And they found a servant from among Our servants to whom we had given mercy from us and had taught him from Us a [certain] knowledge. (Quran: Al-Kahf: 85)

Posts tagged ‘governance’

Corporate Governance: Healing The World

Corporate-GovernanceThis writing would cover about what I would do if I have the power to change the world with two approaches, causes which I concerns, and its solutions.

I really concerns in the wealth distribution in current economy, especially in empowering specific elements of society. Scholars of neoclassical economy said that current economy is driven by greed, and they argue that greed is good to have economic growth. They are measured by world GDP at ultra-macro level, company size growth at micro level, etc. To feed these growths, people struggles to find any available resources, one of them is capital resources. To acquire the capitals they need, it demands liquidity (money). These liquidities are highly demanded which resulting in increment of the price of the liquidity itself. Meanwhile, at the same time, the price of money is reflected as interest rate charged.

Scholars at this topic argue that these interest rates are associated with the risk nature of debtor. The less risky the debtor, the rate would be charging low. At the other hand, the rate charges high for risky debtors.

This condition is really sad since the one who is being charged high mostly is small medium enterprise (SME). The volatility nature of SME businesses becomes the reason of creditors to charge wildly, away above free rate or market premium. The condition is worsened in emerging markets. In emerging markets, the alternative financing doesn’t really exist, while emerging markets’ interest rate is relatively high due to sovereign risk factor. The SME businesses in emerging countries face double risks associated to them. It leaves them no options to finance their business, except the costly interest rate which could be up to 30% (and even 50% in black market). The cycles of economic with this trend-pattern continues, broadening the global gap between rich and poor people.