Kenneth Rogoff, and Nariman Behravesh, their reaction on the monthly report that was just released by the U.S. Department of labor, their answers were â€Å"Its worse then anybody had anticipated†; â€Å"Its pretty disastrous†, and â€Å"I am shocked† Langfitt (2007). Before the report was published, the economic forecasters view was that the report would show the U.S economy increased about 100,000 jobs in August. Instead there was a net loss of 4,000 jobs; there was no growth for the first time in four years. U. S Department of Labor (2007). The forecasters were not done getting it wrong, however, after publication of the jobs data, a number of them predicted the news would bolster the U.S. stock market, because they argued, the employment report practically guaranteed that the Federal Reserve would cut interest rate on September 18, Instead, investor panic over the employment report caused the market, which had been volatile during most of the summer, to quickly lose about 2% on all major indices as per Whalen (2007). The Federal Reserve did eventually cut rates as expected, but it took a number of reassuring comments by U.S. central bank governors on September 10 to calm Wall Streets fears according to Monica (2007). What is now clear is that most economists underestimated the widening economic impact of the credit crunch that has shaken U.S. financial markets since at least mid-July 2007. According to Times online (2009) years of lax lending inflated a huge debt bubble as people borrowed cheap money and ploughed it into property. Lenders were free with their funds, especially in the US, where billions of dollars of so-called Ninja mortgages no income, no job or assets were sold to people with weak credit ratings (called sub-prime borrowers). The informal notion was that if they ran into trouble with their repayments rising house prices would allow them to re mortgage their property as per times online (2009). It seemed a good idea when Central Bank interest rates were low; the trouble was it could not last. Interest rates hit rock bottom in America in 2004 at just 1 per cent, but in June that year they began to rise Bernank (2006). As interest rates jumped, US house prices started to fall and borrowers began to default on their mortgage payments sparking trouble for us all BBC websites (2009). According to Mullan, 2008 easy money conditions made funds available to finance millions of US ‘sub prime borrowers, less well-off people who in earlier times would not have been seen as credit-worthy enough to get a plastic card never mind a home mortgage. These extra homebuyers helped reinforce the pre-existing rise in property prices, producing price hikes in many regional markets across the US. By summer 2007, the market had turned house prices were falling and default levels were raising Mullan, 2008. When the sub prime crisis hit, liquidity froze in the wholesale money markets, not just in the US but also across the Western world nytimes (2008). Following the common pattern of all credit crises, at a certain point never precisely predictable, because of the ‘elastic nature of credit debt becomes too extended for some borrowers when their circumstances change, default levels begin to grow, and the upward spiral of credit expansion and asset price appreciation turns into its unwelcome opposite Mullan, 2008. Just as mortgage issuance and rising US house prices fed on each other for several years, so now price falls and mortgage foreclosures reinforce each other BBC websites (2009). The difference with the credit crisis this time is that the necessity for writing off the bad debts spreads far beyond the original lenders, the banks and the other institutions, which issued the sub prime mortgages, repackaged the debts and sold them on elsewhere into the financial system the process of passing on debt from one institution to another has long been a feature of the financial markets, this activity became so frequent that the terminology of ‘securitization became commonplace, as bank lending was repackaged and sold on as bonds or securities, the same underlying value of a piece of financial paper (or electronic account) becomes reproduced often multiple times elsewhere in the financial system Economichelp.org (2008). In essence, such loans are resold as assets to others so that the same underlying value becomes used many times over, is what the credit system has been about since its early days. This time, in fact since the 1980s, the scale and scope of the repackaging of debt was simply more extensive than ever Mullan (2008). Hence the emergence of trading in ‘derivatives instruments derived from the original credit note that dominates modern financial markets trading. More recently, over the past few years, this practice spawned a number of new acronyms which have been a feature of the terminology for todays crisis: ABSs (asset-backed securities, with the ‘assets often being those home mortgages); CDOs (collateralised debt obligations); and SIVs (structured investment vehicles these are the alternative secondary financial bodies which invested in the new mortgage-backed financial instruments) according to Mullan (2008). 1.2 Causes of credit crunch Inaccurate Credit ratings: According to Acharya, Viral, Bharath, and Srinivasan, (2007) The Collateralized Debt Obligations (CDO) market has grown substantially since 2001 with issuance volume reaching $551.7 billion in 2006. While securitization makes financing more accessible for firms and households1, it also presents regulatory challenges, as rating agencies and institutions struggle to keep up with the rapid pace of financial innovation on Wall Street. According to Coval, Jurek, and Stafford (2008) Since summer 2007, both academics and practitioners have blamed complex CDOs for being, in part, responsible for the current sub prime crisis and credit crunch. While more than 85% of the dollar value of CDO securities issued was rated AAA by either Moodys or Standard and Poors (SP), 3 several major banks and financial institutions eventually had to write-off substantial portions of their balance-sheets related to investments in CDOs, largely those backed by sub prime mortgages. In 2007, Moodys downgraded $76bn in CDO securities and another $150bn remained on credit watch as of January 2008. Downgrades in November 2007 alone numbered 2,000 and many downgrades were severe, with 500 trenches downgraded more than 10 notches.4 The ensuing confusion about the true value of these complicated securities and the extent of exposure by financial institutions, incited a credit crunch with effects beyond sub prime mortgage related investments. In another words the securities, especially the now-notorious C.D.O.s, for (collateralised debt obligations) were probably too complex for anyones good. Investors placed too much faith in the rating agencies which, to put it mildly, failed to get it right. It is tempting to take the rating agencies out for a public whipping. But it is more constructive to ask how the rating system might be improved. Thats a tough question because of another serious incentive problem. Under the current system, the rating agencies are hired and paid by the issuers of the very securities they rate which creates an obvious potential conflict of interest. The following figure shows the typical collateralised debt obligations (CDO) structure and CDO issuances over time respectively: 1.3 Sub prime market collapse: According to Khan (2008) As the housing sector continued to inflate due to the appetite for housing by Americans, the sub prime sector continued to also grow. Commercial banks entered what they considered a buoyant market that could only raise, many Americans refinanced their homes by taking out second mortgages against the added value to use the funds for consumer spending. The first sign that the US housing bubble was in trouble was on the 2nd April 2007 when New Century Inc the largest sub rime mortgage lender in the US declared bankruptcy due to the increasing number of defaults from borrowers. In the previous month 25 sub prime lenders declared bankruptcy, announcing significant losses, with some putting themselves up for sale. Khan (2008) also highlights the crisis that then spread to the owners of collateralized debt who were now in the position where the payments they were promised from the debt they had purchased was being defaulted upon. By being owners of various complex products the constituent elements of such products resulted in many holders of such debt to sell other investments in order to balance losses incurred from exposure to the sub prime sector or what is known as ‘covering a position. This second round of selling to shore up funds and meet brokerage margin requirements is what caused the collapse in share prices across the world in August 2007, with the market getting into a vicious circle of falling prices, leading to the further sales of shares to shore up losses. This type of behavior is typical of a Capitalist market crash and is what caused worldwide share values to plummet. What made matters worse was many investors caught in this vicious spiral of declining prices did not just sell sub prime and related products; they sold anything that could be sold. This is why share prices plummeted across the world and not just in those directly related to sub prime mortgages Khan (2008). International institutes who poured their money into the US housing sector realized they will not actually receive their money that they loaned out to investors as individual sub prime mortgage holders were defaulting on mass on such loans this resulted in all those who took positions in the housing sector not being able to pay the institutes they borrowed money from. It was for these reason central banks across the world intervened in the global economy in an unprecedented manner providing large amounts of cash to ensure such banks and institutes did not go bankrupt Khan (2008). According to bbc.co.uk the European Central Bank, Americas Federal Reserve and the Japanese and Australian central banks injected over $300 billion into the banking system within 48 hours in a bid to avert a financial crisis. They stepped in when banks, such as Sentinel, a large American investment house, stopped investors from withdrawing their money, spooked by sudden and unexpected losses from bad loans in the American mortgage market, other institutions followed suit and suspended normal lending. Intervention by the worlds central banks in order to avert crisis cost them over $800 billion after only seven days. 2.1 Islamic Banking: The beginning of Islamic Banking: The earliest writings on the subject of Islamic banking and finance date back to the forties of the twentieth century Nejatullah (1981) and the earliest practice can be traced to early sixties Mahmud (1995). The literature showed ambivalence between the model of an intermediary designed after conventional commercial banks and one like an investment company serving individuals seeking profits as well as the community needing development. Models of commercial banking based on two-tier Mudaraba came from economists aspiring to build an alternative to a system of banking and finance hinged on interest. Some of them placed the issue in the larger context of the struggle between capitalism and socialism in which Muslim intellectuals projected Islam as having a different approach resulting in a distinct economic system with its own financial institutions. Community initiatives looked forward to something workable while avoiding interest. The nineteen-sixties saw the establishment of an interest-free bank in Karachi, that of Tabung Haji in Malaysia, and saving-investment banks in Mit Ghamr in Egypt, that were based on sharing profits and avoided interest. Only Tabung Haji survived, Haji (1995), thanks to its roots in the community, its narrow focus, official blessings and clear structure as a business. Early in the nineteen seventies came the Dubai Islamic Bank, taking deposits in current as well as investment accounts and engaging in profit-making activities directly as well as through working partners. The Islamic Development Bank, which started operations in 1975, was designed to serve Muslim countries and communities by arranging finance for trade and development on non-interest bases. By late nineteen-seventies there were half a dozen more banks in the private sector in Egypt, Jordan, Kuwait, and the Gulf. The following decade saw a rapid expansion bringing the number of banks to dozens by the end of the decade. To banks were now added non-bank financial institutions, like investment companies and insurance companies IAIB (1997). According Mohammad (1970) till the end of the nineteen-seventies, largely a plea for replacing interest in bank lending by profit sharing. This would change the nature of financial intermediation, making the fund owners as well as the financial intermediaries share the risks of enterprise with the fund users. Early literatures main emphasis was on fairness. Making the fund-user-entrepreneur bear all the risks of business and allowing fund owner and bank claim a predetermined return was regarded to be unjust. The environment in which productive enterprise was conducted did not guaranty a positive return, so there was no justification for money capital claiming a positive return irrespective of the results of enterprise, it was argued. Hadi (1973), Nejatullah (1968). It was also argued that most, though not all, the other problems of capitalism were rooted in the practice of lending on interest. Among these problems were unemployment, inflation, poverty amidst plenty, increasing inequa lity and recurrent business cycles Mohammad (1955), Ala (1961), Mahmud (1972), According to Mohammad (1970) abolishing interest and replacing it by profit sharing could solve these problems. It was not until the next decade that Islamic economists were able to fortify these claims by sophisticated economic analysis, especially at the macroeconomic level. The focus at this stage was largely on pointing out the deficiencies of capitalism and linking them to the institution of interest, among other things. With this went the arguments showing that it was possible to have banking without interest and that it would not adversely affect savings and investment Ala (1961), Ala (1969) Iqbal (1946), Nejatullah (1969). Hasan (2005) The most significant development during the late nineteen-seventies and early eighties was the advent and proliferation of Murabahah or cost-plus financing. What the businessman got from the Islamic bank under this arrangement is the commodity he needed purchased by the bank at his request, with the promise to purchase it from the bank at a price higher than its purchase price, to be paid after a period of time. Each Murabahah transaction created a debt. Compared to funds supplied on a profit-sharing basis, funds invested in Murabahah transactions were safe. Within a couple of years of the introduction of Murabahah in late nineteen seventies, it conquered the landscape of Islamic finance, assigning Mudarabah or profit-sharing to a corner accounting for less than ten percent of the operations. Security of capital invested rather than magnitude of returns to capital ruled the roost, insofar as the fund owners were concerned. However, the proliferation of Murabahah did give a big boost to Islamic finance during the coming decades. Their total number by year 2004 may have exceeded 200, spread over more than fifty countries. Archer and Karim (2002) the seventies also saw Pakistan officially committing to interest-free Islamic banking, followed by Iran and Sudan in the eighties. Meanwhile Malaysia developed a new approach of introducing Islamic banking and finance under official patronage, while the main system continued along conventional lines Indonesia followed in early nineties. This pattern later became the model for certain countries in the Gulf, like Bahrain, Qatar and the UAE. With the spread of Islamic financial institutions across the globe and enlargement of the size of funds managed by them, came the involvement of big players in the international financial arena like Citibank, HSBC and ABN AMRO according to Archer Karim (2002). According to Vogel and Hays (1998) in the development of theory of Islamic finance and banking, the late seventies and the eighties saw many significant contributions. Murabaha or cost plus financing, acknowledged only grudgingly in documents such as the Islamic Ideology Council of Pakistan Report on Elimination of Interest from the Economy, earned full recognition as well as respectable rationale. The controversy around its legitimacy, its efficacy hardly had any impact on the speed with which it conquered the landscape of Islamic finance. Practitioners of Islamic finance report they tried to push through sharing based Finance but the results were not encouraging Attiyah (2007). The laws of the land did not (may be, could not) offer the financier same protection from false reporting of profits by the users of funds, even against outright fraud and deception, not to speak of delay in payment, as was offered to borrowers in a lending contract. There seemed to be no room for collaterals. On top of all this there were projects to be financed that simply defied profit-sharing finance, like long term municipal plans to lay sewage-pipes in a city. In this case, returns to the finance would accrue over many decades in the future while costs had to be met in the present. In the absence of a market on which shares could be floated, even medium term Mudarabah bonds designed to finance development of WAQF property did not succeed Khairallah (1994). Recourse to trade based modes of finance became necessary. This happened with privately established Islamic banks in the Gulf area as well as with the Islamic Development Bank. By the early nineteen-eighties, Murabahah had become the dominant mode of Islamic finance everywhere. As pointed out above, early theory had failed to pay due attention to trade based modes of finance and to the issue of capital protection. Murabahah seemed to fill the gap. According to Khairallah (1994) the macroeconomic implications of Islamic banking were still being worked out on the assumption that it would be largely based on profit sharing. It was argued that financial intermediation based on profit sharing rather than lending will contribute to greater stability in the economic system in general and the financial markets in particular. It was also argued that such a system would be more efficient than the conventional system Khairallah (1994). 2.2 An overview of Islamic Banking and Financial products: The earliest Islamic financial product to appear on the scene was investment deposit with an Islamic bank or investment certificate issued by an Islamic investment company IIBI (1995). Both were based on profit-sharing/ Mudarabah between the depositor/certificate holder (Rabbal-mal) and the bank/investment company (Mudarib). The next to appear were based on sale. Murabahah is sale with a mark-up on purchase price, payment being deferred. Ijarah is sale of usufruct of an equipment or real estate owned by the seller. Murabahah proceeds on the basis of a purchase order by a client who commits to buy the commodity involved. Originally introduced as contracts between two parties both Ijarah and Murabahah ended up in the form of securities. Bypassing controversies around operating leases versus financial leases Nejatullah (2005b) The market seized upon Sukuk. Ijarah bonds are investment certificates indicating ownership of a real asset subject to a lease contract yielding predetermined rent yields, they are very popular in the Gulf, unlike the Sukuk based on Murabahah receivables that are considered valid only in Malaysia. Adam and Thomas (2004). Other sale-based modes in Islamic finance are Salam and Istisnaa Islamic banks started by using them as bases for extending finance to agriculture and industry respectively. As they had no interest in taking possession of the commodities or the manufactured goods involved, there was usually a parallel contract reversing the flow so that the bank ended up with cash, larger in amount than that paid by it in the first contract. In their more developed forms, the Islamic financial market now has Sukuk based on Ijarah, Salam and Istisnaa. The buyers of Sukuk periodically get a predetermined income over and above the privilege of redemption at par on maturity, as in case of conventional bonds. According to (http://www.bankislam.com.my) there are efforts to develop secondary markets on which these Islamic bonds could be traded. If and when these efforts succeed, the same markets could handle variable return Mudarabah bonds or Sukuk based on Mudarabah/musharakah. The big difference would be in there being no guaranteed value on redemption as these investors are vulnerable to losses too, unlike those who invest in fixed income Sukuk mentioned earlier. We have to examine, first how trade based modes of finance got in, and second, how bond-like Sukuk were constructed. Later on, we go on to economics: the impact of fixed income financial products on an economy aspiring to be Islamic. Malaysia introduced sale of debt (Bay Al-Dayn) in Islamic finance. It also brought in Inah, a way of obtaining cash now against a larger amount of cash to be paid after a period of time, on the basis of sale contracts on deferred prices followed by buyback contracts at lower cash prices. The first Islamic bank to come up in Malaysia, Bank Islam Malaysia Berhad, started its operations in 1983. It is now marketing about 50 innovative and sophisticated Islamic banking products and services, comparable to those of their conventional counterparts (http://www.bankislam.com.my). A second Islamic bank, Bank Muamalat Malaysia Berhad commenced operations in 1999. The Central Bank of Malaysia also decided to allow the existing banking institutions to offer Islamic banking services using their existing infrastructure and branches. The long-term objective of BNM is to create an Islamic banking system operating on parallel lines with the conventional system This involves some interaction between the two systems, which is overseen and organized by the central bank, Bank Negara Malaysia, which has in-house National Shariah Advisory Council. An Islamic Inter-bank Money Market launched in 1994 plays a significant role in this regard (http://www.bnm.gov.my). There is also Mudarabah Inter-bank Investment facilitating interaction between deficit and surplus Islamic banks. The backbone of the whole structure seems to be the Government Investment Issue (GII). It was originally based on ‘the Shariah contract of Qard Hasan, the holder being given back only what he/she gave. ‘Any return on the loans (if any) is on the absolute discretion of the government. But, in 2001, the basis of Government Investment Issue (GIIs) issuance was further enhanced to accommodate the need to develop further the secondary market activities of the Islamic money market. An alternative concept of GII based on Sell and Buy Back Arrangement was introduced in June 2001. Under this arrangement, the Government will sell its identified assets at an agreed cash price to the buyer and subsequently buy back the same assets from the buyer at an agreed purchase price to be settled at a specified future date (http://www.bnm.gov.my). Saleem (2006) says besides complying with the prohibitions against interest and the financing of forbidden activities, Islamic banking products are based on the concept of property exchange, profit and risk sharing, and certainty. Uncertainty (gharar) is not permissible, and contracts for banking services must clearly define the responsibilities and rights of the customer and bank as to the ownership of property, fees, and risk sharing. 2.3 Istisnaa The Istisnaa the second kind of sale where a commodity is transacted before it comes into existence. This allows the Bank to order for the goods or equipment required for a construction project according to the choice of the client and delivers them to the client. The client agrees to pay in installments at specified dates. There are two sub types of Istisnaa contracts, which are classified based on the commodity bought or sold Saleem (2006). 2.4 Ijarah Islamic Investments ‘Ijarah is the process by which (Usufruct of a particular property is transferred to another person in exchange for a rent claimed from him/her). It is the equivalent of ‘Leasing in commercial banking. This allows the Bank to order for Capital assets required for the customer against a rental agreement with him. The title