Why Standard Chartered Bank Operates Outside UK

Standard Chartered bank  is a UK bank with its  headquarters in London the assumed hob of financial activities in Europe. Standard Chartered bank has little commercial activities in UK compared with the financial activities in Asia, Africa and some part of middle east.

The question that comes to mind is why did Standard Chartered moved? or why don't they have considerable presence in the UK or even EU at large? Our  submission at EcoInshore is that, there  has always been contagion effects in the UK banking sector where the problem with one financial institution affects the other this is because of the exposure of trading of these other banks in the same market, the risk of one will ultimately affect the other.

The British banks that operates and realise more than 60% of their business activities  in the UK like Lloyds banking group , Royal Bank of Scotland (RBS) fell victim of this contagion effect predominantly caused by the Euro crisis which eventually affects their  balance sheet position and profits.  The unwillingness to diversify and enter into the emerging markets in other to hedge their risk exposure to Euro lead them to government bailout. This is evident because the UK government had to use tax payers money to bail out both Lloyds bank and RBS with the government having 43% stake and 83% respectively.

The two British banks Standard Chartered and HSBC have significantly diversify their business operations in Asia, Africa, Latin America and Middle east see their businesses not only grow compared to its other UK banks but with no bail out from government. 

Standard Chartered bank half year result of 2012 shows Income growth of 9%  these growth are based on 2 elements which are not evident in other UK banks  like  RBS and Lloyds bank.

1. Diversification and multiple income engines with growth rates in double digit : UK and America 26% , China 22% , Malaysia  21%, Indonesia 20% , Korea 13%  and Hong Kong 10%.

2. Cost and risk : The Payment Protection Insurance(PPI) provisions have depleted the profits Lloyds and RBS because of their more reliance on the UK increased their cost. Standard Charted have limited exposure to the Euro though but only acts as a bridge to link the Asia ,Africa with Euro

Though some might argue that Standard Chartered bank is not much of a retail bank that is why they do not have much presence in UK, but they understood that doing business in Malaysia, Singapore , china , Indonesia, Africa and middle east has been the best business decision they make because these regions make up 90% of their operating profit in the half year result.  

Islamic Finance - My Understanding

Image courtesy: Capital Business

A friend once asked me is Islamic Finance and banking for only Muslim? This prod me to write this short piece based on my understanding. Many people believed that since the name says 'Islamic' it simply has to do with Muslims. It is a financial system that allows all and sundry to participate irrespective of their religious beliefs.

Islamic finance and banking  sometimes called Non- Interest Finance can be said to be financial activities which is based on Islamic principles that forbids interest 'Riba' and financial speculation. It focuses more on risk and profit sharing which is the basic principle.

The major principles :

Non-Interest (Riba) : The conventional banking focuses on taking and giving interest  but in Islamic finance, it prohibits any payment above the actual amount of principal been borrowed.

Risk Sharing: It is financial system that focuses on profit, loss and risk sharing as well as participation of parties involved the transaction.

Investment in gambling and dealings in alcohol is prohibited.

Market prices are determined based on the forces of demand and supply and not on speculation.

Finally, non -Interest finance as I like to call it is centred on fair, transparency and risk sharing in all dealings. I will follow up this short piece with my personal opinion on Islamic finance and the financial crisis.