The Evolution Of Islamic Banking In Pakistan Project Presentation By Agha Sumair Khan Pathan

Slide 1: THE EVOLUTION OF ISLAMIC BANKING IN PAKISTAN By Agha Sumair Khan Pathan 23rd May ,2007

Slide 2: 23rd May ,2007

Slide 3: THE EVOLUTION OF ISLAMIC BANKING IN PAKISTAN  INTRODUCTION  What is Islamic banking?  Products of Islamic banking  Research process  Research Methodology  Observation  Research Question  Research Objective  Preliminary data gathering  Literature survey  Presentation and Analysis of Data  Interview with experts  Interview with account holders  Research Results  Conclusion  Recommendation 23rd May ,2007

Slide 4: WHAT IS ISLAMIC BANKING?  In Quran" Allah Almighty informed that He has permitted trade, that could be both cash and credit, and prohibited Riba”.  Islam prohibits interest (riba).  Islam doesn’t prohibit gain on capital 23rd May ,2007

Slide 5: HOW IT IS DIFFERENT FROM CONVENTIONAL BANKING?  Islamic bank deals with Asset management for purpose of income generation  Depositors will receive halal income against the trading being done by bank on halal basis 23rd May ,2007

Slide 6: Products of Islamic banking  Mudarabah ( partnership)  Rabulmal= customer  Mudarib= Islamic bank  Musharkaha ( joint venture)  Just like joint venture  Ijarah (car finance)  Car ijarah and house ijarah  Murabahah (personal loans)  Finance effected on basis of sale 23rd May ,2007

Slide 7: The Research process Observation Research Topic is: Scientific “Evolution of Islamic Research Design Banking in Pakistan” •This research is descriptive and Data Collection, Theoretical Framework conducted in a Analysis, and •Following are few natural Interpretation variables affecting the Generation of environment. Analysis and research problem: Hypothesis •Questionnaire is interpretation of Problem •Potential for Islamic •Hypotheses used as a collected data is Definition Banking are discussed method for discussed in detail in The main •Shariah Compliance in the report collecting data, it the report. problem is the •Media on page # 15 is one shot data. lack of •Consensus among •Data is collected awareness and Islamic Scholars on individual misconconceptio •Variable relationships bases. ns about Islamic are discussed in the Deduction Banking. Research question is answered. Preliminary Data Gathering •Articles •The challenge facing Islamic banking by Maria Siddiqui Yes Source: Dawn •Islamic banking not growing at desired rate By Shahid Iqbal Source: Daily Dawn 5th August 2006. •Interviews Report •Interview of Dr. Ahsan H. Khan the President and Chief Writing Executive at Banker’s Skills Development Centre. •Interview of Mr. Agha Meer Mohammed Khan the Customer Relation Officer at Bank Islami Pakistan Limited. Managerial Report decision 23 May ,2007 rd Presentation making

Slide 8: Observation  The main purpose of conducting  Observe & Analyze the factors that will be important in the future of Islamic banking  Research Question:  What?  how much?  what is the growth rate?  what are the various plans and policies? 23rd May ,2007

Slide 9: Continued…  Research Objectives:  Determine how much the masses are aware of Islamic banking  How much potential is there for the Islamic banking in the overall banking industry?  All the transactions of Islamic banks are shariah compliant?  Misconceptions of people regarding the profit and loss sharing.  How Islamic banking system is emerging in Pakistan? 23rd May ,2007

Slide 10: Preliminary data gathering  LITERATURE REVIEW  According to article in financial year 2006, customer deposits of scheduled banks grew by 18% and reached Rs2.8 trillion  This growth in deposits is in line with the deposits growth of last three years (FY03-FY05), where average deposits growth of the banking sector was 19%.  Rs79bn till March 2006 23rd May ,2007

Slide 11: Presentation and Analysis of Data  Experts 23%  A/c holder 77%  Total 100% 80% 70% 60% 50% 40% Population 30% out of 100% 20% 10% 0% EXPERT 23rd May ,2007 A/C HOLDER

Slide 12: EXPERTS VIEWS  In favor 81%  No views 19%  Total 100% 90.00% 80.00% 70.00% 60.00% 50.00% Population out 40.00% of 100% 30.00% 20.00% 10.00% 0.00% IN FAVOUR NO VIEWS 23 May ,2007 rd

Slide 13: Account holders  Yes 92.22%  No 4.44%  Total 96.66% 100.00% 80.00% 60.00% A/c Holder 40.00% 20.00% 0.00% Yes No 23 May ,2007 rd

Slide 14: Operates account in banks  A/c in one bank 85%  A/c in multiple bank5%  No A/c7%  Total 97% 90% 80% 70% A/c in one bank 60% 50% A/c in multiple 40% bank 30% No A/c 20% 10% 0% 23 May ,2007 rd

Slide 15: Islamic bank follows the Islamic economic systems  I think 21%  Not sure 32%  I don’t think 32%  Total 85% 35 30 25 I think 20 Not sure 15 I don’t think 10 5 0 23rd May ,2007

Slide 16: Islamic banking is Riba free  Strongly agree 31%  Slightly agree 14%  Neutral 29%  Slightly disagree 13%  Strongly disagree 13%  Total 100% 5=strongly agree 13% 31% 4=agree 13% 3=neuteral 2=disagree 29% 14% 1=strongly disagree 23rd May ,2007

Slide 17: Conclusion  Almost over 70% people want to Islamic shariah in Pakistan.  They give preference to Islamic banking because Islamic banking is based on Islamic economic system.  They give preference to profit sharing rather than on interest base economy  They need fully awareness about Islamic banking.  They are strongly agreed on the evolution of Islamic banking in Pakistan.  Therefore state bank of Pakistan start a new department which handle to the Islamic banks  Islamic banking is growing all over the world.  Mostly people are not aware clearly from the concept of Islamic credit card, therefore, almost 40% people are disagreeing to use this facility. 23rd May ,2007

Slide 18: Continued…  Almost 60% people agree that Shariah supervisory board is performing the role of advisory.  Almost 90% people agree that Riba is the biggest factor for all Muslims to avoid the dealing of conventional banking.  Almost 45% of people agree that the functions of Islamic banking are riba free.  Almost 42% of people agree that the function of Islamic banking is same like conventional banking.  Almost 39% of people are satisfied with the Islamic banking system 23rd May ,2007

Slide 19: Recommendation  Government of Pakistan should take serious actions for Islamic economic system because we are Muslims and it’s our 1st duty to implement the Islamic rules and regulation in our life.  Islamic banking industry must give awareness to the consumers, Because in this research we get the biggest problem of Islamic banking system is that the consumer has no accurate knowledge about this system. 23rd May ,2007

Slide 20: Continued..  According to our point of view that Islamic banking industry must be transparent and accountable to their consumers.  Media should play an important role for increasing the awareness of shariah.  If they will take serious actions on our recommendation so most probably the growth in the evolution of Islamic banking industry will be more than now. 23rd May ,2007