Presentation on Islamic Banking Presented by : Ramesh Sharma (B-28) Rohit Mishra (B-39) Prabhat Mani Tripathi (A-20)

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.

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

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

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

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 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.

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

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.

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.

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 Client Islamic Goods & Services money

Structure of Hierarchy

Major Contracts Used in Islamic Banking Buying & Selling Mudaraba: Investment management Musharaka: Partnership Ijarah : Leasing Wakalah : Agency Istisna’: Contract of works

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

Principles Governing Islam Aqidah (Faith and Belief) Shariah (Practices and Activities) Akhlaq (Moralities and Ethics)

Shariah Requirements Avoidance of prohibitions Ensuring that the contract have all their essential elements with their necessary conditions

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

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

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.

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

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

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

Economy of Scale

Product Differentiation

Legal Barriers

Rivalry among Existing firms Equally balanced Competitors Lack of differentiation Diverse Competitors

Equally balanced

Competitors

Lack of differentiation

Diverse Competitors

Bargaining power of buyers Size of buyers Differentiation The buyer has full information

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

Concentration or Size of Suppliers

Differentiation

Switching costs

Threat of Substitute products or services

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