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!