How Islamic Banking Has Gained Momentum - Free Essay Example

Sample details Pages: 18 Words: 5419 Downloads: 5 Date added: 2017/06/26 Category Statistics Essay Did you like this example? In the last quarter a century, Islamic banking become as hot issue in both Muslim and non-Muslim World and gained momentum. Many studies have been conducted on commercial Islamic banking but nothing up to date has been done on integrating Islamic banking system with its conventional counterpart. Islamic banking is steadily moving into an increasing number of conventional financial systems. It is expanding not only in nations with majority Muslim populations, but also in other countries where Muslims are a minority, such as the United Kingdom or Japan. Similarly, countries like India, the Kyrgyz Republic, and Syria have recently granted, or are considering granting, licenses for Islamic banking activities. In fact, there are currently more than 300 Islamic financial institutions spread over 51 countries, plus well over 250 mutual funds that comply with Islamic principles. Over the last decade, this industry has experienced growth rates of 10-15 percent per annum -a trend that is expected to continue. Don’t waste time! Our writers will create an original "How Islamic Banking Has Gained Momentum" essay for you Create order Despite this rapid expansion, in most conventional banking systems, Islamic finance is still uncharted territory for most practitioners and policy-makers. Since current trends indicate that Islamic banking will continue to increase its penetration of conventional systems, policy-makers and practitioners need to become acquainted with this process and its implications for financial supervision. CHAPTER 1 INTRODUCTION 1.1 Overview The Islamic financial system has a century-old history (Chapra and Khan, 2000). From the very early stage in Islamic history, Muslims were able to mobilize resources and facilitate productive activities and consumer needs without interest. The system worked well during the early days of Islamic civilization. However, as the forces of economic gravity shifted activities over to the western world, western financial institutions became dominant and the Islamic tradition took the back stage and remained dormant. In recent years, there has been a significant revival of interest in developing a modern version of the historic Islamic financial system, in the wake of Muslims cry to stay away from interest, which is prohibited according to the Islamic sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah. Some countries are however trying a complete elimination of interest in the financial system while others have allowed the establishment of interest-free banking along side the conventional banks. The Islamic financial system is based on a number of principles found in the Islamic law (Sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah) as well as other jurisprudence or rulings known as fatwa. The central distinguishing feature of the Islamic financial system is the absolute prohibition of interest charges. Although, Islamic finance relies on the equitable risk-sharing, it rejects the concept of pre-determined interest rate but permits an uncertain rate of return based on trade and profits. The financial sector of the economy encompasses financial instruments, financial institutions, and financial markets. Financial instruments are traded on financial markets by financial institutions. However, over the time, some participant will find it necessary or profitable to acquire more worth of goods and services than they currently produce and give in exchange. Under the modern financial system, interest and enterprises based on interest occupy a prominent position, the whole banking system rest on interest, but the Islamic financial system differs from its conventional counterpart. Islamic banking is steadily moving into an increasing number of conventional banking set-ups. It is expanding not only in Muslim majority countries but also where Muslims are minority such as United Kingdom and Japan. An important principle of Islamic finance is the desire to maintain the moral purity of all transactions. The funds intended for sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah compatible investments should not be mixed with those of non-Islamic investments. In this sense, when a conventional bank opens an Islamic window, it is only establishing a separate entity from the rest of the bank. The aim of this chapter is to lay down the objective, aims, importance, methodology, and hypotheses of the research. An overview of evolution of financial systems and a survey of chapters covered in this research will follow. 1.2 Research Objective This study will attempt to explore the concepts of Islamic financial principles which relate to the integration of Islamic banking with the conventional financial system at the present time. So much, however, has been written on the theoretical side that it might be asked whether a further study can contribute to our understanding of the subject or not. Nevertheless, this research is using HSBC Amanah as a case study with an evaluation of its operations and performance in order to try and answer the following questions to reach this objective: Can conventional banks legitimately offer Islamic financing facilities given their involvement with interest-based finance? Are both conventional and Islamic banks converging or becoming increasing distinctive? How can conventional banks offer Islamic financing facilities? Do the functions of the Islamic banks differ significantly to that of the conventional banks? 1.3 Significance of the Study Islamic finance is emerging as a rapidly growing part of financial sector in the world. It is growing at such a rapid pace that Islamic financial institutions are present today in over 51 countries (Sole 2009) Despite this consistent growth, many supervisory authorities and finance practitioners remain unfamiliar with the process by which Islamic banks are introduced into a conventional system. This work attempts to shed some light in this area by describing the main steps in the integration process, and by flagging some of the main challenges that countries could face as Islamic banking is integrated into conventional institutions. 1.4 Methodology This research work was carried out using a deductive reasoning approach. To ensure validity and reliability of the research, HSBC Amanah was used as the case study. Data was collected from HSBC Amanah head office in Dubai, UAE, Islamic Bank of Britain in Birmingham to act as the control data as well as libraries across London such as The British Library in Kings Cross and London School of Economics and Political Science Library. In more details, the methodology of the research is as follows: 1) A literature review of the western financial system is completed to enable comparisons between the western and the Islamic financial system to be undertaken. 2) The operations of conventional banks are reviewed. 3) Having established acceptable Islamic financial principles, the operations of an Islamic bank are examined in the context of conventional banks. 4) To evaluate the performance of the HSBC Amanah, historical data available in the annual reports was studied and analysed. The Islamic Bank of Britain is taken as a model for comparison. 5) To provide a more comprehensive evaluation of HSBC Amanahà ¢Ã¢â€š ¬Ã¢â€ž ¢s performance questionnaires were distributed to collect more information to confirm or otherwise the findings of the financial analysis under 4 above. 1.5 Main Hypotheses The main hypothesis of the research is that the Islamic financial system model differs from that of conventional financial system. This hypothesis will be examined in the light of 1) The theory of Islamic finance as perceived in the Islamic economic and financial literature. 2) A case study of HSBC Amanah. 3) The opinions of those operating or Governing HSBC Amanah and Islamic Bank of Britain CHAPTER TWO LITERATURE REVIEW 2.0 Introduction The importance of the financial system cannot be overemphasized. Before the introduction of the money based economy, the barter system of trade prevailed; this involves the direct exchange of goods for goods in a simple market transaction without the intermediation of money as a medium of exchange. The main problem with the barter economy is that it is considered primitive and if there is no financial system based on money, there would be no reason to hold money but rather to accumulate physical assets. This chapter discusses the literature that provides the foundation for the research. It explores the theoretical concepts used in the later analysis and identifies the gaps in the literature that led to the study. 2.1 The Financial System The financial system consists of financial markets, instruments, institutions, business firms and government in financing the acquisition of goods and services, capital investments and in transferring ownership of securities (Schall and Haley, 1991). Financial systems are never static but changes over the time as new products and instruments are developed. The influence of the financial system is not limited to investments or borrowing but rather changes in the value of financial assets or the rate set for other financial variables can affects the whole level of activity in an economy. Financial system is important in any economy for the following reasons: 1- It provides an efficient means of bringing the surplus units and the deficit units together in order to make transactions quicker and cheaper. 2- The financial system includes the secondary markets which facilitates the buying and selling of outstanding securities. This makes it easy for a firm to raise external debt or equity capital. 3- The value of a firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s stock can be easily determined through the market forces of demand and supply. 2.2 Roles of the financial system The key roles of the financial system are not specific to conventional or Islamic based system. Financial systems perform most of their everyday operations so quickly and smoothly that their importance is not always well readily recognized. A well functioning financial system performs its principal roles of effecting payments, facilitating the investment of accumulated wealth, making funds available to finance viable new projects and providing risk management facilities. Parts of the financial system operate to make the system for payments in the economy as smooth as possible. It thus helps money to perform its function as a medium of exchange. The financial institutions predominantly involved in the monetary system are the à ¢Ã¢â€š ¬Ã…“clearing banksà ¢Ã¢â€š ¬?. They assist with the payment mechanism by offering current accounts against which the account holder can write cheques or use debit cards to pay for goods. In the absence of such facilities, people would need to carry sufficient cash in order to make payments. The role of financial intermediation requires providing mechanisms for saving and borrowing so that agents in the economy can alleviate budget constraints. This involves creating a variety of financial assets and liabilities with different characteristics that appeal to different savers and borrowers. Financial assets (equity and debt) are the basic products of the financial system (Schall and Haley, 1991). The role of financial intermediation requires providing mechanism for savings and borrowing so that agents in the economy can alleviate budget constraints. This involves creating a variety of financial assets and liabilities with different characteristics that appeal to different savers and borrowers. The conventional banks provide the mechanism for savings and borrowings on the basis of rate of interest on both the assets and liabilities side. In any particular period, some people in an economy will wish to spend more on goods and services than their income earned in the period allows, and at the same time, other people will have income more than they wish to spend and will want to save the surplus for spend in the future periods. The role of the financial system is to create a wide variety of instruments and incentives for an efficient allocation of scare financial real resources between competing ends. An efficient allocation of resources requires an accurate assessment and efficient pricing of risk. The price of finance needs to include an allowance for the risk involved. The role of financial system as provider of risk management facilities is often regarded as having emerged in the 1970s and 1980s (Neave, 1998). That view stems primarily from observations of the very rapid growth of risk trading during those decades. Risk management became more popular as the financial environment became more turbulent. Market trading of such risk management instruments as derivative securities is based on the same considerations that led insurance companies to write liabilities and commodities traders to purchase futures. 2.3 Financial system organisation This describes how a typical financial system is organised. It was mentioned earlier that the principal role of the financial system is to channel funds from surplus units to deficit units. The financial system is composed of a collection of financial institutions, financial instruments, and market trading. 2.3.1 Financial institutions Some financial institutions are involved in direct lending and borrowing of funds. Example includes banks and building societies in the UK. The other category of financial institutions is the à ¢Ã¢â€š ¬Ã…“investing institutionsà ¢Ã¢â€š ¬?. These institutions channel funds to deficit units in the economy by acquiring financial securities. Investment trusts are institutions which attract money from individuals and then invest it in larger amounts in securities issued by companies or public bodies requiring funds. Although there is a split between lending and investing institutions, there are increasing overlaps between the two. Banks have traditionally been involved in taking deposits from people who wish to save and lending to those wish to borrow. But of recent, banks are also actively trading financial securities which make it difficult to distinguish between banks and investing institutions. 2.3.2 Financial Markets A financial market is considered to be a forum for the exchange of financial products, represented in some cases by a physical location. But in others by a common information system sharing data on prices, and volumes transacted, and where a number of professional take an active part in the process of the market (Fell, 2000). Financial markets exists in most capitalist markets economies for the trade of company shares and short or long-term borrowing securities. The two major components of financial markets can be termed the money and capital markets. The difference between the two lies in that in the money market, money is exchanged for other financial assets having a maturity of one year or less while the capital markets exchange, involves claims with a maturity greater than one year. Financial Institutions Deficit Units Financial Markets Surplus Units Figure 2.1: Financial System 2.4 Functions of the Financial System There are three broad functions performed by the financial system. First, it should provide a smooth and efficient transfer of funds from surplus units to deficit units. This transfer of funds can occur either directly through money and capital markets or indirectly through the Intermediation market via financial institutions. Efficient transfer and flow of funds mean it Should be accomplished at the lowest possible cost Secondly, it should maintain a reasonable degree of soundness between financial institutions and markets in case of adverse economic conditions. Soundness of the financial system here means that institutions and markets maintain an efficient-transfer and flow of funds between SUs and DUs even in cases of adverse economic events such as inflationary and recessionary periods or avoidance of inflation and a lack of confidence in the financial system. Thirdly, it should be flexible and adaptable to the continuously changing needs of the economy resulting from economic growth and to any new conditions facing the financial system either externally or internally. If all of these functions (efficiency, soundness and adaptability) have been attained, then it will have a stable financial framework to support a rate of growth consistent with the resource base and technology of the economy, (Cargill, 1986). This stable financial framework must be accompanied by a stable monetary framework which means there must exist methods to allow money and credit to grow at sufficient rates to support economic growth at non inflationary levels, 2.5 Principles of Transferring Funds in the Financial System There are two methods for transferring the funds from SUs to the DUs which constitute the basic nature of the financial system. The two methods are through direct and indirect finance. 2.5.1. Direct Finance A direct transfer of money occurs when the DU which wants to acquire money, issues a financial asset (debt or stock) and sells it to the SU which has money available. The financial asset which is issued in this process is a piece of paper to indicate the nature of the asset which meets the legal requirements for establishing the claims (debt or stock). In this method of finance the SUs and DUs deal either directly face to face or indirectly through the services of specialized brokers, dealers, or agents. Those brokers, Dealers or agents match the SUs and DUs; they do not actually own the financial assets, rather, they only charge a commission for their services. Here the consumption units must sell their factor services to the production units for which they will receive income payments as wages and salaries. At the same time the consumption units or the households will purchase the goods and services produced by the production units or the non-financial business firms and will receive the household current expenditure payment as a price for these goods and services. The consumption units usually save part of their income and they are considered SUs and at the same time the production units usually need funds for investment and are as a result DUs. Production units do not have sufficient income to cover their current expenditures and purchase of new capital equipment and building. Since the SUs have income left over after all their spending has been completed, the DUs can use that income under the condition and willingness to pay interest to the SUs for the use of their savings. Thus, the DUs will issue IOUs to the SUs for their borrowed funds which will be used for the DUs investment and they will pay back to the SUs both the principal and the interest cost. In the direct financing method the needs of the SUs and DUs must coincide before direct financial relationships can occur. Both the SUs and DUs have to be satisfied simultaneously for the transfer of funds to occur. Hence, there are several conditions necessary fore direct finance between SUs and DUs can occur, they are as follows: a) The amount of the transfer of funds from the SU must be consistent with the spending plans of the DU. b) The time horizon (the length of the time period) the SU wants to lend must equal the time horizon of the DU who wants to borrow. C) The degree of risk the SU has to carry may be high, while the DU carries no risk, the SU must be willing to assume the risk of lending to the DU. These conditions create limitations for direct finance to take place and this provides the opportunity for indirect finance to emerge. 2.5.2 Indirect Finance The indirect finance method overcomes the limitations of the direct finance method. This method separate the SUs and DUs to such an extent that neither one is aware of the others existence (Cargill, 1986). The indirect finance method involves the introduction of a financial intermediary between the SUs and DUs. The flow of funds will be advanced from the SUs to the financial intermediaries and in turn will flow to the DUs when demanded. Also, as the figure shows, exchange involves the surplus funds being transferred for an IOU drawn on the financial institution. This financial institution deals with many SUs and will accumulate a large volume of funds which in turn can lend too, many DUs spreading not through the diversification of assets. The DUs will issue in turn IOUs to the financial intermediaries where they received loans. The financial intermediary will assume the risk of the DUs and the SUs only assumes the risk of the lending certificate (IOU) issued by the financial institution. The transfer of funds, therefore, between SUs and DUs will reallocate the burden of risk. A financial intermediary acts as a middleman between those who have funds which they do not wish to exchange for goods, and those who do not have funds, but do wish to purchase goods. They provide an indirect means of transferring funds from savers to borrowers. The process of intermediation combines two basic and vital functions-First, it provides an opportunity for savers to deposit their savings, and earn a return on them, thereby mobilizing funds which otherwise may be hoarded. Second, it transfers risk from the lender to the intermediary and/or to the borrower. Individuals with available savings may be reluctant to invest themselves, or lend directly or to take equity in a borrowers project. Those individuals may not want to take the risk, they may not be able to asses the risk, and they may not know how to protect themselves legally and financially if things go wrong. An intermediary takes these risks away from individuals and in many cases transfers them to the borrower by taking security, (Kitchen, 1986). Savers must have confidence in the intermediary; otherwise they would not place funds with them. This means intermediaries cannot mobilize funds unless savers have confidence in them. In the case of indirect finance, the excess lending over borrowing of the SUs will be represented by increases in the certificates owed by financial institutions. At the same time, the excess of borrowing over lending of the DUs will be represented by an increase in outstanding certificates held by the financial institutions. Indirect financing methods have several significant advantages for the SUs, DUs and the intermediary. Advantages to the surplus unit 1. The surplus unit can purchase any kind of investment (short or long term) and any amount (small or large) of IOUs from financial institutions. 2. Financial institutions can diversify their financial assets to a greater extent than can any single SU does by itself 3. The IOU of a financial institution which pays the same interest return will involve a smaller degree of risk for the SU than IOU drawn directly on a DU, (Cargill, 1986). Advantages to the deficit unit 1. The DU can borrow large amounts from the financial institution which has a large accumulation of funds from several small SUs. 2. The search costs of the DU in finding a suitable lender will be reduced with the existence of the financial institutions when compared with direct finance. 3. The financial institutions can offer other services to the DU such as market analysis and investment opportunities, (Cargill, 1986). The financial intermediary, it receives compensation for the services it is providing to the lenders and the borrowers which are achieved through profits generated by the difference between what the financial intermediary pays its depositors and what it charges its borrowers, (Thygerson, 1993). The following section discusses and examines the role and functions of financial institutions and their importance to the economy. 2.8 Financial Institutions The financial system consists of markets trading, financial instruments and financial institutions. These two aspects of the system are very hard to separate and in many cases it is financial institutions which create the market. In this section, the role and functions of financial institutions are examined. All financial institutions serves intermediaries to facilitate the transfer of funds from the surplus unit to the deficit units, financial institutions differ among themselves primarily in the magnitude of their operations and the services they handle to the SUs and the DUs concerning the sources and uses of funds. The financial institutions (financial intermediaries) come between SUs or suppliers of funds and DUs or demanders of funds. Financial intermediaries or institutions accept savings from SUs and in return these suppliers of funds acquire claims against the intermediaries. Intermediaries make loans or investments to the DUs or demanders of funds. The suppliers of funds expect some return in the form of interest or cash dividends as a reward for entrusting saving to the financial intermediaries, (Pinches, 1987). Financial institutions are divided into two groups- depository financial institutions and Non-depository financial institutions. 2.9 Depository Financial Institutions The depository financial institutions have a unique role in the financial system. First, they deal with every type of surplus and deficit unit in the economy. Second, they have a very important role in the money supply process. The liabilities of depository institutions classified as transaction deposits represent the major part of the money supply measured as M1 (Cargill, 1986). These depository institutions have the ability to destroy and create Money because their transaction deposits are subject to a fractional reserve requirement. This means that for every unit of reserve, depository institutions can support several units of transaction deposits. Transaction deposits are created or destroyed during the lending investment activities of depository institutions, (Cargill, 1986). Any loan made by the depository financial institutions represents a creation of that amount in transaction deposit. According to the multiplier function each unit of reserve will support several units of loans and hence transaction deposits. The same outcome occurs if the bank purchases a security. The securities purchase of the bank involves a payment which will be a transaction deposit under the name of the seller, and so on. The whole operation will be repeated and more transaction deposits will be created and more money supply will be created. The reverse process of destroying transaction deposits during the lending and investment process can also take place by paying off the loan which means drawing down the transaction deposit. In this case if the bank does not make a new loan to replace the paid-off loan this means transaction deposits will be lowered. In the case of the financial investment activity, if the bank sells a security and holds on to funds then it means transaction deposits are destroyed. From the previous discussion it can be seen that the ability of depository institutions to expand or contract transaction deposits depends on the level of reserve requirements. Any changes in the monetary base will lead to multiple changes in transaction deposits and, hence, the money supply, (Cargill, 1986). When reserve requirements decrease then the depository institutions will be able to increase lending and investment activities. Transaction deposits and the money supply; and vice versa. Depository Financial Institutions are divided into two types: banks and non-bank financial institutions. The primary difference between these two typesà ¢Ã¢â€š ¬Ã¢â€ž ¢ institutions is that: the banks dominate the issuance of demand deposits and demand deposits are considered the largest single component of the money supply. For this reason any changes in demand deposits represent significant changes in the money supply. The non-bank financial institutions do not have that impact on the level of money supply and they do not have the check-clearing mechanism for payments like banks do. In general banks are considered the first to be affected by any change in monetary policy which in turn will affect the entire financial system. The non-bank financial institutions are only indirectly affected. 3.1 Islamic Financial System It must be understood from onset that Islam is a comprehensive way of life that has its own broad and flexible economic policies which allows its followers their choice of economy irrespective of time and place (Siddiqi, 1970). Islamic finance can however be described as the operating financial system which is based on the financial teachings and practices of Islam. It can also be described as a means through which money flow from one unit to another in return for either equity or rights to share in future business profits. It could also be in form of delivery of goods and services in return for the repayment of the value I a later date. DeLorenzo (2005) described it as actually part of a Muslimà ¢Ã¢â€š ¬Ã¢â€ž ¢s practice of his or her religion. To understand the theories and ideas of Islamic financial system we need to understand the rules of Sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah from which the idea of the Islamic financial system had been drawn. 3.2 What is Sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah? Sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah is an Arabic word meaning the path to be followed (Kettel, 2008). Literally it means a way to a watering place. It is believed by Muslims that the path to Aljanah has been ordained by Allah through his messenger, Prophet Muhammad (PBUH) for whoever wishes to follow the path. Qurà ¢Ã¢â€š ¬Ã¢â€ž ¢an 2:4; à ¢Ã¢â€š ¬Ã…“And who believe in that which is revealed to you (Muhammad) and that Which was revealed before you, and are certain of the hereafterà ¢Ã¢â€š ¬? The fundamental principles governing the Islamic faith are firmly based upon sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah and are in the interest of the people. The sources of the sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah law are categorized into four; The holy Qurà ¢Ã¢â€š ¬Ã¢â€ž ¢an The sunnah or the doings and practices of the Prophet Muhammad The ijma, consensus of opinion of the Ulama-learned in the society. The Qiyas, analogical reasoning or deductions. 3.3 Tenets of Islamic Finance: i) Prohibition of Interest: The central tenet of Islamic finance is the prohibition of interest. This was mentioned in four different revelations in the Qurà ¢Ã¢â€š ¬Ã¢â€ž ¢an, the first revelation emphasizes that interest deprives wealth, of Godà ¢Ã¢â€š ¬Ã¢â€ž ¢s blessing, Qurà ¢Ã¢â€š ¬Ã¢â€ž ¢an 2:275 à ¢Ã¢â€š ¬Ã…“Those who swallow usury cannot rise up except as he arises whom the devil has prostrated by (his) touchà ¢Ã¢â€š ¬?. The second revelation condemns it, Qurà ¢Ã¢â€š ¬Ã¢â€ž ¢an 2:276 à ¢Ã¢â€š ¬Ã…“Allah has destroyed usury and made almsgiving fruitful. Allah loves not the impious and guiltyà ¢Ã¢â€š ¬? The third revelation enjoins Muslims to stay clear of it Qurà ¢Ã¢â€š ¬Ã¢â€ž ¢an 2:278 à ¢Ã¢â€š ¬Ã…“O you who believe! Observe your duty to Allah, and give up what remains (due to you) from usury if you are (in truth) believersà ¢Ã¢â€š ¬? and finally a clear distinction is made between interest and trade and also enjoined Muslims to take principal and forgo debt if the debtor is unable to pa y. Qurà ¢Ã¢â€š ¬Ã¢â€ž ¢an 2: 280 à ¢Ã¢â€š ¬Ã…“And if the debtor is in straitened circumstances, then (let there be) postponement to (the time of) ease; and that you remit the debt as almsgiving would be better for you if you did but knowà ¢Ã¢â€š ¬? Although there have been discussion among Muslim scholars on the reason for the prohibition of interest, it is obvious from the above quotations that it is considerations of equity and protection of the poor that lie behind the strong condemnation. There have been arguments that a system in which interest is not allowed is unlikely to work efficiently in the short run and in the long run, this will result in the eventual dry-up of savings and investments. These views tend to reflect a basic confusion between the terms à ¢Ã¢â€š ¬Ã…“rate of interestà ¢Ã¢â€š ¬? and à ¢Ã¢â€š ¬Ã…“rate of returnà ¢Ã¢â€š ¬?. Islam clearly forbids the rate of interest but rather encourages trade and profit (Khan, 1986). ii) Profit and Loss sharing: The principle here is that the lender must share in the profit or loss arising out of the business enterprise that the money was lent. It is thought that one needs to invest its money and become partner in order to share profits and risks in a business rather than become creditors. In order to ensure investments are made into productive enterprises, Islamic financial system encourages investment in which the society at large benefits. It does not give room for people who are not willing to take risk but intend to hoard their money or deposit it in a bank and earn interest for no risk. It encourages the notion of higher risk and higher returns. The whole objective is to encourage investment and production to provide a stimulus for the economic growth. Under Mudarabah for example, the provider of fund suffers the loss in a business enterprise where as the entrepreneur suffers his loss by not receiving wages for his endeavors. Due to the nascent experience with economy-wide profit and loss sharing system in the Muslim states, it is not possible to state with confidence that such a system will function as well or better than the conventional interest-based system. iii) All financial transactions are asset backed: The idea of making money out of money is not acceptable in Islam. Money itself has no value and is only a medium of exchange, and should not be allowed to generate more money. Money only become capital when it is put into a productive venture, that is, invested in business. iv) Acceptance of only sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah compliant products: In Islamic financial system, everyone needs to work within the moral value system of Islam. All financial products and services developed needs to be approved by the international sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah board for the high end of the market. This gives it a wider market acceptance and the mitigation of sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah risk for similar products or services. v) Sanctity of contracts: Islam places all economic relations on the firm footing of contracts. The freedom to enter into contracts, designed within the framework of the sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah and the obligation to remain faithful to their stipulation has been deeply emphasized in Islam. vi) Role of the State: The stateà ¢Ã¢â€š ¬Ã¢â€ž ¢s role in the Islamic economy relates to ensuring that, firstly, everyone has equal access to natural resources and means of livelihood. Secondly, each individual has equal opportunity including education, skills and technology to use these resources. Third, that market is supervised to ensure justice in exchange, and finally, the distributive justice is assured for the next generation through the implementation of the laws of inheritance. The state is empowered within the framework of sharià ¢Ã¢â€š ¬Ã¢â€ž ¢ah to design any economic policy that is required to guarantee the attainment of these objectives and to meet the necessary expenditure associated with the performance of its duties through taxation and utilization of natural resources.

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People like Syrian Refuges are ban indefinitely until the 46th POTUS reverses that order, who are seeking nothing butRead MoreThe United States Of America Essay1694 Words   |  7 PagesA crash in america may be coming a lot sooner than many people think. The United States of America is facing problems a lot of people are either unaware of or just dont think its a big deal. Most of america think that our economy and government is in alright financial shape, That may not be the case though. America is in bad shape and it seems to be going down hill. America is declining in world power as well and this is just another factor leading to a crash in the future. Other nati ons are growingRead MoreThe United States Of America1674 Words   |  7 PagesThe United States of America is the world largest single economy with a lot of trade activities with other nations. The country has traded with other nations for centuries hence it is an important economic partner (Jensen, Quinn Weymouth, 2015). The country normally has a lot of influence in the world trade since it serves almost all the nations worldwide. In fact, most of the trade policies that affect the whole world have been proposed by the United States of America. Moreover, the country isRead MoreThe United States Of America1354 Words   |  6 Pages The United States of America was sought out by immigrants as a place of freedom and refuge. Throughout America s short history, people from all over the world looked to America as a land of opportunity. Immigrants from Eastern European countries such as Poland, Lithuania, and Hungary poured into the United States in the mid 19th century. The large am ount of immigration from Eastern European countries to the United States between 1919 and 1924 was due not only to the opportunities of work and freedomRead MoreThe United States Of America938 Words   |  4 PagesThe United States of America is one of, if not the most developed nation in the world as of 2014. America is well-known for its freedom and opportunity it offers, which is why many individuals sought out for it. But I am not going to write about America’s many achievements and prestigious comforts. I would like to address the current situation that has been haunting America for quite some time now. In the last century, technology all around the world has undergone dramatic changes, whether it isRead MoreThe United States Of America1340 Words   |  6 PagesThe journey of how the United States of America became the United States of America is a very complex one. With America declaring separation from the Great English Empire, to the organization of becoming a free, sovereign nation and lastly, the migration and colonization of the now, western United States, including the great state of Nevada, has many components. The Declaration of Independence initiated the process of becoming a country of its own. This Document pushed the separation from England

Essay on money laundering - 2736 Words

nbsp;nbsp;nbsp;nbsp;nbsp;Money laundering is the routing of illegal profits from bank to bank to disguise its existence. The illegal profits are usually made through activities such as drug trafficking, prostitution rings, illegal arms sales, and various other things. Unfortunately money laundering is a serious crime that is still prevalent in the United States and other countries. The Russian mafia, the Triad or Chinese mafia, and the Columbian drug cartel are just a few of the groups that partake in money laundering. No one knows exactly how much money is laundered yearly but it is estimated to be about $100 billion in the United States. The United States is not the only country affected by these numbers. The estimated amount of†¦show more content†¦Most of the money laundered today is done by some sort of organized crime, whether it is a drug cartel, illegal arms sale, smuggling, prostitution rings, the Mafia, or corporations. Organized crime has existed in the United Sta tes for many years. Some of the organized crime groups known for money laundering are: the Russian Mafia, the Triad, other wise known as the Chinese Mafia and the Yakuza. All of these groups are known for a variety of illegal activities that involve receiving substantially high profits. Some of these activities may include drug trafficking, illegal arms sale, and various other things. Recently law enforcement has discovered that corporations have been helpers in laundering money. This discovery leads back to the Black Market Peso Exchange. These corporations do not have a direct involvement with the laundering, but are a helping hand at times. Many times corporations are the supplier of goods for the broker. The perks that go along with being the supplier entail getting an exchange rate better than the market. An example of this is if a corporation has pesos that they need to exchange back into dollars, and the exchange rate is 1,000 pesos for 1 U.S. dollar, the broker may discount the rate to 880 pesos for 1 U. S. dollar. The initial stage occurs when a criminal, or a group of criminals, involved in an illegal activity make a substantial sum of money. The money is then put into theShow MoreRelatedMoney Laundering Essay1211 Words   |  5 PagesAccording to Hopton (2009), money laundering tends to allocate dirty money around the world on the basis of avoiding national controls and therefore tainted money tends to flow to countries with less stringent controls. Money laundering has a major affect on the businesses that were used for the crime. The integrity of the bank and their financial services are depended heavily on professionalism and ethical standards. A reputation of integrity is one of the most valuable assets of any financialRead MoreThe Mafias Money Laundering988 Words   |  4 PagesMoney Laundering The term money laundering is said to create from Mafia possession of Laundromats in the United States. Gangsters there were earning huge sums in cash from extortion, prostitution, gambling and bootleg liquor. They needed to demonstrate a legitimate source for these monies. ‘Money laundering is the process by which criminals try to conceal the true origion and ownership of the proceeds of their criminal activity, allowing them to maintain control over the proceeds and, in the endRead More Money Laundering Essay1166 Words   |  5 PagesDepartment of Justice, money laundering is the process by which one conceals the existence, illegal source, or illegal application of income and then disguises that income to make it appear legitimate. 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Money laundering is when funds from criminal activity are converted into â€Å"clean money† and cannot be traced back to the criminal activity. The goal is to conceal the criminal activity and the criminals involved. One of the main reasons people commit criminal acts is to make money off of it. Money laundering allows criminals to enjoy these illegal proceeds without law enforcement noticing. Money laundering can be used in drug trafficking, terrorism financing, or tax evasionRead MoreNature and Causes of Global Money Laundering8912 Words   |  36 PagesNATURE AND CAUSES OF GLOBAL MONEY LAUNDERING PRESENTED BY: Kiran Aftab (Roll # 01) Afifa Naseer (Roll # 68) MBA-2004 4th Semester INSTITUTE OF BUSINESS ADMINISTRATION UNIVERSITY OF THE PUNJAB LAHORE TABLE OF CONTENTS Introduction 6 History Read MoreScott Rothstein - Money Laundering Synopsis2070 Words   |  9 PagesDecember 12 Scott Rothstein 2013 In July of 2010, Scott Rothstein was sentenced to 50 years in prison for running a US$1.2 billion Ponzi scheme from his Florida law firm. DH Gatsby EXECUTIVE SUMMARY: Money Laundering Scott Rothstein In July of 2010, Scott Rothstein was sentenced to 50 years in prison for running a US$1.2 billion Ponzi scheme from his Florida law firm. Rothstein had two types of schemes. 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Business fraud is highlighted by illegal and unethical business behavior which is very serious in the business world and calls for very punitive measures like lengthy jail sentences, being blacklisted in business and end to very promising careersRead MoreEssay about The United States Law Enforcement and Money Laundering1932 Words   |  8 Pageswithout being exposed? If a criminal wants to enjoy his money successfully, he knows he has to hide the true proceeding of his wealth. Since criminals began doing misdeeds for money, there have been ways to disguise the real origins of the profits. For example, the famous Al Capone was so careful hiding the true proceedings of his criminal activities that the police could only arrest him for tax evasion charges, now considered money laundering, too. It was not until the late 20th century that a formal

Do you think that cities can ever become sustainable Free Essays

In relation to cities, sustainability refers to development that lets the people living now get the things they need but without reducing the ability of people in the future to get what they need i. e. growth in a way that doesn’t irreversibly damage the environment or use up resources faster than can be replaced. We will write a custom essay sample on Do you think that cities can ever become sustainable? or any similar topic only for you Order Now For example, an urban area that is growing by generating all its power from finite sources will exhaust its supply and could accelerate climate change. Megacities require so many resources that it is unlikely they will ever develop in a truly sustainable way, but there are things that can be done to make them develop in a way that is more sustainable. In order for urban areas to become more sustainable the key issues that need to be tackled are overcrowding, transport problems, crime and pollution. Exploring sustainability projects at different points along the urbanisation pathway in cities such as Shanghai (LEDC), Putrajaya (NIC), Chattanooga and London (MEDC) will give an insight as to whether city sustainability is more likely to be achieved in MEDCs or LEDCs. Whilst MEDCs may have the necessary resources and technology to make an impact on becoming more sustainable, their starting point is a much bigger ecological footprint. Therefore, there may be more potential in LEDCs becoming sustainable as they have a more appropriate use of intermediate technology. Shanghai, at the heart of China’s economic surge, has realised that a key aspect of sustainability is transport. Their major challenge was to reduce energy demands and greenhouse gas emissions but at the same time maintain mobility within the city. The city developed an eco-friendly transport system which includes a network of 11 metro lines at a total of 325km which is integrated with a bus based mass transit system, reducing the need for people to use personal cars. A railway link to the new international airport, which involves the world’s first commercial magnetic levitation trains capable of reaching 550kmh reducing travel time and greenhouse gas emissions, has been built. A reduction in the number of cars on the roads has occurred due to increasing licensing fees and restricted access to the city centre, whilst the electronic guidance system helps avoid congestion and keeps road traffic flowing. Whilst it is common for cities to encourage people to cycle by introducing cycle lanes, the 9 million cyclists in Shanghai may soon face a ban from major roads as the authorities struggle to control congestion and reduce the rising car ownership of the middle classes proving that their attempts to become more sustainable are failing. Furthering the transport systems, Shanghai is planning to create a new city designed to be completely sustainable, it will be called Dongtan and will be the size of Manhattan. It was to have been built on Chongming Island, near Shanghai, in the Yangtze River Delta. The first phase, comprising a city of 25,000 people, was due to have opened for the Shanghai Expo in 2010. By 2030 it was intended to house 500,000 residents. However no construction of the eco-city has taken place yet, so the project has fallen much behind schedule. It is claimed to be the world’s first genuinely eco-friendly city powered by renewable energy sources (mainly HEP) and will be as close to carbon neutral as possible. However the waters are rich in aquatic life and it is an important feeding ground for migrating wetland birds, the construction of this city may cause a loss in habitats and safe resting places for the birds causing a loss in species diversity making this eco-friendly city not as sustainable as was hoped. Malaysia has become one of the many countries that have deliberately created a new capital city. In 1995 it was decided that the national government function should be moved from Kuala Lumpur, which remains the country’s financial and commercial centre, to a greenfield site 25km south of the city. Putrajaya has a population of 67 964, and is located within a high tech zone 15km wide and 50km long known as the Multimedia Super Corridor (MSC), Malaysia’s ‘silicone valley’ stretching southwards from the centre of KL and includes KL international airport, Putrajaya and Cyberjaya (a ‘smart’ city specialising in education, research and high tech business). The spine of the MSC is an electronic superhighway (fibre optic network) that provides high speed computer links. A large lake is being created, surrounding an artificial island, which will play an important role in flood and pollution control, an environmental benefit, as well as providing recreational and aesthetic value. 40% of the 500 hectare site will be left as green space in an attempt to counteract any greenhouse gases emitted. The main five precincts will be situated in the core and will contain offices, banks, shopping centres and sports complexes. The peripheral area will contain residential neighbourhoods with housing for all incomes, with community centres, parks, places of worship, schools, hospitals and other amenities. There will only be a small amount of housing available for those on low incomes which means there will be a degree of exclusion as the city will be mostly enjoyed by the affluent. The city aims to be indigenous with a modern look, based on new town ventures in the US and UK, with the running efficiency allowing a relatively low rate of consumption of natural resources. However, the environmental impacts will be considerable as the construction and development of the city will involve utilising and modifying a Greenfield site. Nevertheless, high levels of recycling and better flood and pollution control will have positive effects on the environment. Cities in the MEDW will have a hard time ever becoming truly sustainable as they use vast amounts of energy to power the technology used every day. Chattanooga in Tennessee is a classic example of how a city can become more sustainable. In 1969 the US Environmental Agency named Chattanooga as the ‘dirtiest city in America’, just over 21 years later it was applauded as the nation’s best ‘turn around story’. Credit for the re-imaging of the city has to go to the partnership between the city authority and the Lyndhurst Foundation (sponsored by coca-cola) as well as many individuals. It has tackled issues such as building affordable housing, providing public education and alternative transport systems, conserving natural parks and green areas to help reduce the ecological footprint, reducing pollution and improving recycling facilities and development of the riverfront. Top down strategies such as the Clean Air Act which forces manufacturers to invest heavily in pollution-control equipment, and bottom up measures e. g. Vision 2000 programme which calls for all citizens to visualise the city as they would like it to become, from the responses an agenda evolved resulting in major developments. 10km of waterfront along the Tennessee River was redesigned into an urban park cutting through the heart of the city, made up of playgrounds, spaces for outdoor performances, fishing piers and shaded walkways, transforming the once rundown downtown area. The Tennessee aquarium has attracted many visitors, encouraging the development of the old warehouses surrounding it into shopping malls, restaurants and apartments. Transport has been improved to be more sustainable, by means of an electric shuttle bus service capable of moving a third of downtown commuters at a tenth of the cost of diesel vehicles. It is claimed to be the electric bus capital of the world, with the city manufacturing 22 seater buses that are marketed all over the world. Over 3000 inner city housing units have been renovated, and a zero emissions eco industrial park and a grass roofed convention centre have also been constructed. The sustainability of the city has been enhanced especially in terms of outputs. The environment has benefited greatly from the substantially reduced industrial and vehicle emissions as well as increased green space leading to a decrease in the ecological footprint. Residents have benefited from renovations of the housing and the downtown are. I believe that whilst these urban areas and many others are attempting to become more sustainable, there is still much more that can be done to improve sustainability. For example, housing can be built to be carbon neutral by using solar panels and insulation to reduce the ecological footprint. Public transport could be improved further to produce little or no harmful gases, such as London buses which run on Hydrogen. Renewable energy sources should be used more such as LA uses HEP from Hoover Dam, and whilst renewable energy sources will never generate enough power to support large cities, they should definitely be used more by cities that have large ecological footprints. I feel that as we are so dependent on technology in today’s society, cities will never truly become sustainable. How to cite Do you think that cities can ever become sustainable?, Papers

Hospitality & Tourism in Australia-Free-Samples-Myassignmenthelp

Questions: 1.Identify and discuss the prime ethical and governing issues presented in the Vanuatus Broken Dream video. 2.Did PO Cruises act ethically in this case? 3.Discuss how Australian and/or Vanuatus governments could have resolved identified issues. 4.Suggest at least three recommendations to overcome such issues in the future. Answers: 1.From the video, there are various ethical issues presented. The first issue in this case is failing to assist those who were supposed to be assisted with the money received from the tourists. Before the tourists arrived, the residents had great hope that a lot would change. When tourists flood in a particular area, some dollars were expected to move from the rich to the poor. From Vanuatus, this was not the case. The money which they thought would assist them to upgrade their lives were stolen for personal benefits. This was wrong based on the fact that the residents were in need of different necessities. It is also wrong to build a toilet for the tourists when the residents do not have one. Toilets plays a significant role in preventing the spread of some deadly diseases (Pierce, 2016). The community in this case are living in total poverty because those who lead them are greedy. From this great development opportunity which was triggered by tourists, those who are in charge could have utilised the received money to develop the wellbeing of the residents. When the tourists arrived, most of the residents were so welcoming. Some of them dedicated their time to even act as tour guides for the tourists, clean the area and establish artwork that would attract them. Having spent a lot of time and energy in doing so, they were never paid well. The money which they could have been paid was stolen by those in charge. This was unethical because human beings deserve better pay for the tasks they undertake and using public resources for personal gains is wrong. Failing to publish financial statements between 2004 and 2012 shows that those in charge were massively stealing public funds and did not want people to realize through the financial statements. The prime minister in this case was aware that corruption was the order of the day and was ready root it out. From the video, most of the politicians live in luxury while so many residents remain in poverty. This is not right because the residents are the ones who contribute in generating the money which make the politicians to live good lives (Wright, 2012). When the tourist arrived, the residents played a key role of welcoming them, selling products to them, and showing them some of their cultural practices. This means they were supposed to fully benefit from what was received from the visitors. 2.PO cruises acted ethically because the tourists did their part. What was questionable is how the authorities spent the money. When the tourists came, some of the residents had some stores to sell various goods to them. The visitors were so generous because they sometimes told the residents to keep the change when they purchased a particular product. The tourists were also so friendly to the residents. They were interested with various services which the residents offered (Yap, 2017). They paid those who had something unique to show case as a way of appreciating and motivating the residents. This means the PO cruises had done something good to the people because it has brought them an opportunity which would change their lives if the money was well utilized. When some of the tourist heard that the few available toilets were made for the foreigners, they were surprised (King, 2012). They did not imagine how a foreigner can have a toilet yet the residents who are the taxpayers do not. Showing concern towards this issue indicates that irrespective of feeling that they were being valued, they were also concerned with the wellbeing of the residents. Tourists remains off-limits to the people in this island (Wright, 2012). PO cruises did good to make the residents experience what tourism is all about. Tourism plays a significant role in developing an area and therefore it was a good action for the PO cruises to bring the foreigners in this area. Who should be responsible for rectifying issued that you have identified? Why? Explain your reasoning The people who should be responsible for rectifying the issue is the government and the agencies that are concerned with tourism and developments (King, 2015). From the case, Vanuatu is an island that should be developed based on the fact that the tourist came with a lot of money. The government and concerned agencies should investigate to identify where the money went. The residents should also play a role in rectifying the issue (Okech, 2010). They should always question about how public resources are being utilised when they suspect things are not going as expected. They have the right to make those who are in charge to show how each coin obtained from the tourists was used. The residents should avoid electing leaders whose ethical track records are questionable. From the case, we are told that financial statements of different years were not provided. This indicates that an individual or a group of people was misusing public funds and did not want the public to know (Klintman, 2012). Based on this factor, the residents should unit and question why that was happening. Chief tourism stakeholders like for example PO cruises should also act to rectify the issue (Okech, 2010). They should ensure the money received from the visitors is utilised to benefit those who are involved in conducting activities which pleases the visitors and also to develop the wellbeing of the community. 3.From this case, the government is the key stakeholder which should have intervened to resolve this issue. The residents were experiencing problems because those who should have intervened were among were corrupt and after personal gains (King, 2012). One of the ways which the vanuatus government would have done to address the issue is making sure the money that was received from the activity was properly used. The government of Australia and that of Vanuatu should have worked together to investigate the matter and take legal action upon the culprits. The disciplinary action should be strong enough and publicized so that those who had intentions to misuse public funds for personal gains can learn a lesson. Vanuatu government would have ensured that those who were in charge of the money were people who understood the importance of ensuring the community lives in good conditions. Having corrupt individuals in the government was the primary cause of the problems which the residents were experiencing (Wright, 2012). The government of Australia and that of Vanuatus should have ensure financial statements were availed to the public each year for scrutiny. The other way in which the government of Vanautu would have done to intervene the situation is ensuring the foreigners do not seem to be favoured more than the residents. Although this may seem a special consideration to the tourists, some of them may see it as some form of discriminating the residents and even decide to never to visit the area again (Dimitrova, 2015). The reason why the tourists may feel so is because being in an area where hygiene and sanitation is not valued may risk them to getting various diseases even if they had special toilets. The Vanutu government should also encourage the residents to engage in income generating activities to root out poverty in the region. This could be through opening small businesses, engaging in faming activities and relating well with the tourists. 4.To overcome such issues in future, the government should scrutinize all officials to ensure they value integrity in what they do (Okech, 2010). The reason which made this issue to arise was because the government officials were very corrupt and did not mind the wellbeing of the people. Ensuring high level of integrity among the government officials will assist in having leaders who are focused to development rather than personal gains. The residents can also play a role in preventing this issues from happening in the future by pressing the government to correctly utilize the money received from the tourists (Pierce, 2016). When the residents remain silent over the issue, those who steal the money will never see the importance of not stealing what should be utilized for development. The residents should also consider electing only leaders who knows the importance of attracting tourists and those who knows the importance of developments. Lastly, such issues can be prevented in the future by ensuring the legal measures are taken upon those who misuse money received from the tourists (Wright, 2012). Taking legal measures will assist in making the corrupt officials to quite from engaging in such activities and hence lead to proper utilization of the money earned through tourism. Bibliography Dimitrova, M., 2015. The Ethics of Tourism. Critical and Applied Perspectives. European Journal of Tourism Research, Volume 10, pp. 57-65. King, S., 2012. 'Australia Speaks': Reactions to Political Opinion Polls in Australia 1941-1943. Flinders Journal of History and Politics, Volume 28, pp. 78-96. King, V., 2015. Encounters and Mobilities: Conceptual Issues in Tourism Studies in Southeast Asia. SOJOURN: Journal of Social Issues in Southeast Asia, 30(2), pp. 541-562. Klintman, M., 2012. Issues of Scale in the Global Accreditation of Sustainable Tourism: Schemes toward Harmonized Re-Embeddedness?. Sustainability : Science, Practice, Policy, 8(1), pp. 87-95. Okech, R., 2010. Tourism Impacts on Local Communities around Coastal Zones: Issues of Sustainable Development. Journal of Tourism Challenges and Trends, 3(1), pp. 21-35. Pierce, J., 2016. Mythic Frontiers: Remembering, Forgetting, and Profiting from Cultural Heritage Tourism. The Arkansas Historical Quarterly, 75(3), pp. 12-23. Wright, C. B., 2012. On the Edge of Crisis: Contending Perspectives on Development, Tourism, and Community Participation on Rote Island, Indonesia. Austrian Journal of South - East Asian Studies, 5(1), pp. 95-102. Yap, O. F., 2017. When Do Citizens Take Costly Action against Government Corruption? Evidence from Experiments in Australia, Singapore, and the United States. Journal of East Asian Studies, 17(1), pp. 25-52

Laissez-Faire Essays - Political Spectrum, Right-wing Politics

Laissez-Faire Explaining a Concept: Concept of the Invisible Hand in a Laissez-faire economy By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of it. Adam Smith, Inquiry into the Nature and Causes of the Wealth of Nations 1776. What business does a government have in commerce and trade? Why would a government want to interfere between two countries benefiting from each other by trade? What right does the government have in two individuals wanting each others products or services? According to some, commerce and trade should be permitted to operate free of controls of any kind; there should be no tariffs or other barriers. This is where the term laissez-faire is introduced. Its direct translation in French, leave alone to do, is self-explanatory. A strong believer in this type of economics is Adam Smith, both a philosopher and an economist. Born on 1723 in Kirkcaldy, Fife, he studied at Oxford, and became a professor of logic at Glasgow (1751), but took up the chair of moral philosophy the following year. In 1776, he moved to London, where he published An Inquiry into the Nature and Causes of the Wealth of Nations (1776), the first major work of political economy. This examined in detail the consequences of economic freedom, such as division of labor, the function of markets, and the international implications of a laissez-faire economy. Adam Smith is most remembered today for his explanation of our market system. A majority of people saw confusion when they observed economic activity in England during the middle of the 18th century. They saw everyone doing whatever they pleased and deemed necessary. Businesses produced whatever they wanted to make. Consumers purchased whatever they wanted to buy. No one told anyone what had to be bought and what had to be sold especially the government. And yet, somehow, businesses seemed to be providing the goods and services that consumers wanted and needed. Some might have called it luck; Adam Smith called it an invisible hand. And today, it is considered the laissez-faire economy. The invisible hand is a term for the unseen process of co-ordination which ensures consistency of individual plans in a decentralized market economy (Pearce, 220). Adam Smith introduced this phrase in his book, An Inquiry into the Nature and Causes of the Wealth of Nations (Book IV, Chap. II), who stressed the role that the invisible hand played in attaining a harmony of interests. Imagine this invisible hand suspended above everyone. This invisible hand encourages businesspeople to pursue profits and it pushes consumers to buy goods and services. And at the same time, that invisible hand discourages government from directing the economic activity. This invisible hand that Adam Smith refers to as a guiding force was the people and their attitudes. It all started with profit-seeking individuals. Using self-interest to feed their drive, people started businesses. When a business would become successful, others would notice and enter into the same field. As a direct result, growing consumer demand was satisfied while competition controlled rising prices. As demand grew, businesses were established in which workers shared tasks. This is called division of labor, in which one worker handled the first stage, another the second, and a third finished the product. The result was mass production, more efficiency, and lower costs. Mass production meant that people no longer had to grow there own food and remain on the farm; there would be enough to supply a large workforce. Paying all those laborers resulted in an army of consumers with money to spend. Adam Smith argued that an individual acting purely out of self-interest, would be a progressive force for the maximization of the total wealth of a nation. The role of the government should be permissive, creating a legal defensive setup sufficient to allow individual action. Interference with the free working of this natural order will reduce the growth of wealth and misdirect

Sample Scholarship Essay About Financial Need

Sample Scholarship Essay About Financial NeedIf you are looking for a sample scholarship essay about financial need, then the Internet is your friend. You can get a wide range of sample essays on these topics and several websites will help you compile this information for your own convenience. We will look at the most basic one.The most common kind of scholarship essay is the overview essay that will show you how financial need is a good thing and why you should study more and get better grades so that you can qualify for scholarships. This is a good essay to get you motivated. It helps to set up goals and see what you can achieve if you work hard.There are also different types of essays. The one on internships is quite similar to the one on scholarships. It will tell you all about scholarships and explain how internships make a difference in your life.One more essay on college loans will give you some information about the different kinds of college loans available. You can write an essay about your experiences with debts and credit and how you were able to pay them off and keep a balance to them.Most college students need money for college for a reason and writing an essay will be a great help. Write about what has made you successful in college and how you use the help you got and how it has helped you.College students who choose to apply for grants can put their essay into the template provided by the government so that they do not have to create it themselves. A single piece of paper will not contain too much information, so you can apply for several scholarships at the same time.There are many different essays and each one gives you a different view on the subject. You should find the one that best fits your learning style.