The brave new world

FE Team | Published: March 20, 2009 00:00:00 | Updated: February 01, 2018 00:00:00

Mahmudur Rahman
"Neither a borrower nor a lender be"
William Shakespeare
There are times when the simplest of truths and wisdom drown in the deluge of worldly temptation. The consequences are such as what the world is now going through: an abyss if an economic mayhem that appears to have no ending. Then of course, there has to be. After all, what goes round comes around.
The institution of banking came into being for the purpose of a 'safe house' for people's hard earned money, to essentially provide the peace of mind from the greedy eyes of those who prefer to be on the wrong side of the law. Thereafter, when banks' own form of greed took over and these institutions collapsed overnight in the early days, safeguards were introduced in the form of interest and other instruments.
Even in recent times we have had instances of banks going overboard in bad loans and such to the ruination of depositors resulting in a loss of faith in private banks. Government-owned banks were more conservative in interest rates but also more dependable as it was the state that provided security of deposits.
With the passage of time and growth of transnational trade, it became more convenient for businesses to fund their activities through bank loans and overdrafts. The mathematics suggested that it was more productive for loans against collateral or deposits than funding through own resources. That way cash working capital, often referred to as 'idle money' could be minimized. Banks and financial institutions weighed the risk of the loans by assessing the business module, forecasts and overall credit worthiness of the applicants before approving loans in robust analysis.
Over time and through experience 'trust' and 'gut' feel got the better of 'analyses'. Ambitious targets were set both individually and for financial corporations-rewards for achieving which were significant. Then came a time when the life-span of experience inexplicably shortened and became the casualty to 'speed of thinking and decision making'. The new wave encouraged 'fast-track' managers who rode on a surging tide of the economy and totally missed the plot. Management Gurus had prophesized that corporation boards would in the future be manned by young, in-the-thirties managers. They were correct. However, what they didn't foresee was that the same managers would through caution and experience to the winds as outdated norms. The balance was disturbed and as we now know the house of cards came crashing down.
A lacking is sometimes a blessing. Bangladesh's market being less speculative has meant it being spared from the immediate pain of the meltdown. The future impact is another question altogether. Implications have to be carefully tracked and analyzed in terms of the effect on other sectors. Experience and what has been proven to work must come back into the balance along-side youth and new ideas. It may be a brave new world but the bravery has already been challenged. (The writer is a former Head of Corporate and Regulatory Affairs, British American Tobacco (BAT), Bangladesh and Chief Executive Officer (CEO) of Bangladesh Cricket Board. He may be reached at e-mail: mahmudurrahman@gmail.com)