An essay on hr problem in cognizant technology solutions, yyderabad, india Free Essays

string(36) " of the employee on the management\." Introduction This essay describes the recent HR problem faced by Cognizant Technology Solutions, Hyderabad, India one of the fastest growing IT Service Providing Companies, a subsidiary of Cognizant Head Quarters, New Jersey as heard from one of the associates within the company. The Organization faced the problem of retaining their experienced associates during the economic down-turn period or so called Recession period when the other competing companies fired many of their employees who have worked for more than half-a decade because of posing financial problems on the company in regard to wages and maintenance during that period. Started with around 264 associates to 10,000+ members (till date), they have contributed a lot to the Organization’s notable growth over a short period of 8 years at Hyderabad Off-shore Development Centre. We will write a custom essay sample on An essay on hr problem in cognizant technology solutions, yyderabad, india or any similar topic only for you Order Now [ By Geeta Ramachandran, Sr. Executive – HR, Global Workforce Management (GWFM), CTS(H), Feb, 2006-(till date). ] Key Words: Associates, Resources, Off-shore Development Centre, Business Continuity Plan, Work Force Management, Incentive Approach, Two-in-a-Box Module. Background Cognizant Technology Solutions, one of the leading Multi-National Companies started its Off-shore Development Centre (ODC) at Hyderabad, India in 2002 as a part of Global Expansion. It serves more than 500 clients belonging to various fields such as Banking Financial Services, Health Care Insurance, Communications, Consumer Goods, Energy Utilities, Information, Media Entertainment, Life Sciences, Manufacturing, Retail, Technology, Transportation Logistics, and Travel Hospitality. The Company has recorded its highest growth in the 4th quarter of 2010. And announced 200% hike for their top performers during this quarter recovering from the recession blows. They have crossed the 10M strength in the same quarter globally. [http://www.cognizant.com/aboutus/in news ] Interventions Recession is more often can be termed as one of the phases for readjustment in disequilibrium of capital management. Whenever a resource is released within an organization from the declining activities, they will be immediately shifting to the expanding industries. Recession or recovery is the first phase of readjustment process in this world of non-uniform capital and rigidities in adjustment processes starts with the realization of errors delivered under the false impression projected by easy credit. Downturn period in the global markets is considered as bad by concerning the nominative judgments about the different phases of the cycle. [ â€Å"Capital in Disequilibrium: An Austrian Approach to Recession and Recovery† by Noah Yetter and John P. Cochran. ] Multi-national companies are focused on getting the experienced staff which would allow them to have the feasibility of not spending additional investments on any other different training programs. Small scale organizations are more focused on fresher as they cannot bear huge pay to the experienced hires. By providing the well established environment to the employees so that the employees can work freely and can apply all thought process into reality. Because of this, there is a diversion among the managers whom to consider with high priority when financial matters are involved with the resource management techniques. [ Resourcing in Business Logistics: The Art of Systematic Combining, by M. Jahre, L.E. Gadde H. Hakansson, D. Harrison, G. Persson, and G. Liber, Torkel Stromsten, Stockholm School of Economics, Stockholm, Sweden, Book Review, Page No. 411-414.] As there are financial prospects involved, it is always better to recruit fresh graduates and train them based on the requirements of business with the usage of proper forecasting techniques. If the resources belonging to an organization are homogenous in all aspects and all prices, wages, and interest rates are perfectly flexible in according to the organizational policies, then the recession or recovery process would be a single process which would be quick and practically painless.An experienced employee wages equal the 3-4 fresh graduates wages whose cost to company would be low when compared to former. It is always preferable to have those young minds which are innovative and creative at times and works smart in reaching the timely goals rather than being laborious for completion of tasks. And if the Organization thinks that an experienced employee needs to be retained with the organization, firm should assign them the multiple tasks up to the possible extent but not overloading them. By making the experienced resources responsible in some managerial positions and offering them the provision of consistent support and means for supervision from the top-level management to guide the new candidates in achieving service and delivery goals much to the satisfaction and delight of the customers. [ â€Å"Estimating the impact of enterprise resource planning, project management decisions on post-implementation maintenance costs† by Meg Fryling, University at Albany, USA.] In order to retain the experienced employees from the organization, one needs to build the strong belief about the future prospects of the employee ensuring about their role in the organization and more importantly job-safety. Cognizant has employed the same strategy during that turmoil and with the same strategy they achieved the tag of fastest growing IT Services Provider around the globe. Cognizant trained the people irrespective of experienced or a fresh candidate in the sector during the period to grab the opportunities in future. By making sure that the employees would fit into the requirements accordingly, and providing them the different options like self-learning, e-learning courses to learn and understand the new technologies rather than sticking to the existing technology which they have already learnt during their graduation and the same has applied over the years for the routine deliverables thus not allowing themselves to reach the further levels in contributing to the success of the organization. [ â€Å"Leadership in the era of Economic Un-Certainty† by Charan. R, McGrawhill, 2009.] [ â€Å"Managing a risk controversy: The Canadian Salmon Aquaculture industry’s responses to organized and local opposition† by Nathan Young; Mary Liston.] Training and allowing them to understand, implement the new technologies might take some time initially but it makes the employee well-versed with the same. With the same strategy we can build the confidence in the people by spending whole-sum amount for training purpose as it helps in retaining the confidence of the employee on the management. You read "An essay on hr problem in cognizant technology solutions, yyderabad, india" in category "Essay examples" After facing the initial phase of economic un-certainty, every Organization concentrated on cost-cuttings thus enabling the clients to trust the management with respect to the ROI and value of investments. This would reduce the revenue and profits to the company during that period and on a long-term basis, this result in maintaining the healthy relationship with the clients. [â€Å"Applying the Theory of Planned Behavior to Explain Marketing Managers’ Perspectives on Sustainable Marketing† by Ahmed Shahriar Ferdous.] Reallocation of the resources is another crucial factor which would create some distance between the employees and their families. Reallocation need to be carried out depending on the requirement and feasibility of the company. Depending on the designation, work-experience of a particular employee, he/she would be given the priority to serve the organization according not affecting the business continuity plan and meeting the deliverables in time. Regular Audits will be held at those which were shown to the clients at the start-up. Meeting the expectations of the customer in time is a technique which is possible only through dedicated resources for the organization. With the same approach, organizations build the reputation among the clients. [ Estimating the impact of enterprise resource planning, project management decisions on post-implementation maintenance costs by Meg Fryling, University at Albany, USA.] [Collaborative Behavior and the performance of the organizations by Andrew B. Whitford, Soo- young Lee, Taesik Yun, Chan Ju Sung.] Resource Management within the organization should be considered as a high-priority issue which requires proper attention. Resource Planning and Resource Management according to the business needs to be scheduled. As Cognizant applies Two-In-A-Box Module, On-site/Offshore Delivery module, they tend to have more resource strength at off-shore than on-site as the CTC would be increasing if the on-boarded people are in large number. They do follow a policy of 1:3 ratios Onsite – Offshore resource strength because of which Cognizant resources would like to stay with the organization rather than opting for other organizations. And another way to look at it, the company offers huge incentives and various other activities alongside the regular work. Cognizant recruited graduates during recession period from universities who will be completing their graduation in another 6-8 months of time and gear up to face the global environment instead of firing the experienced hires. Meanwhile th e organization can avail the time to plan accordingly and train them the different technologies to meet the expectations from the customers and serve them with high efficiency. [By Rohit Eustachius, Executive – HR, Campus Talent Manager, CTS(H), Aug, 2006-(till date).] Based on the above interventions for the problem, we can state that a mixture of fresh and experienced people is required in every industry and the same applies universally. With the help of experienced bunch, fresh employees into the company will learn key points and apply the same when it demands. Reduce the no. of experienced employees gradually and at the same time hire the fresh graduates to compensate work load and financial issues can be settled with less pay details. [ â€Å"HR and IT Capabilities and Complementarities in Knowledge-Intensive Services† by Naresh Khatri, Alok Baveja, Narendra M. Agrawal and Gordon D. Brown. ] Conclusion Thus we can derive that problems relating to human resource management involves so many factors and all those factors should be considered when a problem needs a necessary action to be implemented to resolve the problem. Human Resource Management involves with financial issues which plays key role in organizational structure and helps in progress of the organization. This also reveal us how to invest in those crucial times of the market forecasting the future prospects and demands in mind. Resource planning, resource management are two important areas which would contribute to organizations success in the long-run prospects. In the resource planning or resource management, profitable expansion puts inflationary pressure on prices, as more requirement tries to be funded by the same pool of real resources, but this pressure isn’t always felt by all prices. Best returns on equity investments is possible, especially compared to the low returns generally available under depressed i nterest rates, which may draw excess profitable demand into the stock market, pushing prices to go up further. If the inflationary pressure of the original profitable expansion resulted in a general rise in prices, there would be a relative mild stock slump, and it reflects simply in the market’s realization as the firms are over-valued. But if the economy also experiences inflation in the asset price with little or no commodity price inflation, the stock correction ought to be quite severe, as the prices of stocks fall to reflect not only more realistic valuations of firms but also drastically lower demand for stocks. Easy credit props up the supra-normal demand for equity investments and they are spurred on by its effects, now by that excess amount plus a panic discount declines the demand which was forecasted, as investors who would otherwise have kept their money in stocks pull it out due to an increased in perceived risk. Once the period of increased risk with mass liqui dation passes, investors will start to see that stocks are now underrated, and buy in again. This post-panic reawakening of equity investment will be a signal that the readjustment process is actually complete, and normal economic growth is continued. Tax cuts are helpful to the amplitude that they stimulate savings investment and reduce the role of government in the economy, but implementing them as a means to stimulate consumption is a wrongheaded approach. Thus with the different approaches human resource management is a tough task as it involves multiple issues related enterprise resource planning, resource management, supply chain management etc. The research about the problem resulted in the following approaches to deal with the employees: Allowing the experienced employees to learn the new technologies by means of e-learning rather than attending the in-house training sessions separately thus reducing the cost to the company when the training programs are taken into consider ation. By recruiting the fresher from the universities and train them in different technologies accordingly in place of the experienced resources when the cost to company matters as the fresher would be paid less wages compared to the experienced by forecasting the future demand much in advance. To reduce the cost to company by maintaining or retaining the productive resources who have contributed lot to the organization’s growth ensuring the customer satisfaction to the most possible extent. By allocating senior resources to managerial positions to serve the newly hired resources to know in and out about the organization in detail and to gain expertise on the technologies they would apply. Bibliography International Human Resource Management: Managing People in a Multi National Context, 4th edition by Peter J.Dowling and Denice E. Welch. Journal of International Consumer Marketing: Capital in Disequilibrium: An Austrian Approach to Recession and Recovery by Noah Yetter and John P. Cochran. Journal of Global Marketing: [â€Å"Leadership in the era of Economic Un-Certainty† by Charan. R, McGrawhill, 2009. Resourcing in Business Logistics: The Art of Systematic Combining, by M. Jahre, L.E. Gadde H. Hakansson, D. Harrison, G. Persson, and G. Liber, Torkel Stromsten, Stockholm School of Economics, Stockholm, Sweden, Book Review, Page No. 411-414. Journal of Risk Research: Applying the theory of planned behavior to study the health decisions related to potential risks by Z. Janet Yang; Katherine McComas; Geri Gay; John P. Leonard; Andrew J. Dannenberg; Hildy Dillon Pages 1007 – 1026 Journal of Risk Research: Managing a risk controversy: The Canadian Salmon Aquaculture industry’s responses to organized and local opposition by Nathan Young; Mary Liston. Journal on Enterprise Information Systems: Estimating the impact of enterprise resource planning, project management decisions on post-implementation maintenance costs by Meg Fryling, University at Albany, USA. International Public Management Journal: Applying the Theory of Planned Behavior to Explain Marketing Managers’ Perspectives on Sustainable Marketing by Ahmed Shahriar Ferdous. International Public Management Journal: Collaborative Behavior and the performance of the organizations by Andrew B. Whitford, Soo- young Lee, Taesik Yun, Chan Ju Sung. International Journal of Human Resource Management: HR and IT Capabilities and Complementarities in Knowledge-Intensive Services by Naresh Khatri, Alok Baveja, Narendra M. Agrawal and Gordon D. Brown. http://www.cognizant.com. How to cite An essay on hr problem in cognizant technology solutions, yyderabad, india, Essay examples

Report Guitar in Jazz free essay sample

Type of guitar Traditionally. Jazz guitarists use a hollow-box body type of guitars with magnetic Plock- ups, but a solid body also was introduced in around 1 asss. Hollow-box body had more of an acoustic guitar sound which is simply amplified through pickups. The solid body guitars have a slightly different tone. Thats the kind of guitars that all rock bands use nowadays. Playing styles Jazz guitar styles like combing refer to playing chords underneath a songs melody or another musicians solo Improvisations. The guitar In Jazz Is more of an accompanist type of Instrument, but doesnt completely serve as Just a background instrument. Guitarists can also perform solos as guitar offers versatility of sound and a variety of types in playing styles. When Jazz guitar players improvise, they may use the scales, modes, and arpeggios associated with the chords in a t tunes chord progression; thus, making it an excellent soloist. We will write a custom essay sample on Report Guitar in Jazz or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page History In earlier years of Jazz guitar It was primarily used In sub-genres Like Dixieland and Bebop. It can be traced too Jazz guitarist such as Eddie Lang.In a song call Perfect where he used acoustic guitar as lead while Plano played mall melody. The use of guitar in jazz can be justified by their ability to cut through the sound of piano, bass ND drums rhythm sections, same as banjo which, by the sasss began being replaced by guitar as the primary choral rhythm instrument in Jazz music, because it could be used to voice chords of greater harmonic complexity, and it had a somewhat more muted tone that blended well with the upright bass, which, by this time, had almost completely replaced the tube as the dominants bass Instruments In jazz music. But guitar didnt make it into jazz first. Looking back at its history, guitar can be traced into blues first, where singers used guitar to accompany themselves when they sang: 1 singer- 1 guitar type of music. And we didnt see the use off guitar as a solo instrument till much later due to not being able to play louder over horn sections, at least not until guitar amps were Invented. Now sasss Jazz guitarists became more established as soloists In their own right beside their rhythmic Orleans.Guitar had a way of being louder and yet being more complex than a banjo and almost as good piano and woodwind or brass. Guitar players started experimenting with guitar even more. Adding distortion and improving in soles, with speed and different finger techniques, that had an instant effect on what music can e versus what it was, like blues and Jazz. Now, fast forward 40 years and we have our Jimmy Hendrix shredding on and upside down guitar for rightist.

Free Essays on Ethnic Cleansing

Jon Giraudo Ethnic Cleansing Ethnic cleansing is a term that most people in the United States find unfamiliar. This seems a bit odd, being that ethnic cleansing is the way in which we acquired this fine nation from the natives that had been living here for who knows how long. While researching this topic, three definitions seemed to stand out in best describing this atrocity. Ethnical cleansing: 1) â€Å"is the systematic removal of a group of people identified by ethnicity from a certain area. This may be done through genocide (killing) or forced migration,† 2) â€Å"the removal or extermination of a racial or cultural group,† and 3) â€Å"the mass expulsion and killing of one ethnic or religious group in an area by another ethnic or religious group in that area.† It is safe to say that the term ethnic cleansing is a euphemism. It is euphemistic because the term cleansing implies something good. Murdering of women and children, or the act of genocide does not sound like a righteo us act of cleansing. This paper is not a cry out for the loss of the Native American people’s land, but to illustrate the fact that ethnic cleansing is not merely limited to everywhere in the world except the United States. It is true that there is a constant battle that certain ethnic groups must fight in countries such as Bosnia, Croatia, Kosovo, Yugoslavia, and several others, but northern Americans are no strangers to this battle. The act of ‘population removal’ has been happening since the beginning of time, however, the following pages will be used to give an account of the situations contained in United States history. The Trail of Tears illustrates ways in which the North American legal system has been known to systematically violate their own laws in the expropriation of Indian land. In the early nineteenth century powerful Indian nations, including the Creeks, Cherokee and Chickasaw, constructed elaborate constitutions and c... Free Essays on Ethnic Cleansing Free Essays on Ethnic Cleansing Jon Giraudo Ethnic Cleansing Ethnic cleansing is a term that most people in the United States find unfamiliar. This seems a bit odd, being that ethnic cleansing is the way in which we acquired this fine nation from the natives that had been living here for who knows how long. While researching this topic, three definitions seemed to stand out in best describing this atrocity. Ethnical cleansing: 1) â€Å"is the systematic removal of a group of people identified by ethnicity from a certain area. This may be done through genocide (killing) or forced migration,† 2) â€Å"the removal or extermination of a racial or cultural group,† and 3) â€Å"the mass expulsion and killing of one ethnic or religious group in an area by another ethnic or religious group in that area.† It is safe to say that the term ethnic cleansing is a euphemism. It is euphemistic because the term cleansing implies something good. Murdering of women and children, or the act of genocide does not sound like a righteo us act of cleansing. This paper is not a cry out for the loss of the Native American people’s land, but to illustrate the fact that ethnic cleansing is not merely limited to everywhere in the world except the United States. It is true that there is a constant battle that certain ethnic groups must fight in countries such as Bosnia, Croatia, Kosovo, Yugoslavia, and several others, but northern Americans are no strangers to this battle. The act of ‘population removal’ has been happening since the beginning of time, however, the following pages will be used to give an account of the situations contained in United States history. The Trail of Tears illustrates ways in which the North American legal system has been known to systematically violate their own laws in the expropriation of Indian land. In the early nineteenth century powerful Indian nations, including the Creeks, Cherokee and Chickasaw, constructed elaborate constitutions and c...

7 Reasons Why It’s Never Too Late To Change Your Career

7 Reasons Why It’s Never Too Late To Change Your Career Leaving a job can be enormously stressful, and very daunting. And sometimes leaving in a fit of rash frustration is not the way to go. But there are circumstances in which it’s a very prudent- even life changing- thing to change careers. If you suspect this might apply to you, and that you’re ready for a change- even if that means leaving your contacts and colleagues, many of which have now become your friends- then watch this little video and psych yourself up.  Then think of all these reasons why you’re making the right call.1. You’ll Gain More KnowledgeChanging careers means being brand new to a job again. Remember your super intense learning curve at your first job? Remember how that curve tapered off and flat-lined eventually as you got more settled in? Once you’ve mastered your current job, you stagnate. Putting yourself in a situation where you haven’t yet mastered something means you’ll broaden your knowledge base and learn a lot- fast.2. New Challenges are  GreatIf your current job doesn’t challenge you anymore, that’s a great sign it’s time to go. Bend your comfort zones a bit, and expand your horizons. Put yourself in a situation where you’re not absolutely sure you’re on top of everything every day you go to your desk- a bit of risk and fear and having to rush to keep up or excel will be great for your morale. Maybe it’s just plain time for a change.3. You’ll Increase Your Earning PowerIt’s possible that your skills might be even more valuable in another industry, or in another kind of company structure. Start looking around to see what your counterparts are making in other industries, and take the leap.4. No More Toxic StressYour current job- let’s face it- is making you physically sick. Your immune system is shot. You’re exhausted. You’re grumpy all the time. Maybe this is because you’re bored, or on the contrary , you’re under far too much pressure. Maybe you just cannot stand your boss- or your coworkers are hostile and insufferable. Either way, no job is worth sacrificing your health. Reboot and reset somewhere fresh.5.  Finding Firmer GroundSometimes it’s just plain time to wake up and smell the sinking ship. If your company is going under or merging, or your industry is changing- and not in a way that you think will be good for you, then getting yourself somewhere more stimulating and secure could be your lifeboat.6. Growth OpportunitiesChanging careers can give you a way to use all of your assets and talents. To expand as far as you can within your skills, and to grow as high as you can up the ladder. Get vertical! Get promoted! Get a raise! Do the things you’ve always wanted to do.7.  A Renewed Sense of PurposeIf you do successfully change careers, at least you get to feel totally at the helm of your own boat. You’re living your life with purpose- and m aking decisions that are best for you and where you want to end up. When you take charge of such things, you gain valuable confidence.

Accountability, Representation and Control and the Euro crisis Essay

Accountability, Representation and Control and the Euro crisis - Essay Example Some of the common perspectives on the crisis suggest that the weaknesses in the accountability processes, compromised systems of control, and poor representation are at the core of the Euro crisis (Hopwood, 2009, p. 797). Those who hold onto this view contend that revamping the structural basis of the three features is fundamental to resolving the crisis. The banking sector, the government spending practices, and the corporate world remain some of the areas that have received significant focus by analysts of the Euro crisis. Poor controls feature in the manner in which governments have failed to put in place regulatory systems to stem bad spending practices, which lead to increased deficits that imperil economic growth. Weak accountability systems encouraged unethical accounting practices that threatened the collapse of the banking sector in the region attracting large amounts of bailouts that burdened the taxpayers. The genesis of the Euro crisis stems from failure of some member s tates to regulate their sovereign debt. The sovereign debt, which had been capped at the 60 percent of the gross domestic product GDP, determines the state of stability of the economic stability of the member states (Arnold, 2012). Proposals for austerity measures, which have been suggested by countries like Germany have incurred the displeasure of some of the most affected countries such as Greece and Poland. The central thinking of the affected countries is that austerity measures will stunt economic growth and leading to states of economic instability, which would expose the affected countries to more damage from the systems. It is important to consider some of the reasons of the economic crisis in terms of the structural germ of their causes. At the bottom of the debt crisis is the need for stronger and reliable regulatory frameworks that would enable accountability, control, and representation in order to shield the Eurozone from the adverse consequences of the crisis. Pursuit of economic self-interest among the Eurozone member states remains one of the challenges facing efforts of addressing the Euro crisis (Lynn, 2011, p. 31). Entry into the Eurozone necessarily required member countries to cede some control of their economic structures to a centralized operational framework without mortgaging their sense of autonomy. Further, the challenge also involves the question of competition, which drove some countries to practice subjective accounting practices with the intention of protecting certain self-interests. According to some economic policies, the Euro crisis would have been averted had the member countries adjusted their accounting policies and operations in ways that embrace the aspect of representation as understood within the framework of fair trading practices (Arestis, 2012). Such structures would have provided the necessary points of economic convergence, which would have shielded the countries from the threats posed by the crisis. Much of the f ocus of the Euro crisis has involved unqualified accounting practices in the corporate world (Knight, 2012, p. 13). A number of banks, for instance, presented unqualified audit reports, which gave hints of growth based on misrepresentation of certain disclosures on assets and mortgages. Such banks later encountered numerous operational challenges that led to their being declared bankrupt. On this account, many banking institutions led to massive government expenditure in terms of bailouts, which were necessitated by the fact that failure to put in place appropriate regulatory mechanisms would expose the banking sector to the threat of collapse, which would then touch of a series of economic challenges that

Establish your Building Business Assignment Example | Topics and Well Written Essays - 2250 words

Establish your Building Business - Assignment Example Without doubt, the company will have process flows representing how all of these errands and employees interact with each to produce the ultimate service or product (Gainforte, 2010) As partners, we are going to set out expectations, entrust, progress the training time, and duplicate for growth. We will also be required to have procedures documented. In some cases, we will be required to have operations manual in place. This operations manual will ensure that customers have the same experience every time they encounter with my company. Conversely the relation between complexity and planning for buildings is something we are not going to overlook. We are going to build a large a large building enterprise, where the mission is critical and the system highly distributed, the need for data architect, infrastructure architect, business architect enterprise architect and solutions architect is going to arise. To maintain the building licenses it is important that to consider having a super intendent in place (Yetton, 2010). The superintendent should be included in the hierarchy of the buildings management. It is important to should ensure that the superintendent is respected and respected by the board and management. Ideally, the job of the board is to lay down policies, while the job of the management will be implanting those policies. The superintend job is to supervise the building staff, and report back to the management. Furthermore, for board to be successful, it should keep its directives and policy decisions to a minimum to allow their subordinates, to carry out polices and procedures that not only benefit the company, but also meet the building policies. Quality and control and safety should also be major concerns for project managers. Defects in constructed facilities could lead to heavy costs. Even so, with slight defects, this could lead to re-construction and or the closer of the facility operation. Additionally, accidents either fatal or not fatal may oc cur during construction processes. It will be, therefore, paramount that I hire project managers who are highly qualified. The project managers will ensure that proper job in done, and that no accidents occur in the construction process (Yetton, 2010). In order to keep and maintain the business and building licenses, I will be required to hire inspectors and quality assurance personnel. There job will be inspecting samples of materials in specialized laboratories to ensure adherence to regulatory requirements (Gainforte, 2010). It will be my great concern that I ensure the contractors I will hire in my company, will b conscious of these standards. I will also ensure that I encourage quality control among employees, too. As a contractor, my company will be responsible for all safety site operations, in accordance with the terms of the contract. Adequate training of employees is something I will ensure is observed so that the employees can implement their particular duties property. A fter being advised by my financial advisers, I favored a business that will be owned and operated more than individual. In short, I decided to structure the business as a partnership. Even so, I settled for general partnership, whereupon the partners will manage the company and bear debt responsibilities of the company. I settled for partnership business structure because of the tax treatment associated with it. Ideally,

Islamic Securitisation and Conventional Securitisation

Islamic Securitisation and Conventional Securitisation Introduction: According to the topic of discussing the differences between Islamic securitisation and conventional securitisation, the discussion will lead to the satisfactory aspects of comprehensive analysis of the information gathered during the research. Moreover, it continues with the Islamic securitisation structure on the qualitative as well as quantitative basis according to the difference from the conventional securitisation structure. Securitisation which openly deals with the trade have more emphasis on the aspects to provide lucidity that it is riba-free (non-Islamic interest free) and its mechanism is based on shariah compliant system. We will be discussing different aspects that provide a clearer picture to mechanism that how it works i.e. structure, elements of risk shifting (risk scattering) and risk sharing in the deemed process so far as the area requires a lot more research to acquire steadiness in financial world and to enrich more on the topic some distinctive facts and figure are discussed as well. Background information of the topic: From the beginning of the Islamic banking in early 1960s which reckons the acuity of Islamic Shariah according to Quran and Sunnah brought into account as legal maxims with many ideas to facilitates the use of finance in both debt based and equity based. Not only Muslims countries regarding Islamic securitisation is worried about many factors to find a way out to enrich financial systems many other countries however following the conventional financial and banking systems. In the start and yet it is quite infant situation of securitisation because of the collective concerns of lenders or financier and borrowers. Lately, it has to move on with incentive compatibility and attractiveness for investors. Financial intermediaries even nowadays face quite drastic situations despite their in-house financial management; debt handling being a global concern. There is a wider line drawn understanding the differences between Islamic ways and uses of securitisation and its conventional counterpar t though it seems quite trembling discussing about when it is debt based securitisation. Refer to the figures shown below which signifies the basic mechanism of securitisation; providing a clearer picture to its importance. According to Masum Billah M., in his article Shariah Frameworks of Securitisation in the Capital Market, he discusses about securitisation being a prevalent method of financing nowadays more precisely in corporate sector. Furthermore he illustrates securitisation that where the company pooled its illiquid assets together and issued a claim to a pool of assets and when the assets are securitised, it made the assets tradable in the financial market. Furthermore, he presented the simplest definition that the securitisation is a process where corporation converts its physical assets in to financial assets. Masum aggregated in his words about the assets that have to be securitised have to be illiquid – cannot be traded in share market or secondary market- and should also have produce cash flows over its lifetime. Besides that, the assets should have financial value so that they can be used as a claimed against the securities. From the above depiction, a securitisation engages the s ale of a large pool of assets by an entity or the originator that creates or purchases the assets in the course of its business to bankruptcy remote, special purpose vehicle (SPV). The SPV acts as an issuer, issue and sale the securities through either in a private placement or public offering. When securitisation process is closed funds flow from the purchasers of the securities to the issuers and from the Issuers to the Originator. All these transaction occur virtually simultaneously. (Masum) Hence, the above description is the basic structure of securitisation. The actual structures are more complex because it involves more elements and participants. Refer to the rainbow-pie chart which presents a practical implication of securitisation according to Commerz bank. The above implementation can be an example of securitisation though many different approaches and products that provide seamless structure on Shariah compliant way which lie still under research yet required to be evolved. Scope of the research: The entire research is nourished on the basis of salient research techniques which consist of a vast study of reference books, written journals (inclusive of e-journals), research papers, seminar notes, open survey from public and some online resources. Furthermore, it helped a lot as a combination of theoretical and statistical comparison between conventional and Islamic securitisation in the literature review (which encompasses the knowledge as well as defined focus on the topic) with ground reality at an optimum level. Literature Review: Before moving on with detailed analysis there is a need to proclaim types (structures) of securitisation in general depiction. According to Masum, there are three main structures commonly used in securitisation. The originator chooses between three types of structures: pass-throughs, asset backed bond and pay-through. Masum further defined those structures coming forth; pass-through structures likely represent the direct ownership by the originator in a portfolio of assets. The originator services the portfolio, makes collections, and passes them to the investors. In pass through, the securities is not debt obligations of the originator thus, do not appear on the originators financial statement. Since the ownership of the assets lies with the originator, pass-through is designed to represent an assignment of a portion of ownership, rights and obligation but not a conveyance of title. (Masum) Masum elaborates that the Asset-Backed bond is collaterised by a portfolio of assets. The Asset-Backed Bond is a debt obligation of the issuers. In the issuers financial statement, the collateral remains as assets and the Asset-Backed Bond appears as a liability. The cash flows from the asset are not dedicated to the investors. The investors only receive a part of the cash flows and the residual remains with the issuers. One of the important aspect of the Asset-Backed Bond is that the securities is over-collateralized i.e. the value of the underlying assets is significantly in excess of the total obligation. For example, Company A issued RM1, 000,000.00 of bond using the Asset-Backed Bond structures. The value of the underlying assets that backed the bond is RM2, 500,000.00. The issuer chooses to over-collateralised its bond in order to provide some level of comfort to the investors. (Discussed by M.M. Billah in his paper) Lastly, he concluded with the final structure of securitisation is the pay-through structures. This structure has combination of pass-through and Asset-Backed Bond. The bond is collateralized by a pool of assets and appears on the issuers balance sheet as a debt. However, the cash flows arise from the assets is passed to the investors. The issuer only earns the service fees from the investors. From the above description of the mentioned, we can see that pass-through is the structure closest to satisfy the Islamic principle. Under pass-through, the cash flows collected are dedicated to the investors and the issuer only earns the service charge. Besides that, the security does not classify as a debt by the originator. Henceforth, conventional securitisation must be secluded according to research in different products and approaches and thus a large part of the conventional securitisation market – for example, mortgage backed securities, would be prohibited because the income (th ough not the principal) element of the cash flow would be characterised as riba. Similarly, CDOs and other such instruments could not be allowed as an asset class as these represent Debt rather than an allowable commodity or activity. However, these restrictions do not mean that an Islamic securitisation market cannot develop. There are many classes of assets with a long history of securitisation that are halal (allowable), in particular any physical asset such as plant and machinery, and many of the techniques used in a conventional securitisation transaction are equally valid in an Islamic transaction. The remainder of this article will try to show just how similar those requirements are, and point out some further underlying differences in structuring a Sharia compliant securitisation. Mervyn and Kabir (2007) conversed Islamic point of view of investments in different aspects according to ethics and moral besides regulatory framework and it is quite well defined perception that an investor needs a brighter depiction of profit generation to allow him to think about different financial intermediaries in this modern world though it is going through analysis time to time since many years following their psyche on the other hand banks being financial intermediary have to put through making most of it avoiding concept that money should not be loan according to legal maxims. According to Ayub M. (2007), Islamic principles can make the difference and that Islamic finance is passing significant milestones; which lead entrepreneurs not to stop putting their research on and on. Islamic researchers are more concerned meeting shariah compliant regulatory requirements. Sohail (2006) overstated that Islamic retail banking and finance is not only designated for Muslim community on ly; which means Islamic retail banking products are adopted to some extent because of their competency and efficiency, and are being used under the umbrella of conventional (non-Islamic) banks; they often call it as window for Islamic banking products. Detailed analysis of differences between Islamic securitisation and its conventional counterpart: Islamic lending transactions are governed by the precepts of the shariah, which bans interest and stipulates that income must be derived as return from entrepreneurial investment. Since Islamic finance is predicated on asset backing and specific credit participation in identified business risk, structuring shariah-compliant securitisation seems straightforward. As mentioned in by Kabir and Mervyn (2007) according to Humayoun A. Dar; fixed-return modes deals with the control and management of funds as clients have the possession which was made available by the investors, financial frameworks are often used with different areas of Islamic banking products like investment accounts based on mudharabah and saving account based on wadia, inclusive of Islamic retail banking products like Islamic mortgages, Islamic auto finance, sukuk (Islamic bonds) and many other products dealt with the concept of asset-backing and riba-free i.e. Islamised frameworks. Nonetheless, financial institutions have been able to develop various forms of Islamic finance instruments that are virtually identical to their conventional counterparts in substance. Since most Islamic financial products are based on the concept of asset backing, the economic concept of asset securitisation is particularly amenable to the basic tenets of Islamic finance. Securitisation under Islam ic law bars interest income and must be structured in a way that rewards investors for their direct exposure to business risk, i.e., investors receive a share of profits commensurate to the risk they take on in lieu of pre-determined interest. All three asset types of Islamic finance are principally eligible for Islamic securitisation; however, unresolved issues, including restrictions on debt trading or the management of prepayment risk could limit their indiscriminate use as collateral. Characteristics of conventional securitisation only apply if they convey a sufficient element of ownership to investors as entrepreneurial investment in real economic activity within an interest-free structural arrangement. In addition, also administrative issues, such as underwriting standards, issue placement and the procurement of ratings, are subject to religious scrutiny. Any capital generated from securitised issuance under Islamic law is to be used exclusively used for the repayment of initial funding. Conventional securitisation, which originated in non-Islamic economies, invariably involves interest bearing debt. Although the religious prohibition of the exchange of debt and the required conferral of ownership interest to participate in business risk still poses challenges to further development of Islamic securitisation, the gradual acceptance of Islamic investment certificates, so-called sukuk bonds, represents a successful attempt to overcome these impediments based on the adequate interpretation and analogical reasoning of shariah principles applied in Islamic finance. Sukuks are shariah-compliant and tradable asset-backed, medium-term notes, which have been issued internationally by governments, quasi sovereign agencies, and corporations after their legitimization by the ruling of the Fiqh Academy of the Organization of the Islamic Conference in February of 1988. Sukuk notes convey equity interest to (capital market) investors in the form of a call option on partial or complete ownership of underlying reference assets, including the right to some calculable rate of return as a share of p rofit (secondary notes) and the repayment of the principal amount (primary notes). All three broad types of Islamic finance transactions (asset-, debt- and equity-based) can be reference assets of such Islamic securities. Following exhibits (3 and 4) provide the sukuk implementations. Detailed analysis of elements of risk shifting and risk sharing in securitisation process: Over the last five years, the sukuk has evolved as a viable form of capital-market-based Islamic structured finance, which reconciles the concept of securitisation and principles of the shariah law on the provision and use of financial products and services in a risk-mitigation structure subject to competitive pricing (El-Qorchi, 2005). Notwithstanding these religious constraints, Islamic finance can synthesize close equivalents to equity, mortgages, and derivatives known in conventional finance. To this end, it relies on structural arrangements of asset transfer between borrowers and lenders to emulate traditional interest-bearing financial contracts. Since lending transactions under Islamic law are based on the concept of asset backing and specific credit participation in identified business risk, it also appears relatively straightforward to structure a shariah-compliant asset-backed securitisation (ABS) that delivers a risk-return profile similar to a conventional structure. Howe ver, conventional securitisation was developed in non- Islamic economies and invariably involves interest-bearing debt. Essentially, asset securitisation represents a cost-efficient and flexible structured finance1 technique of liquidity transformation and risk transfer, which converts present or future asset claims of varying maturity and quality into tradable debt securities. The various methods of securitisation have much to offer, but so far they have found only limited acceptance in Islamic finance due to religious restrictions on the sale and purchase of interest-bearing debt and legal uncertainty surrounding the enforceability of investor interest under Islamic jurisprudence. Over the last five years, the nascent Islamic securitisation market has seen many positive developments owing to the adoption of enabling capital market regulations, a favorable macroeconomic environment, and financial innovation aimed at establishing shariah compliance. The most popular ABS structures w ithin Islamic finance are commonly referred to as sukuk bonds backed by either one of the three basic forms of Islamic finance (synthetic loans, sale- leasebacks, or profit-sharing arrangements). Asset securitisation describes the process and the result of issuing certificates of ownership as pledge against existing or future cash flows from a diversified pool of assets (reference portfolio) to investors. (Jobst, 2006b). Foreign Investment Insurance Policy-FIIP by The Islamic Corporation For The Insurance of Investment And   Export Credit ICIEC Islamic securitisation transforms bilateral risk sharing between borrowers and lenders in Islamic finance into the market-based refinancing of one or more underlying Islamic finance transactions. Protection against basic risk; can be unless returns for investors are linked to the rate of interest on the underlying assets, there is a risk that the relationship between the rate paid on the underlying assets and that paid on the securities will differ over time. Normally a swap will be arranged to protect against this risk. In addition, conventional securitisation is virtually absent in Islamic countries, where Islamic home finance and sukuks provide a potentially untapped market for structured finance. Islamic securitisation complements the conventional ABS universe as an alternative and more diversified funding option that broadens the pricing spectrum and asset supply as high demand for alternative investment products causes greater lending width amid a low-yield market environment. In some circumstances, the shariah compliance also entails tax exemptions when investors hold direct ownership interest in the securitised assets. Conclusion: Islamic securitisation is a helpful and important tool, which must be carried out prior to the issuance of Islamic bonds or Islamic Debt Securities. By securitising assets, the Islamic way, Muslim investors can now participate in the bond market without worrying that the process of securitising the assets and issuing of the bonds are contradictory to the Islamic teachings. Islamic finance is being more attractive for not only the Muslim community but for non-muslim world. Its products are being progressive even though there been some hurdles and late development of Islamic banking and finance industry and moreover it is has been so securitised for customer satisfaction and avoided almost the pity of riba-based banking structure. In this regard, it has a more focus on the revision and research on the proposed and as well as on financial structures that are being practiced nowadays. It has been proven that many big names like HSBC, Lloyds and Standard Chartered are putting there focus on Islamic products and especially on retail banking products and securitisation products. Suggestions and Recommendations: Islamic Finance Expanding Rapidly (2007) by IMF(MCM Dept.) Many Islamic products have the thirst to be researched on and provided quite attractive picture for entrepreneur to spot focus on Islamic finance industry. Besides many Islamic retail banking products, Sukuk (i.e. Islamic Bonds – despite of the type), Takaful (Insurance) and Tawarruq (AAOIFI standardised loan) are called out as the future for Islamic banking and might have a better attraction to conventional banking world as well. References(s): Aggarwal, R. K. Yousef, T. (2000) Islamic Banking and Investment Financing, Journal of Money, Credit and Banking, Blackwell Publishing Ahmad Ausaf (1993) Research Paper 20: Contemporary practices of Islamic financing techniques, Islamic Research and Training Institute, Islamic Development Bank, Jeddah Ahmad Ausaf (1987) Development and Problems of Islamic Banks, Islamic Development Bank, Jeddah Ayub M. (2007) Understanding Islamic Finance, John Wiley and Sons Ltd, Chichester Commerz Bank, Securitisation of Banks, https://cbcm.commerzbank.com/en/site/banks/securitisation_cf_banks/index.jsp [Access Date: 14th August 2010] Deringer (2006), Islamic finance: basic principles and structures Freshfields Bruckhaus Consultants, pp 30. Dualeh, S. (1998). Islamic Securitisation: Practical Aspects. Paper presented at the World Conference on Banking, July 8-9, 1998, Geneva. El-Qorchi, Mohammed (2005), Islamic Finance Gears Up, Finance and Development (December), International Monetary Fund (IMF), 46-9. Fabozzi, F. J. (ed). (2001). Accessing Capital Markets through Securitisation. New York: Fran J Fabozzi Associates. Hassan Kabir M. Lewis Mervyn K. (2007) Handbook of Islamic Banking, Edward Elgar Publishing Ltd., Cheltenham IMF, Islamic Finance Expanding Rapidly, URL: [Accessed on: 18th August 2010] http://www.imf.org/external/pubs/ft/survey/so/2007/res0919b.htm Islamic Credit and Political Risk Insurance, A Useful Risk Management Tool For BanksURL:http://www.kantakji.com/fiqh/Files/Insurance/Islamic%20Credit%20and%20Political%20Risk%20Insurance.htm [Access Date: 17th August 2010] Jaffar S. (2006) Islamic Retail Banking and Finance: Global Challenges and Opportunities, Euromoney Books, London Jobst, Andreas A. (2006b), Asset Securitisation: A Refinancing Tool for Firms and Banks, Managerial Finance, Vol. 32, No. 9, 731-60. Kazarian G. E. (1993) Islamic versus traditional banking: Financial Innovation in Egypt, Boulder: Westview Press Kothari, Vinod (n.d.). Securitisation: a Primer. Available at: , Access Date: 17th August 2010. Manjoo F. A., (2005) Securitisation: An Important Recipe for Islamic Banks A Survey, Review of Islamic Economics, Vol. 9, No. 1, 2005, pp.53 Masum Billah, M. (unknown), Shariah Frameworks of Securitisation in the Capital Market URL: http://www.applied-islamicfinance.com/sp_securitisation_1.htm [Access Date: 10th August 2010] Mullineux, A. W. Murinde, V. (2003) Handbook of International Banking, Edward Elgar Publishing Ltd., Cheltenham Usmani M. M. T. (1988), An Introduction to Islamic Finance, Islamic Publication, pp. 1-5, Karachi Zaher, Tarek S. Hassan, Kabir M. (2001) A comparative Literature Survey of Islamic Finance and Banking; Financial Markets, Institutions and Intruments, Blackwell, New York Islamic Securitisation and Conventional Securitisation Islamic Securitisation and Conventional Securitisation Introduction: According to the topic of discussing the differences between Islamic securitisation and conventional securitisation, the discussion will lead to the satisfactory aspects of comprehensive analysis of the information gathered during the research. Moreover, it continues with the Islamic securitisation structure on the qualitative as well as quantitative basis according to the difference from the conventional securitisation structure. Securitisation which openly deals with the trade have more emphasis on the aspects to provide lucidity that it is riba-free (non-Islamic interest free) and its mechanism is based on shariah compliant system. We will be discussing different aspects that provide a clearer picture to mechanism that how it works i.e. structure, elements of risk shifting (risk scattering) and risk sharing in the deemed process so far as the area requires a lot more research to acquire steadiness in financial world and to enrich more on the topic some distinctive facts and figure are discussed as well. Background information of the topic: From the beginning of the Islamic banking in early 1960s which reckons the acuity of Islamic Shariah according to Quran and Sunnah brought into account as legal maxims with many ideas to facilitates the use of finance in both debt based and equity based. Not only Muslims countries regarding Islamic securitisation is worried about many factors to find a way out to enrich financial systems many other countries however following the conventional financial and banking systems. In the start and yet it is quite infant situation of securitisation because of the collective concerns of lenders or financier and borrowers. Lately, it has to move on with incentive compatibility and attractiveness for investors. Financial intermediaries even nowadays face quite drastic situations despite their in-house financial management; debt handling being a global concern. There is a wider line drawn understanding the differences between Islamic ways and uses of securitisation and its conventional counterpar t though it seems quite trembling discussing about when it is debt based securitisation. Refer to the figures shown below which signifies the basic mechanism of securitisation; providing a clearer picture to its importance. According to Masum Billah M., in his article Shariah Frameworks of Securitisation in the Capital Market, he discusses about securitisation being a prevalent method of financing nowadays more precisely in corporate sector. Furthermore he illustrates securitisation that where the company pooled its illiquid assets together and issued a claim to a pool of assets and when the assets are securitised, it made the assets tradable in the financial market. Furthermore, he presented the simplest definition that the securitisation is a process where corporation converts its physical assets in to financial assets. Masum aggregated in his words about the assets that have to be securitised have to be illiquid – cannot be traded in share market or secondary market- and should also have produce cash flows over its lifetime. Besides that, the assets should have financial value so that they can be used as a claimed against the securities. From the above depiction, a securitisation engages the s ale of a large pool of assets by an entity or the originator that creates or purchases the assets in the course of its business to bankruptcy remote, special purpose vehicle (SPV). The SPV acts as an issuer, issue and sale the securities through either in a private placement or public offering. When securitisation process is closed funds flow from the purchasers of the securities to the issuers and from the Issuers to the Originator. All these transaction occur virtually simultaneously. (Masum) Hence, the above description is the basic structure of securitisation. The actual structures are more complex because it involves more elements and participants. Refer to the rainbow-pie chart which presents a practical implication of securitisation according to Commerz bank. The above implementation can be an example of securitisation though many different approaches and products that provide seamless structure on Shariah compliant way which lie still under research yet required to be evolved. Scope of the research: The entire research is nourished on the basis of salient research techniques which consist of a vast study of reference books, written journals (inclusive of e-journals), research papers, seminar notes, open survey from public and some online resources. Furthermore, it helped a lot as a combination of theoretical and statistical comparison between conventional and Islamic securitisation in the literature review (which encompasses the knowledge as well as defined focus on the topic) with ground reality at an optimum level. Literature Review: Before moving on with detailed analysis there is a need to proclaim types (structures) of securitisation in general depiction. According to Masum, there are three main structures commonly used in securitisation. The originator chooses between three types of structures: pass-throughs, asset backed bond and pay-through. Masum further defined those structures coming forth; pass-through structures likely represent the direct ownership by the originator in a portfolio of assets. The originator services the portfolio, makes collections, and passes them to the investors. In pass through, the securities is not debt obligations of the originator thus, do not appear on the originators financial statement. Since the ownership of the assets lies with the originator, pass-through is designed to represent an assignment of a portion of ownership, rights and obligation but not a conveyance of title. (Masum) Masum elaborates that the Asset-Backed bond is collaterised by a portfolio of assets. The Asset-Backed Bond is a debt obligation of the issuers. In the issuers financial statement, the collateral remains as assets and the Asset-Backed Bond appears as a liability. The cash flows from the asset are not dedicated to the investors. The investors only receive a part of the cash flows and the residual remains with the issuers. One of the important aspect of the Asset-Backed Bond is that the securities is over-collateralized i.e. the value of the underlying assets is significantly in excess of the total obligation. For example, Company A issued RM1, 000,000.00 of bond using the Asset-Backed Bond structures. The value of the underlying assets that backed the bond is RM2, 500,000.00. The issuer chooses to over-collateralised its bond in order to provide some level of comfort to the investors. (Discussed by M.M. Billah in his paper) Lastly, he concluded with the final structure of securitisation is the pay-through structures. This structure has combination of pass-through and Asset-Backed Bond. The bond is collateralized by a pool of assets and appears on the issuers balance sheet as a debt. However, the cash flows arise from the assets is passed to the investors. The issuer only earns the service fees from the investors. From the above description of the mentioned, we can see that pass-through is the structure closest to satisfy the Islamic principle. Under pass-through, the cash flows collected are dedicated to the investors and the issuer only earns the service charge. Besides that, the security does not classify as a debt by the originator. Henceforth, conventional securitisation must be secluded according to research in different products and approaches and thus a large part of the conventional securitisation market – for example, mortgage backed securities, would be prohibited because the income (th ough not the principal) element of the cash flow would be characterised as riba. Similarly, CDOs and other such instruments could not be allowed as an asset class as these represent Debt rather than an allowable commodity or activity. However, these restrictions do not mean that an Islamic securitisation market cannot develop. There are many classes of assets with a long history of securitisation that are halal (allowable), in particular any physical asset such as plant and machinery, and many of the techniques used in a conventional securitisation transaction are equally valid in an Islamic transaction. The remainder of this article will try to show just how similar those requirements are, and point out some further underlying differences in structuring a Sharia compliant securitisation. Mervyn and Kabir (2007) conversed Islamic point of view of investments in different aspects according to ethics and moral besides regulatory framework and it is quite well defined perception that an investor needs a brighter depiction of profit generation to allow him to think about different financial intermediaries in this modern world though it is going through analysis time to time since many years following their psyche on the other hand banks being financial intermediary have to put through making most of it avoiding concept that money should not be loan according to legal maxims. According to Ayub M. (2007), Islamic principles can make the difference and that Islamic finance is passing significant milestones; which lead entrepreneurs not to stop putting their research on and on. Islamic researchers are more concerned meeting shariah compliant regulatory requirements. Sohail (2006) overstated that Islamic retail banking and finance is not only designated for Muslim community on ly; which means Islamic retail banking products are adopted to some extent because of their competency and efficiency, and are being used under the umbrella of conventional (non-Islamic) banks; they often call it as window for Islamic banking products. Detailed analysis of differences between Islamic securitisation and its conventional counterpart: Islamic lending transactions are governed by the precepts of the shariah, which bans interest and stipulates that income must be derived as return from entrepreneurial investment. Since Islamic finance is predicated on asset backing and specific credit participation in identified business risk, structuring shariah-compliant securitisation seems straightforward. As mentioned in by Kabir and Mervyn (2007) according to Humayoun A. Dar; fixed-return modes deals with the control and management of funds as clients have the possession which was made available by the investors, financial frameworks are often used with different areas of Islamic banking products like investment accounts based on mudharabah and saving account based on wadia, inclusive of Islamic retail banking products like Islamic mortgages, Islamic auto finance, sukuk (Islamic bonds) and many other products dealt with the concept of asset-backing and riba-free i.e. Islamised frameworks. Nonetheless, financial institutions have been able to develop various forms of Islamic finance instruments that are virtually identical to their conventional counterparts in substance. Since most Islamic financial products are based on the concept of asset backing, the economic concept of asset securitisation is particularly amenable to the basic tenets of Islamic finance. Securitisation under Islam ic law bars interest income and must be structured in a way that rewards investors for their direct exposure to business risk, i.e., investors receive a share of profits commensurate to the risk they take on in lieu of pre-determined interest. All three asset types of Islamic finance are principally eligible for Islamic securitisation; however, unresolved issues, including restrictions on debt trading or the management of prepayment risk could limit their indiscriminate use as collateral. Characteristics of conventional securitisation only apply if they convey a sufficient element of ownership to investors as entrepreneurial investment in real economic activity within an interest-free structural arrangement. In addition, also administrative issues, such as underwriting standards, issue placement and the procurement of ratings, are subject to religious scrutiny. Any capital generated from securitised issuance under Islamic law is to be used exclusively used for the repayment of initial funding. Conventional securitisation, which originated in non-Islamic economies, invariably involves interest bearing debt. Although the religious prohibition of the exchange of debt and the required conferral of ownership interest to participate in business risk still poses challenges to further development of Islamic securitisation, the gradual acceptance of Islamic investment certificates, so-called sukuk bonds, represents a successful attempt to overcome these impediments based on the adequate interpretation and analogical reasoning of shariah principles applied in Islamic finance. Sukuks are shariah-compliant and tradable asset-backed, medium-term notes, which have been issued internationally by governments, quasi sovereign agencies, and corporations after their legitimization by the ruling of the Fiqh Academy of the Organization of the Islamic Conference in February of 1988. Sukuk notes convey equity interest to (capital market) investors in the form of a call option on partial or complete ownership of underlying reference assets, including the right to some calculable rate of return as a share of p rofit (secondary notes) and the repayment of the principal amount (primary notes). All three broad types of Islamic finance transactions (asset-, debt- and equity-based) can be reference assets of such Islamic securities. Following exhibits (3 and 4) provide the sukuk implementations. Detailed analysis of elements of risk shifting and risk sharing in securitisation process: Over the last five years, the sukuk has evolved as a viable form of capital-market-based Islamic structured finance, which reconciles the concept of securitisation and principles of the shariah law on the provision and use of financial products and services in a risk-mitigation structure subject to competitive pricing (El-Qorchi, 2005). Notwithstanding these religious constraints, Islamic finance can synthesize close equivalents to equity, mortgages, and derivatives known in conventional finance. To this end, it relies on structural arrangements of asset transfer between borrowers and lenders to emulate traditional interest-bearing financial contracts. Since lending transactions under Islamic law are based on the concept of asset backing and specific credit participation in identified business risk, it also appears relatively straightforward to structure a shariah-compliant asset-backed securitisation (ABS) that delivers a risk-return profile similar to a conventional structure. Howe ver, conventional securitisation was developed in non- Islamic economies and invariably involves interest-bearing debt. Essentially, asset securitisation represents a cost-efficient and flexible structured finance1 technique of liquidity transformation and risk transfer, which converts present or future asset claims of varying maturity and quality into tradable debt securities. The various methods of securitisation have much to offer, but so far they have found only limited acceptance in Islamic finance due to religious restrictions on the sale and purchase of interest-bearing debt and legal uncertainty surrounding the enforceability of investor interest under Islamic jurisprudence. Over the last five years, the nascent Islamic securitisation market has seen many positive developments owing to the adoption of enabling capital market regulations, a favorable macroeconomic environment, and financial innovation aimed at establishing shariah compliance. The most popular ABS structures w ithin Islamic finance are commonly referred to as sukuk bonds backed by either one of the three basic forms of Islamic finance (synthetic loans, sale- leasebacks, or profit-sharing arrangements). Asset securitisation describes the process and the result of issuing certificates of ownership as pledge against existing or future cash flows from a diversified pool of assets (reference portfolio) to investors. (Jobst, 2006b). Foreign Investment Insurance Policy-FIIP by The Islamic Corporation For The Insurance of Investment And   Export Credit ICIEC Islamic securitisation transforms bilateral risk sharing between borrowers and lenders in Islamic finance into the market-based refinancing of one or more underlying Islamic finance transactions. Protection against basic risk; can be unless returns for investors are linked to the rate of interest on the underlying assets, there is a risk that the relationship between the rate paid on the underlying assets and that paid on the securities will differ over time. Normally a swap will be arranged to protect against this risk. In addition, conventional securitisation is virtually absent in Islamic countries, where Islamic home finance and sukuks provide a potentially untapped market for structured finance. Islamic securitisation complements the conventional ABS universe as an alternative and more diversified funding option that broadens the pricing spectrum and asset supply as high demand for alternative investment products causes greater lending width amid a low-yield market environment. In some circumstances, the shariah compliance also entails tax exemptions when investors hold direct ownership interest in the securitised assets. Conclusion: Islamic securitisation is a helpful and important tool, which must be carried out prior to the issuance of Islamic bonds or Islamic Debt Securities. By securitising assets, the Islamic way, Muslim investors can now participate in the bond market without worrying that the process of securitising the assets and issuing of the bonds are contradictory to the Islamic teachings. Islamic finance is being more attractive for not only the Muslim community but for non-muslim world. Its products are being progressive even though there been some hurdles and late development of Islamic banking and finance industry and moreover it is has been so securitised for customer satisfaction and avoided almost the pity of riba-based banking structure. In this regard, it has a more focus on the revision and research on the proposed and as well as on financial structures that are being practiced nowadays. It has been proven that many big names like HSBC, Lloyds and Standard Chartered are putting there focus on Islamic products and especially on retail banking products and securitisation products. Suggestions and Recommendations: Islamic Finance Expanding Rapidly (2007) by IMF(MCM Dept.) Many Islamic products have the thirst to be researched on and provided quite attractive picture for entrepreneur to spot focus on Islamic finance industry. Besides many Islamic retail banking products, Sukuk (i.e. Islamic Bonds – despite of the type), Takaful (Insurance) and Tawarruq (AAOIFI standardised loan) are called out as the future for Islamic banking and might have a better attraction to conventional banking world as well. References(s): Aggarwal, R. K. Yousef, T. (2000) Islamic Banking and Investment Financing, Journal of Money, Credit and Banking, Blackwell Publishing Ahmad Ausaf (1993) Research Paper 20: Contemporary practices of Islamic financing techniques, Islamic Research and Training Institute, Islamic Development Bank, Jeddah Ahmad Ausaf (1987) Development and Problems of Islamic Banks, Islamic Development Bank, Jeddah Ayub M. (2007) Understanding Islamic Finance, John Wiley and Sons Ltd, Chichester Commerz Bank, Securitisation of Banks, https://cbcm.commerzbank.com/en/site/banks/securitisation_cf_banks/index.jsp [Access Date: 14th August 2010] Deringer (2006), Islamic finance: basic principles and structures Freshfields Bruckhaus Consultants, pp 30. Dualeh, S. (1998). Islamic Securitisation: Practical Aspects. Paper presented at the World Conference on Banking, July 8-9, 1998, Geneva. El-Qorchi, Mohammed (2005), Islamic Finance Gears Up, Finance and Development (December), International Monetary Fund (IMF), 46-9. Fabozzi, F. J. (ed). (2001). Accessing Capital Markets through Securitisation. New York: Fran J Fabozzi Associates. Hassan Kabir M. Lewis Mervyn K. (2007) Handbook of Islamic Banking, Edward Elgar Publishing Ltd., Cheltenham IMF, Islamic Finance Expanding Rapidly, URL: [Accessed on: 18th August 2010] http://www.imf.org/external/pubs/ft/survey/so/2007/res0919b.htm Islamic Credit and Political Risk Insurance, A Useful Risk Management Tool For BanksURL:http://www.kantakji.com/fiqh/Files/Insurance/Islamic%20Credit%20and%20Political%20Risk%20Insurance.htm [Access Date: 17th August 2010] Jaffar S. (2006) Islamic Retail Banking and Finance: Global Challenges and Opportunities, Euromoney Books, London Jobst, Andreas A. (2006b), Asset Securitisation: A Refinancing Tool for Firms and Banks, Managerial Finance, Vol. 32, No. 9, 731-60. Kazarian G. E. (1993) Islamic versus traditional banking: Financial Innovation in Egypt, Boulder: Westview Press Kothari, Vinod (n.d.). Securitisation: a Primer. Available at: , Access Date: 17th August 2010. Manjoo F. A., (2005) Securitisation: An Important Recipe for Islamic Banks A Survey, Review of Islamic Economics, Vol. 9, No. 1, 2005, pp.53 Masum Billah, M. (unknown), Shariah Frameworks of Securitisation in the Capital Market URL: http://www.applied-islamicfinance.com/sp_securitisation_1.htm [Access Date: 10th August 2010] Mullineux, A. W. Murinde, V. (2003) Handbook of International Banking, Edward Elgar Publishing Ltd., Cheltenham Usmani M. M. T. (1988), An Introduction to Islamic Finance, Islamic Publication, pp. 1-5, Karachi Zaher, Tarek S. Hassan, Kabir M. (2001) A comparative Literature Survey of Islamic Finance and Banking; Financial Markets, Institutions and Intruments, Blackwell, New York