The invention of smart contracts and blockchain technologies has paved a path for the development of an alternative financial ecosystem known as decentralized finance (DeFi).Based on the idea of disintermediation and open protocols, DeFi aims to rewire the prevailing financial services in a more interoperable, pellucid and open manner.Inefficiencies, legacy systems and opacity in traditional finance have proved major hindrances in the way of financial inclusion and frictionless economy.DeFi, through decentralized applications (Dapps), intends to democratize financial services.The term DeFi gained momentum in the year 2020.In that particular year, the total value locked in DeFi protocols grew by a factor of 20 to approximately $16bn.Nevertheless, DeFi also brings unique kinds of financial and non-financial risks.The present book is a good starting point for financial academicians, entrepreneurs, practitioners and policymakers to understand various applications, primitives, risks and opportunities in DeFi.This book has multiple goals.Firstly, it identifies the weaknesses in the current financial system, including a discussion of some early initiatives that challenged the business models of centralized finance.Next, it explored the origins of DeFi and discussed a critical component of DeFi: blockchain technology.Next, the book detailed the solutions DeFi offers and coupled this with a deep dive into some leading ideas in this emerging space.The final aim of the book is to analyze the major risk factors and conclude by looking to the future and attempt to identify the winners and losers.The book is divided into eight chapters and is written by renowned professors and professionals of the domain.The first introductory chapter provided a brief overview of DeFi and the problems faced by the centralized financial (CeFi) system.It covers the results of these problems and because of that what all growth opportunities are missed by the financial sector.Another section of this chapter deliberated on the implications the financial sector is facing because of the problems of CeFi.The second chapter describes the evolution of finance with coverage on the barter system, eventually leading to money and its purposes along with all the traditional characteristics money possess.It also pictorially included the very first banknote, Western Union money transfer telegraph, Diners Club credit card, ATM introduced in north London
Abstract The present study investigates what drives Lending inquisitors’ judgement & decision-making behaviour that influences credit risk assessment in Indian banks. This research investigates three aspects: risk attitude & information acquisition behaviour, the effect of experience on lending, and desirable attributes of lending inquisitors. For the first area , Kruskal–Wallis non-parametric test is applied, for second area correlation and Cramer’s V is applied on fictitious case analysis and for third aspect 27 attributes of inquisitors through unstructured personal interviews are then analysed by applying Kruskal Wallis Test, Factor analysis and Fuzzy analytic hierarchy process (FAHP). Fuzzy AHP technique was applied to understand the key personal attributes and sub-attributes, which play a major role in Lending inquisitors’ judgement & decision-making behaviour. The risk attitude and information acquisition provided no substantial relationship between the two. Whereas, in the second area, which is assessing the impact of experience on decision-making behaviour, the result shows that the senior and junior credit inquisitors are cautious in acquiring the information as compared to outsourced credit inquisitors.
Small and Medium Enterprises (SMEs) are playing more and more important role in world economic development. Indian SMEs have been on the forefront of the development path. However, Indian SMEs face a host of obstacles when they try to access credit market for their financing needs. Banks do not feel confident to extend loans to the business units whose track records are not apparently known to them, nor are they easily verifiable by the banks. On one side the government assigns a target of minimum threshold level of SME financing for banks and on the other side banks are reluctant to finance because of perception of higher probabilities of credit default. A specialized and effective enterprise credit rating mechanism is extremely important for these enterprises. In this paper we examine the major issues in the financing of SMEs in an Indian context and evaluate the flip side of the current rating mechanism. We also suggest a framework of financing these enterprises for respective sources of capital with comments on the role of the central bank in this regard.
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