Fee based activities

Some of the fee based activities are Managing the capital issues (pre-issue and postissue) Arrangement of funds from financial institutions for the clients projects. Assisting in obtaining Govt. clearances.

Some of the modern activities

Most of the modern financial services are non-fund -

based activities. Some of them are: Project advisory services Planning M&A Capital restructuring Recommending changes in the management structure Joint venture agreements Rehabilitation and restructuring of sick companies Hedging risks (exchange rate risk, political risk)

FINANCIAL INNOVATION
Customer needs are dynamic Market is volatile and uncertain Therefore the financial intermediaries have to

innovate.

Causes for Financial Innovation

Low profitability: decline in traditional banking

products and profits have been affected. Keen competition: Many entrants in the financial sector. Therefore to out beat competition. Economic liberalization: economic measures have opened up new opportunities, deregulation of exchange controls has brought foreign competitors

 Improved communication technology:

Advanced technology helps to link issuers with investors. (GDR issue) Customer service: Customers expect newer products at a lower cost, customer sophistication, customized product Global impact: Financial intermediaries have become active and ready to assume more credit risk. (Lehman Brothers) Investor awareness: Investors are shifting their investment from physical assets to financial assets, not risk averse any more.

FINANCIAL ENGINEERING
It is the design, the development and the implementation of innovative financial instruments and processes and the formulation of creative solutions to problems in finance.

FINANCIAL SERVICES AND PROPMOTION OF INDUSTRIES

Grameen Bank- A Role Model in Microfinance

Yet another monsoon season was

approaching; but Joshuna Begum (Begum) unlike her neighbours was not worried about her house getting damaged during the monsoon. Her house now had a tin roof, mud walls and wooden windows, a luxury in rural Bangladesh. Earlier, Begums house had a straw roof and bamboo walls, which used to get damaged in the monsoon season, forcing the whole family to live in the kitchen.

 She got her hut repaired with a loan from the Bangladesh

Grameen4 Bank (Grameen Bank). Begum wasnt the only one; there were thousands of people in rural Bangladesh who had improved their living conditions with the help of the microfinance programs of Grameen Bank, a pioneer in microfinance (Refer Exhibit I for more about microfinance). Grameen Bank helped thousands of poor Bangladeshi women to improve their lives by extending loans to them to start. their own enterprises. By 2003, it was reported that between 33-48% of Grameen Bank borrowers had moved above the poverty line5. By 2003, with 1,170 branches across Bangladesh, Grameen Bank was seen as a role model for microfinance all over the world.

 The Grameen Bank model was replicated

across the world -- not only in developing countries like India, Pakistan, and Vietnam, but even in developed countries such as Australia and the USA, where similar schemes were set up to improve the lives of the urban poor (Refer Exhibit II).

 WHAT IS MICRO FINANCE AS PER THIS

CASE?
CAN MICRO FINANCE BE CONSIDERED AS A

NEW FINANCIAL INNOVATION?

WHAT ARE THE BENEFITS OF MICRO

FINANCE AS PERCEIVED BY YOU?

FINANCIAL SERVICES AND PR0MOTION OF INDUSTRIES

The efficient transformation of mobilized funds

into real capital helps to promote and develop industries.

CAPITAL INVESTMENT

SAVERS

F.S

SPENDERS

INCREASED SAVINGS

INCREASED PRODUCTIVITY

INCREASED D.I

INCREASED P.P

INCREASED EMPLOYMENT

ROLE OF F.S IN PROMOTION OF INDUSTRIES

1) Industrial promotion through Merchant Banking 2) 3) 4) 5) 6) 7) 8)

9)

Services Working Capital provision through factoring Services Equipment financing through Leasing Financial resources through MFs Long term risk capital through Venture Capital Hedging through Derivatives Credit rating for debentures Development finance by Development Banking Service Specialized services like bill discounting, depository services

NEW FINANCIAL PRODUCTS & DESIGN

Merchant Banking

Loan syndication
Leasing Mutual Funds Factoring Forfaiting Venture Capital Custodial services Reverse Mortgage