Interest Rate Behavior and Lending in Microfinance

An Essay on Interest Rate Behavior and Lending in Microfinance Abstract: This essay analyzes factors which affect interest rate behavior and its subsequent impact on lending in microfinance. Here we have used regression model for our analysis. Furthermore comparison has been drawn among the different sources of loans outside Bangladesh. Here the experience of microfinance outside Bangladesh like India, South and South-East Asia, Latin America has been fully illustrated. This essay conducts analysis on the basis of the existing literatures on Microfinance.Interest Rate Behavior Determinants of interest rate of lending in Micro-finance: * to expand and improve business operation * recruiting personnel , * marketing the services , * improving financial information system, * constructing new offices * Default * Unwillingness to pay * Poor Management * Economic recession * Inability to pay * Staff identifying * Checking creditworthiness * processing loan applications, * disbursing loans, monitoring * collecting repayments, * costs of the space occupied, * communications, transport, * support staff, Grant * Equity * Foundation * Trust * Saving Account We can observe that in MFI lending there is higher interest rate than the commercial bank’s lending rate. The interest rate charged here is higher as cost of funding, processing, cost of risk of loan losses and profit are higher in this case. The graph below shows the different ingredients interest rate. As above-mentioned factors are very much crucial in this sector that is why require extra attention and thereby require the MFI to charge high interest rate. Rosemberg, R. , A. Gonzalez and S.Narain (2009) and Gonzalez (2010), suggest that though small loan provided by the MFI has low default rate but has higher administrative cost that most of the cases cannot be offset by economies of scale. These administrative costs are the single largest contributor to interest rates. Finally, they suggest that, a bigger loa n size may help them to reduce their lending interest rate. Further, they also emphasize if higher loans were received by more experienced borrowers then credit risk would decline and thereby interest rates. Lending in Micro-finance: Accordingly the loan transaction may be described in the following steps.First, the financial firm decides how much to charge and what the optimal loan size to offer must be in order to reach its profitability goal. Once known the value of the lending interest rate and the average loan size the financial institution offers, a potential customer decides whether s/he wants to request a loan. Taking into account the credit history of the potential borrower and its income-expenditure stream, the financial institution builds a risk profile of the individual. With this at hand, they decide where to lend or not. The loan transaction process is given below: P. otler of Groningen university with his vast research wanted to show that profitability will increase w hen lending interest rates and/or productivity and/or the loan size increase or when the funding cost declines . He also showed that The lending interest rate will be negatively correlated with the loan size. So if they wish to achieve a higher profitability it is likely that all else equal they will offer loans of higher size. When microfinance institutions start operations they usually offer loans of small amounts because they do not have much capital or experience and debtors tend to be people without credit history.We find that the lending interest rate is negatively correlated with the productivity of financial institutions and years of operation and positively correlated with the funding costs. What Can Reduce the Interest Rates in Microfinance? P. cotler also shows that probability that financing boosts growth is weakened if interest rates are extremely high. There are two policies to reduce interest rate : * One is to reducing funding cost and * Another is increasing product ivity. How could productivity be raised? Institutional factors such as technology use and management quality and commitment to efficiency should be variables to consider.Further, it should depend on with what capacity loan officers to reach their target clients. Such capacity not only depends on the quality of infrastructure but maybe more important on the geographic and demographic characteristics of the country in which microfinance institutions operate. 1 Effects of Competition over Lending Behavior in Microfinance Competition in a good influencing factor for the markets, consumer protections, efficiency of allocation and incentive for the development of new products. MFI’s enjoyed a monopolistic market in the early years of its inception.Monopolistic market power is associated with allocative inefficiency. Allocative inefficiency refers to the welfare losses as a consequence of high prices a monopolist charge. There is even further loss if the monopolist employs inefficie nt technology (productive inefficiency). Besides, there may not be demands to invest in efficient technology and introduce new products. Therefore, it would be realistic to assume competition can be beneficial in the context of microfinance market as it may result in improved and new financial product designs, better customer services, lower costs and lower interest rates.The other side of the argument is that microfinance market makes use of soft-information and depends on strong MFI-client relationship. MFIs provide financial services for the poor that are considered not creditworthy by the conventional banks. They are often praised for overcoming the problem of information asymmetry and providing loans without collateral requirements. They do so by establishing strong personal relationship with clients. Another tool is the usage of other forms of collateral such as group lending that generates social collateral.Competition and the effort to win clients and expand market share, th erefore, may lead to low screening and lending standards. There are some indications of lose MFI-clients relationship with intense competition. Increased competition is also associated with an increase in information asymmetry, which makes it difficult for MFIs to know about the general debt level of clients. This in turn may lead to manifold borrowing, serious debt burdens, low repayment rates and poor portfolio quality.The effect of competition could go both ways and deserves an empirical investigation. However, very few examine the effect of competition among MFIs and the literature on competition in microfinance is limited. Below is an overview of the few available related works. The focus on making MFIs profitable and financially-sustainable started in the 1980s and 1990s. The essential elements of this approach are competition, regulation and profitability. The essay explores the Latin American microfinance market where the commercial approach to microfinance proceeded rapidly .It describes the market as facing rising competition, which leads to market saturation in some countries. Olivares-Polanco (2005) examines some of the subjective and descriptive evidences. He investigates the effect of competition by mainly focusing on outreach (measured by loan size). His findings show that increased competition results in lower outreach. Navajaset al. (2003) studied competition in the Bolivian microfinance market by focusing on two major MFIs (Casa Los Andes and BancoSol), which collectively have around 40 percent market share.The results suggest that outcome of competition is ambiguous since competition leads to innovation thereby expanding outreach. However, it reduces the ability of lenders to cross-subsidize less profitable smaller loans. In a similar study, Vogelgesang (2003) examines how competition affects loan repayment performance for Caja Los Andes. The analysis indicates competition is related with multiple loan taking and higher levels of borrower ind ebtedness. The probability of default is also shown to be high with higher levels of indebtedness.On the other hand, he argues the probability of timely repayment is high in areas where there is high competition and high supply of microfinance services. Thus, the results seem inconclusive. A theoretical model developed by McIntosh and Wydick (2005) characterizes the effects of competition between MFIs where increased competition leads to increased information asymmetry. As a number of competing MFIs amplify in a market, which makes information sharing between them challenging, borrowers may engage in multiple borrowing which increases the debt level of clients and the probability of default.This in turn can make worse off borrowers with a single lender since this behavior will create an externality by inciting MFIs to respond to multiple borrowing by adjusting interest rates upward. In a Ugandan microfinance market, which McIntosh et al. , (2005) studied, there is a rise multiple bo rrowing and decline in repayment rate as competition intensifies. Other works that do not address the effect of competition among MFIs but present an argument about the possible effects of competition includes Hermes et al. (2009). Their work examines how overall level of financial development in a country affects the efficiency of MFIs.After presenting a balanced argument that the effect of financial development on efficiency could be both negative and positive, they empirically document a positive effect of financial development of efficiency of MFIs. They suggest competition, among other channels, through which financial development could affect efficiency. On a related work, Cull et al. (2009b) investigates how MFIs perform under the pressure of competition from formal banks. Their results show that in a country where there is larger formal bank presence, MFIs tend to deepen their outreach (i. . , extend their outreach to women and also lend in small amounts). However, the effec t on other performance indicators, such as profitability, appears weak. Findings Given significantly large numbers of people in developing countries are financially excluded and the relative success of MFIs in promoting access to finance for the poor, it is not surprising to see MFIs get the attention they are enjoying. With the growth of the microfinance sector and increasingly varied players comes intense competition, which the effects on MFIs outcomes are not clear.In this essay, we take the first approach in measuring competition in a standard way. Interestingly, the measure shows indeed competition is growing in the microfinance market. As a next step, a critical question is addressed, namely what is the effect of increased competition. We consider important dimensions of MFIs’ performance. These are outreach, loan repayment, efficiency and profitability. The results document strong negative effects of competition on performance of MFIs, after controlling for various mac roeconomic and MFI factors.We show competition is negatively related with outreach while it is associated with rising default rates. Furthermore, declining efficiency and deteriorating financial performance is shown to be associated with intense competition. The results might appear rather depressing for microfinance enthusiast, anyone for that matter, who would like to see the sector grow and bring all the positive benefits along. What could be done? These calls for measures that do not put a halt on the growth of the sector rather ensure the (negative) competitive effects are minimized.This may include designing ways that makes sure MFIs do not compromise lower lending standards for increased market share. At the same time, designing ways that promote information sharing between MFIs, so that a borrower that default on one MFI loan could not turn to another MFI in the neighborhood and granted a loan, can contribute to lower delinquency as well as better borrowers’ welfare. In addition, promoting financial literacy among clients may help them in their borrowing decisions, which in turn may limit multiple loan-taking. Finally, as we show in the results, increased competition is negatively associated with efficiency of MFIs.Innovative ways among MFIs that could enhance efficient service provision may also help in ensuring benefits from the growth in the microfinance market. Incentives and Disincentives that Affect Lending Behavior in Microfinance In late 1980s and early 1990s thousands of non-governmental organizations (NGOs) and specialized finance institutions around the world initiated micro enterprise finance programs. Most of these programs are financially supported by the international donor agencies or governments to improve the lives of the poor.Therefore, for NGOs micro enterprise finance appears to be socially motivated. Reasons Why Banks Make Micro and Small Enterprise Loans Frequency of Response* % of total a) Profitability of micro and small loans 72 49% b) Changing market conditions and increasing competition in lending to large/medium enterprises 64 44% c) Regulations imposed by the government 25 17% ————————————————- d) Poverty alleviation / social objectives 29 20%Disincentives for Making Micro and Small Enterprise Loans Frequency of Response % of total a) Higher administrative costs 29 40% b) Risky borrowers 12 17% c) Interest rate controls 21 29% d) Not interested in micro enterprises 5 7% e) Lack of network and personnel to serve this market 23 32% f) Other 18 5% Banks’ Lending Behavior and Loan CharacteristicsBanks Age and Their Portfolio Share in Micro/Small Business Loans Out of 148 banks, 119 banks answered to the question on loan portfolio analysis. When these banks are classified according to the number of years since they were established, it is found that the newly established banks, o n average, have a larger share of loan portfolio delegated to small and micro enterprise loans than the older banks. Loan Terms The findings of this research indicate that, the loan terms provided by these commercial banks for small and micro enterprises ranges between three months to six years.On average, the loan term for micro enterprise loans is 2. 4 years and for small businesses it is 2. 9 years. These loan terms are much longer than the loan terms provided by NGOs, which are generally between one to three months. Average Loan Terms for Micro and Small Enterprise Loans Sample Size Average (years) Median (years) Micro 57 2. 4 1. 75 Small 46 2. 9 3. 00 Loan term: In micro and small business finance, the loan term or the loan repayment schedule can affect the ability of the borrower to pay his/her loan back.The shorter loan terms or frequent payments of installments can make it easier for the borrower to pay his/her loan back, whereas the longer loan terms and infrequent payment s of loan installments can make it difficult for micro/small business owners to pay their loan on time. Therefore, the longer the loan term, or the less frequent are the loan installments it is more likely for banks to have higher arrears which indicates a positive relationship between the length of the loan term and the level of arrears for a bank.Average interest rate on micro/small loans: In the micro finance literature, it has been widely accepted that micro and small enterprises are capable of borrowing at commercial, or market interest rates. Furthermore, it is also argued that, if micro or small enterprise loans are subsidized by governments, loan default or corruption may be encouraged which may result in higher arrears in banks’ loan portfolios. These arguments suggest a negative relationship between loan rates and banks’ arrears.On the other hand, the higher nominal interest rate paid on a loan implies a greater cash flow burden on the enterprise hence increa sing the likelihood of arrears. Due to data limitations, other financial costs, such as fees and commissions associated with the loan could not be taken into account in this research. Findings: The higher the loan interest rate given everything else is held constant; the higher will be the rate of arrears.This finding contradicts with the common argument that the micro and small enterprises are capable of borrowing and paying their loan back with a high rate of interest. It is however important to note that micro and small enterprises may show different characteristics in loan repayment with respect to given interest rates. One of the most important findings of this study is that many banks are using inappropriate lending criteria when making loans and managing their portfolio of small business loans.In the case of small business loans the banks that require collateral have higher than average levels of loan arrears. Hence reliance on collateral tends to cause poor borrower evaluati on and inadequate follow up once the loan have been made. It is also found that the level of interest rate charged on the loans is not a factor affecting the rate of arrears for micro enterprise loans but it is a factor affecting the level of arrears for small business loans. Justification of high interest rate in Micro financeSmall businesses normally struggle to find out the sources of fund due to the small size of business where lenders face difficulties to cover up the loan money. From several evidences it is observed that small businesses are very efficient to utilize the funds and can rapidly realize profits though borrowing at very high interest rate. An author explained this through an example of a fruit seller who takes loan in the morning, buys fruit, sells it and pay lender outrageous rates to repay the money by the end of the day.So, It is very critical that though rates are high that MFIs have, small business can cover the spread. How can interest rate be reduced? Evide nces from Bolivia pursue us that interest rate in micro finance sector can be reduced by great regulation and create a competitive environment among the micro finance institutions. If situation looks like that MFIs are managing huge profits in that case government should take some initiatives that will discourage MFIs to make extra ordinary profit.Government can give licenses to new MFIs to create competition. But it should be remember that regulatory framework is a vital element. So, before giving licenses government should strengthen the monitoring function. Then we can expect thatat least some of that profitability will be passed back to the customer either through lower rates, reduced fees or another way. Should Subsidy Be Provided To Reduce Interest Rate? From the very beginning of the history of Micro finance we see that it has been growing at an exponential rate over the years.Many evidences about the recovery rates convince us that interest rate is almost justified so subsid y may create distortion in this sector. According to Mary Ellen Iskenderian, President and CEO of Women’s World Banking, â€Å"I don’t think a subsidy is the way to go about reducing rates because, in the end, the reason that microfinance has been so successful to-date is that it has always been about sustainability—sustainability of the institutions to recover their costs as well as sustainability of the borrower to make on-time payments. Responsiveness of lending amount to the changes in interest rate: Example from Bangladesh Bangladesh is a poverty-stricken country. It is a great pleasure for marginal people to get loans from MFIs because it is almost impossible for them to manage loan from conventional commercial banks. So, poor people are willing to pay even high interest rate to get loans. Now the question is that how are poor people responsive to increase in interest rate charged by MFIs? SafeSave, a credit cooperative in the slums of Dhaka,Bangladesh, o perate three branches across the city to provide credit.Administrative records kept by this MFI asserts that when interest rate increases suddenly, less wealthy borrowers reduce their demand for loan and they are relatively more sensitive than the wealthy borrowers. Another important thing is that the loan portfolio of this organization shifts from less wealthy borrowers from wealthy borrowers with the increase in interest rate. Influential advocates now argue that poorhouseholds are so insensitive to interest rates so interest rate in micro finance sector should be deregulated.If this is so, microfinance can readily expandto serve the hundreds of millions of currently excluded households, without sacrificingdepth of outreach. This claim is far from clear as a general proposition. First, diminishing marginal returns to capital disregards the possibility of unequal access to non-capital inputs like managerial skillsand human capital by poor borrowers. Moreover, raising interest rates can in principle exacerbate moralhazard and adverse selection, worsening loan repayment rates and screening out the most reliable borrowers.And, while microlenders may still find a pool of customers afterreal interest rates are raised, the customers may not be from the same pool that was reliable, willing and able to pay the lower rates. In addition, Moral perception to keep costs as low as possible for the poor, have compelled thelargermicrolenders in Bangladesh to keep real interest rates below 40 percent per year,even if it means turning to subsidized resources to cover costs (e. g. , Morduch, 1999). The average fees charged by two large lenders in Bangladesh arejust under 30 percent.The Grameen Bank (which is not one of the two) keeps theirinterest rates and fees close to 20 percent per year (nominal) on their main lending products—and they ignore suggestions to raise rates. Experience inside Bangladesh Credit delivery system by Grameen bank Grameen Bank Credit Delivery means taking credit to the very poor in their villages by means of the essential elements of the Grameen credit delivery system. The credit delivery system of this authentic micro-finance is very much well-functioning. The credit delivery is the most productive weapon of Grameen bank to reach the highest number of its beneficiaries.Grameen Bank credit delivery system has the following features: 1 There is an exclusive focus on the poorest of the poor. Exclusivity is ensured by: i) establishing clearly the eligibility criteria for selection of targeted clientele and adopting practical measures to screen out those who do not meet them ii) ii) in delivering credit, priority has been increasingly assigned to women iii) iii) the delivery system is geared to meet the diverse socio-economic development needs of the poor 2   Borrowers are organized into small homogeneous groups. Such characteristics facilitate group solidarity as well as participatory interaction.Organizing the primary gr oups of five members and federating them into centres has been the foundation of Grameen Bank's system. The emphasis from the very outset is to organisationally strengthen the Grameen clientele, so that they can acquire the capacity for planning and implementing micro level development decisions. The Centres are functionally linked to the Grameen Bank, whose field workers have to attend Centre meetings every week. 3 Special loan conditionalities which are particularly suitable for the poor. These include: i) very small loans given without any collateral i) loans repayable in weekly instalments spread over a year    iii) Eligibility for a subsequent loan depends upon repayment of first loan iv)   Individual, self chosen, quick income generating activities which employ the skills that borrowers already posses    v) close supervision of credit by the group as well as the bank staff    vi) stress on credit discipline and collective borrower responsibility or peer pressure    v ii) Special safegaurds through compulsory and voluntary savings to minimise the risks that the poor confront    viii) Transparency in all bank transactions most of which take place at centre meetings Simultaneous undertaking of a social development agenda addressing basic needs of the clientele. This is reflected in the â€Å"sixteen decisions† adopted by Grameen borrowers. This helps to: i) Raise the social and political consciousness of the newly organized groups    ii) Focus increasingly on women from the poorest households, whose urge for survival has a far greater bearing on the development of the family      iii) Encourage their monitoring of social and physical infrastructure projects – housing, sanitation, drinking water, education, family planning, etc. Design and development of organization and management systems capable of delivering programme resources to targeted clientele. The system has evolved gradually through a structured learning process, tha t involves trials, errors and continuous adjustments. A major requirement to operationalize the system is the special training needed for development of a highly motivated staff, so that the decision making and operational authority is gradually decentralized and administrative functions are delegated at the zonal levels downwards. 6| Expansion of loan portfolio to meet diverse development needs of the poor.   |   As the general credit programme gathers momentum and the borrowers become familiar with credit discipline, other loan programmes are introduced to meet growing social and economic development needs of the clientele. Besides housing, such programmes include:|   | i)| Credit for building sanitary latrines| | ii)| Credit for installation of tube wells that supply drinking water and irrigation for kitchen gardens|   | iii)| Credit for seasonal cultivation to buy agricultural inputs|   | iv)| Loan for leasing equipment / machinery, ie. cell phones purchased by Grameen Bank members|   | v)| Finance projects undertaken by the entire family of a seasoned borrower. Three Cs in Credit delivery: Character: means how a person has handled past debt obligations: From credit history and personal background, honesty and reliability of the borrower to pay credit debts is determined. Capacity: means how much debt a borrower can comfortably handle. Income streams are analyzed and any legal obligations looked into, which could interfere in repayment.Capital: means current available assets of the borrower, such as real estate , savings or investment that could be used to repay debt if income should be unavailable. | | The loan disbursement has been robust year after year and profit has also been increasing year after year. The loan disbursement schedule and profit are summarized below: year| Loan disbursement (million Tk)| Profit/loss (million Tk)| 2001| 146538. 20| 58. 45| 2002| 162286. 24| 59. 67| 2003| 183575. 33| 357. 52| 2004| 209166. 76| 422. 13 | 2005| 3248163. 17| 1000. 44| 006| 306368. 63 | 1398. 15| 2007| 356798. 22| 106. 91| 2008| 418903. 07| 1305. 00| 2009| 498311. 47| 371. 57| 2010| 594460. 61| 757. 24| Interest rate charged on different loan on different duration are given below: Description of the loan| EAIR(Old Payment Method)| EAIR(New Payment Method)| 10-Year stable Level Loans @ Tk. 2,000| 350%| 556. 44%| 10-Year Increasing Loans| 18. 48%| 44. 13%| Actual 7-Year Center Loan History| 15. 39%| 35. 57%| The â€Å"Old† Payment System: Under the â€Å"old† system, Grameen borrowers made weekly payments for 50 weeks.Their principal balance was reduced by the full amount of the payment, and no interest payment is credited. The â€Å"New† Payment System: Under the â€Å"new† system, the entire structure of loan payments was altered. The loan payment period is now defined as 46 weeks in length, but factored into the system is the anticipation of 6 official â€Å"national holidays† when the we ek’s payment is suspended. ASA Microfinance in Bangladesh: ASA has been working relentlessly to reduce poverty since its inception in 1978.The formal banking sector in developing countries, like Bangladesh, does not typically provide financial services to the poor. This sector concentrates on large loans to the upper class, thereby completely excluding low income groups. The microfinance movement, however, has shown that there is a thriving market among the poor when financial products cater to their specific needs. The poor are a quite active group in any economy. ASA has shown that their needs can be met while at the same time making the providing institution profitable as well.Up to October 2011 ASA's cumulative Loan disbursement has been BDT 481,381 million (US$ 6,326 million) while loan outstanding (principal) is BDT 44,972 million (US$ 591 million) among 4. 43 million borrowers. At the end of June 2011 ASA's Operational Self Sufficiency(OSS) was 182. 48%, Financial Self -sufficiency (FSS) 118. 82% and rate of loan recovery 99. 83%. The loan disbursement over the years are given below: Year| Disbursement in million Tk. (during the year)| 2008| 61,108,00 | 2009| 61,495,00. | 2010| 68,486,00| 011| 44,835,00| The rate of interest charged by the ASA is given below: Category| Eligible Criteria| Initial Maximum Loan Size| Interest Rate| Loan term| Primary Loan| Economically active poor to undertake or strengthen income generating activities (IGAs). | BDT 8,000-20,000 to maximum BDT 50,000 at first loan cycle. | Maximum 27% declining| 4, 6 or 12 months based on nature of IGAs| Special Loan| Small/micro enterprises or entrepreneurs and traders to promote and scale up production, business activity and employment generation. BDT 51,000-500,000 | Maximum 27% declining| 12, 18, 24 or 30 months based on nature of enterprises| BRAC BRAC, a development organization, was formed in 1972 under the Societies Registration Act 1860. Although it was first set up to reset tle refugees in post-war Bangladesh, BRAC later redesigned its strategies in accordance with its philosophy of poverty alleviation and empowerment of the poor. At present, BRAC has a large number of development programs that cover the areas of health, education, credit, employment and training for the poor people of Bangladesh.BRAC carries out licensed banking activities through the BRAC Bank Ltd. and also earns from various income generating projects such as Aarong Rural Craft Centre, BRAC Printers and Printing Pack, BRAC Dairy and Food project, BRAC Tea Estates, andvarious programme support enterprises such as poultry farms, feedmills, seedmills and prawn hatcheries. Microloans: These loans, which range from USD 50 – 700, are given exclusively to individual women who are serviced in a group setting, namely the VO. The VO acts as an informal guarantor by creating peer pressure to ensure timely repayment.Borrowers repay through weekly or monthly installments and deposit savin gs during the regular VO meetings. These loans are generally used for small operations in poultry, livestock, fruit and vegetable cultivation, handicrafts or rural trade. Microenterprise loans (Progoti): These loans, which range from USD 700 to 10,000 are given to both male and female entrepreneurs to support and help expand existing small enterprises which are too small to qualify for credit from mainstream banks. Borrowers generally use these loans to finance shops and small-scale manufacturing activities.A ladder of opportunity :BRAC have developed a ‘ladder’ of financial services to target different poverty groups because we understand that the financial needs of the poor are diverse. The most vulnerable are the extreme poor who do not benefit from microfinance – for this group BRAC have developed a grant-based programme that incorporates asset transfers with non-financial support; BRAC’s Ultra Poor programme. Similarly, it has launched, with the help of the Government, a specific customised product for marginal farmers, which combines access to finance with technical support.Another specialised microloan scheme aims to financially empower adolescent girls, helping them continue their education, build savings and receive livelihood training to start smaller home-based enterprises. The rate of interest charged by the BRAC Bank SL no. | Types of loan| Annual interest Rate| 1| General micro credit (Rural and Urban)| 25%-33%| 2| Micro Enterprise loan| 26%-40%| 3| Ultra poor loan| 22%| 4| Agriculture loan| 22%-33%| 5| Seasonal loan| 26%-33%| 6| Disaster management loan| 2. 8%-21%| Loan Disbursement over the year is given below: Sl no. | year| Loan disbursement(TK)| | 2009| 75680756900| 2| 2010| 38749653600| 3| 2011| 39554248779| 4| 2012| 42235412000| Experience outside Bangladesh There is a vast array of experience outside Bangladesh as microfinance is now a globalphenomenon. The information below is simply intended to give a snapshot of the differentexperiences in a few countries, and to show how the complex issue of interest rates has beenaddressed, either by inaction or explicit action by governments. Figures on interest rates fromvarious countries in different parts of the world are given below, in particular those nearby inAsia.Countries are also mentioned where the government or parliament (not necessarily thesame) has sought to impose a ceiling on interest rates in the twin belief that poor peoplecannot afford to pay the high interest rates charged by MFIs and that it is indeed immoral thatthose who are poor should pay higher interest rates on loans than those paid by richerindividuals. South and South East Asia The table below (prepared for the Joint Donor Strategy initiative) gives a summary picture ofthe situation in selected countries in the S. nd SE Asia Region, showing data assembled byEDA Rural Systems, with the comparative rates in Bangladesh at the bottom of the table forcomparison: Three importa nt conclusions can be drawn from these figures. 1. First, that the interest rates charged by MFIs are invariably higher than the rates charged by commercial banks, on average approximately 100% higher. 2. Second, that in general the rates charged by informal moneylenders vary much more widely than either the rates charged by the banks or by MFIs, and almost always are substantially higher than the rates charged by the MFIs. . Third, the interest rate charged by almost all NGO-MFIs in Bangladesh, 30% effective annual rate, is by no means out of line with what is being charged elsewhere in South and South East Asia. If any person wants to borrow from traditional banking system he has to fill out application form. He has to go to the bank for many times for the sanctioning of loan that incurs substantial amount of transportation cost for him. In addition to high transportation cost, there are some processing cost and commissions charged by banks.Ultimately, Effective interest rate is q uite higher in case of borrowing from traditional banking system. On the other hand, traditional banks can’t cover up administrative cost by providing small loans. Comparison of Interest Rates of Various Sources of Loans in India Quoted Cost and Cost after Adjustment for Transaction Costs From the table we see that there is no transaction cost in case of borrowing from MFIs loan. From the evidence of India, we have found that MFIs are used to make election engineering.The main motive of MFIs is to provide credit to women and poor. But, politicians are trying to use it as a political tool. Government provides subsidy which are distributed through MFIs. Large number of impoverished people is a big vote bank for politicians. In this process government influences the decisions of the voters in time of election. In Tamil Nadu we see that government passed ordinance that MFIs could not charge more than 12% interest that may ultimately drive out huge number of lenders from the marke t.So, poor people have to rely on nonchalant public sector banks and according to Mahajan and Ramola they will not have no recourse except money lenders for borrowing. Interest rate, Lending ; Microfinance Less Dependence on Money lenders, Mahajon etc More economic activities because of easy funding reduce asymmetry of information, rural development possible. Downward competitive environment in informal market. Rise in income level, Purchasing power, Overall standard of living. Production, consumption level increases. ResultEliminate the practice of charging usury, greater financial leverage, only does it help to reduce poverty, it Scales down inequality as well. Fig: Effect of Interest rate, Lending ; Microfinance On the Perspective of Latin America In Latin America, the leading MFIs all operate under a formal legal framework, usually as specialized MFI banks, under the supervision of the central bank. Figures for five of the best known institutions are given below, all of which ha ve substantial numbers of clients (by the standards of the region) and are currently operating profitably.Probably the most interesting (for Bangladesh) is Comparators which has from its inception deliberately targeted poorer clients, as can be seen from the current average size of loans ($277). Leading Microfinance Institutions Primary Indicators (End Third Quarter 2003) The figures below for the same five MFIs show the average rates of interest which they are receiving on their various loan products. Descriptive Statistics | Mean| Std. Deviation| N| NO. CLIEN No of CLIENTS| 94000. 00| 65490. 457| 5| AVG. LOAN Average Loan| 1002. 0| 501. 657| 5| LOANST Total Loan| 78000000. 00| 42361539. 160| 5| Regression Variables Entered/Removed(b) Model| Variables Entered| Variables Removed| Method| 1| NO. CLIEN No of cLIENTS(a)| . | Enter| a All requested variables entered. b Dependent Variable: LOANST Total Loan Model Summary Model| R| R Square| Adjusted R Square| Std. Error of the Estimate| Change Statistics| | | | | | R Square Change| F Change| df1| df2| Sig. F Change| 1| . 169(a)| . 028| -. 295| 48213878. 375| . 028| . 088| 1| 3| . 786| Predictors: (Constant), NO. CLIEN No of cLIENTS The unstandardized parameters tell you the difference in Y per unit change in X whereas the standardized tells you the difference in Y in standard deviations per standard deviation difference in X. With the exception of BancoSol, these rates are all higher than those charged by the NGO-MFIs in Bangladesh (in the case of Compartamos substantially so), but their operating costs are also higher than the leading NGO-MFIs in Bangladesh due largely to the higher costs of staff.Nonetheless all five institutions are profitable and the high returns achieved by the three most profitable institutions have enabled them to achieve the most rapid rates of growth in client numbers in the 21 months covered by thee figures; almost triple by Banco Solidario; more than double by Compartamos; and over two t hirds by Mibanco. Leading Microfinance Institutions: Costs and Interest Rates (End Third Quarter 2003) As reported by Helms and Reille, when BancoSol in Bolivia began as a bank in 1985, it charged a combination of interest and fees equivalent to 65% effective annual interest rate. Today, BancoSol, operating in a highly ompetitive environment, has brought down its costs and charges interest rates on its products yielding the 24% shown in the table above. According to one of the managers at BancoSol, the banks growth from 4,500 to 55,000 clients in just ten years has been possible by its ability to charge sustainable rates of interest. Further, whilst its return on average assets is a modest 1. 6%, its current return on average equity is over 11% (because of the leverage it has been able to exercise on its equity). Conclusion Obtaining financial information from institutions involved in microfinance is no easy task.In most countries because there is no financial authority that collect s it and makes it available to the public. Furthermore, the absence of governmental or organized market supervision means that these entities can freely decide how to measure – if they want to do it– the variables describing their different sources of income and expenditure. Finally, even if there were an informal consensus on how to measure these variables, that would not necessarily ensure that the information is reliable since it is very likely that accounting deficiencies might exist. 1. David L. Wright, Dewan A. H.Alamgir, Microcredit Interest Rates in Bangladesh ‘Capping v Competition’, Donors’ Local Consultative Group on Finance, March 2004. 2. P. Cotler , What Drives Lending Interest Rates in the Microfinance Sector? , August 4th, 2010, Microfinance Workshop, Groningen University. 3. Esubalew Assefa, Niels Hermes and Aljar Meesters, Competition and Performance of Microfinance Institutions, August 2010. 4. Mahajan, Vijay and Ramola, Bharti Gu pta; (August 2003); ‘Microfinance in India – Banyan Tree or Bonsai’, a Review Paper for the World Bank 5. Donoghue, Kieran et al, (June 2002), unpublished manuscript for AusAID ‘ Interest Rates in Microfinance’ . Porteous, David, of Finmark Trust, South Africa (2003); unpublished paper ‘Is Cinderella Finally Coming to the Ball? † 7. Hatice Jenkins, Commercial Bank Behavior in Micro and Small Enterprise Finance, Development Discussion Paper No. 741, February 2000. 8. Microfinance Institutions Under Interest Rates Ceilings, Denis H. ACCLASSATO, Laboratoired’Economied’Orleans (LEO), Universited’Orleans, Preliminary Version, June 2006. 9. Sinha, Sanjay, (2003); ‘Experience in Selected Countries in South and South East Asia on Regulation and Supervision, and Comparative Interest Rates’

Effective ways to improve communication Essay

Teenagers and their parents need to increase their communication in order to have a strong relationship. It is very important that they cooperate so that they can reach a common goal. Some tips to improve communication for parents are being there for their teenager children, learning to talk while in motion, risk making a change, being honest, sharing their hopes and dreams, and creating a comfortable environment by listening. Some methods for teenagers are opening up and sharing about their thoughts and feelings with their parents. There are several ways to improve the communication between teenagers and parents. Parents need to find quality time out of their busy schedule to talk with their children. Parents should take advantage of everyday opportunities or plan a simple activity for just themselves and their children, such as watching television. Talking to teenagers is basically the same thing as talking to adults. Most teenagers are overstressed, overworked, preoccupied and, in many cases, just simply distant from their parents. They need lively adults who are present and awake. In this way, parents could spend time with their children, engaging in activities that suit their age and interests. Teenagers always seem to be on the move. Teenagers are action machines because they do not like sitting still. They have the added distraction of being inside bodies pulsing with energy and strength. If parents really want to connect with a teenager, they need to get active with them, such as challenging them to a basketball game. Teenagers know their parents as well as their values, rules and weaknesses. They also know just what to say and how to maneuver around their parents. The problem is that they do not really expect their parents to ever change the way they think or act. Teenagers thrive on surprise and love to think odd thoughts. Parents should try to be a little surprising and do something completely unexpected and unpredictable. Young adults appreciate the opportunity to relate in a way that was completely unpredictable and different for their parents. Young adults deserve honest answers and explanations because this is what  strengthens the children’s ability to trust. By being open and honest, parents can express their values in a caring way. Parents do not often want to show their mistakes and past errors because they are unwilling to seem imperfect. Parents should tell teenagers some of their own secrets and try to be outgoing. They should try and set an example for their teenagers so that the teenagers will learn from their honesty. Although parents should always communicate with their teenagers, they have to remember not to talk too much. Teenagers hate listening to long lectures. Parents need to avoid repetition of lectures which might bore teenagers. Also, parents should not continue on about different subject that the teenagers are not ready to hear. Teenagers don’t have much of a past, and so they live in the future. Parents need to capture what it is that rivets teenagers’ attention the most – their imagination pertaining to the future and what’s important to them. Not many parents will sit down with their children and openly discuss the future without any boundary, agenda or parental rigidity. Teenagers will search until they find someone who will dream with them. They will look forward to the opportunity to explore their future with someone they truly care about and who really wants to hear about their dreams. Parents should always create a climate in which the teenager feels free to discuss anything. In order to create an atmosphere in which teenagers can ask any questions without the fear of consequences, parents need to be encouraging, supportive and positive. This will show teenagers that the parents can be of help in solving problems, and they will not be fearful of speaking out. Parents need to take them away from places and things that can distract them. They have to listen attentively because when parents talk to teenagers after careful listening, they are more informed and aware of the situation. Parents need to remember that young adults need an open mind and some guidance during adolescence more than any other period in their lives. If they fear that their parents will discourage them from being truthful by displaying disappointment and disapproval, they will pull away fast and will not return that easily. Parents have to be curious and ask questions about  teenagers’ ideas and feelings to get to know them and their world. Parents should be prepared to just listen and accept the simple truth that teenagers feel what they feel, no matter how irrational it may sound. It is important for teenagers and their parents to find ways to communicate their point of view, which will encourage the other person to listen. They need to avoid blaming the other person and not be judgmental. They should stay in the present and not refer to the past. They have to look for solutions together and be prepared to compromise. These are some ways to improve communication between parents and teenagers.

Actions that the MLRO of BCD should take

Given that Radovan Rankovich (RR) is allegedly wanted by the authorities in the Ukraine for criminal actions against the state, and has received a recent transfer of ?15 million from a Corporate Service Provider in Cyprus, it is likely that this would warrant a disclosure to NCA for investigation. In accordance with this, the MLRO will be required to file a Suspicious Activity Report (SAR) with NCA and subsequently liaise with them to deal with this matter accordingly (Ellinger et al; 2011: 97). Part 7 of POCA makes it a requirement for banks to make a disclosure to NCA if they reasonably suspect that a person is involved in money laundering (s. 329). If the MLRO fails to make such a disclosure then he or she may be found criminally liable under this Act for a failure to disclose (s. 331). This is because a person commits an offence under s. 329 if they; acquire, use or have possession of, criminal property. Since a bank would fall within the scope of this section, it is possible that BCD Bank would be subject to criminal proceedings if they failed to take the appropriate action and thus make the relevant disclosures. If the MLRO does not believe that the grounds of suspicion are sufficient to report the matter to NCA, then the MLRO will be required to make further inquiries (International Monetary Fund, 2011: 65). Once the MLRO has made a report to NCA, the report will be ‘protected’ under s. 337 so that nothing in the report shall be taken to breach any restriction on the disclosure of information. Given that BCD Bank may have engaged in money laundering by allowing RR’s transactions to take place, they may have a defence under s. 338 if they make demonstrate that they made the disclosure as soon as possible. Similar provisions also apply under th e TA if the person is also suspected of terrorist financing. As Christian has received a text message stating that RR is wanted by the authorities in the Ukraine for criminal actions against the state, it is likely that the MLRO will also be required to comply with the provisions under the TA for a reasonable suspicion of terrorist financing. An obligation to report under the TA will therefore arise which means that the MLRO will be required to disclose the identity of RR, any information that relates to the matter and the whereabouts of the laundered property. There are two different types of report that may be made by the MLRO, namely protected reports and authorised reports. A protected disclosure is made by a person during the course of their trade, profession or employment. This type of disclosure is generally made by a person who is carrying our professional activities. An authorised disclosure is made by a person who is about to commit a prohibited act or has already committed a prohibited act (Bastable and Yeo, 2011: 108). Since the bank has already dealt with the property that is suspected of being laundered, it is more appropriate for an authorised disclosure to be made. The MLRO will also be required to obtain consent from NCA under ss. 335 and 336 to determine whether Christian can action any further transfers out of RR’s account. This will be done by making a ‘consent report’ to NCA, which will then block any transactions for seven working days. If NCA gives consent to the MLRO, the MLRO will then be able to give consent to Christian to carry out the transactions (Bastable and Yeo, 2011: 108). If NCA refuse consent, however, the proposed transactions will be frozen for a further 31 days, unless consent is granted during that period; R (on the application of UMBS Online Ltd [2007] WL 1292620. The Risks and Issues for the Bank This particular issue regarding RR is likely to be problematic for the BCD Bank as they will want to act in the best interests of their customer, namely RR, so that they remain in business with them whilst at the same time they are required to fulfil certain obligations imposed upon them by law. Because BCD will be required to disclose their suspicions even if RR has not acted in a criminal manner, this will have a damaging effect upon RR’s reputation and as put by Hislop (2009); â€Å"absent bad faith, little more than a â€Å"bad feeling† can trigger a banks disclosure obligations under POCA 2002, with in some cases catastrophic commercial consequences for the customer and a damning of his hitherto â€Å"good name† in the business community.† If the banks suspicions are incorrect, this can be significantly detrimental for RR. As such, the bank will need to be careful that they are striking a balance between the interests of RR with its duties to disclose . In the recent case of SHAH and another v HSBC private bank (UK) Ltd (2009) EWHC 79 (QB) the implications Part 7 has upon the rights of the individual and the banking business was clearly highlighted. Here, it was demonstrated that where a bank makes a SAR in respect of a suspicious transaction, they may not be provided with protection if the customer decides to challenge the banks suspicions in the future. This is so, despite the fact that a criminal offence may have been committed if the bank failed to make such a disclosure. Customers will have a right to challenge the banks suspicions with the bank then being required to prove that the suspicion was reasonable. It may be difficult to determine how the bank can justify making a disclosure since it was made clear by the court in this case that â€Å"the defendant must think that there is a possibility, which is more than fanciful, that the relevant facts exist. A vague feeling of unease would not suffice.† The bank will therefore be taking a risk in many any disclosure, especially this one since it will have to be shown that the text message was sufficient enough for a disclosure to be made. Furthermore, even if the circu mstances do render a disclosure justified, the bank’s decision may still be challenged which can be costly and time consuming. In K Ltd v National Westminster Bank plc [2007] 1 WLR 311 it was noted by the Court that; â€Å"to intervene between a banker and his customer in the performance of the contract of mandate is a serious interference with the free flow of trade. But Parliament has considered that a limited interference is to be tolerated in preference to allowing the undoubted evil of money-laundering to run rife in the commercial community.† Therefore, even though such a disclosure may interfere with the relationship between the bank and RR, such interference will be necessary if it will be likely to prevent money laundering from taking place. The bank needs to be clear that an interference of RR’s account is appropriate on the circumstances, since a frozen bank account for a period of time has in the past been considered a ‘grave injustice’ in the case of Squirrell Limited v National Westminster Bank plc (Customs and Excise Commissioners intervening [2006] 1 WLR 637. Here, the customer’s funds were frozen resulting in the customer being unable to afford the legal fees it would cost to challenge the decision. Therefore, if RR’s funds were frozen, which subsequently prevented RR from challenging the decision; it is unlikely that this would be deemed appropriate by the court. In accordance with this, it has been said that the test for suspicion is â€Å"a purely subjective matter† ( Medroft, 2010: 190). The decision as to whether the suspicion is reasonable will therefore depend upon whether Christian actually believed that the transaction was suspicious. If it cannot be found that this is the case, the interference cannot be considered justifiable and a breach of the customer’s human rights may also be established as in K Ltd. The bank will therefore be required to consider whether ‘reasonable grounds’ do actually exist, having regard to the elements constituting market abuse offences (Hudson and Hutchinson, 2009: 1). There are many inherent risks that are associated with disclosures and as such, it is vital that the bank is aware of its exact rights and obligations. In SHAH the court found that the bank did not act in an unreasonable manner which is likely to be the case in the instant situation. As such, it will most likely be difficult for RR to show that the bank had not acted in good faith. However, it could be argued that there was an unreasonable delay by the bank to make the disclosure under s. 338(2). As a result of this, the bank could be exposed to liability for breach of its duty of care (Medroft, 2010: 190). Whether this is acceptable remains an arguable subject but as expressed by Benjamin (2007: 62); â€Å"here the objective is not informed consent to risk but combating crime.à ¢â‚¬  Accordingly, it is therefore generally accepted that a bank’s interference will be justified on public policy grounds. The bank will still be subjected to many risks when making a disclosure, nonetheless, and must therefore consider whether the consequences of making a disclosure can be justified (Ellinger et al. 2010: 114). In addition, if the bank decides to make a disclosure, they must be careful not to allow the customer to find out as they can be found liable for ‘tipping off. This is another issue that may arise since a customer could become aware that a disclosure has been made simply due to the fact that their account has been suspended. It could be said that the bank is in a difficult situation as whatever option it takes, sanctions may still be imposed. As one judge noted in Governer Company of the Bank of Scotland v A Ltd [2000] Lloyd’s Rep Bank 271, 287; â€Å"the bank may commit a criminal offence if it pays or if it refuses to pay.† Furthermore, if the bank makes a disclosure based on its suspicions, which later turn out to be unfounded, the bank risks civil liability for breaching its contract with its customer (Ellinger et al: 2010: 114). This is because the bank will have frozen the customer’s account which would have prevented payments from being made in and out of the account. Because the banks have a significant burden imposed upon them when it comes to dealing with money laundering, some attempt has been made to ensure that banks acting in good faith will not face criminal liability. For example, it was held by the court in C v S [1999] 2 All ER 343 that â€Å"it would not normally be an abuse of process to prosecute a bank which was doing no more than obeying a court order for disclosure.† Still, it is necessary for the bank to consider all of the risks before considering whether to make a disclosure or not. Overall, it is necessary on the facts for the MLRO of BCD Bank to make a disclosure to NCA since it does appear that the suspicions are reasonable. This is based upon the transaction of ?15 million that was made recently as well as the text message that Christian has received. Whilst the bank would be required to examine the potential issues with disclosing such information and freezing the account of RR this appears necessary and in the public interest. It will most likely prevent money laundering activities from taking place and will ensure that Christian, the MLRO and the bank are complying with their obligations. References Bastable, G., and Yeo, N., (2011). Money Laundering Law and Regulation: A Practical Guide, Oxford University Press. Benjamin, J., (2007). Financial Law. OUP Oxford. Ellinger, E. P., Lomnicka, E., and Hare, C., (2011) Ellinger’s Modern Banking Law, (Oxford University Press. Ellinger, E. P., Lomnicka, E., and Hare, C., (2010) Ellinger’s Modern Banking Law. 5th Edition. OUP Oxford. Hislop, D., (2009). ‘Banks, SARS the Customer’ 159 New Law Journal 1099, Issue 7380. International Monetary Fund., (2011) Banking and Insurance, Business Economics. Medcroft, N., (2010). A Banker’s Liability for Damages Arising from Compliance with PT 7 POCA’ 4 Journal of International Banking and Financial Law 227, Issue 4. Medcroft, N., (2009). Refusing to Execute Payment Instructions Where a Bank Suspects Money Laundering. 4 Journal of International Banking and Financial Law 190, Issue 4. Hudson, D., and Hutchinson, K., (2009). Suspicious Transactions Reports: Reporting Obligations of Financial Institutions in the UK. Complinet, [Accessed 07 June, 2014]. Cases C v S [1999] 2 All ER 343 Governer Company of the Bank of Scotland v A Ltd [2000] Lloyd’s Rep Bank 271, 287 K Ltd v National Westminster Bank plc [2007] 1 WLR 311 R (on the application of UMBS Online Ltd [2007] WL 1292620 SHAH and another v HSBC private bank (UK) Ltd (2009) EWHC 79 (QB) Squirrell Limited v National Westminster Bank plc (Customs and Excise Commissioners intervening [2006] 1 WLR 637 Actions that the MLRO of BCD should take Given that Radovan Rankovich (RR) is allegedly wanted by the authorities in the Ukraine for criminal actions against the state, and has received a recent transfer of ?15 million from a Corporate Service Provider in Cyprus, it is likely that this would warrant a disclosure to NCA for investigation. In accordance with this, the MLRO will be required to file a Suspicious Activity Report (SAR) with NCA and subsequently liaise with them to deal with this matter accordingly (Ellinger et al; 2011: 97). Part 7 of POCA makes it a requirement for banks to make a disclosure to NCA if they reasonably suspect that a person is involved in money laundering (s. 329). If the MLRO fails to make such a disclosure then he or she may be found criminally liable under this Act for a failure to disclose (s. 331). This is because a person commits an offence under s. 329 if they; acquire, use or have possession of, criminal property. Since a bank would fall within the scope of this section, it is possible that BCD Bank would be subject to criminal proceedings if they failed to take the appropriate action and thus make the relevant disclosures. If the MLRO does not believe that the grounds of suspicion are sufficient to report the matter to NCA, then the MLRO will be required to make further inquiries (International Monetary Fund, 2011: 65). Once the MLRO has made a report to NCA, the report will be ‘protected’ under s. 337 so that nothing in the report shall be taken to breach any restriction on the disclosure of information. Given that BCD Bank may have engaged in money laundering by allowing RR’s transactions to take place, they may have a defence under s. 338 if they make demonstrate that they made the disclosure as soon as possible. Similar provisions also apply under th e TA if the person is also suspected of terrorist financing. As Christian has received a text message stating that RR is wanted by the authorities in the Ukraine for criminal actions against the state, it is likely that the MLRO will also be required to comply with the provisions under the TA for a reasonable suspicion of terrorist financing. An obligation to report under the TA will therefore arise which means that the MLRO will be required to disclose the identity of RR, any information that relates to the matter and the whereabouts of the laundered property. There are two different types of report that may be made by the MLRO, namely protected reports and authorised reports. A protected disclosure is made by a person during the course of their trade, profession or employment. This type of disclosure is generally made by a person who is carrying our professional activities. An authorised disclosure is made by a person who is about to commit a prohibited act or has already committed a prohibited act (Bastable and Yeo, 2011: 108). Since the bank has already dealt with the property that is suspected of being laundered, it is more appropriate for an authorised disclosure to be made. The MLRO will also be required to obtain consent from NCA under ss. 335 and 336 to determine whether Christian can action any further transfers out of RR’s account. This will be done by making a ‘consent report’ to NCA, which will then block any transactions for seven working days. If NCA gives consent to the MLRO, the MLRO will then be able to give consent to Christian to carry out the transactions (Bastable and Yeo, 2011: 108). If NCA refuse consent, however, the proposed transactions will be frozen for a further 31 days, unless consent is granted during that period; R (on the application of UMBS Online Ltd [2007] WL 1292620. The Risks and Issues for the Bank This particular issue regarding RR is likely to be problematic for the BCD Bank as they will want to act in the best interests of their customer, namely RR, so that they remain in business with them whilst at the same time they are required to fulfil certain obligations imposed upon them by law. Because BCD will be required to disclose their suspicions even if RR has not acted in a criminal manner, this will have a damaging effect upon RR’s reputation and as put by Hislop (2009); â€Å"absent bad faith, little more than a â€Å"bad feeling† can trigger a banks disclosure obligations under POCA 2002, with in some cases catastrophic commercial consequences for the customer and a damning of his hitherto â€Å"good name† in the business community.† If the banks suspicions are incorrect, this can be significantly detrimental for RR. As such, the bank will need to be careful that they are striking a balance between the interests of RR with its duties to disclose . In the recent case of SHAH and another v HSBC private bank (UK) Ltd (2009) EWHC 79 (QB) the implications Part 7 has upon the rights of the individual and the banking business was clearly highlighted. Here, it was demonstrated that where a bank makes a SAR in respect of a suspicious transaction, they may not be provided with protection if the customer decides to challenge the banks suspicions in the future. This is so, despite the fact that a criminal offence may have been committed if the bank failed to make such a disclosure. Customers will have a right to challenge the banks suspicions with the bank then being required to prove that the suspicion was reasonable. It may be difficult to determine how the bank can justify making a disclosure since it was made clear by the court in this case that â€Å"the defendant must think that there is a possibility, which is more than fanciful, that the relevant facts exist. A vague feeling of unease would not suffice.† The bank will therefore be taking a risk in many any disclosure, especially this one since it will have to be shown that the text message was sufficient enough for a disclosure to be made. Furthermore, even if the circu mstances do render a disclosure justified, the bank’s decision may still be challenged which can be costly and time consuming. In K Ltd v National Westminster Bank plc [2007] 1 WLR 311 it was noted by the Court that; â€Å"to intervene between a banker and his customer in the performance of the contract of mandate is a serious interference with the free flow of trade. But Parliament has considered that a limited interference is to be tolerated in preference to allowing the undoubted evil of money-laundering to run rife in the commercial community.† Therefore, even though such a disclosure may interfere with the relationship between the bank and RR, such interference will be necessary if it will be likely to prevent money laundering from taking place. The bank needs to be clear that an interference of RR’s account is appropriate on the circumstances, since a frozen bank account for a period of time has in the past been considered a ‘grave injustice’ in the case of Squirrell Limited v National Westminster Bank plc (Customs and Excise Commissioners intervening [2006] 1 WLR 637. Here, the customer’s funds were frozen resulting in the customer being unable to afford the legal fees it would cost to challenge the decision. Therefore, if RR’s funds were frozen, which subsequently prevented RR from challenging the decision; it is unlikely that this would be deemed appropriate by the court. In accordance with this, it has been said that the test for suspicion is â€Å"a purely subjective matter† ( Medroft, 2010: 190). The decision as to whether the suspicion is reasonable will therefore depend upon whether Christian actually believed that the transaction was suspicious. If it cannot be found that this is the case, the interference cannot be considered justifiable and a breach of the customer’s human rights may also be established as in K Ltd. The bank will therefore be required to consider whether ‘reasonable grounds’ do actually exist, having regard to the elements constituting market abuse offences (Hudson and Hutchinson, 2009: 1). There are many inherent risks that are associated with disclosures and as such, it is vital that the bank is aware of its exact rights and obligations. In SHAH the court found that the bank did not act in an unreasonable manner which is likely to be the case in the instant situation. As such, it will most likely be difficult for RR to show that the bank had not acted in good faith. However, it could be argued that there was an unreasonable delay by the bank to make the disclosure under s. 338(2). As a result of this, the bank could be exposed to liability for breach of its duty of care (Medroft, 2010: 190). Whether this is acceptable remains an arguable subject but as expressed by Benjamin (2007: 62); â€Å"here the objective is not informed consent to risk but combating crime.à ¢â‚¬  Accordingly, it is therefore generally accepted that a bank’s interference will be justified on public policy grounds. The bank will still be subjected to many risks when making a disclosure, nonetheless, and must therefore consider whether the consequences of making a disclosure can be justified (Ellinger et al. 2010: 114). In addition, if the bank decides to make a disclosure, they must be careful not to allow the customer to find out as they can be found liable for ‘tipping off. This is another issue that may arise since a customer could become aware that a disclosure has been made simply due to the fact that their account has been suspended. It could be said that the bank is in a difficult situation as whatever option it takes, sanctions may still be imposed. As one judge noted in Governer Company of the Bank of Scotland v A Ltd [2000] Lloyd’s Rep Bank 271, 287; â€Å"the bank may commit a criminal offence if it pays or if it refuses to pay.† Furthermore, if the bank makes a disclosure based on its suspicions, which later turn out to be unfounded, the bank risks civil liability for breaching its contract with its customer (Ellinger et al: 2010: 114). This is because the bank will have frozen the customer’s account which would have prevented payments from being made in and out of the account. Because the banks have a significant burden imposed upon them when it comes to dealing with money laundering, some attempt has been made to ensure that banks acting in good faith will not face criminal liability. For example, it was held by the court in C v S [1999] 2 All ER 343 that â€Å"it would not normally be an abuse of process to prosecute a bank which was doing no more than obeying a court order for disclosure.† Still, it is necessary for the bank to consider all of the risks before considering whether to make a disclosure or not. Overall, it is necessary on the facts for the MLRO of BCD Bank to make a disclosure to NCA since it does appear that the suspicions are reasonable. This is based upon the transaction of ?15 million that was made recently as well as the text message that Christian has received. Whilst the bank would be required to examine the potential issues with disclosing such information and freezing the account of RR this appears necessary and in the public interest. It will most likely prevent money laundering activities from taking place and will ensure that Christian, the MLRO and the bank are complying with their obligations. References Bastable, G., and Yeo, N., (2011). Money Laundering Law and Regulation: A Practical Guide, Oxford University Press. Benjamin, J., (2007). Financial Law. OUP Oxford. Ellinger, E. P., Lomnicka, E., and Hare, C., (2011) Ellinger’s Modern Banking Law, (Oxford University Press. Ellinger, E. P., Lomnicka, E., and Hare, C., (2010) Ellinger’s Modern Banking Law. 5th Edition. OUP Oxford. Hislop, D., (2009). ‘Banks, SARS the Customer’ 159 New Law Journal 1099, Issue 7380. International Monetary Fund., (2011) Banking and Insurance, Business Economics. Medcroft, N., (2010). A Banker’s Liability for Damages Arising from Compliance with PT 7 POCA’ 4 Journal of International Banking and Financial Law 227, Issue 4. Medcroft, N., (2009). Refusing to Execute Payment Instructions Where a Bank Suspects Money Laundering. 4 Journal of International Banking and Financial Law 190, Issue 4. Hudson, D., and Hutchinson, K., (2009). Suspicious Transactions Reports: Reporting Obligations of Financial Institutions in the UK. Complinet, [Accessed 07 June, 2014]. Cases C v S [1999] 2 All ER 343 Governer Company of the Bank of Scotland v A Ltd [2000] Lloyd’s Rep Bank 271, 287 K Ltd v National Westminster Bank plc [2007] 1 WLR 311 R (on the application of UMBS Online Ltd [2007] WL 1292620 SHAH and another v HSBC private bank (UK) Ltd (2009) EWHC 79 (QB) Squirrell Limited v National Westminster Bank plc (Customs and Excise Commissioners intervening [2006] 1 WLR 637

The determinants of the crises upon the technology firms in turkey Essay

The determinants of the crises upon the technology firms in turkey - Essay Example The business cycle or economic cycle refers to the ups and downs seen somewhat simultaneously in most parts of an economy. The cycle involves shifts over time between periods of relatively rapid growth of output (recovery and prosperity), alternating with periods of relative stagnation or decline (contraction or recession). These fluctuations are often measured using the real gross domestic product. To call those alternances "cycles" is rather misleading as they don't tend to repeat at fairly regular time intervals. Most observers find that their lengths (from peak to peak, or from trough to trough) vary, so that cycles are not mechanical in their regularity. Since no two cycles are alike in their details, some economists dispute the existence of cycles and use the word "fluctuations" (or the like) instead. Others see enough similarities between cycles that the cycle is a valid basis of studying the state of the economy. A key question is whether or not there are similar mechanisms that generate recessions and/or booms that exist in capitalist economies so that the dynamics that appear as a cycle will be seen again and again. Now let us closely observe the main types of business cycles enumerated by Joseph Schumpeter and others in this field have been named after their discoverers or proposers: 1. The Kitchin inventory cycle (3-5 years) -- after Joseph Kitchin. 2. The Juglar fixed investment cycle (7-11 years) -- after Clement Juglar. 3. The Kuznets infrastructural investment cycle (15-25 years) -- after Simon Kuznets, Nobel Laureate. 4. The Kondratiev wave or cycle (45-60 years) -- after Nikolai Kondratiev. Edward R Dewey, who formed The Foundation for the Study of Cycles, studied cycles in everything -- including economic data.... The paper tells that in the Juglar cycle, which is sometimes called "the" business cycle and is the main focus of this entry, recovery, and prosperity are associated with increases in productivity, consumer confidence, aggregate demand, and prices. In the cycles before World War II or that of the late 1990s in the United States, the growth periods usually ended with the failure of speculative investments built on a bubble of confidence that bursts or deflates. In these cycles, the periods of contraction and stagnation reflect a purging of unsuccessful enterprises as resources are transferred by market forces from less productive uses to more productive uses. Cycles between 1945 and the 1990s in the United States were generally more restrained and followed political factors, such as fiscal policy and monetary policy. Automatic stabilization due the government's budget helped moderate the cycle even without conscious action by policy-makers. Because the periods of stagnation are painfu l for many who lose their jobs, pressure arises for politicians to try to smooth out the oscillations. An important goal of all Western nations since the Great Depression has been to limit the dips, and until 2001 or so, a comparable period of economic malaise was avoided. Government intervention in the economy can be risky, however. For instance, some of Herbert Hoover's efforts (including tax increases) are wide, though not universally, believed to have deepened the depression. This was perhaps because his ideas were uninformed by Keynesian economics.

Texas Decision to Refuse to Expand Medicaid Essay

Texas Decision to Refuse to Expand Medicaid - Essay Example As the paper stresses texas decision of rejection has protected the private insurance and encouraged its growth. Therefore, private insurance in Texas are affordable, and the number of people with insurance is increasing. Rejection of the Medicaid has affected the country negatively in that the country spending in the country funded health care programs for the uninsured is increasing. Once the expenditure increases the government increases tax thus causing an increase in price on different commodities. According to the research findings the Medicaid program harms the people though it is intended to serve. Expanding Medicaid means that patients who are already enrolled in the program many of whom have nowhere else to go for coverage will be competing for medical services with up to 20 million more people being added to the program. Moreover, the most vulnerable patients who have the greatest needs are likely to have the hardest time getting care. Texas rejecting the expanded Medicaid has protected its people from this problem. The expanded Medicaid under the Affordable federal Act provides a strong health care system. Provision of quality health care increases the number of residents with health insurance reducing the uncompensated care cost. In addition, healthy resident is a sign of productivity in that state. Medicaid emphasis more on coverage and not to care provided to the patients.

Philip Morris Co Case Study Example | Topics and Well Written Essays - 3250 words

Philip Morris Co - Case Study Example Production of a good quality product, testing it properly, marketing it in a proper way ensuring that no unethical means are used are some of the aspects of business ethics. In short, business ethics are the rules to ensure that the business causes no harm to other businesses, people and society in any way, be it morals and values or any other way. Being such a big international organization, Philip Morris holds great social responsibility. Adding to it the fact that it is a tobacco company, this social responsibility is even doubled. Many ethical issues are posed on it every day and the way it tackles these issues and makes its decisions accordingly, is one of the main factors that make it the leader of the tobacco market. Corporate social responsibility is defined by many people in many ways. Some define it as carrying out the business responsibly and properly giving the society economic benefits, while other define it as striving to solve world's different problems. In either case, corporate social responsibility refers to the act of an organization acting as a responsible part of the society and helping it in one way or the other. When talking about Philip Morris's Corporate Social Responsibility, the main issue is the question that w... Looking at these facts and statistics, it is not surprising if Philip Morris cannot be classified as a socially responsible company no matter how philanthropic campaigns they lead and how many worthy causes they serve to. In cases like Philip Morris, where the corporate goals and interests of the society go in totally different directions, it is very important for the company to incorporate corporate social responsibility in its corporate strategy in a much more integrated way as compared to any other organization. This is extremely important for companies like Philip Morris, the leader of a market that literally kills people. This issue, if not handled properly, can become so serious for the organization that it can become an issue for its survival in the market, since the society would always tend to reprimand any such business that poses such hazards to it and is totally incongruent to its values and interests. Ethical Issues associated with Marketing Practices Although ethical issues are frequent in almost all areas of the business for a tobacco company like Philip Morris, but the major issues are posed in the arena of marketing of its product. In 1998, after the conflicts of four years, the US government and Tobacco Market Leaders settled on an agreement. It tackled with the two most important and growing issues in the society; public health and underage access to the tobacco products. The settlement also required the industry to take necessary steps to ensure the reduction in underage access and underage consumption of the tobacco products. It created a National Foundation and a Public Education fund to make people aware of the hazards attached to tobacco consumption and educating them accordingly.

Product channeling Essay Example | Topics and Well Written Essays - 500 words

Product channeling - Essay Example These systems can be integrated vertically or as separate, independent entities. Insurance distribution can be found using any or all of these methods collectively. The ability to navigate distribution channels would require understanding of optimal timing. "Choosing the right channel for the life cycle stage of the product can have a dramatic impact on sales, and often it determines the success or failure of any new or existing product." (Combs, L. S.; The Right Channel at the Right Time; Industrial Management; 46(4); July -August 2004) But in essence, there are many methods toward choosing either a singular channel or multiple channels for distribution purposes, especially in the world of insurance. "The proliferation of disconnected distribution channels is a product of the competitive nature of the insurance industry." (Toth, W.; Navigating Distribution Channels; Insurance & Technology, 30(7), S6-S8; 2005) This alone speaks volumes in the realm of the life cycle considered to be prominent in insurance sales, that during peak times the effectiveness of disconnected distribution channels, or independent distributors or contractors, would in f act be of benefit toward the industry. The most effective channels for insurance would have to be independent marketing organizations for two reasons; this gives the co

Caribbean Essay Example | Topics and Well Written Essays - 1000 words

Caribbean - Essay Example Much like the Caribbean people who struggle with their national identities after enduring European brutality, West Indian poets found it difficult to find their own poetic voice (Breiner, 113). Instead of producing works that reflected their true feelings, West Indian poets found their poetry succumbing to the traditional British verse and subject matters. It was not until later that West Indian poets were permitted to liberally express themselves in the poetic form. When they ventured to write parallel to their true feelings and beliefs, West Indian poets often did so apologetically. Poets were left to question their poetic boundaries. Likely questions of the poets were whether or not they should engage in "social commentary, protests," or seek to find a balance between "protest poetry and high art" (Jennings 23). As a result, much of the West Indian poetry, including Eric Roach's, conveyed uncertainty and confusion. Known for Caribbean pastoral imagery in his writing (Jennings 4), Roach paints vivid pictures that show beauty of the land. In each stanza of the poem, the poet conveys his adoration of the land. The poem opens with sensual imagery which allows the reader to picture lush green vegetation and hear waves breaking amid the expansive blue waters. Roach further enjoys what the land has to offer by accompanying others on a jubilant banana boat tour. Roach's imaginative perception of the landscape serves a dual purpose; it captures the essence of Caribbean beauty and showcases the delight that the author takes in his land. Amid the beauty in each stanza, however, resides negativity and inner turmoil. Roach reveals that the internal conflict interrupts his ability to fully appreciate his surroundings. In the first stanza, the beauty and brilliance of the landscape intrudes upon his desires. Though pleasing to the eye, Roach's surroundings hold his dreams and aspirations hostage. From there, the poem digresses into an explanation of the role of restriction and how it ultimately tainted his view of the land. With songs in his heart, Roach once again optimistically attempts to enjoy what the land has to offer in the following stanza. However, the enjoyable excursion is short-lived as the sun turns to snow and they encounter "hostile and exploding zones." Thus, inner turmoil and confusion taints the joys and hopes presented in the poem. Each stanza of the poem conveys an absolute contrast between the land and the Roach's state of mind. In the beginning of the poem, the distant beautiful and crashing waves are empty, yet they engulf all of his dreams. It seems that the water represents a destructive force. Roach comments on the burial of his friend and his sister's beauty being tainted. Obviously, the vicious experiences take a toll on the people of the land. In spite of it all, however, the people remain steadfast in their desire to survive. Once again, hope is presented in the people's perseverance to regenerate their confidence. Moreover, the people's perseverance encourages Roach to proclaim that love (the pride in their heritage and nation) defeats the oppressive struggle. In the end, the Roach finally admits the struggle in coming to terms with the tainted precedence before him and the will to purify it

Career Planning Assignment Essay Example | Topics and Well Written Essays - 1250 words

Career Planning Assignment - Essay Example In this paper, an attempt will be done right from class, internships as well as organizations of students. I like Loyola Marymount University based on the fact that it has a rich career development program. Loyola Marymount University Office of Career and Professional Development (CPD) in Von der Ahe 135 contain a number of career development opportunities. First, it has business school. The school has business specialization in various categories that fall within the Department of business administration, finance and Economics. The various departments avails a fundamental and culturally significant business concept that exposes students to the larger business world. The business concepts touch on economic aspects of any company in a given country. The business analysts collaborate with academicians across all fields through the lines of academic disciplines and business interactions with the surrounding Los Angeles communities. The business department also offers diverse learning opportunities in various business fields. In general, the business department encourages me to explore the b usiness world in a more visual and real way by availing experience in doing business. The other career development service available in the LMU’s Office of Career and Professional Development is the theater arts. The Theatre Arts program provides me with a strong inclusive course work schooling and experience in such fields as acting, design, directing, theatre technology, criticism, history and playwriting. Intimate classes give room for close working associations as pertains to the faculty. I am certain to get a unique experience in theater with standard, current multicultural networks, political as well as progressive. I can also have opportunities to undertake personal research and projects that are quite creative. Besides, I am

Review the literature related to the effect of surgical repair in Essay

Review the literature related to the effect of surgical repair in wound healing.Discuss the influence it may have on healing - Essay Example Reports are vague on how the prehistoric man treated wounds, but in the primitive tribes, wounds are covered with plant parts and other materials believed to have healing properties. Wounds were also filled with spider web in time past. Various crude methods of wound draining and wound closing are also reported among some tribes. An ingenious wound clamp was devised out of the jaws of insects by primitive tribes of India and South America who made the insects bite across the apposed edges of a wound.(Haeger, 1988) . Wound management has two main approaches: the surgical and non-surgical categories of intervention. In the non-surgical approach, classical methods such as administration of topical or systemic therapeutic agents, locally applied enzymes, and dressings designed to optimize the wound for later surgery, or to heal the wound by secondary intention (Knox et al., 2007). The surgical approach involves the implementation of preparatory surgical procedures which help to prepare the wound for accelerated recovery and augment the body healing process. Both of these approaches are different, yet aim at the same goal. This review is concerned with the surgical aspects and how they provide a facilitating environment for timely wound healing. For effective wound healing in modern day surgery, the aims are to ensure quick regeneration of damaged tissue, reduce infection, and maximize immune response, and central to achieving these aims are blood perfusion, oxygen supply, prevention of re-injury and good diet(Hunt and Hopf, June 1997a). Reduction of infection and quick tissue regeneration are directly related to wound blood perfusion and oxygenation. Perfusion therefore appears to be the most important factor in wound healing. Wounds in well perfused areas of the body tend to heal faster, even when they are massively infected. They also form less scar. The same goes for wounds that occur in areas of

Reading More Books Essay Example for Free

Reading More Books Essay How to encourage your children to read more books Ten great ways to develop your children’s desire to read book By Chris Barnardo Reading is great for both you and your children and is a fantastic form of relaxation and escapism. Reading books helps your children develop their language skill, extend their vocabulary and their understanding of the world. Your children’s spelling and writing skills are also improved by regular reading. Reading can be especially helpful to your children when they are going through difficult times in their lives, such as the separation of parents,  starting a new school, the death of a loved one, bullying, or puberty. A good book gives them a mental place to go where the day to day worries aren’t so ever present, it gives them new people to meet and gets them involved in other people’s stories. Reading develops your children’s creativity. It’s better than the television, because when children get involved in the book they are reading, they imagine the characters and scenes, which paint all kinds of Fill your house with books and give your kids their own bookshelf This is especially important if they don’t live with  you, because any way you can make your place feel like their home, is good, and having their own favourite books in a special place is perfect. Read to your children Set up a routine of a bedtime story or chapter from their book. Bedtime reading is a great routine to get into because it is a perfect relaxing bridge between the excitement of the day and sleep. It is also a special time for you to be together without the stresses and hassles of the day, a time when all is clam and you are just having fun together. However, don’t restrict yourself to bedtimes,  read to them whenever the opportunity presents itself. Read them funny or interesting stories from the newspaper when you spot them, save and read out a funny or moving poem before you eat a meal together; get them to read their homework out loud to you when they have done it. Page 1 of 2 wonderful images in their minds, in a far more interactive and satisfying way than television can ever do. reading encourages your child to be creative and think for themselves. So, everyone knows how good reading is for their children, but how do you encourage them to read, or read more. Here are ten top tips to get you started and get your children reading books. Listen to audio books in the car on longer journeys Audio books make every long journey an adventure in itself. If the story is good and the narration is well done, the journey will flash by and when you reach your destination you may even find yourselves wanting to stay in the car to hear the end of the story. They can be expensive, but most stories will bear repeated listening and the library lend out audio books for free. Don’t be a book snob Children are inspired to read by all kinds of  different books, graphic novels, magazines, web blogs, manuals, science fiction, or teenage romance for example. Let them get interested in reading in whatever form that takes to start with, once they get into the habit of reading this will expand to take in a wider and wider choice of material over time as their friends introduce them to new books and ideas.  © C. Barnardo dadcando 2008 How to encourage your children to read more books Talk though the story when you read it Chat about the characters in the story. If it is a novel then talking about the main character’s  motivations, asking what your children think the characters are going to do next, or what is going to happen in the story, all add weight to the experience of reading. Ask questions about the writer’s style, or the way the writer describes the scenes will help your children get the most out of the story and will help them in a very subtle (but powerful) way with their own written schoolwork and homework assignments. Discussing stories and listening to what your children have to say about the characters and the situations they encounter in the book will tell you a lot about  what your child is thinking, and help you understand them better. At weekends or on holidays make a treat of getting magazines Magazines have short articles about things they like, horses, cars, fashion, gossip, TV soaps, toys, console games, and popular science for example. If they really like a particular magazine then consider buying a subscription to it for them as a birthday (or other special occasion) present. Give books as gifts Take the trouble to go to the bookshop at the weekend or browse the second hand book shop for interesting titles and involve your children in  choosing the best book as a gift. When giving a book, especially to your children, always write their name and the date and a short message in the book inside the cover or on the flyleaf. Then they’ll always know it’s theirs and know that you think that it is a precious gift that you have chosen specially for them. Choose material that they like There is plenty of time to discover the classics. To start with choose books that you know your children will like. Choose different books to read to them than those which they are going to read to themselves. When you read to them, you can pick books with exciting or thrilling stories that may have longer words in then they would be able to read themselves. (Always explain a word or phrase if you think that they don’t understand it). Perhaps you have seen a film that you all liked, get the book that inspired the film and read that. If they are reading to themselves, a graphic novel or even a comic is an excellent way to start reading around a film story. Have a word of the day Reading is as much about exploring language and the way stories are told as it is about the stories  themselves. Look on the web or in a dictionary and pick a word of the day which you can all learn together. The word you choose can be gross or exciting, different or funny, long or strange but above all make sure that it is useful in some way. Get everyone to make up a sentence with the new word in it and give a point or star for the best sentence. If they want, let your children each find and tell their favourite new word of the day. A good time to do this is at meal times when you are all together. *** For some ideas on a few good books that your  children might like, have a look at dadcando’s what we like this week column or dadcando’s recommended â€Å"Superb kid’s books† on dadcando’s â€Å"Be Inspired, be inspiring† pages. Get a poetry book and occasionally read them a poem Poems are fabulous for evoking emotions and feelings. The best poems condense and capture descriptions of scenes or feelings in a very powerful way, bridging the gap between stories and songs. Inspire your children with poems and they will remember lines from them, and the times you read to them, for the rest of their lives. Page 2 of 2  © C. Barnardo dadcando 2008.

Body Language In Intercultural Communications Cultural Studies Essay

Body Language In Intercultural Communications Cultural Studies Essay With the international communication becoming closer,except the verbal communication in daily life, we may encounter many body languages. These body languages can express their mood or even substitute one sentence. Therefore, in order to understand the intercultural communication better, this dissertation first introduces the relationship between culture and language, then briefly explains what body language is and its function in intercultural communication, subsequently, briefly analyses the differences of the same body language in different cultures. At last, the dissertation suggests that when studying English language, one cant ignore the huge body language, it will be helpful with our English study. Key words: Language; culture; body language; intercultural communication I. Introduction With the international communication becoming more and more frequently, Chinese people may have many chances to get in touch with foreigners. They always use many body languages with their talk. It is a funny phenomena. Shakespeare said Theres language in her eyes, her cheek, her lip, Nay, her foot speaks. Indeed, these body language not only can make their word lively, but also express the speakers mood, or even substitute a sentence. What the body language means when they use for communication?This is the necessary knowledge of English study. Any kind of body language is formed on the foundation of culture. Without understanding the true meaning of a body language, it will embarrass or make mistake. Therefore, this dissertation will analysis the differences of same body language in the different cultures and suggest to study English on the premise of understanding their culture. II. Literature review 2.1 Culture and language 2.1.1 Culture The definition of culture is evolving as time passes. In the west, at first it was used to describe some ability of person which represent a form of act. Then culture used to describe the real achievement of a instructed person. And in 1952, a book of Alfred L. Kroeber and Clyde Kluckhohn named Culture. A Critical Review of Concepts and Definitions was give a general definition based on more than 160 kinds of cultures definition which was identified by modern east and west academic circle. And in China, its meaning was that with the understanding of all phenomena of human social, govern the world with instructing and inspiring. In the Confucian concept, wen not only means word, but also refer to all the rules of etiquette and music in general. In ancient Chinese language, culture meant guiding people with ethics. Culture is a complex concept and changing with human social. However, the word culture is most commonly used in three basic senses: Excellence of taste in the fine arts and humanities, also known as high culture An integrated pattern of human knowledge, belief, and behavior that depends upon the capacity for symbolic thought and social learning The set of shared attitudes, values, goals, and practices that characterizes an institution, organization or group 2.1.2 Language Language is the important thinking and communicating tool of human being. With language people can keep and pass human civilization achievement. In general, any nation has its own language. It is a notable character of a nation and has long history. Language is closely related with thought. It is the carrier and exhibition form of thought. Language is a social phenomenon with stability and nationality. Though many animals can make sound to express their emotion or deliver message, these sounds are regular without change. Only person have language and can combine all the sounds that have no meaning to become a meaningful morpheme, then put these morphemes together in many ways to form utterance. Using infinite changing form to express infinite changing meaning. 2.1.3 The relationship between language and culture Culture and language are mutual dependence and can not be separated. Language is part of culture, it is the media of culture communication. We use language to communicate, and language is largely influenced by culture. The relationship between culture and language is on the foundation of nation. A nation produces language, at the same time produces culture. Edward Sapir thought that language can not exist without culture. The culture we talk about is social custom and belief. It can decide our life structure. Linguistician Palmer said that language faithfully reflects all the history and culture, game and amusement, belief and prejudice of a nation. As a part of nations culture, language reflects the nations visage, at the same time, language reflects the content of culture as form. Language is the important carrier of culture. Other carriers such as historical site, book, or painting, only show part or even a corner of culture. But language stores all the information of culture comprehensively. Language consists of voice, vocabulary and grammar. Vocabulary, especially the notional word, bear the important responsibility of carrying culture. Time passes, and many new words are coming into being, such as virtual floating, means netizens put their worries and secrets in the virtual bottle without knowing who will get it. All of these are anonymous. And kickback, the original of this word is that the International Olympic Committee will open an ethics investigation into Issa Hayatou over allegations the African football official took kickbacks from FIFAs former marketing agency. But these new words hardly possible become part of culture. Only those language fact that integrate into the bottom life deeply, chosen and washed out by history, enter the basic nation voc abulary is the sign of language affect culture profoundly. For example, Buddhism have been spreaded about 2000 years. Some words like free, retribution, disengagement, hell are coming from Buddhism. These words have already integrated into Chinese become part of it. Culture has effect on language semiotic system itself, language concept, thought and expression, and language learning. Nation culture is decided by the meaning of vocabulary. Different culture tradition and mentality have definitively function to it. Such as dragon, the western people have no favor to it, they thought it is monster, cruel person, stand for devil. But in ancient Chinese culture it stands for the son of heaven and the emperor, lucky and honorable. The reference content and way of culture are decided by the cultures person and persons culture. For example, Cantonese cant see snow for the whole year, so they do not distinguish ice and snow in concept. The northman say à ¥Ã¢â‚¬  Ã‚ °Ãƒ ¦Ã‚ £Ã‚ , and Cantonese say à ©Ã¢â‚¬ ºÃ‚ ªÃƒ ¦Ã‚ Ã‚ ¡. But the Eskimo who live in arctic pole always contact with snow and have a perceptive. There are more than 20 kinds of words used to describe different snow. As the carrier and express tool of thought, language promote the developm ent of thought, on the other hand, language is restricted by thought. For instance, Chinese say à §Ã‚ Ã‚ «Ãƒ ¨Ã‚ ½Ã‚ ¦, that is à §Ã‚ Ã‚ « and à ¨Ã‚ ½Ã‚ ¦, looking into the physics function of à §Ã‚ Ã‚ « and à ¦Ã‚ ±Ã‚ ½. But in English, there is railway train, look into the move way of rail and track. To understand the culture of English countries is the important step of English study. The research of language and culture is divided into language culture and language in culture. So culture is divided into two part: big culture and small culture.(Bright, 1976) Here is a form: language Big culture other cultural phenomena Culture Verbal language Small culture Non-verbal language Body language is the important part of non-verbal language. Non-verbal language and culture are learned behaviour and social custom that rich in long history heritage. The relationship between both have these characters in someone like Samovar etals eyes: culture and non-verbal language can not be divided. Many non-verbal languages are the result of learning culture. The shaping and impacting of non-verbal behaviour are always decided by determinate culture environment. It is very important to understand the relationship between culture and non-verbal language. (Samovar etal, 1981) Samovar thought that through understanding the basic represent mode of some cultures non-verbal language, we can search peoples behaviour and attitude. Through non-verbal language mode can understand a sort of cultures value system. Through the research of non-verbal language can exclude the narrow ethnocentrism. The most realistic signification of researching the relationship between culture and non-verba l language in intercultural communication is to resolve the culture conflict in non-verbal language. People always do not realize the learning of their own culture, but very sensitive with other cultures non-verbal language and easily produce misunderstand. Worth the whistle, the culture conflict brought by non-verbal language is serious than that brought by verbal language. Because non-verbal language always is the expression of sensibility and emotion. Samovar put forward that to resolve the non-verbal language culture conflict in international communication should remember the follow three principles when understand the meaning of other cultures non-verbal language: 1. When pay attention to the behaviour of a non-verbal language can not ignore that there are manifold non-verbal language cooperative work in real communication. 2. Anyone can not list and describe all the non-verbal language in any culture. But if we can understand exactly the information of some usually used non-verbal language under the international communication environment, it will be helpful to understand the necessary information. 3. Only understand our cultures non-verbal language first, can we understand other cultures behaviour. Under international communication, to identify the message of non-verbal language should avoid modal or only notice superficies. Be sure to keep in mind that any non-verbal language does not appear lonely, nor deliver any message consciously. Pay special attention to that when study foreign language, international communication activity, and international research, for the need of communicating, studying and researching, people have to make a summation and generalization of the non-verbal language of the same country and the same language nation to sum up some representative non-verbal language. However, in real communication, people must find that the non-verbal language in the same country and nation are not just the same. Even in the same area, it is differ in thousands of ways between the people in different occupations, different age groups and different culture levels. Such as America which is famous for multinational immigrant living together, their non-verbal language are ver y hard to be consistent. So as the different English country, the differences are more further. III. Body language 3.1 Definition Body language is a way of communication that body movements which use head, eyes, neck, hands, arm, foot or other parts of the body to express peoples thought and emotions. Facial expressions, eye contact and other postures and gestures are the commonly used body movement. In a general sense of word, body language includes facial expression, in a narrow sense of word, body language only includes the meaning expressed by body and four limbs. The assortment of body language was advanced by Ruesch and Kees in 1956 according to the basic component of non-verbal language. It involves sign language, action language, and object language. The other assortment was advanced by M. Knapp in 1978 through the analysis of some pertinent researching and literatures. That are body motion and kinesics behaviour, physical characteristics, touching behaviour, paralanguage, proxemics, artifacts, environmental factors. Subsequently, Jensen advanced another statement: body motion and gestures, attitudes to ward time, attitudes toward space, general habits in communication. The research of human body language can trace back to Aristotle in Greek. The formally research was beginning from Darwin. In his 1872 book The Expression of the Emotions in Man and Animals put forward that man and animals have many similar expressions. The systemic research of body language must come first Ray Birdwhistell. His 1952 book Introduction to Kinesics put forward the theory of kinesics. Made the body language become a coding system like verbal language to study the relationship between body movement and communication. Body Language of Julius Fast is a representative work that reflects the research result of body language. This book is known as the summary of the scientists research in the body language field. From then on, body language becomes a boundary science and produces new research result continuously. According to estimates, human body can make out more than 270,000 kinds of posture and movement. This is far more than the sound made out by human body. These postures and movements meaning are very complex. Some are definite and material as some are general and blurry. Some are used to communicate as some are used to self-express. Some are expressing emotion message as some are reflecting character and attitude. So the sort of body language is very complex. The body language classification method of Ekman and Friesen has important effent in non-verbal language communication educational circles. According to all the movements origin, usage and code, they divided human face and bodys continuous movement into five parts: 1. Symbolic movement: these movements have clearly meaning, such as the gesture express OK and victory. Symbolic movement always used to substitute verbal language. In general, they have distinct culture character. For example, the movement means suicide, in Japan, people use hand to simulate dagger to thrust the abdomen, and in America, people use hand to simulate a gun shot temple. 2. Illustrative movement: these kind of movements cooperate with verbal language directly to explain the meaning of the talking. For example, to emphasize a sentence, describe a thought, indicate a material, depict a space relationship, characterize a things rhythm and speed, portray a phenomena , describe a body movement, explain a sentences meaning, etc. 3. Emotion revealing movement: mainly through facial expression to show emotion or mood, of course the other part of body can also express these emotion. Express the emotion can repeat, exaggerate,deny the verbal language, or may be no relationship with it. Express the emotion always deliver the message of communication unconscious, but also can use it in communicating conscious. 4. Modulation movement: this kind of movement is used for maintaining or adjusting the talk in the face-to-face talk. It drops a hint that the speaker can keep talking, repeat again, explain further, speak fast or more lively, let other people have a talk, etc. In recent years, people pay attention to the research of the turn-talking in chat. Turn-talking means that telling the opposite side I want to talk; stopping the speaker changing the topic; asking the other side to give me a speaking chance; let the other side keep talking; telling the others that I have finish my talking and you can speak. The usually used movement is head and eye movement. 5. Adaptable movement: Ekman and Friesen divide it more further: 1). Self-adaptable movement: this kind of movement always happen on personally, such as, holding own hand, rubbing hand, grabing, scratching, clutching, nipping, whisking or gathering the cloth. In general, the emotion is more disconcerting, the pretty actions are more distinguished. Picking nose and wiping eyes belong to this kind. 2). Transformational adaptable movement: this kind of movement take place in the connect with other people. Such as, bringing or delivering, attacking or protecting, close or away. Leg movement can react that encroach, footsie or attack. Shaking hand or foot means fidgety that the person want to avoid talking. 3). Object adaptable movement: this kind of movement always relate to the using of material, such as smoking and writing. 3.2 The function of body language in intercultural communication As the necessary communication tool, body language has important function in intercultural communication. Bradford J. Hall(2002) summarized the mainly function of body language language: 1. Repetition: Body language can reinforce the verbal language by repeating the verbal message nonverbally, such as using a gesture, it can help the receiver understand the message easily. For example, when someone ask you where is the restaurant, you can point a certain direction when you say, the restaurant is north the library. Or we point to the question on the book we just ask. 2. Substitution: Body language can be used to replace some verbal language to deliver a certain meaning. When your friend meet a sad thing that make him cry, you can give him a hug. This is more powerful than any soothing words. 3. Contradiction: Body language sometimes can betray the speaker by sending contradictory message to the verbal language. The body language is often regarded as the powerful word than the spoken words. For example, we cant keep our face from blushing even say we dont nervous or we cant slow down our heartbeat if we are scared. And the teacher can find a student is wandering from the eyesight even though his eyes are staring the blackboard. So the body language is reliable than the verbal language sometimes. 4. Accentuation: It can force the power when you add a body language with your talk than only use verbal language. When you apologize to someone, if an apology show on you face, this can make your apology more conviction. In addition, body language can provide a complement to the verbal language. In some countries, you can up you thumb as the same time you give a admiration to your friends for his good performance. 5. Regulation: The body language also helps us to control the situation of our talking. For example, when we need a quiet, we can put our finger on our lip. IV. The analysis of the differences of the same body language in different cultures 4.1 The different meaning of the same body language in different cultures Here contrast some body languages that usually used but have different meaning. If you use a very awful body language, this might bring a badly result. 1. In China, up the thumbs means good to praise you are doing a good job, bravo and so on. It is same in many countries. If thumbs down means disagree, finish or youre game over. But in Australia, no matter it up or down is obscene. 2. Protrude the index finger means wait a minute in America, but in Australia it means one more beer. 3. Protrude the little finger means cowardly man in England as bet in America. 4. The V for victory or peace sign in America if made with the palm facing inward is taunting or sneering in England. It is very offensive to societys morals. 5. American people sometimes up head, palm facing down, index finger across the throat, it means Im full. I cant eat anymore. But it means decapitation in China. 6. When Chinese people communicating with foreign people, the most antipathetic movement is using index finger point the others casual. Indeed, the movement is in bad taste and impolite to western people. This is reproof and rebuke. 7. Chinese male like to put hands on other mans shoulder for a long time. And Chinese female frequently take other womans hand closely for long time. These shock the foreigners because they consider this gesture means homosexual. 8. When Chinese people receive or send a cup of water or a gift, they will use two hands to accept it to show appreciate and admiration. But American people dont care about whether use one or two hands. 9. When talking with American people Chinese like to put their hands crossed behind their back or into their pockets. But these gestures make the American think you are hiding guns in your hands. 10. Chinese may scratch their noses when feeling uncomfortable. This is confused the western people because in their culture this movement means Im telling a lie. 4.2 Some embarrassing examples due to misunderstanding of body language Under the same culture, people may have misunderstanding because of the body language, even the different culture. Culture difference in different countries, so the body language can express different meaning. If we do not understand the other peoples meaning, it will have misunderstanding and displeasure. For Examples: Tom is the manager of an American company in China. Recently, Li Lei, one of the Chinese staff makes a mistake at work. He is very upset about what had happened, so he comes to Toms office to apologize. Entering the office with smile. He says: I feel terribly sorry for the mistake. I am here to make a sincerely apology to you and promise that it will never happen again. When he said this, the smile always on his face. But Tom feels it is hard to accept and ask himAre you sure? Li says yes with smile. Tom is angry and saysYou dont look sorry at all. If you really feel sorry, how can you still smile? Li feels so embarrassed and does not know what to do. A Chinese student Wangdan and her friend, the American student Judy who studys in China were on the way to store. They saw a boy fell down on the ground. He tried to stand up while the surrounding people laughed. Luckily he was ok. Judy was worried but found Wangdan was smiling too. She was very curious and asked how could you laugh when someone else fell down. Why dont you help him to stand up and ask him whether he was hurt. Wangdan said, Because they know he was not hurt too much. But Judy still couldnt understand. She said, In my culture, if this was happen, we would do anything but laugh. The former examples are all about the smile. In daily life we usually smile, but in different culture, this ordinary movement can bring misunderstanding or some more serious results. When western people come across these situations, they will with solemn face to apologize or come to console the boy. Though smile means happy, it is the symbol for people in general, but in different culture, smiling in the communication are different. The western people think smile always means happy, high in spirits or think something is funny. But Chinese people often smile, because it not only means humours and satisfaction, also means embarrassment and protection, even a kind of evadable. So it confuses the western people, they say it is too hard to understand. In China, people sometimes use smile to eliminate embarrassment, also means never mind, and the person smile to self-mockery or play a joke. But if the affair is very serious, people will provide help but laugh out of court. So for the peopl e who do not know the meaning, this kind of smile will make them unhappy even produce antipathy. A Chinese student went to a American family and sent present to the child of this family,when he beckon to the little boy, yet the boy back off him. The hand movement is very abundant and with infective. Every gesture has its particular function. In the case, the Chinese student used Chinese gesture, which palm facing down and making a scratching motion with fingers to beckon. This is different in America that means to go away. When they let somebody to close up, their palm facing up or only move index finger. This is opposite to Chinese and may bring Chinese peoples repulsion. V. Conclusion After the briefly analysis of the analysis of body language in intercultural communications, we have a knowledge about the relationship between culture and language, and the influence of body language in the communication. The body language in our daily life is incalculable. Every one can use his body to represent himself. Body language is the same as verbal language to be the carrier of culture that may cause misunderstanding in the international communication because of culture difference. As an English major, to understand the culture of the target language is very important. Having the knowledge of body language will be helpful to us in intercultural communication.