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Deck 18: Global Operations and Supply Chain Management
ملء الشاشة (f)
سؤال
Microloan Bankers: Charity or For-Profit Business Model?
This is Sophia Maimu, a melon stand owner and microloan client of ACCION Tanzanian partner, Akiba Commercial Bank.
You might think it would be utter folly to lend money to the poor in a developing country. What about a loan to a new small business or entrepreneur such as a vegetable peddler, tailor, or candle maker? Worldwide, development organizations are finding that some of the world's poorest entrepreneurs repay their debts at rates approaching 100 percent. To encourage grassroots private business in Latin America, Asia, and Africa, microlending organizations are expanding programs that already lend thousands of small entrepreneurs amounts ranging from $50 to several hundred dollars. Tiny businesses in developing countries commonly repay these microloans faithfully because of community pressure and the security of a favorable credit rating. Microloans give them small spurts of working capital when they need it, allow them to establish credit, and let them borrow again in hard times. The money helps them start or expand their businesses-selling vegetables, sewing, repairing shoes, making furniture, and the like-and boosts the local economy.
The microcredit concept was developed by Professor Muhammad Yunus, a U.S.-trained Bangladeshi PhD economist, through the Grameen Bank in Bangladesh (which he established to administer his program), and ACCION, a U.S. microcredit organization. Dr. Yunus was awarded the Nobel Peace Prize in 2006 for his work fighting poverty.
The microloan repayment performance shines when compared with that of some sovereign nations. It also looks very good compared with a default rate of 13.8 percent among U.S. recipients of federally guaranteed student loans. ACCION reports a repayment rate over the life of its program of 97 percent. A Mexican program, Compatramos, reports a 1 percent default rate.
Critics point out, though, that one microloan is not going to pull a budding entrepreneur out of poverty, let alone a whole country. When Tufts University received an endowment to set up a microloan program, specialists were ready to warn Tufts of the ethical aspects of microloans: its program needs to be much more than banking. A series of loans is probably necessary, combined with training and support.
Recently, several not-for-profit microloan operations have changed. Because of their success, they have become banks, and in one case, Mexico's Banco Compartamos sold 30 percent of its shares to the public, with the IPO share price moving up 34 percent. Their 2007 IPO also brought a lot of difficult issues forward. Compartamos began as a charity grant program, then became a bank, and then a publicly listed bank. The move to private ownership that seeks a return on investment changes the microloan business model substantially, from charity to business. The charity model uses donated funds and funds from international financial institutions such as the World Bank and the European Bank for Reconstruction and Development, and they have low interest rates. Some of the microcredit organizations even make profits, but they are cooperatives, such as Grameen Bank, so their profit moves back into their stakeholder community. Compartamos, in contrast, now charges its credit customers in the range of 100 percent (on an annualized basis) to cover loan interest, fees, and taxes. That is three times the cost of borrowing from other microcredit lenders. To make matters a little more complicated, many of the shareholders who profited greatly from the Compartamos IPO are themselves microlenders, such as ACCION. Tufts University splits the revenues from its microloans 50?50 with the loan program and the university itself. In 2008, the university reported a $6.60 million payout from its share of the microlending operations. a
Is it right to profit from loans to the poor? Dr. Yunis thinks definitely not, and "refuses to mention the words Compartamos and microfinance in the same breath." b At the same time, here's an explanation from the two friends who founded Compartamos in 1990. They suggest that, much like food crisis and famine, the issue isn't the existence of the needed good; both food and money exist. The issue is one of distribution: the food and money frequently are not where they are needed most desperately. The argument is that a profit potential brings private capital in touch with the people who need it, the world's poor, quickly and efficiently. It is a way to align the world's wealth with the world's poor. Big investment firms and banks have begun to participate in profitable microlending. Firms such as CITI Group, Morgan Stanley, TIAA-CREF, and Deutsche Bank are active in the sector now. With returns like Compartamos has, at 53 percent, investors are interested. Here's how the loans work: they are small, usually to women, guaranteed by peers, paid off on time, and often followed immediately by another loan. c
In a disagreement over this very issue, Dr. Younis was ousted from his directorship of Grameen Bank in 2011. View a PBS video that explores this issue further at www.pbs.org/now/shows/338/.
So, what do you think, is profiting from microloans to the poor ethical?
This is Sophia Maimu, a melon stand owner and microloan client of ACCION Tanzanian partner, Akiba Commercial Bank.
You might think it would be utter folly to lend money to the poor in a developing country. What about a loan to a new small business or entrepreneur such as a vegetable peddler, tailor, or candle maker? Worldwide, development organizations are finding that some of the world's poorest entrepreneurs repay their debts at rates approaching 100 percent. To encourage grassroots private business in Latin America, Asia, and Africa, microlending organizations are expanding programs that already lend thousands of small entrepreneurs amounts ranging from $50 to several hundred dollars. Tiny businesses in developing countries commonly repay these microloans faithfully because of community pressure and the security of a favorable credit rating. Microloans give them small spurts of working capital when they need it, allow them to establish credit, and let them borrow again in hard times. The money helps them start or expand their businesses-selling vegetables, sewing, repairing shoes, making furniture, and the like-and boosts the local economy.
The microcredit concept was developed by Professor Muhammad Yunus, a U.S.-trained Bangladeshi PhD economist, through the Grameen Bank in Bangladesh (which he established to administer his program), and ACCION, a U.S. microcredit organization. Dr. Yunus was awarded the Nobel Peace Prize in 2006 for his work fighting poverty.
The microloan repayment performance shines when compared with that of some sovereign nations. It also looks very good compared with a default rate of 13.8 percent among U.S. recipients of federally guaranteed student loans. ACCION reports a repayment rate over the life of its program of 97 percent. A Mexican program, Compatramos, reports a 1 percent default rate.
Critics point out, though, that one microloan is not going to pull a budding entrepreneur out of poverty, let alone a whole country. When Tufts University received an endowment to set up a microloan program, specialists were ready to warn Tufts of the ethical aspects of microloans: its program needs to be much more than banking. A series of loans is probably necessary, combined with training and support.
Recently, several not-for-profit microloan operations have changed. Because of their success, they have become banks, and in one case, Mexico's Banco Compartamos sold 30 percent of its shares to the public, with the IPO share price moving up 34 percent. Their 2007 IPO also brought a lot of difficult issues forward. Compartamos began as a charity grant program, then became a bank, and then a publicly listed bank. The move to private ownership that seeks a return on investment changes the microloan business model substantially, from charity to business. The charity model uses donated funds and funds from international financial institutions such as the World Bank and the European Bank for Reconstruction and Development, and they have low interest rates. Some of the microcredit organizations even make profits, but they are cooperatives, such as Grameen Bank, so their profit moves back into their stakeholder community. Compartamos, in contrast, now charges its credit customers in the range of 100 percent (on an annualized basis) to cover loan interest, fees, and taxes. That is three times the cost of borrowing from other microcredit lenders. To make matters a little more complicated, many of the shareholders who profited greatly from the Compartamos IPO are themselves microlenders, such as ACCION. Tufts University splits the revenues from its microloans 50?50 with the loan program and the university itself. In 2008, the university reported a $6.60 million payout from its share of the microlending operations. a
Is it right to profit from loans to the poor? Dr. Yunis thinks definitely not, and "refuses to mention the words Compartamos and microfinance in the same breath." b At the same time, here's an explanation from the two friends who founded Compartamos in 1990. They suggest that, much like food crisis and famine, the issue isn't the existence of the needed good; both food and money exist. The issue is one of distribution: the food and money frequently are not where they are needed most desperately. The argument is that a profit potential brings private capital in touch with the people who need it, the world's poor, quickly and efficiently. It is a way to align the world's wealth with the world's poor. Big investment firms and banks have begun to participate in profitable microlending. Firms such as CITI Group, Morgan Stanley, TIAA-CREF, and Deutsche Bank are active in the sector now. With returns like Compartamos has, at 53 percent, investors are interested. Here's how the loans work: they are small, usually to women, guaranteed by peers, paid off on time, and often followed immediately by another loan. c
In a disagreement over this very issue, Dr. Younis was ousted from his directorship of Grameen Bank in 2011. View a PBS video that explores this issue further at www.pbs.org/now/shows/338/.
So, what do you think, is profiting from microloans to the poor ethical?
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ملء الشاشة (f)
Deck 18: Global Operations and Supply Chain Management
1
Microloan Bankers: Charity or For-Profit Business Model?
This is Sophia Maimu, a melon stand owner and microloan client of ACCION Tanzanian partner, Akiba Commercial Bank.
You might think it would be utter folly to lend money to the poor in a developing country. What about a loan to a new small business or entrepreneur such as a vegetable peddler, tailor, or candle maker? Worldwide, development organizations are finding that some of the world's poorest entrepreneurs repay their debts at rates approaching 100 percent. To encourage grassroots private business in Latin America, Asia, and Africa, microlending organizations are expanding programs that already lend thousands of small entrepreneurs amounts ranging from $50 to several hundred dollars. Tiny businesses in developing countries commonly repay these microloans faithfully because of community pressure and the security of a favorable credit rating. Microloans give them small spurts of working capital when they need it, allow them to establish credit, and let them borrow again in hard times. The money helps them start or expand their businesses-selling vegetables, sewing, repairing shoes, making furniture, and the like-and boosts the local economy.
The microcredit concept was developed by Professor Muhammad Yunus, a U.S.-trained Bangladeshi PhD economist, through the Grameen Bank in Bangladesh (which he established to administer his program), and ACCION, a U.S. microcredit organization. Dr. Yunus was awarded the Nobel Peace Prize in 2006 for his work fighting poverty.
The microloan repayment performance shines when compared with that of some sovereign nations. It also looks very good compared with a default rate of 13.8 percent among U.S. recipients of federally guaranteed student loans. ACCION reports a repayment rate over the life of its program of 97 percent. A Mexican program, Compatramos, reports a 1 percent default rate.
Critics point out, though, that one microloan is not going to pull a budding entrepreneur out of poverty, let alone a whole country. When Tufts University received an endowment to set up a microloan program, specialists were ready to warn Tufts of the ethical aspects of microloans: its program needs to be much more than banking. A series of loans is probably necessary, combined with training and support.
Recently, several not-for-profit microloan operations have changed. Because of their success, they have become banks, and in one case, Mexico's Banco Compartamos sold 30 percent of its shares to the public, with the IPO share price moving up 34 percent. Their 2007 IPO also brought a lot of difficult issues forward. Compartamos began as a charity grant program, then became a bank, and then a publicly listed bank. The move to private ownership that seeks a return on investment changes the microloan business model substantially, from charity to business. The charity model uses donated funds and funds from international financial institutions such as the World Bank and the European Bank for Reconstruction and Development, and they have low interest rates. Some of the microcredit organizations even make profits, but they are cooperatives, such as Grameen Bank, so their profit moves back into their stakeholder community. Compartamos, in contrast, now charges its credit customers in the range of 100 percent (on an annualized basis) to cover loan interest, fees, and taxes. That is three times the cost of borrowing from other microcredit lenders. To make matters a little more complicated, many of the shareholders who profited greatly from the Compartamos IPO are themselves microlenders, such as ACCION. Tufts University splits the revenues from its microloans 50?50 with the loan program and the university itself. In 2008, the university reported a $6.60 million payout from its share of the microlending operations. a
Is it right to profit from loans to the poor? Dr. Yunis thinks definitely not, and "refuses to mention the words Compartamos and microfinance in the same breath." b At the same time, here's an explanation from the two friends who founded Compartamos in 1990. They suggest that, much like food crisis and famine, the issue isn't the existence of the needed good; both food and money exist. The issue is one of distribution: the food and money frequently are not where they are needed most desperately. The argument is that a profit potential brings private capital in touch with the people who need it, the world's poor, quickly and efficiently. It is a way to align the world's wealth with the world's poor. Big investment firms and banks have begun to participate in profitable microlending. Firms such as CITI Group, Morgan Stanley, TIAA-CREF, and Deutsche Bank are active in the sector now. With returns like Compartamos has, at 53 percent, investors are interested. Here's how the loans work: they are small, usually to women, guaranteed by peers, paid off on time, and often followed immediately by another loan. c
In a disagreement over this very issue, Dr. Younis was ousted from his directorship of Grameen Bank in 2011. View a PBS video that explores this issue further at www.pbs.org/now/shows/338/.
So, what do you think, is profiting from microloans to the poor ethical?
This is Sophia Maimu, a melon stand owner and microloan client of ACCION Tanzanian partner, Akiba Commercial Bank.
You might think it would be utter folly to lend money to the poor in a developing country. What about a loan to a new small business or entrepreneur such as a vegetable peddler, tailor, or candle maker? Worldwide, development organizations are finding that some of the world's poorest entrepreneurs repay their debts at rates approaching 100 percent. To encourage grassroots private business in Latin America, Asia, and Africa, microlending organizations are expanding programs that already lend thousands of small entrepreneurs amounts ranging from $50 to several hundred dollars. Tiny businesses in developing countries commonly repay these microloans faithfully because of community pressure and the security of a favorable credit rating. Microloans give them small spurts of working capital when they need it, allow them to establish credit, and let them borrow again in hard times. The money helps them start or expand their businesses-selling vegetables, sewing, repairing shoes, making furniture, and the like-and boosts the local economy.
The microcredit concept was developed by Professor Muhammad Yunus, a U.S.-trained Bangladeshi PhD economist, through the Grameen Bank in Bangladesh (which he established to administer his program), and ACCION, a U.S. microcredit organization. Dr. Yunus was awarded the Nobel Peace Prize in 2006 for his work fighting poverty.
The microloan repayment performance shines when compared with that of some sovereign nations. It also looks very good compared with a default rate of 13.8 percent among U.S. recipients of federally guaranteed student loans. ACCION reports a repayment rate over the life of its program of 97 percent. A Mexican program, Compatramos, reports a 1 percent default rate.
Critics point out, though, that one microloan is not going to pull a budding entrepreneur out of poverty, let alone a whole country. When Tufts University received an endowment to set up a microloan program, specialists were ready to warn Tufts of the ethical aspects of microloans: its program needs to be much more than banking. A series of loans is probably necessary, combined with training and support.
Recently, several not-for-profit microloan operations have changed. Because of their success, they have become banks, and in one case, Mexico's Banco Compartamos sold 30 percent of its shares to the public, with the IPO share price moving up 34 percent. Their 2007 IPO also brought a lot of difficult issues forward. Compartamos began as a charity grant program, then became a bank, and then a publicly listed bank. The move to private ownership that seeks a return on investment changes the microloan business model substantially, from charity to business. The charity model uses donated funds and funds from international financial institutions such as the World Bank and the European Bank for Reconstruction and Development, and they have low interest rates. Some of the microcredit organizations even make profits, but they are cooperatives, such as Grameen Bank, so their profit moves back into their stakeholder community. Compartamos, in contrast, now charges its credit customers in the range of 100 percent (on an annualized basis) to cover loan interest, fees, and taxes. That is three times the cost of borrowing from other microcredit lenders. To make matters a little more complicated, many of the shareholders who profited greatly from the Compartamos IPO are themselves microlenders, such as ACCION. Tufts University splits the revenues from its microloans 50?50 with the loan program and the university itself. In 2008, the university reported a $6.60 million payout from its share of the microlending operations. a
Is it right to profit from loans to the poor? Dr. Yunis thinks definitely not, and "refuses to mention the words Compartamos and microfinance in the same breath." b At the same time, here's an explanation from the two friends who founded Compartamos in 1990. They suggest that, much like food crisis and famine, the issue isn't the existence of the needed good; both food and money exist. The issue is one of distribution: the food and money frequently are not where they are needed most desperately. The argument is that a profit potential brings private capital in touch with the people who need it, the world's poor, quickly and efficiently. It is a way to align the world's wealth with the world's poor. Big investment firms and banks have begun to participate in profitable microlending. Firms such as CITI Group, Morgan Stanley, TIAA-CREF, and Deutsche Bank are active in the sector now. With returns like Compartamos has, at 53 percent, investors are interested. Here's how the loans work: they are small, usually to women, guaranteed by peers, paid off on time, and often followed immediately by another loan. c
In a disagreement over this very issue, Dr. Younis was ousted from his directorship of Grameen Bank in 2011. View a PBS video that explores this issue further at www.pbs.org/now/shows/338/.
So, what do you think, is profiting from microloans to the poor ethical?
The commercial activities that cross national borders are known as international business. The goods, services, technology, personnel etc. all are moved from one country to another and also to many countries and vice versa. This movement is known as import and export in layman language. It is generally done through various modes of entry like licensing, franchising etc.
The profiting from microloans to the poor is ethical only when they are charged a very minimal amount of interest on the landed money because it helps the lenders to pay the lending fees and taxes as well as help to give microloans to others.
The profiting from microloans to the poor is ethical only when they are charged a very minimal amount of interest on the landed money because it helps the lenders to pay the lending fees and taxes as well as help to give microloans to others.
2
You are the finance manager of an American multinational that has sold US$6 million of your high-tech product to a Chinese importer. Because of stiff competition for the contract against European and other American companies, you agreed that the negotiators could sign a renminbi-based contract, although this is not standard practice for the firm. This concession may have won you the deal, actually.
The sales contract calls for the Chinese importer to make three equal payments at 6, 12, and 18 months from the date of delivery, which is in 60 days. Your plan is to translate the renminbi to dollars on their receipt; your company has no operations in China and no need for the currency. You realize, though, that this arrangement involves transaction exposure. How could you cover this risk?
The sales contract calls for the Chinese importer to make three equal payments at 6, 12, and 18 months from the date of delivery, which is in 60 days. Your plan is to translate the renminbi to dollars on their receipt; your company has no operations in China and no need for the currency. You realize, though, that this arrangement involves transaction exposure. How could you cover this risk?
The commercial activities that cross national borders are known as international business. The goods, services, technology, personnel etc. all are moved from one country to another and also to many countries and vice versa. This movement is known as import and export in layman language. It is generally done through various modes of entry like licensing, franchising etc.
The following options are available to cover the risks:
1. Currency Option hedge: It is the technique used to protect from the losses occur due to currency fluctuations. This option provides the holder to enter into the market at a specific price allows the seller to buy or sell the currency at a specific rate of exchange.
2. Money market hedge: In this option, the holder trade in highly liquid and short instruments of the money market, includes Treasury bills, commercial paper etc.
3. Forward market hedge: In this option, the financial assets or instruments are set at the price of future rates.
4. Exposure netting: It is the method of reducing currency risks by offsetting exposure in one currency with exposure in another or same currency.
5. Lending and Lagging: The exporter should do the transactions through lending (making a payment earlier) or lagging (making payments late), depends on the movement of currency.
The following options are available to cover the risks:
1. Currency Option hedge: It is the technique used to protect from the losses occur due to currency fluctuations. This option provides the holder to enter into the market at a specific price allows the seller to buy or sell the currency at a specific rate of exchange.
2. Money market hedge: In this option, the holder trade in highly liquid and short instruments of the money market, includes Treasury bills, commercial paper etc.
3. Forward market hedge: In this option, the financial assets or instruments are set at the price of future rates.
4. Exposure netting: It is the method of reducing currency risks by offsetting exposure in one currency with exposure in another or same currency.
5. Lending and Lagging: The exporter should do the transactions through lending (making a payment earlier) or lagging (making payments late), depends on the movement of currency.
3
The cultural analysis of accounting Gray presents suggests that transparency is the result of a cultural characteristic of some countries and secrecy of others. Could the same attributes be explained by the hypothesis that transparent cultures are less trusting and need the transparency to satisfy their cultural distrust? What do you think?
This is an opinion question that encourages students to think through the way culture impacts all aspects of international activity. The alternative explanation is certainly a possibility.
4
Use the globalEDGE site (http://globalEDGE.msu.edu/) to complete the following exercises:
Deloitte Touche Tohmatsu hosts an International Accounting Standards (IAS) webpage that provides information and guidelines regarding accounting guidelines approved by IASC. Locate the website, go to the section on standards, and prepare a short description of the international accounting standards for recording intangible assets.
Deloitte Touche Tohmatsu hosts an International Accounting Standards (IAS) webpage that provides information and guidelines regarding accounting guidelines approved by IASC. Locate the website, go to the section on standards, and prepare a short description of the international accounting standards for recording intangible assets.
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5
How might Sarbanes-Oxley influence the progress of the convergence of international accounting standards?
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6
Use the globalEDGE site (http://globalEDGE.msu.edu/) to complete the following exercises:
The top management of your company has requested information on the tax policies of Denmark. Using the Denmark business guide on Deloitte International Tax and Business Guides -a resource that provides information on the investment climate, operating conditions, and tax system of the major trading countries-prepare a short report summarizing your findings on Denmark's business taxation.
The top management of your company has requested information on the tax policies of Denmark. Using the Denmark business guide on Deloitte International Tax and Business Guides -a resource that provides information on the investment climate, operating conditions, and tax system of the major trading countries-prepare a short report summarizing your findings on Denmark's business taxation.
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7
How might triple-bottom-line accounting improve the social and environmental behavior of companies?
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8
What is your assessment of the movement pushing for 3BL? Explain your thinking.
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9
You are establishing your first overseas subsidiary. As you consider how to capitalize your business, what are your concerns about using the local and home-country debt and equity markets?
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10
A local exporter has signed a sales contract that specifies payment of $3 million in Saudi riyals in six months. Discuss the hedge options you would advise the exporter to consider.
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11
One of the characteristics of centralized structures is that they are slow and reduce innovation. Why would an MNC set up a centralized cash management operation?
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12
What aspect of how foreign operations of a company are organized is key to its U.S. tax liability?
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13
What are the differences between transaction and translation exposure?
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14
Describe how mircolending has developed as a result of its success.
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