Archive for November 25th, 2019

History of Islamic Banking in Pakistan

November 25, 2019

Interesting bit of banking history of a different kind.

Steps for Islamization of banking and financial system of Pakistan were started in 1977-78. Pakistan was among the three countries in the world that had been trying to implement interest free banking at comprehensive/national level. But as it was a mammoth task, the switchover plan was implemented in phases. The Islamization measures included the elimination of interest from the operations of specialized financial institutions including HBFC, ICP and NIT in July 1979 and that of the commercial banks during January 1981 to June 1985.

The legal framework of Pakistan’s financial and corporate system was amended on June 26, 1980 to permit issuance of a new interest-free instrument of corporate financing named Participation Term Certificate (PTC). An Ordinance was promulgated to allow the establishment of Mudaraba companies and floatation of Mudaraba certificates for raising risk based capital. Amendments were also made in the Banking Companies Ordinance, 1962 (The BCO, 1962) and related laws to include provision of bank finance through PLS, mark-up in prices, leasing and hire purchase.

Separate Interest-free counters started operating in all the nationalized commercial banks, and one foreign bank (Bank of Oman) on January 1, 1981 to mobilize deposits on profit and loss sharing basis. Regarding investment of these funds, bankers were instructed to provide financial accommodation for Government commodity operations on the basis of sale on deferred payment with a mark-up on purchase price. Export bills were to be accommodated on exchange rate differential basis.

In March, 1981 financing of import and inland bills and that of the then Rice Export Corporation of Pakistan, Cotton Export Corporation and the Trading Corporation of Pakistan were shifted to mark-up basis. Simultaneously, necessary amendments were made in the related laws permitting the State Bank to provide finance against Participation Term Certificates and also extend advances against promissory notes supported by PTCs and Mudaraba Certificates. From July 1, 1982 banks were allowed to provide finance for meeting the working capital needs of trade and industry on a selective basis under the technique of Musharaka.

As from April 1, 1985 all finances to all entities including individuals began to be made in one of the specified interest-free modes. From July 1, 1985, all commercial banking in Pak Rupees was made interestfree. From that date, no bank in Pakistan was allowed to accept any interest-bearing deposits and all existing deposits in a bank were treated to be on the basis of profit and loss sharing. Deposits in current accounts continued to be accepted but no interest or share in profit or loss was allowed to these accounts. However, foreign currency deposits in Pakistan and on-lending of foreign loans continued as before.

Hmm…

Posted in Central Banks / Monetary Policy, Economics - macro, micro etc | Leave a Comment »

Notes from an inter-planetary monetary anthropologist

November 25, 2019

Fascinating post from a fascinating monetary economics blogger JP Koning:

My work as an inter-planetary monetary anthropologist has brought me to dozens of different planets to study their monetary systems. The monetary system of the most recent planet that I visited, the planet of Zed in the Xv2 galaxy, falls into the same classification as the systems on Vigil X and Earth (which I last visited in 1998 and, according to other anthropologists, hasn’t changed much).

As on Earth, markets on Zed tend to lie towards the free end of the spectrum. Zedians can own property. And property rights are enforced. Zedians often put their savings in institutions much like banks and earn interest. Banks in turn lend to individuals and business.

:-)…

Posted in Blogs to Read, Central Banks / Monetary Policy | Leave a Comment »

Should Bulgaria abandon its Currency Board and join the Euro?

November 25, 2019

Prof Steve Hanke , has been a long time advocate of currency boards.

In this paper, he along with Todor Tanev argue that Bulgaria should not abandon its currency board…

 

Posted in Academic research & research papers, Central Banks / Monetary Policy, Economics - macro, micro etc | Leave a Comment »

Rediscovering Indian thought: How a scholar built a database of pre-Independence magazinesRediscovering Indian thought: How a scholar built a database of pre-Independence magazines

November 25, 2019

Prof Rahul Sagar of NYU Abu Dhabi has built this fantabuolus database: https://www.ideasofindia.org/. It indexes the contents pages of 255 English-language pre-Independence magazines from India.

In thus scroll article. Prof Sagar details his journey:

In the early nineteenth century the East India Company committed itself to imparting modern knowledge to the people of India. Soon thereafter Indians began flocking to newly created colleges and schools where they became avid readers of the celebrated British periodicals of the era such as Athenaeum, The Quarterly Review, The Contemporary Review, The Fortnightly Review, The National Review, and Nineteenth Century. Not unreasonably, they came to view these periodicals as exemplars of public debate and reasoned deliberation.

As the century progressed, these increasingly urbane Indians ached to discuss subjects closer to home. They answered this need by founding local counterparts to the British periodicals they admired so greatly. In a matter of decades there were hundreds of periodicals in circulation, brimming with essays on a wide range of topics. How to address inequalities of caste and gender? What to learn from rising powers like Japan and the United States? How to ensure economic development and advance self-government? How to reconcile traditional beliefs with modern science?

A vibrant public sphere now took shape as legions of newly minted graduates contributed and subscribed to these English-language periodicals. The most notable of the first wave included Bengal Magazine, Haris Chandra’s Magazine, Mookerjee’s Magazine, Allahabad Review, Madras Review, and The Quarterly Journal of the Poona Sarvajanik Sabha. At the end of the nineteenth century came that magnificent trio – The Hindustan Review, The Indian Review, and The Modern Review – that dominated public life for the next half a century. They were joined by dozens of smaller periodicals such as Welfare, The Aryan Path, and Modern World.

It is impossible to overestimate the importance of these periodicals. Transported around the country by newly built railway networks, they attracted and cultivated a wide readership. By compelling writers and readers to think more broadly, they midwifed modern India. This was not all. As these periodicals were typically published on a monthly basis, they devoted themselves not to reporting news, which would be stale by the time the periodical reached the subscriber, but to essays on the leading questions of the day.

Post-1947, all these magazines were lost:
When India became independent in 1947 public attention shifted to debates on the floor of Parliament and in the opinion columns of newspapers. A new technology, the radio, proved a livelier and more accessible forum for debate and deliberation. It was not long, then, before these periodicals were shuttered. What came after is the real tragedy.
As poverty bit, public and community libraries, whose subscriptions had underwritten these periodicals, suffered grave neglect. With their holdings literally crumbling away, many of these libraries sold their invaluable archives as raddi (wastepaper). This is why the vast bulk of these periodicals – our intellectual heritage – can now only be found outside India.
He and his team have put all these together. Just amazing work. Applause!!

Posted in Discussion | Leave a Comment »

Does the Lack of Financial Stability Impair the Transmission of Monetary Policy?

November 25, 2019

Viral Acharya, Björn Imbierowicz, Sascha Steffen and Daniel Teichmann in this new NBER paper:

We investigate the transmission of central bank liquidity to bank deposits and loan spreads in Europe over the period from January 2006 to June 2010. We find evidence consistent with an impaired transmission channel due to bank risk. Central bank liquidity does not translate into lower loan spreads for high-risk banks for maturities beyond one year, even as it lowers deposit spreads for both high-risk and low-risk banks. This adversely affects the balance sheets of high-risk bank borrowers, leading to lower payouts, capital expenditures and employment. Overall, our results suggest that banks’ capital constraints at the time of an easing of monetary policy pose a challenge to the effectiveness of the bank-lending channel and the central bank’s lender-of-last-resort function.

 

Posted in Central Banks / Monetary Policy, Economics - macro, micro etc, Financial Markets/ Finance | Leave a Comment »

Mehnat Manzil-Museum of Work in Ahmedabad

November 25, 2019

Fascinating new museum in Ahmedabad.

Prof Jeemol Unni of Ahmedabad Universoty reviews the museum.

Mehnat Manzil is an unique museum that celebrates the life of people who undertake informal work. They form nearly 80 percent of the work force in India and many South Asian countries. By a rough estimate they contribute more than half of the national income of these countries. Yet, they are the most ignored, unsung and nearly invisible segment of the population. 

Lots of pictures as well…

Posted in Economics - macro, micro etc, Indian Economy/Financial Markets | Leave a Comment »

Design a site like this with WordPress.com
Get started