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One of those things which make an entrepreneur a successful entrepreneur is Relationship with its client, customer, supplier, shareholder, business associates and everyone. It directly or indirectly contributes in survival of a business. Business relationship helps a business to communicating with its stakeholder frequently and comfortably[1].
This report is commissioned to examine the relationship of Islamic bank and globalisation and the relationship of bank with clients. In first section this report is discussing about Islamic bank, their services and types of investment. The second section describes about Islamic bank’s relation with its clients. Third section is describing about Globalization and then relation between globalization and finance. After it a conclusion is made about all the report.
Islamic Banks:
Islamic banks are increasing very rapidly in current scenario. Not only Muslims, even different religious people also start using it because of their ethical way of banking. The basic difference between Islamic and commercial banking is that Islamic banks follow the Islamic rules (shari’a) which prohibits them for charging any kind of interest on loans. Shari’a describes that money is not a type of commodity, money is just a method of exchange and it should keep circulating in market for economic activities, which will increase more employment chances[2]. Islamic banks use the rule of “Profit loss sharing” which is a kind of agreement between parties involved, where they consolidate their resources and put their resources to complete a project and then share profit or loss[3].
In Islamic banks, there are 3 types of investments: Mushakara, Mudarabha or financing. Mushakara is when a bank and other entity form a joint venture, where profit is shared by them according to a previous contract. Mudarabha is when bank is the only responsible for money and the other party provide labour and expertise management. The profits are shared according to a previous contract but all the losses are bear by bank only. Financing is when bank estimate the future profit of a particular project and provide money according to that. In this type, if profit is more than expected then the client can take extra money, but if loss occur then bank will charge on a lower rate[4].
Shari’a allows a person to buy stocks because dividend in not known by anybody before. But preferred stocks are not allowed because a fixed dividend is guaranteed by owner.
Relation between Islamic bank and its customer:
Islamic banking is the most ethical bank which is doing banking in a great manner. It protects the Islamic nations and emerging economies from financial crisis. The services provided by Islamic bank are just awesome. People get a big amount of money without any kind of interest. The types of investment is so far good as people according to their need invest in one of them[5]. Bank follows all the Islamic rules, so their focus is only on human welfare rather than making profit. Islamic bank only permit that schemes which will help each and every human being. Islamic banks maintain a good relation with its clients as well as all the stakeholders. The best part of this bank is its service “Profit loss sharing”. Clients need not to take more tension about losses. That’s why, not only Islamic people but people from different religion is also starting business with this bank[6].
Globalization:
Globalization is the most common term nowadays. It is rare when people don’t let know about anything related to Globalization in a day. Globalization drives all forces for globally economic development today. It concerns about the entire factor in the economy, from an individual and household to government. Globalization affects social partner greatly, because of it, tradition labour relations is dealing with totally new and dynamic situation[7].
Globalization is a process of make connectivity globally, socially, technologically, political, culture, institutional sphere. Globalization reduces the barriers between nations. It is involving greater integration in market worldwide. The economic side of it is the most important one. It includes a strong and healthy competition among nations, foreign direct investment from MNCs, technology, financial flows. Globalization enhances competitiveness of company as well as nation. It helps a company to lead its management and government. Generally, globalization involves all the economies that are opening for international competition.
Earlier businesses were not able to increase their capital from international market. The only source they had was domestic market. But after globalization, organizations are allowed to raise their money from foreign market also. There are so many MNCs who want to expand their market in every nation, which makes them feel like profitable. The international financial market offers a business enhanced risk management property, like credit default swap, asset backed securities etc[8].
After globalization, finance market has been changed almost as there are huge changes in it. Because of globalization competitiveness had been increased of a business as well as of a nation. Globalization and finance market has a positive relationship with each other. The country which has opened itself for globalization, a drastic change has been found in that country[9].
Economic growth of that company has been increased. People of that country have more chances to grow up themselves as they have more opportunities in front of them. The status of civilians of that country increases[10].
As after opening up of Islamic countries, the Islamic banks have been growing at an average rate of 17% in 2008-2012. Islamic banks are growing up very rapidly as now they have more area to cover up. The rate is 2-3 times more than a normal commercial bank. Even in the financial crisis, these banks keep moving ahead. The services of this bank are different from commercial bank as these banks follow Islamic Law[11].
Globalization is the key reason behind these huge changes in Islamic banks. As earlier there were less people to whom these banks can cover but now they can cover people from many countries[12]. And the banks are providing different as well as more significant services, so for sure people will feel more confident to be a member of such banks. Not only Muslim people but as well as people from different religion are also feeling attracted towards such banks[13].
The main question was about relationship in a business.
By researching the previous studies the main key element is relationship everywhere. The topic was taken for this paper was Finance and globalization. By studying on both of them, it found that both are having a positive relationship. Globalization directly impacts finance market, as so many options open up for raising the fund and investing funds. Globalization allows a country to go in another country and invest their amount over there or allow a country to call foreign investors. Because of globalization not only finance but as well as technology, research, method, labour etc can get by a country from another one.
Relationships are the key factor of any business. No matter how good services an organization is providing, if it don’t make a good relationship with its clients, suppliers, shareholders, employees, society and other stakeholders, organization will not be able to survive in the market. Even relation between all the activities of an organization is also important, if there is no relation between activities work can never happen properly.
Thus it can be concluded that relationships are essential for every business. Without maintaining a good relationship a business can never survive in market as this is the main element which helps a business to communicate frequently with stakeholders, maintain a good relationship with employees, healthy relation with society, promoting brands, expanding business, start a new venture etc.
Paul, Oliver. “Why is trust so important in business”, LinkedIn, March 29, 2015.
Solomon, Robert C. and Fernando Flores. “Building Trust: In Business, Politics, Relationships and life”. Oxford University Press, 2001.
Visser, Hans. “Islamic Finance Principles and practice”. UK: Edward Elgar Publishing Limited, 2009.
Brian, Kettell “Introduction to Islamic Banking and Finance”. John Willey & sons, 2011.
Hans, Visser. “Islamic Finance Principles and practice”. UK: Edward Elgar Publishing Limited, 2009.
Moghadam, Valentine M. “Globalization and social Movements: Islamism, feminism and the global justice movement”. Rowman & Littlefield, 2012.
Brinkman, Richard L. and Brinkman, June E. “corporate Power and the globalization process”. USA: Portland state university.
Visser, Hans, “Islamic Finance Principles and practice”. UK: Edward Elgar Publishing Limited, 2009.
Mustapha bin Hasan and Isntitut Islam “The economic and financial imperatives of globalization: an Islamic response”. Malaysia: Institute of Islamic Understanding, 2000.
Askari, Hossein, Iqbal, Zamir and Mirakhor, Abbas “Globalization and Islamic Finance: Convergence, Prospectus and challenges”. John Willey & Sons, 2011.
Mondher, Bellalah, “On Islamic Banking. Performance and financial innovations” (Cambridge Scholars Publishing, 2014).
Dincer, Hasan, “Globalization of Financial Institutions: a competitive approach to finance and banking” (Springer science & business Media, 2013).
Caprio, Gerard, “The evidence and impact of financial globalization” (Academic Press, 2013).
Hasan, Kabir and Lewis, Mervyn, “Handbook of Islamic Bank” (Edward Elgar Publishing, 2009).
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