savings needs and money transfer needs paper

  1. Discuss the concept of savings needs and money transfer needs with the help of at least two real-life examples.

Monyoncho 2007 defines Savings as the use of money in the hope of making more money. The money may be used for purchasing stocks, bonds, and the likes in the hope of making a return in the near future.

Based on the type of investment one wishes to engage in, a certain amount of saving will be needed, for example, if one wants to build a house, one needs to save some money for some time before one can start the venture. Therefore, putting money in savings is a way of saving rather than investing, just as it is keeping one’s money in an ordinary bank account (Monyoncho, 2007). Money deposited in interest-earning accounts are said to be making money; hence, such monies can be classified as invested funds.

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Typically people invest for various reasons, which range from paying for children’s education through to university and ensuring a stable income for retirement, to just meeting certain financial objectives. There are two broad categories for savings;

  1. For retirement. Retirement is that period when a person is not working either for self-due to old age or for someone else. It is very difficult to imagine of a retirement when one is actively engaged in employment as an employee or even self-employed (Monyoncho, 2007). Sometime in the future, one’s strength will have waned and, therefore, cannot make as much money as one did in his younger ages. Many countries have social security or retirement schemes, which endeavor to force individuals to invest for retirement.
  2. Achieving financial goals. Unlike investing for a retirement that is long term, the second season is a combination of both. In this case, it is important that one sets goals first before beginning investment. The savings goals could increase employment income. Depending on the goal, savings can be either long or short-term.

To start saving money, one begins by looking at things that they buy weekly and monthly. Simple changes in these regular expenses can add up to funds for saving. For example, one less soft drunk at USD 15 and USD 52 weeks a year adds up to USD 750 a year (Monyoncho, 2007).

Other little changes can yield big savings, say changing brands and choosing more economical packaging and sizes of these products as well as using a little less. These can add up to more than one can think. For additional savings, one should look at recurring bills for instance monthly rent, utility bills, and credit cards. One could look for services they do not use or those that would not have a major negative impact on their lives and stop using them.

  1. Write a short note on Islamic Banking. Include in your answer analysis of two regional banks dealing in Islamic Banking.

Islamic banking is a procedure of banking mainly using the principles of Islamic. Essentially, in Islamic banking, an individual is not allowed to receive or pay any interest but these payments and interests are centered on profit sharing. Kuwait finance house and Sharjah Islamic Bank two examples of Islamic banks mainly focus on generating investments returns by using tools of investments that follow Sharia law. The mission of these banks is to take the finance and Islamic banking to greater achievements by focusing mostly on innovation (Kuwaitfinancehouse –Bahrain, 2013).

On the other hand, their missions desires to deliver excellence in all things done by the financing institution including developments and offering of integrated and broad range of services and products that follow the principles of sharia (Kuwaitfinancehouse –Bahrain, 2013). Supportive advancements, Gulf Cooperation Council growth and other factors in which the two banks invest in and financing structures used globally in Islamic banking systems. The commitment and mission of this financing institution are supported by robust financial positions and long heritage of integrity, leadership, and ingenuity.

Mostly, these financing institutions follow Islamic law that guides the Islamic economies. The Islamic economy is realistic because the rules used fulfil the needs required in life. These banks do not disallow any transactions made except for those having injustices. The Islamic economy is also ethically based because many people make profits by carrying out businesses. For an investment to be legal, the outcomes of the investment are supposed to fulfill the investment transactions. This enables the Islamic bank in stating what are expected in making profits (Kuwaitfinancehouse –Bahrain, 2013).

Most of the Islamic banks have been successful. One should invest in Kuwait Finance House because it is an old financing institution which was developed in 1977. On the other hand, it is the biggest and oldest Islamic lender. The ratings done by various rating agency affirm that the short-term Issuer Default Rating of Kuwait Finance Institution is F1 while the long-term is A+.  The downgrade in the ratings of this institution was due to the exposures the bank faced from investment companies which led to the bank getting high loan impairment provisions in 2008. Additionally, Kuwait Finance Institution has developed independent banks in Malaysia, Turkey, and Bahrain. It has also ventured in different Islamic banks (, 2013).

In Islamic banking, the bank gives the capital and business provides the project management. If profit is gained, the two parties will divide it as stated in the previous agreement. On the other hand, in case of a loss, both parties would share equally as stated in the agreement. This kind of transaction is the same as joint ventures done in non-Islamic banks whereby profits and losses are divided equally as in the agreement. The other Islamic banking principle is the practice of interests versus fixed bank charges.

In Islamic banking, this is particularly cumbersome because asset transfers are mainly involved. Growth achieved over the years produces optimism for the Islamic banking future. This means that Islamic banking systems have a lot of work to do. The Islamic banks that have taken time in considering strategic choices and addressing operational fundamentals will be stronger in capturing unexploited market opportunities.


  1. Write a short note on types of plastic cards. Also, present your personal views on the future prospects of plastic cards.

Bank cards are generally defined as any card issued by a bank, even a nontraditional bank, which assesses a customer’s financial resources. Under this definition fall general-purpose and limited purpose credit cards, automated teller machines (ATM) cads, debits cards, smart cards, and check guarantee cards.

Banks also offer several other types of plastic cards. The following are examples of plastic cards;

ATM Cards. An ATM card permits customers to access transaction and savings accounts 24 hours. ATMs allow customers to find out their account balances, transfer funds, obtain cash, and perform other financial transactions.

Debit Cards. A debit card, like an ATM card, directly accesses a customer’s checking or savings account. To the customer, a debit card acts more like a check than a credit card. Unlike ATM cards, which are used strictly at ATMs, debit cards are becoming widely accepted at merchant locations.

Smart Cards. The smart card is a plastic card into which a tiny computer chip is embedded. With some type of smart cards, popularly referred to as stored value cards, the chip is filled with a monetary value, and each time the card is used the amount of the purchase is deducted from the chip’s memory. Consumers can either purchase a card already contain a certain monetary value or can periodically add monetary value through special ATM devices. Smart cards are also used to store data for information purposes, for instance, a cardholder’s frequent flyer miles or a record of loan payments

Checking Guarantee Cards. Although largely replaced by ATM and debit cards, check guarantee cards are still offered in certain localities and through nonblank organizations such as Telecheck.

The use of smartphones in baking is growing rapidly and consumers should be very careful as the transactions and other information transmitted is highly susceptible to interception by hackers and electronic eavesdroppers. Most major banks now provide access to their banking services via websites or internet baking, operate entirely online, and they often pay higher interest rates. Electronic money management occurs whenever transactions are conducted without using paper documents. Most of these activities involve electronic funds transfer, in which funds are shifted electronically among various accounts and to and from other people and businesses.

The security risk can cause banks to lose the gains of internet banking if problems are not properly addressed. One of the risk identity theft, which can occur in two ways, phishing, namely sending authentic-looking-emails, which trick consumers into giving passwords details by replying to the email; and spoofing which uses a fake website that makes customers believe they are using a real site. These are keylogging, software tracking and remembering passwords and numerous other viruses and Trojans. Even though there exist various challenges and drawbacks in internet baking, the use of it has widespread of the years. Majority of consumers get it convenient and accessible.

Therefore, the use of plastic cards are diminishing over time with many banks and customer shifting to online platforms.


  1. Discuss the concept of borrowing needs with the help of real-life examples.

Every government in the world needs some financial support in order to carry out its day-to-day activities. The money to help run any government is got from the revenue that it collects from the public. The revenue can be accrued from taxes that the government has placed on various goods and services or fines imposed on people for various offenses. At times, however, the revenue collected by the government may not be enough to sustain its operations, thus, forcing the government to borrow money to assist in keeping the government running. The instance in which the government’s expenditure exceeds its revenue is referred to as deficit spending.

The advantages of borrowing by the government can be seen clearly in two main aspects: during a recession and on investment. When there is an economic downturn, the government might result to borrowing. Borrowing can also help increase investment. When under the provision is experienced in the education or public sector, the government might increase spending in the affected sectors.  In so doing, the sectors may experience increased productivity in the future, which might result to higher rate of economic growth.

Borrowing has various effects some of which include rising costs, investment opportunities, and organizations’ emergencies. We will look at the negative effects of deficit spending in each aspect mentioned above. Although there are some positive effects of deficit spending, the disadvantages are immense some of which are felt long after the deficit spending is over and the debt has been repaid by the government.

Borrowing causes a rise in the cost of products available for consumers, whether to an individual or an organization. This is because the government will have to buy almost everything on credit, which means it will have debts. Debts also attract interest that means that all commodities the government purchases will have inflated prices because of the interests charged (Stevens, 2012).

At the level of organizations, the effect of deficit spending is clearer. Borrowing in any organization might make it less appealing to lenders, thus, making such an organization unable to get any financial assistance. Borrowing can also distort financial ratios such as debt to assets and times interest to earned ratios. Such a situation might make outsiders wary of investing in the organizations bonds. Some of the organizations may, as a result, close down altogether.

  1. Write a short note on credit eligibility.

All consumers applying for credit, no matter if it’s a credit card, a car loan or home loan, the lending institution will analyze their applications. The lender has a certain criteria for issuing a loan approval, so it is essential for one to be well prepared before going to a lender and asking for a loan. Even if one gets a cosigner, the lenders will still follow their criteria to lend the money. The following juts illustrate among others, what lenders normally look for before giving loans;

Does the borrower have the capacity to pay the loan? Capacity is the ability of the borrower to make enough money on a steady basis to pay the loan facility. One must be able to show the lender that his or her earnings are enough to pay back the loan. This is done by a debt to income worksheet. This is obtained by summing up all debts one has divided it y the income.

Finance companies are great users of credit scoring techniques for determining borrower creditworthiness, especially for consumer loans. In essence, credit scoring is the evaluation of a business or consumer loan application by the use of the statistical model. A commonly used methodology is multiple discriminant analysis (MDA), widely research to research firms. Credit scoring estimates the raiment probability based on the information in the credit application and a credit bureau report.

Application point-scoring systems assigns points to various credit criteria, such as income, number of existing credit accounts, and time at residence and so on. An applicant who scores enough points to pass the cut-off score is considered creditworthy. Another application scoring technique, decisions tree scoring, also calculates the repayment probability, although it does not assign points to credit criteria. Behavior scoring model, on the other hand, measure a borrower’s ability to repay debt, giving an early warning about potential delinquent accounts.

References (2013, March 27). Kuwait Finance House-Kuwait. Arabian business. Retrieved  March 27, 2013, from

Kuwaitfinancehouse –Bahrain. (2013, March 27). Islamic Banking. Retrieved March 27, 2013, from

Monyoncho K., 2007. How to Save Money for Investment. Publisher WordAlive


Stähler, N. (2009). Taxing Deficits To Restrain Government Spending. Journal of Public

Economic Theory, 11(1), 159-176.

Stevens, R. E. (2012). Market Opportunity Analysis Text and Cases. London: Taylor and



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