| Topic : Financial innovations in Emerging markets |
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Banking & Insurance Professionals
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Activity:
147 views;
last activity : 07 06 2010 20:18:09 +0000
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Financial system/institutional innovations.
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Emerging markets may adopt an approach of
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INNOVATION INC
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For financial innovation proactive INSURANCE support services are the answers in the emerging markets
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Integration with other large/ global Market
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INNOVATION INC
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Product innovations
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Such innovations can effect the financial sector as a whole, relate to changes in business structures, to the establishment of new types of financial intermediaries, or to changes in the legal and supervisory framework. Important examples include the use of the group mechanism to retail financial services, formalizing informal finance sysems, reducing the access barriers for women, or setting up a completely new service structure. |
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Rashmi, what you say is very true and if implemented would be give a good boost...but all this must include..financial inovations for all the strata of economy...The products should be made available or derived for all kinds of financial instruments....with inherent checks and balances...so that any asset specific bubble is avoided & also the fear of future soverign default does not happen...
As the biggest fear for any country even the emrging market is that ...due to globalisation, different types of exotic as well a different kinds of financial instruments bring in global money very fast in to the countries economy and also go out fast...when the tide turns...(asset bubble...like real estate)
This very smart global money...then beomes the bane for that country...current examples being..iceland...dubai...greece...if I am not mistaking...Italy probably...is next on radar...
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Mdam, perhaps you posted allmost a similar question .. just a few days back ? Now .. you are asking the "types" ... and for "emerging markets" .. ? Nce. My posting in your earlier question was like this ... "" You mean innovation of "Financial Instruments" mostly created by Banks / Finance Comapnies, NBFCs, Stock Exchanges etc.? Yes,they have helped to enhance the speed of money moving from hands to hands and thus boosting the economy.
At the same time, these 'instruments' have created bubbles in the economy when mis-utilised. This was seen in the case of Harshad Mehata scam when a single instrument ( RBI General Ledger Receipt .. ? ) was used several times to pose as different instrument and creating artificial money several times. Mr. Late Mehata used the 'bubble fund' in shares luering others to join and invest in shares.The end result : share markets collapsed all on a sudden when the flaw was detected and loopwholes blocked by RBI. In recent times, the Investment Bankers in the USA created another type of bubble while dangerously playing with "Hi-breed Mortgage Loan Instruments", when busted, resulted in today's recession in the USA and world over .. details elsewhere. Innovation is good if used with prudence, with due delegence, with adequate safeguard and above all with control of the Central Bank (RBI) or the Federal Reserve (USA). ... "" Types for emerging markets : Emerging markets may bring forth all (good) F/ intruments from the west as may be deemed fit for their economy. But with great caution. Main thing we have learnt so far : Is the 'underlying' assets strong enough to support hi-breed instruments ? Is the economy strong enough for innovation of Financial Instruments to reach sustained development ? |
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TO REACH TO THE UNTOUCHED AREAS OF RURAL EMERGING MARKETS, A VOUCHER BANKING IS THE SOLUTION.
IF WE TALK ABOUT INDIA POST OFFICES CAN ALSO PROVIDE BANKING SERVICES,AS THEIR SERVICES ARE VERY TO CAPTURE THE UNTAMED MARKETS.
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Post Offices acts like bank for a very long time friends. Don't they?
For financial innovation proactive INSURANCE support services are the answers in the emerging markets
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Insurance is the important wing of the financial Market. Many today believe that Insurance companies take the premium & shy away when claim is reported. If Insurance companies in the emerging market buck up their services at the time of contingency happening & back up the client by providing the resorces to continue their job it would be great. My case in point is e.g. Insurance co.s provide alternate vehicle in case of accident to the insured vehicl, provide a reasonable loan for risk improvements & also give reduction in premium for implimenting the risk improvements. Such proactive small courtesies can take the emerging markets a long way by client's benefits & Industries business boost. Krishna Burli |
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I can not think of any new financial innovation for emerging markets. Most (not all) financial innovation revolves around segregation of asset & risk from a "risk asset". This helps "risk averse" concerns to sell the risk, at a cost mostly but at times at a premium too, to "risk lovering" people or speculators. Also, integrating larger markets will bring opportunities for both the 'risk averse' & the 'risk loving' concern and provide greater dept and liquidity to the financial markets. We all are aware that most developed countries have surplus capital where as most emerging markets are capital deficient. Their integration will help both these countries. Emerging markets will have access to capital (at probably lower cost) whereas the developed economies will have more investment opportunities and can manage a more diversified portfolio (by spreading their risk). The sum total risk remains "zero" (theoretically at least). In fact the large volume may make it difficult to manipulate and gives opportunities to managers to take calculated risk. Also, if an investor is willing to take risk then, what is the objection? A bubble can me managed through proper check & control system and a professionally qualified, proactive, independent regulating body. There should not be any political or other intervention of any kind. |
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Why managing bubble? I believe the ‘overstretched exhaustion phase’ of a market is probably termed as a ‘bubble’. A bubble should always burst. Most market regulators increased margin to de-leverage market and prevent a bubble. Besides, it is important to prevent payment crises and for that purpose we have “call margins” to meet “mark-to-market” losses. All those who are on the wrong side of the market and are not having “prudent risk management system” in place are likely to loose heavily. A larger market gives more liquidity, which is important for risk management.
“Greed of the more powerful investment force”, well is a large and efficient market, it becomes almost impossible to manipulate even for the most powerful of them come together. I have personally seen this happening. In then mid-90s, when the Federal Reserve, The Bank of Japan and the central banks of the entire west Europe and Canada simultaneously intervened the forex market to support the Dollar and they all failed and how!! All because of the size of the market that was too large and efficient.
“Sub-prime” as the name suggest, were never a quality asset and have a very high degree of ‘risk associated’. These assets where securitized and the securities were sold in the financial markets. In past many of these securities yielded magnificent returns which is often the case in a very bullish market (Past performance ….you know!). However, incurring heavy losses is just as natural, particularly if the risk management team is found napping or may be these assets were not liquid.
If every market participant is very logical and scientific in approach then we hardly need a market. Greed and fear as natural part of human behavior and the market participants are just human.
In fact a crisis (or a bubble burst) is an opportunity to enter the market and pick up quality assets at a good discount.
Managing bubble is a very far fetched idea...what will you do when the greed of more powerful investment forces become lust and then...we again have west kind (subprime crises) echoing back in our own emerging market financial jungle...
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TO REACH TO THE UNTOUCHED AREAS OF RURAL EMERGING MARKETS, A VOUCHER BANKING IS THE SOLUTION.
IF WE TALK ABOUT INDIA POST OFFICES CAN ALSO PROVIDE BANKING SERVICES,AS THEIR SERVICES ARE VERY TO CAPTURE THE UNTAMED MARKETS.
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Such innovations include the introduction of new credit, deposit, insurance, leasing, hire purchase, and other financial products. Product innovations are introduced to respond better to changes in market demand or to improve the efficiency of the of the economy as a whole. Thus companies should go for regular product innovations in order to beat the negative effects of the market & economic conditions. |
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