2. Presented by: JUNAID ZAMIR TARIQ ALI KHAN 3. Index
- Performance of various Banks
- Islamic Banks in Pakistan
- Business Model of a ConventionalBank
- Business Model of a Islamic Bank
4. What is Islamic Banking
- A system of financial activities consistent with Shariah, based
on Islamic principles which at the core refuses collecting
interest, transactions involving uncertainty and speculation.
- It is based on the Islamic economic system.
- It is not restricted to Muslims only.
5. Terminologies
- Takaful (Islamic Insurance)Takafulis an alternative form of
cover that a Muslim can avail himself against the risk of loss due
to misfortunes.
- Sukuk (Islamic Bonds)the Arabic name for a financial
certificate but can be seen as an Islamic equivalent of bond.
6. PRODUCT TREE Islamic Modes of FinanceTrade BasedModes
Partnership BasedModes Rental BasedModes
7. Terminologies
- Murabaha It is a contract for purchase and resale and allows
the customer to make purchases without having to take out a loan
and pay interest. Bank purchases the goods on behalf of the
customer, and re-sells them to the customer on an agreed profit
margin and the customer pays the sale price for the goods over
installments.
- Musharaka It means partnership. It involves you placing your
capital with another person and both sharing the risk and reward
with profit sharing ratio, but lossesmust beproportionate to the
amount invested.
8. Terminologies
- Mudaraba It refers to an investment on your behalf by a more
skilled person. It takes the form of a contract between two
parties, one who provides the funds and the other who provides the
expertise andwho agree to the division of any profits made in
advance. The Bank wouldmake Shariaa compliant investments and share
the profits with the customer, in effect charging forthe time and
effort. If no profit is made, the loss is borne bythe
customerandIslamic Bank of Britaintakes no fee.
9. Terminologies
- Ijarah Ijara is a form of leasing. It involves a contract where
the bank buys and then leases an item. For example auto ijarah is
simply an agreement under which the vehicle shall be given to you
on rent for a period, agreed at the time of the contract. Bank
purchase the vehicle and it out to the consumer for a period upon
completion of the ijarah period the consumer get owner ship of the
vehicle through a separate sale agreement.
10. Principles
- It works on Islamic set guidelines consisting of Risk Sharing,
Individual Rights & Duties, Property Rights, Purity of
Contracts, Commitments, Transparencies & Fair Deals.
11.
- Any predetermined payment over & above the actual amount of
principal is prohibited (interest) the only loan it allows is
qard-ul-hassna whereby lender does not charge any interest.
- The Islamic financial system employs concept of participation ,
utilizing funds on a profit-and- loss-sharing basis.
Principles 12.
- The pioneering effort, led by Ahmad Elnaggar, took the form of
a savings bank based on profit-sharing in the Egyptian town of Mit
Ghamr in 1963. This experiment lasted until 1967 by which time
there were nine such banks in the country.
- In 1973, the Islamic Development Bank was set-up.
History 13.
- The first Islamic bank in Malaysia was established in 1983. In
1993, commercial& merchant banks were allowed to offer Islamic
banking products and services under the Islamic Banking Scheme
(IBS). These institutions however, are required to separate the
funds and activities of Islamic banking transactions from that of
the conventional banking business
History 14. History
- The Islamic Summit of Lahore, Pakistan held in 1974 recommended
the creation of Islamic Banks and Islamic Development Bank.
- On 14 Ramadan 1420, the Shariah Bench of the Supreme Court of
Pakistan gave its landmark decision banning interest in all its
forms and by whatever name it may be called. The court also
specified a step by step approach to rid the country of the evil of
interest.(The Historic Judgment on Interest by the Supreme Court of
Pakistan)
15.
- After 55 years after its creation in the name of Islam,
Pakistan became the first Muslim country to officially declare
modern bank interest as a r-riba , declared haram by Qur'an
History 16. How it is Different ?
- Islamic Orders not to use Money as a commodity.
- They operate under the concept of lender-borrower relationship
and the profits generated through this relationship are divided
between the two parties as per agreement.
17. How does it works ?
- The bank entirely depends upon the fixed deposits and does not
borrows money from the central bank.
- Bank gives loan on basis of mutual agreement.
- Marjorly focuses on sales transaction.
18. Overview
- Islamic Banking is growing rapidly in Pak it has been expected
that by 2012 total share in Banking sector will be 12%.
- Present Islamic Banking share is 5%
19.
- Assets Rs 276 Bn (asset base of entire Banking System Rs 5,653
Bn)
- Deposits Rs 201.7 Bn (17.7%)
Overview 20. Performance of various Banks 8,333 UBL 630 Standard
Chartered 621 Meezan Bank 15,459 National Bank 15,375 MCB (53) Bank
Islami 4,157 Allied Bank Profit (March 30, 2009) (Millions) Bank
Name 21. Islamic Banks in Pakistan
- Dubai Islamic Bank Pakistan Limited
- Dawood Islamic Bank Limited
- Emirates Global Islamic Bank Limited
22. Branch Network
- Dubai Islamic Bank Pakistan Limited branches 25 in 10
cities
- Meezan Bank 166 branches in40 cities
- Dawood Islamic Bank Limited 19 branches in 9 cities
- BankIslam102 branches in 49 cites
- Emirates Global Islamic Bank Limited (EGIBL) 41 branches in 24
cities
- Total branch network of combine islamic banks353 Branchesin
almost all big cities of Pakistan.
23. Business Model of a ConventionalBank
Mode ofCredit Interest Interest
- Interest based pool managed by bank
Withdrawal 24. Business Model of a Islamic Bank
- Investment Account Holders(Depositors)
- Islamic Banking Business(Shariah Compliant)
Profit Mode of Deposit & Funding
- Mudaraba(Shariah compliant)pool managed by bank
Withdrawal 25. Key Challenges Facing Islamic Banks:
- Product development and execution
- Competition from conventional banking
26. SWOT analysis
- S : religious appeal, Zakat, Innovative aspect, all bigger
banks carry a Islamic portfolio because of its success.
- W : Lack of standardization, There are differences in theory
and practice, Misinterpretation of Islam
- O : fastest growing religion in the world, Traditional interest
based banking losing its value, New markets have been emerged in
non Islamic regions.
- T : loopholes are present in its proper implementation,
Research in products, Environment for Islamic banking in west has
been declined after 9/11
27. Problems
- The problem with these shariah boards is that they give
conflicting opinions that result in confusion and doubts.
- They approve 1 product and the other may reject
- Jorban a Muslim scholar disapproved the penalty imposed on
defaulting.
- Britain had rejected Islamic mortgage as it based on interest
based structure.
- Malaysia has proposed to setup standards for both IB and IF.
such standards would result in consensus instead of confusion or
conflict.
28. Future
- Replace conventional Banking system with Islamic banking
System.
- Expand their Branch Network.
- 2012 total share in Banking sector will be 12%.
29. 30.
- This is evident not only from the growing number of banks
established specifically for practicing shariah compliant finance,
but also from the increasing number of conventional banks such as
Citibank, HSBC, RBS, Standard Chartered, UBS, etc engaging in
shariah compliant operations.
Future 31.
- Product Innovation- Ensuring innovative Shariah compliant
products.
- Service and product Differentiation.
- Top quality service to ensure that service standards of IB
Institutions is at par with conventional.
- Aggressive Marketing to ensure that Islamic Banking reaches the
tipping point in quickest possible time.
- To removeconflicting confusions and doubts from the mind of a
general customer
- Islamic Banking rules should be uniform worldwide.
Recommendations 32. Thank you
