Problems and challenges facing the islamic banking system in the west: The case of the UK

This study investigates the main problems, challenges, and opportunities facing Islamic banking in the United Kingdom. The study reports the results of interviews that were undertaken with senior officials of several key financial institutions who have had many years of experience in dealing with Islamic banking. Our interviews revealed that, although by strict definition Islamic banks do not currently exist in the UK, London is one of the major centers for Islamic banking and finance. It is apparent that the experience of previously established Islamic institutions, such as Al‐Baraka, has made other institutions realize that it is possible to provide Islamic banking services in the UK under nonbanking regulations. The interviews also revealed that the main problem that Islamic banking faces in the UK is heterogeneous clients and potential clients. Moreover, regulatory hurdles, competition from conventional banks, and lack of adequately qualified and trained personnel exacerbate the situation. The study concludes by identifying opportunities such as e‐banking that may have a significant impact on the future of Islamic banking in the UK. © 2004 Wiley Periodicals, Inc.     

Entry into a Foreign Market: Foreign Direct Investment versus Licensing

We compare foreign direct investment (FDI) and technology licensing as two modes of entry into a foreign market. While direct entry via FDI dissipates rents in the host country, opportunistic competition from a licensee may erode rents in the entrant's other markets. Since FDI increases competition in the host country while licensing stifles it. welfare is higher under FDI than under licensing.     

Public policy and rural poverty : A system dynamics analysis of a social change effort in Pakistan

This paper attempts to explain why public policies that were expected to alleviate rural poverty in Pakistan have not worked. The analysis is based on a system dynamics model that incorporates the income distribution processes of a typical developing country agrarian economy consisting of a capitalist and self-employed sector. Only the economic factors arising out of the rational decisions of the two sectors regarding production and disbursement of income have been taken into account. These factors are considered adequate for explaining the persistence of rural poverty, although the role of social and political factors is acknowledged.The study suggests that the absence of an economic force that should encourage land ownership by its cultivators is a key factor responsible for the poor economic condition of the working rural household that form the majority of the rural population. Land is easily separated from cultivators and is concentrated among the few capitalist households. This concentration significantly reduces income in self-employment and thus leaves the cultivators with very little bargaining power for negotiating compensation for thier labor. Thus development policies striving to increase productivity may only serve to increase the claim to income of the few capitalist households, leaving incomes of the majority of the households unchanged while also assuring continuation of low worker compensation.The study indicates that a development policy for alleviating poverty should simultaneously incorporate fiscal instruments to encourage transfer of land ownership to its cultivators and measures that help increase the productivity of land.     

Trade, Foreign Direct Investment, and International Technology Transfer: A Survey

What role does trade play in international technology transfer?Do technologies introduced by multinational firms diffuse tolocal firms? What kinds of policies have proved successful inencouraging technology absorption from abroad and why? Usingthese questions as motivation, this article surveys the recenttrade literature on international technology transfer, payingparticular attention to the role of foreign direct investment.The literature argues that trade necessarily encourages growthonly if knowledge spillovers are international in scope. Empiricalevidence on the scope of knowledge spillovers (national versusinternational) is ambiguous. Several recent empirical plant-levelstudies have questioned earlier studies that argued that foreigndirect investment has a positive impact on the productivityof local firms. Yet at the aggregate level, evidence supportsthe view that foreign direct investment has a positive effecton economic growth in the host country.      

Longevity challenges and leadership interventions: Strategy journeys of two Indian banks

This article studies the strategic journeys of two Indian banks in evolving socio-political and economic environments, spread across eight decades. It provides a holistic view of longevity challenges by exploring interdependencies between a firm’s internal dynamics, external environment, and its leaders. This article covers the growth of Canara Bank and Syndicate Bank in distinct phases of unrestricted, regulated, and centrally planned economic environment, and in changing socio-political scenarios. It uses within-case and across-case analysis, contextualised in these conditions, to provide rich insights about measures adopted by firms for their long-term survival and sustenance.     

Valuing Homeownership

Housing tenure decision combines financial, economic and socio-psychological factors. This paper considers the global premium associated to homeownership. On the one hand, homeownership is associated to private benefits of being an owner. On the other hand, overinvestment in housing is harmful to diversification and distorts portfolio management. This trade-off, similar to the one associated to corporate private benefits of control, is the cornerstone of our theoretical model based on the expected utility maximization. The originality of the model comes from its simplicity. Furthermore, the empirical implementation of the model, using price and rent data normalized by square-meter, exhibits a homeownership premium for houses in the Brussels Region reaching at least 9% of the housing price. The findings are robust to several methodological refinements. In particular, they confirm the link between liquidity constraints and house prices documented in the literature. However, the premium may largely vary from one place to another, according to tax laws, cultural habits and social status associated to tenure.     

Do boards know when they hire a CEO that is a good match? Evidence from initial compensation

Are CEO initial compensation packages based on variations in the expected match quality of the hiring firms? Using CEO tenure as a proxy for expected match quality, and a sample of CEO turnovers between 1992 and 2006, we find that CEOs that experience good matches, defined as tenures exceeding four years, have higher initial compensation packages. We also find evidence from exogenous switching regression models that inside CEOs receive a higher good match premium than outside CEOs. To account for economic and regulatory changes across our sample period, we divide our sample into three subsamples: 1992–1997, 1998–2002, and 2003–2006, and repeat our analyses. Even though the positive relation between expected match quality and initial compensation persists across all periods, we find that the good match premium for inside and outside CEOs does not differ in the post-2002 period. We attribute this result to increased board independence and changes in regulation (Sarbanes–Oxley) in the post-2002 sample period.     

Exchange rate undervaluation and manufactured exports: A deliberate strategy?

Recent literature suggests that a proactive exchange rate policy in accordance with price incentives (i.e. undervaluation) can foster manufactured exports and growth. This paper is built on these recent developments and investigates, using a sample of 52 developing countries, whether such a proactive exchange rate policy is adopted. The results show that during the period 1991–2005 a number of countries has used undervaluation to foster the price competitiveness of manufactured exports.