Category Archives: Finance

Typical Rates & Fees Associated with Business Loans

When acquiring a business loan, one can expect to pay different rates and fees based upon the years the business has been in operation, the owner’s personal credit history, the business’s credit history, and whether or not the loan is secured or unsecured. If the loans are guaranteed, whether or not they are by the government or some other agency can affect the rates as well.

Interest Rates are controlled by usury laws. A lender can safely charge a business up to 10% interest per year and not violate any usury laws. Depending on the type of lender you seek, personal or commercial, this may not always hold true. There are different usury laws governing personal lenders and those that are protected by the Federal Government (commercial banks, credit unions, savings and loans). Typical lenders charge between 6-7%, however, as stated earlier; financial security in the business and the owner play an important role in establishing interest rates. Often times commercial banks offer fixed interest rates, but more often than not, the rates are flexible after a given number of years. Government loans are offered to small businesses that meet certain criteria. These loans are offered at the approximate US Treasury note rate of + 1.7% (fixed rate). Other agencies and specially funded business loans offer rates that are decided by special committees. Usually they are lower because these loans are only available to certain business owners.

Fees come in different increments based upon the institution you choose to borrow money from. Typical fees include application fees that can run up to $500, although, some institutions and loan companies do not charge any application fee. Closing Costs which usually run within 1-2% of the original amount borrowed. Common commercial loans that are under $500,000 are usually at least 2%. Loans above $500,000 usually have fees ranging from 1.5-1.75%. Other fees that one might encounter when borrowing money for his or her business are: appraisal fees, attorney fees, and environmental assessments. These fees may or may not be included in the closing costs. If not included, these fees may mount up to several thousand dollars. It’s important to ask your financial institution which fees are included in the final closing costs. Government loans and loans that are offered through agencies that cater to certain small business owners offer fees that are based upon the project size. Most are usually at least 3%, some agencies charge the exact amount of all filing fees and an additional 1-2% of the original loan amount.

Many individuals choose to refinance their residence as means for a business loan. Often times these loans can be acquired much easier than a business only loan. Interest rates are often lower and fixed for longer amounts of time, as well. Fees usually range below 2% and can be included in the loan. Having equity in your home may enable business owners to borrow money with lesser interest rates and fees. However, it is a risky plan. If your payments are not made on-time and in full each month, your home may be sold to cover the loan.

John Williams is the business loans blogger at http://businessloans.blogspot.com He reviews business loans and interprets complicated financial data into simple to understand language.

Financial Planning Fail to Plan, Plan to Fail

As the first decade of this millennium comes to a close, we are confronted with more critical, complex questions regarding the management of our personal finances. As people switch or lose jobs, their financial security and social security suddenly disappear overnight without much due of any planning. As financial markets around the word become more volatile, general price level of our property prices, health care, expenses for necessity items becomes more of a worry than before. Are the solutions simple and straightforward? Hardly. However, have you ever thought about how much money will you need in the coming five years? Twenty years? To support a thirty year retirement? To cover the possibilities of unforeseen health problems? Most people can’t figure out what they need for the next week, month, let alone twenty years from now. Meeting today’s needs and wants is already so consuming of their time, money and effort and there is little left over for tomorrow and there after.

The reality is this: To meet and achieve your future goals, it requires considerable amount of energy, foresight, discipline, contingency planning, and a certain amount of good fortune to make your finances work. It requires a certain amount of professional skill to quantify and manage your personal finances.

Remember this: Whether you are an individual or the head of a family, you are the master of your destiny and CEO of your own financial well being. Regarding your personal finances, you may choose to do it all yourself, or delegate it to others such as financial advisors, CPAs, stockbrokers, insurance agents, etc. Regardless of which, you will ultimately need to arm yourself with the basics – the questions and answer at least some of the questions.

The aim of this blog is to help you to answer some of the questions which pertains from the broad perspective of your daily personal finance, management of income, spending, saving, budgeting, banking, credit debit issues. Moneypapa will be touching on some of the latest money making tips (both online and offline) that you can indulge as a sideline income.

Remember – You Plan to Fail if you Fail to Plan.

The Author currently manages a Wealth Management / Investment / Financial Management Tips Blog named – Moneypapa.com

Moneypapa wishes you all the best – For more wealth creation tips – visit http://www.moneypapa.com

Trustee Fees: How Much is Enough and How Much is Too Much?

I am often amused by the ads and offers I see concerning living trusts.

Almost always, one of the big sales pitches is how a living trust will save th*usands of doll*rs in “nasty” probate fees.

This leads the consumer to believe that you pay for probate, but living trusts are “fr*e. ” (that is, after you’ve paid the promoter to set one up for you).

Not so.

Here’s an email I received from one of my subscribers (she has given me permission to discuss her question in this article):

Hi Phil, My mom passed away recently and my sister is 1st trustee. She claims she gets 10% of my mom’s estate as 1st trustee. Is this true? What is the normal fee for 1st trustee?

Great question. Often one of the biggest, if not the biggest, areas of dispute between children or heirs after a death occurs.

What is a trustee fee? How is it calculated? Are there other fees?

If you have a trust and don’t know the answer to these questions, I think the proper thought is “Uh-ohh!”

OK, let’s have a quick review of trustee fees.

First let’s make a distinction between the times a trustee may be called upon to act.

Remember, one of the best uses of a trust is to manage the assets of someone who is incapacitated. My best friend and his sister have been managing their mother’s affairs (as trustees) for the last 10 years. Mom is 95, in decent physical health, but has advanced Alzheimer’s).

Let’s save the discussion of trustees fees charged for managing an incompetent’s estate for a future article. Let’s get down to answering the above question.

Here it is again:

Hi Phil, My mom passed away recently and my sister is 1st trustee. She claims she gets 10% of my mom’s estate as 1st trustee. Is this true? What is the normal fee for 1st trustee?

Basically, the question is “How much can a trustee charge to handle an estate after a death?”

How do we answer this?

First, we have to look at the trust instrument.

Most competently drawn trust instruments will have a section that deals with trustee fees.

The better ones are fairly specific and make a distinction between acting as trustee while the beneficiary is alive, but incompetent, and acting as trustee after a death has occurred (similar actions to what an executor performs through a probate).

So, first, we look to the trust instrument. Often it will specify a fee. Sometimes it will say .75% to 1.25% of the total value of the assets being managed and transferred (since this is the typical fee charged by the professional trust companies run by many banks).

In fact, let’s see what California law tells us about trustee fees (every state will have a statute, go to your county law library and ask the law librarian to help you look it up).

In California, the law of living trusts is contained in the Probate Code. Here is what Probate Code Sections 15680-82 tells us:

15680. (a) Subject to subdivision (b), if the trust instrument provides for the trustee’s compensation, the trustee is entitled to be compensated in accordance with the trust instrument.

(b) Upon proper showing, the court may fix or allow greater or lesser compensation than could be allowed under the terms of the trust in any of the following circumstances:

(1) Where the duties of the trustee are substantially different from those contemplated when the trust was created.

(2) Where the compensation in accordance with the terms of the trust would be inequitable or unreasonably low or high.

(3) In extraordinary circumstances calling for equitable relief.

(c) An order fixing or allowing greater or lesser compensation under subdivision (b) applies only prospectively to actions taken in administration of the trust after the order is made.

15681. If the trust instrument does not specify the trustee’s compensation, the trustee is entitled to reasonable compensation under the circumstances.

So to answer the question, we have to find out what the trust instrument says. If it is silent, then Section 15681 tells us the compensation is to be “reasonable compensation under the circumstances. “

What is reasonable under the circumstances? If it were me, I would gather up the brochures of the various bank trust departments in the area to determine their rates. Where I live, the fee is .75% to 1.20%, depending on the size of the trust and the type of assets. The minimum is $5,000.

So, it looks like the answer to the question is that if the trust instrument says the 1st trustee is entitled to 10% compensation, then she may be. However, if it doesn’t then the amount to be charged must be reasonable.

And, even if the trust instrument said 10%, I would seriously consider asking a court to change the compensation per 15680 (b) (2) that allows the court to change compensation “Where the compensation in accordance with the terms of the trust would be inequitable or unreasonably low or high. “

This article needs to be continued since we haven’t even touched on the big m*ney m*ker for trustees and attorneys, “extraordinary fees. “

Good luck and until next time,

Phil Craig

P. S. Feel free to forward this on to any friends.

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© Phil Craig, All Rights Reserved

http://www.LivingTrustSecrets.com

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Phil Craig is a licensed attorney and entrepreneur. He started practicing law at age 25 in 1979. He does not take on any more clients, but is advisor to some of the biggest names in the internet world. He shares his knowledge gained over the last 25 years at his Living Trust Secrets newsletter site: click here=>http://www.LivingTrustSecrets.com

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Forex Entry Signal Via MACD Divergence Made Easy For Beginners

If you want to earn some money from currency trading, you absolutely need to know what is a forex entry signal. Well, the determination of a forex entry signal has become the topic of many debates. . . all of them of the academically mathematical nature, and I’m not talking about simple algebra.

No folks.

I’m talking about very complicated graphs, usually multi-linear, delineating price points, time frames, and a comparative relationship between the two. It’s ironic to think that the alleged process for determining the best move isn’t really friendly for entry-level forex traders.

We are going to go from difficult graphs to simple ideas that any beginner can understand.

Forex Entry Signal Via MACD Divergence

MACD divergence is hailed by most as the clearest indicator of a forex entry signal. It refers to the Moving Average Convergence Divergence, basically, the comparative difference between two lines, one representing 12 and 26 Exponential Moving Average EMA), and the other representing 9 EMA.

Huh?.

In layman’s terms, MACD can be described as steady growth in the value of the currency over a substantial time frame.

Easy, right? I think you prefer this one!

When determining the best entry signal using the MACD divergence method without having to study those blindingly confusing charts, simply ask yourself these questions:

1. How much increase in value has the currency experienced?

2. Did the currency enjoy this increase over a period of time which is long enough to actually matter?

See how it’s easy to understand with simple words? I hope you enjoyed this forex entry signal crash course.

Franck Silvestre created the Forex Trading System Software website for beginners. He gives awesome Free Forex Tips to helps beginners to turn difficult forex concepts and systems into simple ideas. To get more tips like this one, subscribe to his amazing newsletter today at http://www.forextradinglandpro.com/

Credit Card Debt Tips – How to Take Advantage of Creditor Fear and El

Debt settlements attract more and more customers every day. Debt settlement means that, following a negotiation process with your creditor, a large part of your credit card debt is eliminated. While it does not cancel all the debt, you can still settle your credit card debt for a way smaller fraction than it would otherwise be. This process can eliminate up to 50-60% of your debt.

Why would the credit companies accept such a deal? First of all because they are for-profit companies. They do not benefit from your filling bankruptcy if you are unable to pay your bills anymore, they do not wish “revenge”, but only to recover as large amount of money as possible. They’d rather have you pay a portion of that amount, than not pay them anything at all. When it comes to unsecured debt, there is no guarantee you offered for the money you took, no car or property they can claim, so they’ll have to be content with what they can get.

If you like to keep up with news, you probably already know that the Government already saved a lot of these credit card companies from total collapse, providing them stimulus money. Within the past year, most of the American customers started to have serious financial problems and they could not pay their bills on time like they used to. Many lost their jobs or suffered pay cuts in their salaries and that caused problems to most financial companies, like in a chain reaction. The latter realized that they must eventually keep the pace with the new times and either accept to negotiate and reasonably settle offers with their customers, or simply perish.

If you finally made up your mind to solve your financial troubles as soon as possible, a first step would be to contact the debt relief network from your area. These specialists will select an experienced debt settlement company that can settle a deal with the credit card company on your behalf.

It would be wise to not go directly to a debt settlement company but rather first visit a debt relief network. The top debt relief networks only allow debt settlement companies into their accredited organizations that prove a track record of successfully negotiating debts and have also been certified. They are free to use and offer helpful debt relief advice.

Free Debt Advice

Home Based Business: Your Ultimate Tax Shelter

Starting and operating your own home based business is the ultimate tax shelter.

Although this article has been written from a Canadian income tax perspective, the principles should be practical in other tax jurisdictions.

1. Non-Deductible Personal Living Expenses

All of us have expenses that we incur in everyday living.

Either you rent an apartment or house or you own your residence. Utilities, insurance, rent, mortgage interest, property taxes, and maintenance and repairs are typical costs of operating your home.

Likely, you have a vehicle which also consumes large amounts of cash.

Add to this, dining out, entertainment, gifts, alcoholic beverages, office supplies, telephone and many other expenditures, and you have a significant cash outflow.

In most cases, as an employee, retired person, investor, student, or homemaker, few of these expenses are tax-deductible to you.

This means that you must earn a considerable income, pay your income taxes first, and then use what is left to pay all your expenses.

Some employees may be able to write-off some of their employment related expenses, if such are required by their contract of employment. However, even in this situation, the tax deductions are very limited.

2. Your Own Home Based Business Means Tax Deductions

Now consider the situation where you decide to start your own home based business.

Suddenly, many of your everyday expenses are now being used for business purposes and are now tax-deductible.

If you use one quarter of your home exclusively for business use, you will be able to deduct (or write-off) one quarter of all related occupancy costs. These expenses may include maintenance and repairs (that are not capital in nature), rent, mortgage interest, house or apartment insurance, power, heat, water, and property taxes.

As well, your vehicle expenses used for business purposes are another tax write-off. If you use your car ninety percent for business purposes, you can deduct ninety percent of your vehicle insurance, gas and oil, maintenance and repairs, car washes, license and registration, auto club, loan interest (within certain limits), and other costs from your income. You may also write-off one hundred percent of your business related parking. Capital Cost Allownance (C. C. A. ) on your vehicle is also allowed for income tax purposes; depreciation is the accounting term for this tax deduction.

The Canadian government also allows as a deduction, fifty percent of your business related entertainment expenses.

Also tax-deductible are business related telephone expenses, Internet access, office supplies, travel, books, memberships, and a host of other expenditures.

3. Income Splitting with Your Home Based Business

If you have a high paying job, you will pay higher taxes because the rates of tax increase as your income does.

With your own business, you can pay reasonable wages to your spouse and children. In this way, you can legally divert income taxed at your higher rate to your family members that are in a lower tax bracket.

This tax saving technique is called income splitting. It is another good reason why your own home based business is the ultimate tax shelter.

4. Even a Part-Time Home Based Business Works

Even if you have a full-time job, running a part-time business can be advantageous.

Of course, you must actually run a real, moneymaking business. Any attempts to write unprofitable hobbies off will ultimately fail with the taxation authorities.

If you earned eight thousand dollars during the year from your part-time business and were able to deduct eight thousand dollars in car expenses, home office expenses, entertainment costs, office supplies, and other business related expenditures, you would have a net business income of nil. You would pay no tax on this additional income.

Don`t miss this important point! Although these tax deductions are actual, legitimate business expenses, these are expenditures you would probably have made anyway, whether you had a business or not.

Thus, by rearranging your affairs to start and operate a home based business, you have been able to convert non-deductible personal expenditures into legally deductible business expenses. You have successfully sheltered your income from tax and have split your income with family members in lower tax brackets.

Yes, indeed, your home based business has become your ultimate tax shelter.

RESOURCE BOX:

J. Stephen Pope, President of Pope Consulting Inc. , http://www.popeconsultinginc.com/ has been helping clients to earn maximum business profits for over twenty-five years.

For valuable Work at Home Small Business Ideas, visit: http://www.yenommarketinginc.com/

Restrictive Endorsements – What is it and How Could it be Used to You

A restrictive endorsement is this: A notation on the back of a check (NOT THE FRONT) reminding the creditor about their agreement to the terms by which you agreed to pay them some money. Why do banks require you to sign the back of the check when cashing? The front of the check is the contract. It defines a date, an amount, the place where the funds are and the person or institution to whom you are contracting to pay the funds to. When you endorse the back of a check, it merely is a completion of the terms described on the front of the check.

A recpient of a check with a restrictive endorsement cannot cross out the terms. PERIOD! That is case law. When a party does not conform to the agreement, they have breached a contract and the payee of the check is entitled to relief in the courts. COurts have recently ruled that abuse of the “Satisfaction and Accord” doctrine can make endorsements null and void.

Let’s assume yopu owe $300 to some lender. You might think you’re pulling a fast one and send a check for only $10 thinking if they cash it that you no longer owe the remainder. This particular tactic has been reversed on almost every occasion. It is advised that when you send a check with a restrictive endorsement that you also send an accompanying letter that identifies the amount being sent and the fact that it is a folow up to a previous written agreement. This type of correspondence has always held up in court.

Here is the verbage to print on the back of your check: ” Depositing of the funds constitutes acceptance of the enclosed settlement agreement and full satisfaction of the debt descibed. “

Althought the topic I’ve covered may seem out of sequence with te rest of wht I’ve covered it will all start making sense soon. In my next article we’ll cover how to negotiate debts without any money.

Chuck Lunsford is the owner and developer of EasyFloridaHomeLoans.com. He offers advice on how to get your credit in order and working for you. Visit his website and learn more about how to obtain a bad credit mortgage
.

The Wealthy Barber – Everyones Common-Sense Guide to Becoming Financ

“The Wealthy Barber: Everyone’s Common-Sense Guide to Becoming Financially Independent” by David Chilton is an enjoyable read that introduces basic personal-finance habits that can lead to wealth if practiced and implemented as taught.

The lessons are taught in story fashion by a “wealthy barber” named Roy to a few disciples over a few weeks of visits. The lessons are basic, but that does not mean they are not important. In fact, for many people, these basics are all they will need to better their finances while preparing for a better financial future. This book will not prepare you to become the next Warren Buffet, nor will you be a market genius. There are many more things you can learn on this subject as well, but this book is a nice little primer. Some of the dialog between the characters is a bit corny, if not irritating, but then you can also look at it and laugh at Chilton’s use of light humor to teach important topics.

As I mentioned, the lessons are basic, but they are sound. The strategy of paying yourself at least ten percent of your pay first is not new, and is taught in many ways by many people. That does not make it less important, and most people would be better off if they implemented it. I also liked that there was discussion on wills, life insurance, and responsibility. Pointing out that some people do not need certain types of insurance is as important as pointing out that some people do.

We have all heard that social security may not be around in the future. And those receiving only social security now are barely making due. It is in all of our best interests to plan for retirement. The lessons taught in this book serve as a good reminder of things we should be doing and looking at, and hopefully will encourage many people to start planning and seek out more information on this important topic.

While “The Wealthy Barber” won’t teach you the path toward the Forbes 400 list, it does provide some excellent basic advice on personal finance. Considering the debt that many have, combined with the lack of savings, compounded by the dim outlook for social security, following the advice of this simple little book could make a huge difference in many people’s financial futures. I recommend it highly for anyone that needs a head start on planning for their future. I also recommend it for those that want a quick enjoyable read on some basic financial strategies to motivate you to learn more.

Alain Burrese, J. D. is a mediator/attorney with Bennett Law Office P. C. and an author/speaker through his own company Burrese Enterprises Inc. He writes and speaks about a variety of topics focusing on the business areas of negotiation and success principles as well as self-defense and safety topics. He is the author of Hard-Won Wisdom From the School of Hard Knocks, several instructional dvds, and numerous articles. You can find out more about Alain Burrese at his websites http://www.burrese.com or http://www.bennettlawofficepc.com

Personal Exemptions, Standard Deductions and Tax Brackets for 2011

In 2011, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation.

These inflation adjustments relate to eight tax provisions that were either modified or extended by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on Dec. 17. New dollar amounts affecting 2011 returns, filed by most taxpayers in early 2012, include the following:

* The value of each personal and dependent exemption, available to most taxpayers, is $3,700, up $50 from 2010.

* The new standard deduction is $11,600 for married couples filing a joint return, up $200, $5,800 for singles and married individuals filing separately, up $100, and $8,500 for heads of household, also up $100. The additional standard deduction for blind people and senior citizens is $1,150 for married individuals, up $50, and $1,450 for singles and heads of household, also up $50. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.

* Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $69,000, up from $68,000 in 2010.

* The maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,751, up from $5,666 in 2010. The maximum income limit for the EITC rises to $49,078, up from $48,362 in 2010. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.

* The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $102,000 for joint filers, up from $100,000, and $51,000 for singles and heads of household, up from $50,000.

Several tax benefits are unchanged in 2011. For example, the monthly limit on the value of qualified transportation benefits (parking, transit passes, etc. ) provided by an employer to its employees, remains at $230.

Read more about how to Certified QuickBooks Consultant
, Accountant and Tax Preparation

Corporate Governance in Islamic Finance

The capital markets in most of the emerging financial markets are undertaking regulatory reforms with a view to making capital markets more attractive for domestic and foreign investments. Islamic financial institutions are taking serious initiatives to, among others; ensure higher transparency and accountability within the financial markets, particularly regarding publicly traded companies. For that reason, good corporate governance is essential ingredients for the development of a vibrant and sound Islamic finance industry.

The concept of corporate governance was proposed as a result of increasing awareness on the importance of the need to protect the rights of all stakeholders, including minority

shareholders. Whilst the term corporate governance is relatively new, the concept is essentially not strange to Islam.

The term ‘corporate governance’ has gained importance only in the last two decades. Although there are a large number of documents and works about this subject, its effects have not yet been fully spelled out.

Corporate governance has been defined in many ways;

The Organization for Economic Cooperation and Development (OECD) defines corporate governance as “set of relationships between a company’s management, its board, its shareholders and other stakeholders”.

The UK Combined Code‘s definition is “Corporate governance is the system by which

Companies are directed and controlled. “.

Regardless of the various definitions, corporate governance has mainly to do with “transparency”, “accountability” and “fairness”.

Good Corporate Governance:

Good corporate governance is more than a good idea. It encourages flow of investments, lowers the cost of capital, and supports strong capital markets. Corporate governance represents structures and processes that entail individuals carrying out business whilst exercising professional discretion in a way that exhibits integrity, judgment, and transparency. These principles are essential to Shari’a and Islamic finance.

The OECD Principles of Corporate Governance focus on:

Accountability: Ensure that management is accountable to the Board and the Board is accountable to shareholders;

Fairness: Protect shareholders’ rights; treat all shareholders – including minorities – equitably and provide for effective redress for violations;

Transparency: Ensure timely and accurate disclosure on all material matters, i. e. the financial situation, performance and ownership;

Responsibility: Recognize the legal rights of stakeholders.

Teachings of Shari’a bind fairness and honesty to the main principles of any conduct including transactions. We may strongly argue that good corporate governance is consistent with Shari’a-compliant financial conduct which prohibits fraud, embezzlement, misstatement and other patterns of dealings that cause abuse, injustice and gharar (risk, uncertainty, and hazard).

Is Islamic Corporate Governance Model Different?

The question remains: How corporate governance of an Islamic financial institution is different from a conventional counterpart? The Islamic model of corporate governance would first look at the transactional structure to see whether the transaction involves elements that invalidate the gains or profits. The conventional governance practices do not perform a similar function (except for the related party, self-dealing etc. transactions). On the other hand, it ensures that the transactions do not contravene the corporate code of business ethics and cross the line that the law has drawn.

Since Shari’a represents a major source of legislation in most of the Muslim countries, it plays an important role in the legislative and regulatory development in such countries. It is not unlikely that some Muslim countries would rely on Shari’a for possible future implementation of corporate governance, whether in the form of any code or regulations. For example, Shari’a provides the proper platform for codifying the fiduciary duties and related ethical practices. These practices are the foundation of principles of good corporate governance as outlined in OECD Principles of Corporate Governance. Basically we strongly may conclude that modern corporate governance practices are consistent with Shari’a.

The OECD Corporate Governance Principles emphasize more disclosures and rights to shareholders. Capital markets ensure strong enforcement of such rights. Hence, protection of minority interest is considered crucial for stronger capital markets. For that reason legal protections to the minority shareholders and their strong enforcement promote the local and international investors to invest in the emerging markets.

Shari’a has mandated similar or higher importance to such issues for doing business. Like modern governance practices, the Islamic corporate governance modle requires application of modern and higher standards of minority protection against expropriation, more disclosures and transparency and effective accountability.

With this outlook and as Shari’a does not indicate any upper limit for better regulation, the contemporary drive for achieving higher standards in corporate governance do not appear to be conflicting with Shari’a. Consequently, the Islamic financial institutions would have no problem in meeting the modern corporate governance practices.

Who Are the Major Stakeholders In Islamic Financial Institutions?

There are a number of key players and stakeholders in Islamic Financial Institutions:

Shareholders: they would be interested in protecting the value of their equity in the financial institution and obtain a good rate of return.

Demand Depositors: they would be interested in guaranteeing the valued of their deposits and have ready access to their funds whenever they would like to do so.

Investment Depositors: Murabaha contract holders with Islamic banks through which they supply funds while banks would invest them properly. They would be interested in protection of principal and obtain a good rate of return.

Regulators: Having legal power to monitor the daily activities of Islamic financial institution, they would be interested in preventing systemic problems and crises, protection of quality of financial products and efficiency of the financial system.

Financial Market Authorities: They set minimum standards for transparency and disclosure and would be interested in having efficient financial market.

Islamic Finance Community: Would benefit from standardizing financial Islamic products, contracts and practices.

The public: would be interested in obtaining quality financial services at competitive prices.

In view of the above, in order to have a good corporate governance mode, the board of directors, management as well as the auditors of an Islamic financial institution should perform their professional duties with the objectives of satisfying the needs of the shareholders and Allah as well. Corporate governance aims to enhance accountability, transparency and trustworthy. These values are crucial in Islam.

The Shari’a Supervisory Board Role in Corporate Governance

Part of the internal governance structure of the Islamic financial institution and appointed by shareholders of the institution. Its main function is to review and ensure that all transactions, contracts, products and applications relating to the Islamic financial institution comply to Shari’a rules and principles with the specific fatwa, rulings and guidelines that have been issued

In order to establish a good corporate governance framework, the Shari’a Supervisory Board may have to extend their jurisdiction to cover governance issues of this nature.

Conclusion

According to The Islamic Financial Services Board (IFSB) “there is no “single model” of corporate governance that can work well in every country; each country or even each organization should develop
its own model that can cater for its specific needs and objectives”.

From the standpoint of Islam, deeds are more significant than sheer words, slogans, rhetoric or lectures, as highlighted in one verse of the Quran: “Why do you say that which you do not do?”. Corporate governance should be practiced in the form of deeds and actions. Only when actions speak louder than words, can a good corporate culture come forward and protect the welfare of all stakeholders in today’s corporate

About The Author

Hany Abou-El-Fotouh is Director Head of Policy & Corporate Affairs / Board Secretary, CI Capital Holding – the investment banking arm of Commercial International Bank which is the largest private bank in Egypt . He provides advice and direction to the Board and management with respect to corporate governance practices and formulates corporate policies.

Hany is a leading expert on money laundering and terrorist financing controls in the MENA region. Founder of the Middle East Compliance Officers’ Forum (MECOF), he has been honored for his work in promoting compliance culture and awareness in the MENA region

Hany writes articles to different newspapers and journals on a variety of subjects. He is a public speaker and professional trainer. Previously, he worked in various senior positions in leading banks in Egypt and GCC countries like HSBC, Oman International Bank, Banque Saudi Fransi among others

Hany is a certified member of the Association of Certified Anti-Money Laundering Specialists (ACAMS) and Certified Director by Egyptian Institute of Directors