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Can Socially Responsible Investing bridge the Gap between Islamic and Conventional Financial Markets?

Michael Bennett's picture

Islamic finance is growing in countries like Malaysia (Credit: Asian Development Bank, Flickr Creative Commons)

Over the last three decades, the concepts of Islamic finance have captured the attention of researchers. One of the core principles of Islamic finance is the prohibition of interest and debt-based financing. Instead, economic agents are encouraged to engage in financial instruments of risk-sharing rather than risk transfer.  Although the principles of Islamic finance go back several centuries, its practice in modern financial markets became recognized only in the 1980s, and began to represent a meaningful share of global financial activity only around the beginning of this century. The growth of this market has been driven by the high demand for Islamic financial products, as well as the increasing liquidity in Gulf region due to high oil revenues.  Table 1 shows the growth trend in Islamic finance for the banking sectors by different regions, with estimates of total Islamic banking assets reaching $1.8 trillion by the end of 2013. Figure 1 shows how the growth of the Islamic financial sector in 2006–10 period surpassed the growth of conventional financial sector in all segments of the market, ranging from commercial banking, investment banking, and fund management to insurance in several Muslim-majority countries.

Risk-taking men, time-constrained women: What gender gaps mean for financial inclusion

Do men and women use financial services differently? This is the question we set out to answer when we conducted six country studies on gender finance in sub- Saharan Africa.

The purpose of our study was twofold. First, we wanted to explore the reasons behind differences in usage of financial products. Second, based on these underlying reasons, we wanted to formulate workable intervention strategies that we could recommend as gender-sensitive financial sector policy approaches for policymakers and stakeholders. The countries we studied included Botswana, Malawi, Namibia, Rwanda, Uganda, and Zambia. Based on 50 to 75 interviews per country with individuals from both urban and rural areas, we analysed how and why men and women are using credit, savings and insurance products.

A Global Wave of Financial Inclusion Targets?

Douglas Pearce's picture

Credit: IITA

On October 23, Nigeria joined a fast-growing list of countries making headline commitments to financial inclusion targets and actions,by launching a new Financial Inclusion Strategy. 

A total of 35 countries have now made commitments through the ‘Maya Declaration’ of the Alliance for Financial Inclusion (a global network of financial regulators), including 19 as recently as September 2012. 17 countries committed in June 2012 to targets, actions, and coordination platforms through the new G20 Financial Inclusion Peer Learning Program.  These new commitments and targets could have a significant impact in advancing financial inclusion, if the challenges in meeting them can be overcome.

Banking on Women in Egypt

Empowering women entrepreneurs is good for development and business. Tune in to World Bank Live on October 11, 2012 10:30 a.m JST. to hear Liberia President Ellen Johnson-Sirleaf and World Bank Group President Jim Kim talk #womenbiz at this year's Annual Meetings.

Research has shown that gender equality makes good business sense, and is key to promoting economic growth. But women continue to be excluded from the economic sphere. This is certainly the case in Egypt, which could use an economic boost in a time of transition—especially as millions of famAccess to finance is changing lives of Egyptian women, and their families for the better. (Credit: World Bank)ilies that rely on the slumping tourism industry are having trouble making ends meet.
Indeed, our research has found that would-be Egyptian women entrepreneurs face many obstacles.  For one, being approved for financing can be a challenge for Egyptian women entrepreneurs. Businesswomen in Egypt are also disadvantaged when it comes to the cost of finance. Banks have stricter collateral requirements for loans to women entrepreneurs, which are perceived as higher-risk. Providing collateral is also an obstacle for many women who are under the guardianship of male relatives and unable to independently manage their assets.

An analogy about cars, trust and financial capability

Siegfried Zottel's picture

Imagine you need a car to commute long distances to your workplace or the closest supermarket, to visit your parents and to bring your child to school. Therefore, you want to spend the money you have been able to put aside on a large purchase: a new and reliable car.  However, you do nFinancial education enables the unbanked to participate in financial markets.  (Credit: The Advocacy Project, Flickr Creative Commons)ot know how to drive, nor how do you have even a basic understanding of any technical aspects of a car, not to mention any knowledge about how to maintain a car.
Also, imagine that everything you have heard so far about car dealers from your family, friends and neighbors is that they have a very bad attitude, do not act in your best interest and try to sell you overpriced vehicles with hidden fees and features you do not need. Given your lack of knowledge of how to choose and use a car and your lack of trust, would you still feel confident about approaching a car dealer? Most probably not.

This analogy also applies to one’s participation in financial markets. Especially in developing economies, where most globally unbanked people live. If you do not have knowledge of features and risks associated with financial products, do not know how to choose and use these products, lack any basic understanding of inflation, interest rates and compound interest, it is unlikely that you will participate in financial markets, or that you will benefit from them if you do. A lack of trust in financial service providers will do the same.