How do banks evaluate financial projects and offer loans in Uzbekistan - Free Essay Example

Banks play critical roles in every economy, and perform an important role in terms of maturity transformation. They operate the payments system, and are the major source of credit for large swathes of the economy, and act as a safe haven for deposits funds. They collect demandable deposits and raise funds in the short-term capital markets and invest them in long-tem assets. It means resources from those in surplus (depositors) are allocated to those in deficit (borrowers) through the banking system. This activity can help match deposit and loan supply and provides liquidity to an economy. Banks also provide loan commitments, letters of credits, and other guarantees that help counterparties plan for future investments (Allen et al 2010). Largest banks in many countries have a tendency to transform themselves via merger and acquisition into multi-product or service offers to customers comprising retail banking, asset management, brokerage, insurance, investment banking, and wealth management (Allen et al 2010). RESEARCH QUESTION, RESEARCH AIMS AND OBJECTIVES The aim of this research is to find out and understand How do banks evaluate financial projects and offer loans in Uzbekistan, what do they require from their customers for evaluation, and how do they analyze and evaluate before offering credit limit and loans to customers. The following questions will also be features that I try to identify answers through for my research task chosen: How are the projects evaluated before making a decision to undertake by Uzbekistan banks? How do banks evaluate a companys performance and capital structure using both qualitative and quantitative frameworks and tools? How do banks apply the analytic techniques across different industries? What are the advantages and disadvantages of evaluation tools in use? How do the banks in Uzbekistan face the global economic crisis? What would be a solution if they meet any challenge in evaluating projects? LITERATURE REVIEW Banking industry in Uzbekistan The total loans granted that commercial banks in Uzbekistan have offered to their customers have been significantly increased in these years, from $898 million in 2008 to $1.2 billion in 2009 for micro and small enterprises (MSEs). This number is forecasted to increase by $275 million in 2010 (Asian Development Bank, 2010). However, the demand of MSEs is still unmet although the credit has grown significantly. Therefore, banks in this country become stricter in evaluating, and offering the loans to enterprises. In short-tem, the main risk for banks is higher inflation because of the very restrictive policy towards imports. In medium-term, the risk will be related to financial sector adversely affected by a rise in non-performing loans while the enterprises expect for soft budget constraints and various protectionist measures that results to the competitiveness of enterprises (European Bank for reconstruction and development, 2010). Uzbekistan, showing soundness to global recessi on, is anticipated as one of the most favorable in the region with the real GDP expected to grow by 7 percent in 2009. The strong fiscal position of this country can allow it to get further fiscal expansion in 2010 (European Bank for Reconstruction and Development, 2010). The Anti crisis program and other social programs allow this country to overcome the impact of the world crisis, resulting stable economical growth, stable socioeconomic development and improving the living standards of Uzbeks. Uzbekistan has more than 30 commercial banks with 3 state-owned banks, 13 joint stock banks, 9 foreign capital banks and some other private banks with 46,000 branches and retail stores. Total assets of banks in Uzbekistan are 2 times higher than the total balance of the population and legal entities deposits, insuring complete protection and guarantee of timely payments. Its bank capital adequacy ratio is higher than the international standards. Total current liquidity is 10 times higher than external payments due (see figure 1 and figure 2). (European Bank for Reconstruction and Development, 2010) Figure 2 Figure 2 Figure 1 Fourteen of those 30 banks were rated as stable by leading international rating companies such as National Bank of Uzbekistan (NBU), Asaka bank, Agrobank, UzPSB bank, and some others (see figure 3 for more statistics about assets and capital of the banking system in Uzbekistan). If considering about the following criteria: financial soundness, a significant rural retail network, the ability and willingness to manage the exchange risk prudently, etc, there are three suitable commercial banks chosen: Hamkorbank, Ipak Yuli and Asaka. Hamkorbank, listed on the Uzbek Stock Exchange, was established in Andijan, Uzbekistans fourth largest city, in 1991. This is a leading privately owned commercial bank in Uzbekistan. Its primary business is offering the entire range of retail banking products and services to micro, small, and medium-sized enterprises (SME). It holds about 1.9% market share of banking section assets and 1.3% of capital stock (Asian Development Bank, 2010). In Hamkorbank , the head office and branch-level committees of each regional branch have the authority to approve loans within a particular lending limits annually set by the head office and executive board. This bank has rich experience in dealing with microcredit. Its loans were up to $29.3 million at the end of 2009. Moreover, Hamkorbank has been successful in attracting funding and receiving technical assistance for microfinance from external sources. Another stable bank in Uzbekistan is AIpak Yuli Bank. This is an open joint stock commercial bank establish in 1990. During 2007, the total assets have increased in 1.9 times and have reached 186.8 billion soum (equivalent to 116 million US dollars). This growth rate is kept last three years. Crediting is considered as the as a major part of mutual relations of the bank. The main task of bank in credit activity is to increase a qualitative and highly remunerative loan portfolio based on minimization and diversification of credit risks. AIpak Yuli Bank offers many types of loans such as credit lines, commercial lending in national currency and foreign currency, leasing, factoring, micro-crediting, consumer and mortgage lending. Before accepting and offering a loan, the bank usually gives a special place to issued credit security for guaranteed equipments which is estimated conservatively and sometimes need independent appraisers (AIpak Yuli Bank, 2007) Figure 3 (Source is available from: https://www.jp-ca.org/navoiforum/materials/zantais/4bafaev.pdf) Finance Finance is the science of the management of money and other assets including money, banking, investments, and credit (https://www.thefreedictionary.com/finance). Financing of banks means banks providing funds or capital, supplying fund or credit to lenders borrowers such as enterprises, corporations, government projects, etc. Projects financed by banks There are many banks in Uzbekistan providing project financing, loans, or credit lines such as Asian Development Bank, World Bank, Japan international cooperation agency, Islamic Development Bank, etc. Projects specially paid attention and received loans, credit lines, etc from the banks are investment projects with major contribution to Uzbekistan economic development and structural reforms, projects aiming at infrastructure development, projects of modernizing industrial enterprises, or procurement of new modern technologies, equipments and other strategic goods. Most of enterprises have concentrated on investing new technologies as they think that technology is one of the most important key factors for success. Most industries, such as steel and/or automobile industries, require rebuilding in order to get rid of old technology and reduce labor intensities and increase capital intensities (English J. M., 1984) Project financial evaluation Any project to be undertaken by financial institutions requires a very careful consideration/evaluation. Project financial evaluation is an in-depth investigation of cash flow and risk with the object of determining a projects eventual return on investment (Annettle, 2010). It means all of the fiscal factors such as cash flow, insurances, capital outlay, payback period, and the ROI (return on investment) involved in the project are checked and evaluated carefully. (English J. M., 1984) RESEARCH METHODOLOGY There are various definitions for the term research. Lee and Lings (2008) describes it like Research is about generating knowledge about what you believe the world is. Saunders et al (2003) defines research as something that people increase their knowledge through by finding out things in a systematic way and they highlights two phrases together: systematic research and to find out things. These may contain describing, explaining, understanding, criticizing, and analyzing (Ghauri and Gronhaug, 2002).They show a multiplicity of possible purposes in research. Lee and Lings (2008) believes that research is a human process thats done by people. People may have alternative opinions on understanding things from each other; they conflict, dispute and sometimes make mistakes. Research paradigm To define clear research philosophy reduces mistakes and simplifies the research task. According to Saunders et al (2003), there are three views of business research that leads the way in which knowledge is enlarged and concluded as being acceptable. They are positivism, interpretivism, and realism. Positivist researcher performs the role of the objective analyst, collects data and explains analysis in an apparently value-free manner. They put more emphasis on well-prepared methodology to make easy duplication (Gill and Johnson, 1997) and on scientific study that leads to create a statistical analysis. Interpretive researcher argues that the business situations are getting more and more complex in ever-changing world of business organizations. Such a complexity requires definite laws as the physical sciences refer to. They consider circumstances are reduced wholly to a law-like generalization series. On the other hand, realism pushes the idea that a reality exists in independenc e of human thoughts and beliefs. In the study of business and social sciences this can be seen as indicating that there are large-scale social forces and processes that affect people without their necessarily being aware of the existence of such influences on their interpretations and behaviours'( Saunders et al, 2003). It would be a wrong assumption if I say that one of those philosophies has an absolute advantage or is better than another. However, positivism will be my research methodology. Research strategies Lee and Lings (2008) illustrates two approaches to the research. Deduction is an approach in which researcher concludes from rational and logical principles. In an example given by them, ancient Greeks say writing a book always makes the author(s) rich, but this is valid and the premises are true, only if it were so. Being essentially opposite of deduction, induction applies to a process showing movement from specific surveillance to a more common theory. In the theory of Saunders et al (2003), deduction tests theory where induction builds theory. There are two main types of research: quantitative research and qualitative research. For my dissertation, I will use qualitative research. This type is generally exploratory in nature, consisting investigative research approaches that result in descriptive textual information. The reason why I choose this approach for my research is because of its features. Qualitative research approach can helps to examine processes, patterns, opinio n, values, and case studies including critical incidents. However, the important concern when I conduct qualitative research is that I need to consider the most appropriate methods for gathering and interpreting the information. I will try to look through the eyes of someone else and make a systematic attempt to understand them. Data collection methods The key resource for my research project is the library including both physical libraries and online libraries. In these places, there are not only books, journals, archived materials, but also information centers that co-ordinate an electronic gateway to a massive amount of online information. Using new primary sources: my research will focus on collecting data from primary sources such as recently produced reports from banks and enterprises who requested for financing, or face-to-face research through in-depth interviewing and focus group interviewing. Secondary sources: observation ANTICIPATED RESEARCH ANALYSIS AND FINDINGS The important task when doing a research is critically analyzing and evaluating information, ideas, and data collected. The key aim of qualitative research is to represent the material in a balanced and rational way. I will not only select examples, answers or quotes to analyze but also consider and note the opposing evidence, then arrive at a conclusion based on a careful analysis of the arguments and literature sources related to my topic. TIMEFRAME

Berenguela of Castile

Art Is An Extraordinary Subject - 862 Words

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Cost Accounting Employees Productivity

Question: Describe about the Cost Accounting for Employees Productivity . Answer: 1 (i) Faster processes in itself is a major requirement of every organization. Computerized systems are being installed in the organizations to increase more productivity of the employees. Nowadays, organizations are more interested in investing in computerized software rather than investing in human capital. This has led to increasing in the speed of the work being done both in the administration as well as engineers by the existing employees with the fear of losing their job being done (Vanderbeck, 2013). More advanced and improved technology for producing goods of higher quality at a lower rate is being built by the engineers. With the process time getting reduced, the organizations have the benefit of increased production, innovation which means the engineers have more time to explore a new methodology for improving the quality of the product or developing more products which can increase the sales of the organization and also help in increasing the profits (Charles, 2012). The administration can, on the other hand, help the management in giving more accurate reports based on the activities of the company to the management which would help them in making more accurate decisions regarding the ongoing or upcoming process of the organization. This would help the organization to become more competitive in the market as it will be in a better position than others to take decision earlier and faster. 1(ii) Only increasing the production quantity of an organization will not help it in increasing the profits or making a huge change in the quantity being sold. In todays competitive environment, each organization is trying to install improved system whether it is related to technology or computer related software to increase productivity with the existing labor being employed. However, the major concern is quality (Robinson Last, 2009). Only quantity is not going to solve the problem, quality plays an important role. Since multiple products are available in the market with almost same features and the customers are almost paying the same price for the same, the only factor which can be distinguished is quality. Hence with the decisions of the management, when the management is investing so much in technology it would definitely need the result with an improved quality. When the work is automated, employees have more time with them to invest in the work which they previously used to manual ly; hence quality reports or quality products become a prerequisite for any organization because it will help the organization to stand in a different position than others in the competitive market (Shim Siegel, 2009). 1(iii) Competition in todays world is a major challenge for anybody whether it is an individual or an organization. Everybody is trying to be first. Nobody has the time to wait and watch. Hence with the faster process being implemented and with the shortage of time there is no time left nor in the hands of the labor neither in the hands of the people handling administration to just wait and look into the work done by them. Hence the chances of errors are being increased thoroughly. With the lesser time in hand and the customized technology of which no check can be maintained it obviously means that there are higher chances of mistakes which can be made. Since there is nobody to check the data being entered or in the middle of the process when the data is being processed, with the end result there is always a higher chance that the output received may be wrong or might be containing an error in it (Larry Christopher, 2012). Though the need of the hour is an increase in the speed, however, t he practical difficulties should be understood by the management and just not goes by the vague picture of technology. 2. The key reason behind the ascertainment of the managers bonus based on generated profit is that this can possess a direct influence on their performance. In other words, if the managers of a company have performed really well, and if the companys performance is weak, then the bonus payable to the managers will have to be disregarded as weak company performance clearly signifies low generated profits. Although the company establishes such systems to motivate their team, yet factors like the poor economy or massive competition can impede the attempts of managers. Furthermore, when the bonus is based on generated profits, prior preference is given to these profits and not the managers performance (Lanen et. al, 2008). This can result in the dissatisfaction of managers because the performance of the company is attributable only to its generated net profits. Considering the given case, it is observable that the manager of Adelaide has failed to provide necessary efforts and as a result , the company could not generate profit, and therefore no bonus. On the other hand, the manager of Brisbane observes growth in the net profit and hence becomes eligible for the bonus. This clearly indicates that the role of a manager towards the companys net profit depends on various factors, and if such factors are not considered aligned properly, then their attempts can go wasted. In other words, a manager may be able to work efficiently but there are several other factors, which determine the net profits of a company and these factors can diminish or waste the managers attempts (Venanci, 2012). Therefore, there must be a contradistinction between the managers performance and the profits of a company. On a whole, such concept of bonus based on profit can clearly generate several problems within the company and can result in the dissatisfaction of managers. 3. Favorable material variance suggests cost efficiency procurement by a company. Thus, in relation to the given case, such variance depicts that Dream Housing Limited has earned profits in excess of what was expected or incurred lesser expenses than what was expected (Needles, 2011). A favorable variance for revenues can be assessed to ascertain whether it was the outcome of higher than planned greater quantities, selling prices, or a more favorable combination of products sold. In the same way, a favorable material variance for expenses can be evaluated to recognize the cause of lesser expenses. An unfavorable labor variance implies that the cost of labor was more than what was expected. Such information is very beneficial in the planning procedure of the development of future budget periods, as well as providing a feedback on the major loopholes in the business giving rise to such unfavorable labor variance, and initiating corrective measures as a whole (Horngren Frost, 2012). In the evaluation of production costs and variances, management can get ample amount of relevant details that can play a key role in enhancing the operational effectiveness of the company. In other words, management can understand the production tendencies and various procedures applied by the company in the efficient utilization of its resources (Horngren Frost, 2012). Besides, variances are a beneficial process through which management can understand whether the company has operated effectively or not. In other words, the adverse variance can necessitate corrective measures by the company while a positive or favorable variance can portray efficient functioning. Thus, whether a company is performing accordingly or not, variances can play a key role and be of immense help to the management. 4. Display of variable cost Details Budget A Budget B Variable overhead Rs. 60000 Rs. 75000 Variable selling and administrative expense Rs. 60000 Rs. 60000 Direct Materials Rs. 260,000 Rs. 3,60,000 Direct Labor Rs. 40,000 Rs.60,000 Total (I) Rs. 4,20,000 Rs. 5,55,000 Units in total (II) 20000 30000 per unit cost ( I/II) Rs. 21 per unit Rs. 18.50 per unit As seen by the computation that the ascertainment of variable cost by the senior management is lower while that of the lower and middle management is higher. Moreover, the expenses pertaining to selling and administration display the same. 4 (ii) from the presentation and preparation of Budget A it is indicated that bottom-up approach I followed by the lower and middle management. Such evidence indicates that the management is at home with the cost (internal) and conflicts. As the operational activities are taken care of by the lower and middle management, therefore the material cost stands on a higher basis. The material cost is forecasted by them and they are solely responsible for the increase in cost if it happens in future. For this purpose, they consider the variances and differences. It is imperative for the organization to have costs on the greater side so that a fuller development takes place. 4 (iii). The superior level of management purposes to increase the profit amount and sales of a company. Furthermore, such management is well known to the arrangement of labor, completion of work, obtaining of material, and grouping of other variable overheads, but in the budget procedure, only the unfavorable situations are evaluated. This signifies that the management possesses a well-defined explanation of the financial environment as it focuses on a greater prospect. Furthermore, it is also well known of how much products are saleable in the market and their cost of production. This offers an effective conception that the management pursues an effective understanding of sale of products (Needles Powers, 2013). 4 (iv) It is the primary goal of an organization to operate in such a way that has the potential to garner maximum profits by establishing an alliance betwixt the middle and lower level of management (Spiceland et. al, 2011). Both these level of management can play a significant role in the process of production. The top management estimates production at Rs 18.5 per unit while the lower level of management reports at Rs 21 per unit. This indicates that such lower management must concentrate on production enhancement of Rs 2.5 per unit. Moreover, the top management anticipates at 30000, which indicates gained profits. Thus, it is clear that coordination betwixt management results in profitable opportunities. References Charles, T.S 2012, Cost Accounting: A Managerial Emphasis, Pearson Education Horngren, C T Foster, G 2008, Cost Accounting: A Managerial Emphasis: United States Edition Lanen, W. N., Anderson, S Maher, M. W 2008. Fundamentals of cost accounting, NY: Hang Loose press. Needles, S. C 2011, Managerial Accounting, Nason , USA: South-Western Cengage Learning . Needles, B. E. Powers, M 2013, Principles of Financial Accounting. New York Press Robinson, M., Last, D 2009, Budgetary Control Model: The Process of Translation. Accounting, Organization, and Society, NY Press Shim, J. K Siegel, J G 2009, Modern Cost Management and Analysis, Barron's Education Series Spiceland, J., Thomas, W. and Herrmann, D 2011, Financial accounting, New York: McGraw-Hill/Irwin University Press Vanderbeck, E J 2013, Principles of Cost Accounting, Oxford university press Venanci, D 2012, Financial Performance Measures and Value Creation , State of art . New York: Springer. Larry M. W Christopher J. S2012, Managerial and Cost Accounting, Pearson Press