Sunday, April 03, 2005

High risk to get high return

Assalamualaikum wbt,

This semester i am taking Operation Management and Finance. Finance is the most unfavorable subject to me due to its extensive mathematical calculations and formulas, and i hate maths!!

So to speak, i hate Finance too hoho.

The best thing about this subject is my Prof who is very knowledgable and make efforts to explain to us about a lot of things related to financial world that i never acrossed before (for instance Gold Dinar and etc), and yeah, now i have a financial calculator that can count multiple categories of loans, name it and i can calculate it straight away, using this calculator hohoh.

Notes: You can pay me RM 1 per caculation requested since the calculator that i'm using now is very expensive, huh its price is RM 165 and i believe i will use it only for 3 months!!Huhu :D

One new fact that we have learnt in this course is that the conventional bank and islamic bank has not so much difference in terms of operating, since both are creating loans from nothing (money on paper only). But Prof has emphasized that the economical impact of these 2 loan systems are different, since in islamic system we treat the excess payment that we pay to the bank as total profit, meanwhile in conventional bank, the excess payment is treated as interest. Therefore the total impact and accounting treatment of these transactions are different. And what is the difference? I could not answer since i have not ask that to my Prof yet, but i am interested to know what is it actually.Later k.

The most astonishing part that we have encounter when we are dealing with loans calculations is that, when we want to pay earlier the total loans that we acquire from banks, the total balance payment calculated by Islamic banks are much2 higher than the conventional banks, which had sparked a consensus by us as the students that it is much better to make borrowings from conventional bank rather than islamic banks when it comes to early payment. When we ask our Prof whether do we have any options since we want to avoid the riba, he said that if our islamic bank give us loan based on the 'real money', not the ones which get created of nothing at the first place, then it is ok to go for islamic banks.The problem nowadays is that islamic banks do not practice that, and actually for middle east countries, the Bai al-Bitaman Ajil(BBA) concept is not accepted. They will go for Musharakah Mutanakisah Partnership (MMP) which is implemented by having the bank to buy the asset at the first place, then only they will sell to consumers at a marked-up price, provided both parties agree on the total sale proceeds.

I dun want to make an impression to you that conventional bank is better, since at this point of time i am yet to study the impact and the difference of these 2 banks make on the economy. Nanti ada org ambil bulat2 whatever i write here as your base to make loans from conventional.Wait till i finish study the impact and the differences of these 2 banking systems k :)

To get high return, you must prepare to face higher risk (this is a very popular concept in financial subjects especially when it comes to stock and asset valuations). And i'm doing it now for my life, dun ask what types of risk and return that i'm going for at this moment, but i believe if my intention is pure, insya Allah the return that i will get is sufficient for me for dunya wa akhirah. (Hoho, i know most of you dun understand what the heck i'm talking about, but dun worry, this is for my own understanding :).


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