Presentation on Islamic Banking

Presented by : Ramesh Sharma (B-28)

Rohit Mishra (B-39)

Prabhat Mani Tripathi (A-

20)

History of Islamic finance

1500 years of development.

During Classical period, commerce flourished under

Islamic commercial law.

Development languished under impact of colonialism and

huge Western firms.

Revival began in 1960’s.

Inception of Islamic Banking

Dubai Islamic Bank - 1975

modest beginnings

Initiated by businessmen who did not want to deal with

interest based system

Hostile environment

History of Islamic finance

Increasing rapid growth and sophistication.

Challenged by conventional banking system

Lack of public awareness

Success Story

300 + Islamic financial institutions

$ 500 - 800 bn in funds

Islamic banking by major academic institutions

Success Story

Important database system (HIFIP)

Standards for the Industry (AAOIFI)

Recognition by IMF, World Bank and Basel Committee

Important Reasons for Global Interest in Islamic Banking

Good opportunity for investment

Challenge to the conventional interest-based Capitalistic

System

Demand of Muslim population in many countries outside

the Muslim world.

Islamic Finance Today

Widely used and flexible tool in international finance.

Devout Muslims have been locked out of many individual

financial vehicles.

Many personal alternatives now available

Religious/Ethical/Legal

In the West, Religion/Ethics/Legal only loosely overlap.

Islamic Sharia’a encompasses all three.

Sharia’a is the body of islamic principles with respect to

life’s activities.

Religious/Ethical/Legal

Derived from three sources:

Quran, revelations from God.

Sunnah, authenticated sayings and actions of the

Prophet (Peace be upon him).

Fiqh, collection of interpretations / rulings / precepts

based on the Quran and Sunnah.

Difference between Islamic and Conventional Modes of Finance

Bank Client

money

money + money (interest)

Conventional

Difference between Islamic and Conventional Modes of Finance

Bank ClientGoods & Services

money

Islamic

Structure of Hierarchy

Major Contracts Used in Islamic Banking

Buying & Selling

Mudaraba: Investment management

Musharaka: Partnership

Ijarah: Leasing

Wakalah: Agency

Istisna’: Contract of works

Objective Of Islamic Banking:Banking Without Riba

The main objective of an Islamic Bank is to prohibit

Muslims from dealing with interest or usury (Riba) which

has been strictly prohibited by Allah, and to protect them

from one of the biggest sins

Dubai Islamic Bank Statement

Islam

Aqidah(Faith and Belief)

Shariah(Practices and Activities)

Akhlaq(Moralities and Ethics)

Principles Governing

Shariah Requirements

Avoidance of prohibitions

Ensuring that the contract have all their essential

elements with their necessary conditions

Shariah Requirements

The prohibitions are:

Producing and trading of impure materials,

Producing and trading of materials which are of no

use,

Gharar,

Riba ands

Involvement of gambling

Strategies

Financial services are growing fast in the world.

Year 1998 the finance institution and insurance represented

7.98% from GDP of UAE

Year 2001 the finance sector had grown to reach 11%,

which shows the level of financial services in the country.

This presentation includes information about the PEST

Analysis

Focus Areas

Worldwide Statistics

Market Performance

Strategic Difference

Principles & values Known and trusted for our high standards of corporate

responsibility, we are committed to building a sustainable business through social inclusion, environmental protection and good governance.

PEST Analysis

Political Factors

Economic Factors

Socio culture factors

Technical Factors

Five Forces Model

Threat of New entrants

Rivalry among Existing firms

Bargaining power of buyers

Bargaining power of suppliers

Threat of Substitute products or services

Threat of New entrants

Economy of Scale

Product Differentiation

Legal Barriers

Rivalry among Existing firms

Equally balanced

Competitors

Lack of differentiation

Diverse Competitors

Bargaining power of buyers

Size of buyers

Differentiation

The buyer has full

information

Bargaining power of suppliers

Concentration or Size of Suppliers

Differentiation

Switching costs

Threat of Substitute products or

services