Saturday, November 12, 2011

To Quit or Not To Quit

About a year ago, I had a great conversation with one of my close friends Mehul Kar about the right time to quit. I always have the best conversations with Mehul as I consider him a wise and reassuring friend who seems to make minuscule whatever problem or issue I encountered since I have met him.
The conversation about the right time to quit evolved from my premature decision to quit my position with Whitewater Student Government (WSG). I have always wanted to work with WSG, I still remember walking everyday past the WSG office and thinking to myself: "I want to be part of it!". I knew it was going to be hard to join it for several reasons, the most obvious one was because I was an international student and joining a governmental organization on campus could be a challenge, another reason was that I had nothing in common with the members of the organization except that I was a student and I cared about the campus and its students. But later my dream became a reality and I was hired to join WSG, I was very excited and could not wait to start working there and have my space in the office. I wanted to make it the best experience and tried to work hard to satisfy my duties but things didn't turn the way I wanted and had opposition from the members of the organization to the point that I wanted to quit my dream and enjoy the last months left in college with no pressure or stress. But when I spoke with Mehul, he asked me one question that totally changed my decision: "Are you in a dip, in a cliff, or in a cul-de-sac? ". I had to think the whole night about this question to come up with an answer. My answer the next day was "A dip!". I was not ready to quit but I was ready to push myself more and succeed. I did not want to fail and was ready to make more sacrifices in order for me to stay with WSG, meaning I had to work with the opposition around me to make progress and I did!

You probably wonder what are Cliffs, Cul-de-sac and dips, right?
Well cliffs refer to the situation where everything is going very well now but you know it will eventually go wrong and make you fail, so you have to quit. Cul-de-sac, as fun as the name sounds, it refers to the situation where there is no future ahead, the road is closed in front of you and you have to make a detour (quit), a dip in my understanding is the situation where things are going bad but with more hard work and persistence you could overcome those obstacles and succeed. Clear?

A year from my conversation with Mehul, going through more experiences and having to overcome more obstacles, I realized that this philosophy is wrong! If someone came to me today with the same issue I will ask them: "Are you ready to reinvent yourself?". Quitting is not the right answer anymore. When you are in a cliff or cul-de-sac you have to reinvent, change things in you and around you. I read in an article that if you are in the newspaper industry you are in a cliff because the industry is failing and you have to think of quitting, I would not call it quitting but I'd say reinventing. The word "quit" seems to me so negative that I don't want to believe in it.

Two years ago, I started working on a business idea called "studentutor" with a partner. In a couple of months I realized it was going nowhere, I didn't quit! I reinvented by changing partners and reinventing the idea to come up with a better idea, and that is where Peer2Connect came from... from reinventing.

Summary: When you think that there is no hope and that the road is closed ahead or around you, start by changing (reinventing) yourself and your environment. You might let go something for another that is better, but you are not quitting.

Saturday, October 22, 2011

Internship 101 - The Interview Process

 The Reinvent Yourself Workshop
The Tranel Financial Group

I know some of you have been waiting for my post, hence Blue Perez. But let me know tell you that the only thing that has been holding back from writing is my busy schedule at work. I actually have much more to add on to my post, so enjoy!
I want to start out by telling you, in the next posts, about my experience at my second internship here in the United States and how life changing it was for me, not only on the professional level but also on the personal level. I have been having The Experience of A Lifetime. I say that because I feel the change and I hope you feel it too after your internship wherever that would be.
I started interning for The Tranel Financial Group in May 2011, and I think I have to mention how I got the internship…The answer is simply by being ME. Like any other student in my graduation class, I have been looking for a job or internship months before graduation. I have had a couple of interviews, mostly over the phone and it did not turn out well. I was too nervous, I felt the time emergency and really wanted to be at my best during the interview or perhaps be someone else they might like better than myself.  I think that is how many students prepare for interviews; they become less themselves and more someone else that they think has more chances to get the job! It did not work for me. After a couple of interviews and many disappointments, I became desperate and even thought of giving up, but my friend Maxim came to me one night and suggested I interview with The Tranel Financial Group, because they seemed like a good fit for me. I thought about it the whole night and thought it would probably be my last attempt. I was not nervous at all because I thought to myself “what could possibly happen?”... “another rejection letter?”.
The day of the interview, I didn’t take too much time getting ready. Threw on the first black pants and button shirts I could see in my closet and printed two copies of my resume & cover letter, and left for my interview. Of course I did some research about the company and connected with one of their employees “Kyle” on Facebook. I wanted to put a face to the company and I could do that through connecting with one familiar face I could relate to.  Once there, I was shockingly calm and surprisingly myself. I conducted the interview like I would in a mocking interview with a close friend (Sachie). I suddenly became relaxed and confident, thinking that if my interviewer did not like me the way I am then I should probably not be working for the company. The interview lasted 15 minutes, after that it was me sharing personal stories, being humorous, cheerful, over excited…being myself. When I got the positive answer I have been waiting for, I felt I wanted to jump around, of course being myself I did not stop myself from showing my big smile and sparkling eyes. I felt I made a big step forward to accomplish the dreams I came for to the United States.
Moral of the story: Be Yourself! When you try hard to be someone else, it shows and translate your lack of confidence and self esteem. It also makes the interview awkward and makes it hard for the interviewer to connect with you. Don’t build that obstacle between you and the interviewer with your own hands!

"Always be a first-rate version of yourself, instead of a second-rate version
of somebody else." 
by Judy Garland

Wednesday, October 12, 2011

Crise financière : nouvelles des Etats-Unis avec Sara Amiri

Voici un éclairage pragmatique venant des Etats-Unis sur la crise actuelle...

Sara Amiri, Responsable marketing dans une société financière nord-américaine est l'exemple, à la fois, d'une brillante carrière et d'une intelligente capacité d'adaptation. Jeune marocaine, elle a choisi les Etats-Unis pour parfaire son parcours académique. Notamment, à l'Université du Wisconsin. Entrepreneur-née, elle a été, entre autres, attachée de campagne pour le parti démocrate. Elle nous fait le plaisir de partager sa lecture de la crise financière actuelle, avec sa posture d'outre-atlantique.
- Sara, sur le vieux continent et depuis la crise de la dette grecque, nous nous "gargarisons" de pessimisme et les marchés financiers jouent à se faire peur. Quel état d'esprit prévaut de ton côté de l'Atlantique ?  
Il est vrai que la crise de la dette grecque a déclenché bien de l’angoisse et de l’ambigüité dans tous les continents et notamment chez les investisseurs américains qui sont sensibles aux médias américains mais aussi européens. Ces derniers nous envoient, malheureusement, des signaux défavorables sur l’économie mondiale et sur les marchés financiers en particulier. Nous n’avons toujours pas guérit totalement de la blessure infligée par la crise financière de 2008, et nous voici, une nouvelle fois, confrontés a une crise systémique. Quant à l'état d’esprit prévalant aux Etats-Unis, je dirais qu'il existe beaucoup de confusion. La plupart des gens se demandent comment la crise de la dette grecque peut se répercuter sur le marché financier américain. Peu de gens comprennent la crise de dette, mais ce qui est encore plus important, c’est que peu de gens savent qui au juste détient ces dettes. Ces questions alimentent l'incertitude chez l’investisseur américain. Cela peut également déclencher une crise de resserrement du crédit, voire éventuellement une crise de liquidité. Nous suivons de très près l’actualité européenne. Nous comprenons à présent, le degré de propagation d’une crise financière à travers le globe. Cela dit, je pense que l’on reste vigilent tout en demeurant plutôt optimistes aux Etats-Unis. Les derniers rapports sur la croissance du PIB et sur le taux de chômage sont encourageants. Aussi, je conclurai qu'il n'y a pas autant de pessimisme de ce côté de l'Atlantique.
- L'Europe voue, souvent, aux Etats-Unis une relation schizophrène. Un sentiment tantôt mêlé d'envie et de réprobation mais aussi d'admiration et d'attente. Comment le ressens-tu ?   
Je pense que c’est une relation bien réciproque. Au fil de mon expérience et de mes diverses conversations avec des Américains et des Européens, j’ai pu ressentir cette relation complexe. Je pense, en partie, cela est dû à l’histoire de ces derniers mais aussi à la politique étrangère américaine. La relation historique entre l’Europe et les Etats-Unis est basée sur des valeurs communes et sur une forte croyance fondamentale de la démocratie et des droits de l’Homme. On y ajoute: justice et pouvoir de l’économie du marché.  Ce sont deux fortes économies qui sont à la fois partenaires mais aussi concurrentes sur le marché mondial. Chacune des deux économies assure à l’autre une grande partie de ses investissements directs étrangers.  Il est à noter que les Etats-Unis seuls ont investi en Europe près de 98 milliards d’euros en 2010.  Cependant, le sentiment de reproche envers les Etats-Unis peut être expliqué par le positionnement des Etats-Unis sur la scène politique internationale comme étant la force économique et militaire mondiale, diminuant de facto la force que représentait l’Europe, il y a quelques décennies. Je pense que l’on peut bien constater le mouvement d’hostilité entre les Etats-Unis et l’Union Européenne face à la campagne de lutte contre le terrorisme lancée par les Etats-Unis et l’invasion de l’Irak par la suite.  Je pense néanmoins que cette relation, dite schizophrène, n’est que le résultat logique d’un affrontement entre deux pouvoirs qui tentent de préserver et d’assurer leurs positions au milieu de la scène politique et économique internationale. Toutefois, cela fait sourire de constater que cette scène ne tardera pas à être dominée par de nouvelles forces comme la Chine, Israël, ou l’inde, si ce n’est pas déjà fait en coulisses.
- Le compromis sur la dette US adopté début août entre démocrates et républicains n'a pas enthousiasmé les marchés financiers. Est-ce à attribuer au pessimisme ambiant ou à l'insuffisance du plan ?
Que l’on soit démocrate ou républicain, il était nécessaire d’initier un débat sur l’endettement du gouvernement américain au niveau politique. Barack Obama a conseillé vivement les deux partis politiques de parvenir à un consensus pour éviter que le gouvernement américain ne puisse honorer ses échéances.  Malheureusement, le débat économique sur la dette a pris l’apparence de deux campagnes électorales qui ciblent.....
Pour lire la suite: 

Monday, July 4, 2011

FastPitch Contest in Rockford

Maxim and Sara Answering the judges' questions after the pitch!
The FastPitch Contest has been a great learning experience for us, through the Whitewater Launch Pad Program of Whitewater, we have been preparing and working hard to WIN the contest! We realized that hard work does pay and patience is one necessary element to success adding to it several sleepless nights. Our idea was simple, yet innovative. Peer2Connect is an idea based on our need as international students. Another lesson learned is if you know your target market you know your business!
As partners, we have been communicating everyday. Discussing every little detail of our business plan. Our main communication tool was our weekly meetings and our everyday phone and skype conversations. Although conversations weren't all about business, but we enjoyed every moment of it because it helped us build our dream and reach our objectives with the motivation we gave each other.
Professor William Dougan, from the University of Wisconsin-Whitewater is our mentor and has been a great motivation factor for us because he believed in our idea but also in our abilities. He is always ready to work with us, be it 8 AM or 9 PM. The night before the contest, we stayed in his office working until 1 AM before returning home for more work.
We want people to understand that there is no secret ingredient to winning the fastpitch contest but hard work and sacrifice.

At the Final of FastPitch Contest in Rockford

Winning the contest was great but meeting new people and getting more connections was amazing! It was important for us as new entrepreneurs to get our name out there and let people know that we are ready to work hard and are able to. We are looking forward for the biggest contest of finalizing our business idea and launching Peer2Connect in January 2012.

We will keep you posted!

Wednesday, April 27, 2011

If we were to eliminate expectations!

I start to see the changes in the financial market today as primarily based on expectations. The media reports news everyday about conferences where professionals in the financial fields give their forecast, news about wars and political conflicts, news on inside information about domestic and multinational firms. Soon, investors and households base their investment and business decisions on those news. The questions I ask myself today is: “How credible are those news?” “How reliable are those professionals” and finally “ How would the real mechanisms of the economy react if we were to eliminate individual expectations and forecasts?”
Today April 27th 2011, the world has been waiting impatiently, waiting for THE man to speak! ...Waiting for THE man to give signals about the US economy.  I can’t deny that I was waiting too. I was impatient to see how a man’s word can affect the economy of the world. I was waiting to witness the changes that Ben Bernanke’s conference will generate.  In the morning, many stock exchange markets have registered positive change in their indexes. Paris registered for the fifth consecutive times a 0.55% increase because of the positive signals received from the American and Asian markets. However, Paris was also expecting some change after the FED Chairman Mr. Bernanke’s conference, and the release of the unemployment rate in France.
Since promises are made to be kept. The FED Chairman speaks for the first time at a conference, making his words as clear as never before.  My Finance professor Moini remembers the former FED Chairman speaking with a cigar in his mouth, making his words cloudy and hard to understand and consequently hard to interpret. But today the words came out clear. The economic recovery is at moderate pace, the GDP will most likely be announced to be fewer than 2%, and the dollar will keep fluctuating.  Those announcements didn’t take time to shake the US Dollar’s value, which dropped after the conference. As a result, people’s expectations follow to take a negative aspect.  
On the other hand, the stock market will most likely follow the trend to be affected negatively.
When I made the last statement, I realized that as harmful as I see expectations. I often find myself forming interpretations, upon which I will most likely make decision. I believe today that the economy’s state is no longer under the traditional rule of demand and supply, another factor has come to affect it strongly: Expectations!
Expectations are also tightly linked with speculations! The next question is: Which are the most harmful, expectations or speculations?

Immigration in the United States and its effects on the economy

Immigration is one of the most debated topics in the political scenes internationally, and within developed countries in particular. It is mainly due to the increasing number of citizens from developing countries seeking jobs, better social status, freedom, better education…etc. The United States is not an exception to the massive immigration phenomena in our world today. One of the main reasons, in my opinion is in fact summarized in the wide social, political, and economic gap between developing and developed countries. However, while there are numerous obvious and explicit reasons driving the increasing rate of immigration to the United States, there are also implicit effects of immigration on the economy of the United States and on its foreign policy. The post will discuss those effects and analyze the policies of immigration concerning working authorizations policies and drain of brain or human capital flight phenomena within the United States of America.
 The immigration has played a primordial role in the formation of what we know today as the American Population. Since 1891, immigration in the US has become a federal responsibility. The federal government passed successive laws and policies targeting the containment of the immigration issue facing the United States, especially from neighboring countries in Latin and Central America. The clandestine aspect of the issue has become a serious threat to the stability of the country’s foreign policy and Immigration law enforcement. We have witnessed different controversial debates and legislations such as the Arizona Law, which requires immigrants to carry their documentations at all times and which requires police to inspect and question people if they suspect that they in the United States Illegally. It is considered the toughest immigration legislation passed on a federal level because it creates a hostile environment for immigrants to the US. Immigration issues and policies can be ambiguous for most people, and create a lot of debate and division in opinions. When looking at the effects that it has, opinions can differ dramatically and divide people between pro and anti immigration laws enforcement and more regulations. However, it seems that the economics effects that the immigration has on the US hasn’t been discussed enough. We witnessed the delocalization of numerous American firms seeking cheaper labor and skilled worked. We also witnessed the weakening the industrial sector, turning gradually the America to a service oriented economy. Not only that, but there is an obvious shortage in professional fields such as the medical, engineering, and mechanical. One of the main goals of the immigration policies is to fill those positions with skilled immigrants, but also to admit workers with specific skills. Increased regulations can enlarge the shortage and encourage more firms to delocalize, or not invest in the US territories in the first place. The repatriation of unauthorized worked could cost the US economy billions of dollars in expenditures, but can also affect dramatically its GDP and create an employment crisis within industries and small businesses who still rely on illegal workers to stay competitive using relatively cheaper labor. Some politicians argue that illegal immigration opportunities attract criminals and drug dealers to the United States, it can be counter argued with the fact that legalizing the immigrants and giving them rights, would consequently entails the newly legalized to respect the national and federal laws of the United States and would facilitate the enforcement of those laws while keeping impacting positively the economy. The foreign Affairs Secretary Hilary Clinton says in a conference on immigration policies in 2010: “We have to have a comprehensive, compassionate, pragmatic, rational, and humane immigration policy”. She is referring mainly to the immigration flow coming from Latin and Central America. It is right to believe that immigration policies exercised on certain neighboring nations affect to a certain degree the foreign relations with that particular country. We have seen ups and down within the foreign and diplomatic relations between the US and Mexico due to the immigration policies and enforcement measures taken by the US homeland security in regards to Mexican illegal or authorized workers.
The United States labour is remarkably expensive, which puts American firms at a relative disadvantage compared internationally. It is often a tough task for firms to keep a close control of their costs when they have to pay a high cost of labor. Having stronger immigration regulations to protect American workers is not the answer; it creates a vicious circle in the American economy. The circle can be describes as follows: Less competitive labor market, higher labor costs, higher prices, increasing life standard and a higher inflation. The cited description and theory might not be perfect or non debatable, but it does reflect part of the economic reality in the United States.  As long as American firms delocalize, one can still argue that there is a human resources issue on the national and federal level, in other words, there is an immigration or selective immigration issue. Mentioning selective immigration is crucial to complete this analysis. Many positive effects of immigration were listed, but it is important to be precise and discuss the right process for constructive immigration that would fortify the economy of the United States while keeping foreign relations with neighboring countries relatively at low risk. The US governing institutions have a clear understanding of the needs in the labor, professional, and research market. Immigration policies should be selective to fill in the exact needs concluded. The US is clearly seeking more skilled people in the fields of Science, Technology, Engineering, or Mathematics (STEM), however not enough is done to ensure the retention of newly graduates in American universities, nor is the immigration process to attract skills potential immigrants to the US. Every year, many green cards are issued by the US government to citizens from different countries by lottery, ignoring the education or specific skills factors. Also the foreign workers’ sponsorship cost is very high, which doesn’t encourage firms to hire skilled and legalized immigrants. Companies are often very reluctant in sponsoring foreign workers because of the massive immigration regulations and costs. Newly foreign graduates currently have 12-17 months to find an employer who is willing to take the risk of investing in their sponsorship, which often leads to having skilled professionals leave the US to their country seeking less complication and hostility.
While immigration laws are more comprehensive and compassionate with skilled foreigners from the STEM fields, it is less flexible when it comes to labour filling mechanical or factory jobs needs. There is no legal process for firms to legally hire workers and sponsor them. Illegal Workers in the US are left with the only option to remain working illegally as long as the ethics of the firm permits it to break US immigration laws. On the other hand, industrial firms and factories are also left with the option to delocalize in order to appreciate a more competitive and cheaper labour market.
One can see clearly, that the US immigration laws have a more complex effect and more implicit consequences on the country. It is absurd to ignore the economic sphere of influence and aspect that it takes, while looking at the political and social side. I always see economics as a complimentary element of politics, as a consequence debating the economic side of immigration is, with no doubt, crucial for a better understanding of the US immigration policies and laws’ debate.

Tuesday, February 15, 2011

6 Standards for a Global Student

When students are asked: “what does it mean to be a global student?” answers vary:

“Speaking more than two languages”, “Being aware of international news and issues”, “Traveling to different countries”, “Interact with different cultural groups”
I was always very curious to know the answer, if there is any. There has been a lot of debate within the college of Business and economics at Whitewater about the importance of having global students who consider themselves to be global citizens. In an era where globalization takes a different meaning involving different aspects of our everyday life, thinking globally has become a priority. Globalization 3.0 is the title given by Thomas Friedman to the type of globalization we are experiencing today. It simply means the involvement of individuals rather than companies. The main axis becomes the individual, or the global citizen.
After attending the lecture of Dr. Choton Basu about “Developing the Globally Aware Individuals”, I could understand better what is expected from students in order to meet the standards of the “globally aware citizen”, I list them in 6 categories:
  • Communication: Developing global communication skills, not only speaking more than two languages but also being able to have an intercultural communication.
  • Economy: Understanding the importance of the interconnectedness of the global economy.
  • Politics: Being politically aware, meaning being able to link between the political decision-making and the global economy.
  • Technology: Knowing the importance of technology in linking businesses, nations and individuals.
  • Society: Understand the different cultures, beliefs, and religions and know their impact on the national and international decisions through organization like the UN (United Nations), IMF (International monetary fund), WB (world bank)..etc
  • History/geography: Being aware of the history of nations and being knowledgeable of the geography. History and geography, although listed last, are an important component of globalization that enables individuals to understand the actual issues, agreements, and decisions made today on the national and international level.
The list might not be complete but it represents the closest answer I could get to the question of “what it means to be a global student?” As mentioned before, there might be no definite answer. I think this is the most exciting trait of globalization, it is a phenomenon of ongoing progress and change and it is absurd to restrict its definition in time and in meaning. I hope more students start analyzing this question and find their own answers, as I’m sure they will vary once again.

Monday, February 14, 2011

First Internet Revolution: The Arab World in movement

I want to take the time to talk about the recent revolutions in Egypt and Tunisia but also talk about the uprising public movements against governments in the Middle East supported by social media. Being from the Middle East I give myself the right to analyze and give my personal opinion on the topic, although I can’t say that I represent every Arab around the world.
Internet and the Revolutions:
The Arab world is in movement! Thirsty for freedom and for a democratic government, the younger generation in Tunisia and Egypt accelerated the history of the Middle East. No one expected the fall of governments long supported by the west and most importantly by the US government. It is still very early to know where Middle Eastern countries are headed after the revolutions in Tunisia and Egypt but it is certainly correct to say that there is a fundamental change and it will affect the region but also the international political scene. Those two revolutions pushed  the two leaders: Ben Ali from Tunisia and Hosni Mubarak from Egypt, who were very well installed in their seats, but of whom the aging has given birth to a new generation of internet and social media users who realized the harsh reality of their countries.
In Tunisia, a neighboring country of my home country Morocco, the flame has lit when the oppression of a young man by the police haven’t been treated with justice which pushed the young man to burn himself alive. Perhaps ten years ago this big and painful event would have occurred without anyone noticing or taking action, simply because the news and media in Middle Eastern countries are corrupt and highly controlled by the governments... yes News can and are still controlled in some parts of the world. However, the media has taken a different meaning, given by Social Media and let me tell you one learned fact about it: It is uncontrollable!
Everyone of us, logs on and off several times a day on Facebook, Twitter, and Youtube thinking at the end of the day that it has wasted quite a long time of our day. I’m hoping that this post would encourage everyone today, to look at social media differently and appreciate the power it has proven to have on our everyday life. Nor Egyptians, neither Arabs around the world, thought that there could be any power forcing Ben Ali or Mubarak to resign or leave space for political freedom and democracy. It was certainly a dream we all shared, but knew it was absolutely never going to be more than just a dream which we couldn't share with anyone: we believed even walls had ears and kept any frustration against the government to ourselves only!
In fact, internet made a dream of an oppressed nation come true.
It all started with blogs, Facebook groups, and tweets denouncing what is happening in some dictator governments in the Middle East. But soon people realized that there is a big majority sharing those same concerns and frustrations, the next step was to create a facebook event to get people together and actually start acting against the dictator regimes instead of just talking about it.
In Tunisia, a facebook event got thousands of people protesting together, in Egypt they felt videos were more powerful so they shared videos asking to revolt and organized step by step the protests. We always hear unity is a power, it is true but it was hard to see clearly this unity until the internet has come to play an important role in our lives. Before the only good change we could hope for, is a change coming from higher up: the government. Today we actually can hope for a change coming from the bottom, from the people, from the young aware citizens, from the internet users.
What I found fascinating is that democracy could be practiced during the protests in Egypt even before the election of a democratic government. When I mentioned prior, that the big majority of Egyptians were opposed to the government, I meant that there were Egyptian citizens who thought the government was fair and governing in the best way possible. The pro-Mubarak citizens also organized protests and gathered through facebook and twitter. The two groups anti and pro-Mubarak met in the same spot to express their different opinions. One could notice the triumph of the anti-Mubarak group by the size of the facebook groups and by the attendance of the different facebook events. I felt I was witnessing a great Internet revolution and lived every moment of it behind my laptop.

Friday, February 11, 2011

The Islamic Banking System

 I have always been curious about the Islamic banking system. The notion of no interest rates intriguers my curiosity to know more about how it works and what are the differences between the Islamic economics and the secular economic system when it comes to money and banking. After the recent financial crisis, and the collapse of the subprime market, I started wondering if that type of dysfunctionality in the banking system would happen in an Islamic banking model. The main discussion here would be the risk in the Islamic banking system and how it is managed, but also how is the Islamic banking system implemented in a global economy where the norm is the use of interest rates at secular banking systems around the world, but also in Muslim countries where there is a co-existence between the two models.
The Islamic economy is founded on the concept of banning Al Ribba, which is the arabic word that defines the notion of interest rates. This financial practice is totally prohibited even if interest rates are very low. The first Islamic bank was founded in Egypt in 1963 by the economist Ahmad Al-Nagar. The Islamic economy today has taken a different aspect. In fact, today we are talking about a whole new theory of “Islamic economy”. It consists of different elements, some are dictated by the religious texts, and others are developed by Islamic economists:
·         Increase in wealth: in Islamic economy, money is not considered as an asset itself. It is used in the business cycle to create surplus.  This aspect explains the prohibition of interest rates. The money holder is supposed to invest his money in activities that generate revenue. If that money holder decided to invest in activities that will offer interest payment, he will be less likely to be interested by the business his money is invested in.
·         The government: It plays the role of supervisor and moderator in the economy. Its power relies in the line between the capitalist laisser-faire and the socialist system. The government orients the economic indicators towards more profitable activities providing elements needed to have a constant economic growth.
·         Equitable distribution of wealth through giving zakat, charity of 2.5% of accumulated annual wealth to the less fortunate.
In the banking system, the risk management is highly relevant and important. This importance is emphasized by the existing interdependence between the different financial institutions of a country. The bankruptcy of a bank, although of small size for instance, can affect the stability of the overall banking system and affect the economic growth on the national level as well as on the international level. Thus, it is crucial to have an efficient risk management in the banking system. In order to attain this objective, the financial institutions of the country have to have a well developed model for risk management and a knowledge of the type of risks presented by certain assets or investments. There are different types of risks relates to the traditional banking system and they are: Capital risk, Credit default risk, market risk and liquidity. The agreement of Bale in 1988 introduced the concept of relative weight of risks to assets. This agreement has also required banks in the developing countries that have international transactions to hold a minimum capital in their reserves. The question that arises from this agreement is that whether Islamic banks are adopting the terms of this agreement. It is not easy to answer this question because of the difference in characteristics between a secular and Islamic bank. Therefore, it is important to familiarize ourselves with the particular characteristics discussed above. The credit default risk might pose a problem for Islamic banks. In fact, in the Islamic model, the rescheduling of the loans unpaid cannot happen therefore it might encourage some borrowers to delay their payments voluntarily. Also Islamic banks are not allowed to have transaction in the derivative market because it is against the Sharia law. Therefore, it is not evident for Islamic banks to decrease the risk by using this method. But again, the Islamic banking system can take different forms depending on the country where it is operated. For instance, in Turkey the return to depositors in Islamic banks is very similar to the return in traditional banks and that is due to the channeling of the deposits into bonds and securities that offer interest, which might not be acceptable in other countries like Pakistan. Because there isn’t a common ground of agreement on one Islamic banking theory, it is often hard to regulate this sector. The concept of no interest is definitely agreed upon but the terms by which each Islamic bank operates might differ depending on the government and on the target customers.
The third risk is the market risk. It is the risk related to the evolution of the economy, taxes, inflation, and interest rates. In fact, the market risk affects all goods and securities. Islamic banks, along with secular banks, are exposed to the market risk, although one might think the opposite because Islamic banks don’t charge interest rates. However, as mentioned previously, the returns as quite similar and that means that the interest rates in the market do, in fact, affect the return on deposit in Islamic saving accounts. Kuran (1995) explains that by the investment of the deposited money in Islamic banks in the different bonds that bear interest.  However, Islamic banks usually avoid investing in risky assets.
The risk can also be explained by the use of the concept of LIBOR as a reference to their financial transactions. It causes them to be exposed to the risk of the change in the interest rates of LIBOR. LIBOR is a benchmark interest rate index used to make adjustments to adjustable rate mortgages. Moreover, when there is increase in the rate of LIBOR, the banks are exposed to even more market risk. Because the banks have to take into consideration the distribution of the benefit margin to the deposit account holders, give larger profits to the new deposit account holders, while the deposits were made at a lower rate on the long term, as in the case of Al Murabaha.
Al Murabaha is a form of transaction in the Islamic banking system. It might be considered a form of loan but again with no obvious interest rate. The bank basically buys the product(s) that their account holder needs, and then sell it to him at a marked price while transferring the ownership as the customer makes payments. One might see no difference between this practice and the interest rate used in secular banks. However, the difference lies in the fact that Islamic banks would be responsible for any loss or damage in the property, although the ownership of the banks to the good might not last long enough to put the bank at risk.
In addition to that, any increase in the interest rates of bonds would also be reflected in the beneficiary margin without leaving the opportunity for banks to reevaluate their equivalent assets, because price is already fixed and based on the previous year. That is to say that, unlike many people think, Islamic banks cannot avoid the risk of the change in interest rates.
Secular banks have put in place regulations and tools that help manage the risk of the market, for instance the concept of option contract. While for Islamic banks, the Muslim scholars haven’t yet made a unanimous statement about what kind of measures can be taken by the government to limit the market risk in the Islamic banking system. Islamic countries are reluctant to regulate the Islamic banking based on the secular measures, because of the different characteristics but also because it should be based on the charia law which needs the confirmation from the Muslim scholars and Muslim economists who are knowledgeable of both the religious texts and its interpretation and the macroeconomics.
            The last risk discussed is the liquidity risk. This risk arises when the banks have treasury difficulties, and that it is unable to pay its obligations on time or to finance its operating expenses. A good management of assets is in fact crucial for any bank, Islamic or secular, that want to be able to stay on the market and conduct its activities with less risk.
There are many factors that can be to the origin of the liquidity risk, as mentioned by Hassoune (2007). The first element consists of the importance of the banks liabilities, having illiquid liabilities without the need to sell those liabilities, because again the charia law prohibits the sale of liabilities in the stock market.
Another issue, and probably the most evident one, is that there is no organized and audited Islamic monetary market, which makes it difficult for Islamic banks to raise capital efficiently and in short amount of time. Therefore when Islamic banks want to make an emergency loan from the Federal Reserve, for example, they will have to accept the actual interest rate in use for that period of time, which without doubt would be reflected upon the activities of the Islamic bank in one way or the other.
The last factor would be the fact that most Islamic banks rely heavily on the current accounts, which again have a great risk of withdrawal at anytime. Islamic banks are also not prepared to face this kind of risk. Like mentioned before, there is no last minute lender for Islamic banks unless they accept to borrow with interest rate.
Today, with the frequent change in expectations of the households, the last factor might pose problem for Islamic banks, in case there are negative expectations about the Islamic banking model, many of the money would be withdraw leaving the banks with less liquidity and no interest-free lender.
                                                                                                                   Sara Amiri

Tuesday, February 1, 2011

The pressure of Life after graduation

            -I am graduting this year and found an internship for this summer.
            -I graduted and looking for a job.
            -I'm sending resumes to get a job.
           -I need to find a job before I graduate.

These are all thoughts of students who are about to graduate or graduated. My questions for them are:
Is a job really the absolute next step for graduating students? Is securing a job right after graduation a must for all students?

I have thought this through and me and my friend Maxim have had several discussions on the pressure that is put on us as recent graduates or graduating students. It seems that our life is composed of defined steps and instructions that we should all follow. I think that every student deserves a break after graduation to think about what he/she really wants to do with the degree earned, every student should have a time after graduation that I want to call "transition time" to think about the future and what he/she wants to accomplish in life and the goals to be reached. Securing a job and an income are certainly goals  but they shouldn't be the only and immediate goals.

Last rhetorical question: If I want to own my own business, is really securing a job today my next step?
Comments needed!