By Dr Kamal Munir, Reader in Strategy and Policy at Cambridge Judge Business School
By the manner in which they managed to weather the global financial crisis and outperform conventional banks, the stability of Islamic banks has triggered a lively debate on the nature of the conventional system overall and the risks it entails.
Islamic finance represents one of the fastest growth fields in global finance – since 2006, the asset base has grown by 150% and is forecast to reach $1.8 trillion this year. Given the stability that Islamic banks offer, and the strict constraints under which they function, this is a tremendous achievement. Going forward, the growth rate is likely to remain steady while opportunities will multiply. Above all, the sector is likely to avoid the crises that have become the norm in conventional finance. So what is it that makes the sector so socially desirable and stable? It comes down to three key features:
1. It disallows interest, or ‘riba’
In Islamic finance, one must work for profits, and simply lending money to someone who needs it does not count as work. Under Islamic law, money must not be allowed to create more money. Instead, a bank must provide some service to ‘earn’ its profits. Thus, instead of traditional accounts with given interest rates, Islamic banks offer accounts which offer profit/loss, with the bank purchasing assets with your money which generate returns. In particular, charging high interest rates to someone in need is considered unscrupulous, leaving no space for business models like Wonga.com’s.
2. No room for speculation
The second thing not allowed in Islamic finance is ‘gharar’ or high degrees of uncertainty. All possible risks must be identified to investors, and all relevant information disclosed. Islamic finance prohibits the selling of something one does not own, since that introduces the risk of its unavailability later on. This rules out investments in conventional derivatives, which require speculation about the future subject to excessive risks. This is also the key reason why Islamic banks survived 2007 unscathed (no exposure to derivatives).
3. Keeping it moral
Finally Islamic finance requires that you only invest in ethical causes or projects. Anything unethical or socially irresponsible, from weapons to gambling or adult entertainment cannot be invested in. This produces a very strong alignment between Islamic investments and socially responsible funds.
There are thus very strict constraints that Islamic finance puts on the conventional finance model which of course is irrespective of the profit potential.
Weathering the financial crisis
The fact that Islamic finance weathered the storm so well during the crisis (although later, when the financial economy led to the collapse of the real economy, Islamic banks also suffered along with everyone else) was essentially due to Islamic finance’s prohibition of investment into speculative instruments, that later turned into toxic assets for the conventional banking system. Combined with excessive leverage, conventional banks were left with excessive risk which Islamic banks stayed away from. Several analysts (including the IMF) highlighted Islamic finance as an alternative model that avoids the risks that conventional finance exposes us to and discourages socially irresponsible investments.
Although the modern Islamic banking movement originates from around the 1950s, it really started to develop in the mid-1970s following the 1973 oil crises. Then during the 1990s, Islamic institutions flourished by becoming more and more innovative and developing more complex mechanisms and structures to meet the demands of modern day business. As regulatory regimes in an increasing number of countries developed mechanisms to regulate Islamic finance, products became more standardised and the segment grew rapidly.
This is further driven by a wider realisation of the crucial vulnerabilities of conventional finance, which brought the global economy to its knees in 2007. There are many who flocked to Islamic banks during the crisis and the challenge for the latter now is retaining these consumers.
Finally, Islamic banks have become a key source of investment into large infrastructural projects around the world, through Islamic bonds (sukuks) and other instruments.
Shaping the future of the economy
The financial crisis has caused people and organisations to look for an alternative, and a focus on the Islamic finance model can offer food for thought here. At the same time, familiarity with the competitive dynamics of this rapidly growing sector can open up myriad possibilities for all stakeholders in the global economy.
The Cambridge Judge Business School Executive Education Islamic finance programme is one such course that can aid this process.
The two-day programme will be hosted in Cambridge, Dubai, and London and will provide an introduction to Islamic finance and banking whilst also covering the whole product profile in Islamic finance. It will also talk about various models and strategy and innovation in the context of Islamic markets.
The first Islamic Finance programme will take place on 14-15 November 2013 in Cambridge. For full details visit: https://www.jbs.cam.ac.uk/execed/open/islamicfinance.html
For more information on the custom executive education programmes at Cambridge Judge Business School, visit www.jbs.cam.ac.uk
Five features that decrease the value of your home
When you’re preparing to sell your house or flat you might think of various steps you could take that might increase its value, such as converting unused space to a new room. But another important factor you need to consider is how certain existing features might actually decrease the value of your home, making it harder to find a buyer at the price you’re seeking.
Several features large and small can have a negative impact on your home’s value
Homeowners looking to sell their properties need to make sure that their house or flat looks as best as it can before potential buyers come to visit on viewings. A tidy and well-maintained house will help increase the overall perceived value of the property.
But there are sometimes issues with homes that can decrease the total value of your home, at least as far as prospective buyers are concerned. And as the home buying experts at LDN Properties know, some of these features might not be immediately obvious as the reason why you’re not able to find a buyer at your current asking price.
When you’re ready to sell your house or flat, check the list below to see whether the property has any of the features that might be lowering its value below what you’d like to get in a sale.
Five features that can decrease the perceived value of your property
Some features at a home will be incredibly unique, such as the recent story about a house that’s struggling to sell because it’s located next to a graveyard – and the plan for trying to finally secure a buyer is to give the buyer a free burial plot. There’s not much that particular homeowner can do to solve their issue, but it’s also a problem very specific to their home.
In contrast, there are a number of common features at houses and flats that can reduce their vale. The following list includes five property features that can decrease the total value of your home, making it harder for you to sell at the price that you might want or need:
Outbuildings in poor condition
Although a well-kept greenhouse, garage or shed can be attractive to buyers, they can also be major turnoffs if they are in poor condition. If you have an outbuilding on your land that is in such a bad state that demolition is the only solution, this will detract from your home’s value.
Cluttered and dirty rooms
If the rooms in your house are cluttered with furniture and other items, or they are dirty, or both, this will be a turnoff to many buyers who come to see the house on viewings. If your house is full of clutter it will make the rooms look smaller than they actually are, which will make visitors think the space is worth less than what you are asking.
Having a swimming pool is not a common feature at many homes, but it is one that can be a significant negative attribute despite some people seeing it is a luxury perk. That’s because the cost of maintaining a swimming pool is very high, and it’s something many people don’t want to take on when they’re looking at buying a property.
First impressions always matter, and that’s the case when selling your home. If you have a garden and it is overgrown with weeds and other mess, it will not be appealing to buyers who come to visit on viewings. Having an untidy garden can make people think that your home is worth less than it actually is, making it harder for you to secure a sale.
If your home has a structural problem it can devalue your house, possibly by thousands of pounds depending on the scope of the problem. Among the various features that would be considered structural problems are leaks, subsidence, the presence of the invasive species Japanese knotweed, and other issues that will lower your property’s overall value.
Make changes to your property if you have any of the listed negative features
If your house or flat has any of the above features, you should consider ways that you could address them in order to prevent the value of your property being impacted.
For some projects that might be relatively easy, for example by tidying up the garden or by removing clutter from rooms around the house. Other larger-scale fixes will cost you significant time and money, such as removing a swimming pool if there’s one at your home.
Only do the corrective work for which you have the time and money, and don’t overextend yourself. But do make changes to your home if you have any or all of the listed features, because your priority should be getting as much money for selling your home as possible.
This is a Sponsored Feature.
Do you know where the tax risks are in your business?
By Simon Crookston, Corporate Tax Partner at Crowe UK
Many tax and finance professionals will have noted a trend in recent years, whereby there is greater emphasis on the processes and controls in place to ensure good tax governance.
As a consequence, many large and owner managed businesses are increasing their focus on tax governance, ensuring robust processes and controls are in place; the emphasis is now on ‘how’ tax compliance is dealt with and making sure the right amount of tax is paid at the right time.
The on-going COVID-19 pandemic has accelerated this process, as finance teams have been forced to proactively manage their cash flows, while also reassessing the robustness of their working practices, systems and controls. In some instances, processes and controls based around physical proximity of staff have been shown to be out of date and in need of re-designing.
Ensuring that there is tax integrity within your business is now critical and reflects the wider changing climate in which businesses and tax advisors now operate. Factors influencing this trend include:
- significant amounts of change in the tax regime, both domestically and internationally
- digitisation and new technologies leading to new business models and ways of selling goods and services to customers
- tax authorities focussing on the use of technology to provide real time reporting, for example Making Tax Digital for VAT and Coronavirus Job Retention Scheme claims to HMRC
- finance departments being tasked with providing certainty over the integrity of all taxes
- the implementation of the corporate criminal offence regime, which potentially carries an unlimited fine for all businesses that fail to implement reasonable procedures to prevent the facilitation of tax evasion
- the recent DAC 6 EU regulations requiring the reporting of tax schemes
Tax has also become a reputational risk to businesses. Organisations now operate in a world where tax is considered a moral issue and is front page news. Consequently, many boardrooms and owner managers are focused on ensuring that they do not face negative publicity from their tax affairs.
This trend is expected to continue with increased scrutiny by the media of the taxes paid and claims made by companies in the wake of the COVID-19 pandemic and the punitive measures being taken by HMRC to challenge tax evasion and difficult economic times.
Robust processes and controls can also make it easier for your business to adapt to change. This could be change within the business such as new supply chains or entering new markets, or it could be change driven by external factors, such as changes in tax legislation or events such as Brexit.
The impact of poor governance
Over the last few years HMRC’s powers have increased with the introduction of new information and data gathering powers and with the greater use of technology to identify those people and organisations who are understating and underpaying their tax liability.
As well as receiving information from overseas tax authorities, HMRC’s Connect Computer System, which is essentially a supercomputer, draws huge amounts of data and information from numerous sources including tax records, online platforms, social media information, government departments and websites, bank data and web browsing information to build up a complex ‘tax picture’ on organisations and individuals.
With such a rich source of data HMRC have the ability to evaluate and determine if there are inconsistencies in the tax information which is declared as part of return filings.
As a consequence, those businesses that have received HMRC enquiries over the last couple of years which lead to adjustments, enter into tax planning schemes or take a more aggressive approach to minimising their tax are generally considered to be of higher risk from a tax authority perspective.
Where an enquiry is opened this will typically lead to additional management time being required to justify to HMRC the tax positions taken. If HMRC are successful at arguing that tax adjustments are required then this could lead to the organisation suffering penalties and late payment interest.
We are consequently seeing an increasing number of businesses recognising the merits of keeping a “risk register” of known tax risks that the business is managing. This can help to mitigate or negate the risk of unexpected tax costs, as well as demonstrate to HMRC that the business is proactively assessing and complying with its tax obligations.
As HMRC’s internal machinery and enquiries in relation to corporate criminal offence start to further bite, this will become of increasing importance. Areas of particular focus may include those organisations which have overseas employees, operate in different countries, operate in high risk sectors, have sales teams with lots of discretion or have sales based reward structures.
Some recent examples
A starting point to undertaking a tax governance risk assessment is typically to assess the business’s overall tax risk covering a number of areas. These will typically consist of looking at the business’s: inherent, corporate, vat, employee and international tax risk, to build up an overview profile of the business’s main areas requiring further attention and consideration.
Over the last couple of years we have assisted a number of clients across various sectors with their governance, systems and processes reviews. Some examples of recent reviews include:
|Business overview||Steps and benefits|
|Vehicle equipment manufacturer
· Expanding rapidly in Europe and globally with 70% of the businesses sales from overseas.
· The rapid expansion led to some tax integrity concerns around the business’s VAT, corporate tax and employment tax obligations being able to keep pace with commercial expansion of the business.
|· A supply chain review was undertaken to identify and document where potential VAT supply chain problems existed so action could be taken.
· Identification and rectification of permanent establishment issues that had potentially been created.
· Business education programme on how to proactively identify and manage tax integrity matters for future expansion opportunities.
|Independent boarding and day school
· The school required an employer compliance review to get comfort that the organisation had appropriate processes and controls in place to correctly account for all employment taxes due.
|· Identification of risk areas and establishment of a remediation plan as to how the organisations processes and controls could be improved.|
· Had concerns over its UK VAT and employment taxes position.
· Required an independent review of their processes and controls to ensure the group was correctly accounting for the taxes due.
|· Identification of potential risk areas.
· Formulation of an implementation plan.
· Implementation of changes and submission of appropriate disclosures to HMRC.
What should I do now?
As all businesses are different and dynamic unfortunately there is not a ‘one size fits all’ approach to managing tax risk and the development of robust processes and controls. However, from our experience, here are few example areas for consideration to ensure your processes and controls are robust:
- Do you have a process in place to identify changes in the tax regime that are relevant to your business? Similarly, what is the process whereby the finance/ tax team find out about new developments within the business?
- What systems are used in your tax compliance and is the output provided ‘fit for purpose’ or does it require significant manual manipulation?
- How robust are your accounting and tax processes and procedures and where are the risk areas if the finance team is operating from home or remotely?
- Is remote working increasing your organisation’s vulnerability to cyber-crime?
- What training are the staff involved with taxes given? How often is their knowledge refreshed / kept up to date?
- Who has review and sign-off responsibilities for tax returns to ensure that the numbers to be submitted are accurate and that any payment due is made on time?
- What links are in place with the commercial teams that develop new products or win new business to ensure that new sources of revenue are treated correctly for tax purposes?
- New overseas activities can commonly lead to unexpected tax consequences. What processes are in place to consider the corporate tax, VAT and employment tax implications of undertaking activities abroad? This review should ideally be undertaken before the activities commence.
Clearly, these are just examples and in order to get a good overview of the tax risk areas across your business – a more thorough and detailed review is required.
A starting point is to consider the main tax areas of your business (these are typically corporate tax, VAT, employment tax and international matters) and to undertake a high level risk review of these areas. This can be done by way of a manual review or by the use of a technology tool, such as a Tax Integrity Scorecard, to provide an assessment of the level of tax risk from low – high in each tax area.
A Tax Integrity Scorecard can help businesses understand their UK tax risks and assist them in prioritising where to focus their resources to guard against unexpected tax costs, adverse publicity and to improve tax process efficiencies.
PayPal launches ‘Pay in 3’ buy now, pay later loans to UK in time for Black Friday and Christmas
- PayPal expands its consumer credit solutions through the introduction of PayPal Pay in 3 to UK market
- In the lead up to the busiest shopping season of the year, PayPal supports businesses of all sizes to drive sales, loyalty and increase payment choice for their customers
– all while getting paid upfront
- The latest in a series of steps taken by PayPal to enable UK businesses to adapt to changing consumer demands
PayPal today announced the launch of PayPal Pay in 3, enabling UK businesses of all sizes to offer buy now, pay later payments without taking on additional risk or paying additional fees.
Through PayPal Pay in 3, businesses can offer their customers the option of making purchases between £45 and £2,000 by paying over three, interest-free payments, with seamless automatic re-payments each month. PayPal Pay in 3 will also appear in the customer’s PayPal wallet, so they can manage their payments online or via the PayPal app.
PayPal Pay in 3 will help businesses drive checkout conversion, revenue and customer loyalty, with the option included in the business’s existing PayPal pricing, paying no additional fees to enable it for their customers. PayPal will pay the business or retailer upfront for the full cost of the purchase.
In 2019, there was a 39% year-on-year increase in the proportion of buy now, pay later payments in the UK. This trend is expected to double by 2023.
PayPal Pay in 3 allows companies from start-ups to globally recognised retailers to adapt to this changing consumer behaviour and offer a greater range of payment options. Retailers including Crew Clothing, French Connection, Robert Dyas and Ryman are integrating PayPal Pay in 3, which is available in the UK from late October 2020.
Rob Harper, UK Director of Enterprise Accounts at PayPal, said: “During the coronavirus pandemic, we have seen the number of people in the UK shopping online increase dramatically. At the same time, many more consumers are looking to spread the cost of those purchases. We have developed PayPal Pay in 3 to meet that need, building on our heritage as a responsible lender through PayPal Credit, which we launched in the UK in 2014, and has served more than two million customers to date.
“We will continue to support for UK retailers and businesses through these challenging times by helping them adapt to changing consumer behaviours around how they shop and pay – especially in the lead up to Black Friday and Christmas. PayPal Pay in 3 offers a flexible way for over 24 million PayPal users to shop while providing companies with a tool that helps drive sales, loyalty and customer choice.”
Dealing with the loneliness crisis with assistive technology
By Karen Dolva, CEO and Co-Founder of NoIsolation Humans are social beings, and for most children, school will be their...
Round Table Feature – Attracting FDI at times of crisis
In recent years the growth of Northern Ireland’s financial services sector has been fuelled by an unbeatable combination of world-class...
UK versus Australia – data regulation on both sides of the world
By Guy Hanson, VP, Customer Engagement, Validity While consumer data privacy continues to be a hotly debated topic and many...
COVID-19 is changing people’s preferences when it comes to BTL investments
By Jamie Johnson, CEO of FJP Investment Throughout 2020, investors have had to navigate increasingly treacherous and volatile market conditions...
Three things to help fintech unicorns grow profitability
By Kash Amini, CEO and Founder of MasLife The new breed of fintech companies is missing a trick with a...
How banks can take on Google in the race for AI talent
By Nicola Sullivan, solutions director at candidate engagement tech firm Meet & Engage The events of 2020 have made the...
Furlough Fraud: genuine mistake or cheating the system?
As the furlough scheme comes to an end, many employers will be at risk of falling foul of its stringent...
Five features that decrease the value of your home
When you’re preparing to sell your house or flat you might think of various steps you could take that might...
Regulatory overlaps cause conflicts, confusion and complexity: is collaboration the answer?
By Rob Fulcher, Head of Business – Americas, CUBE Global Regulatory overlaps are an ongoing, perplexing and often time-consuming anomaly....
Shifting Priorities in the Age of Digital Transformation
Creating the analytics-driven enterprise with a “strategic enterprise intelligence system” By Dennison DeGregor, Vice President of Analytics, Trianz In the...