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Bismillah slide
Introduction to the topic
Islamic banking
Outline of the presentation
• History of islamic banking
• Pakistan and islamic banking
• Introduction to bank
• Principle...
History of Islamic Banking
• Islamic capitalism
• Currency: the gold dinar
• Early economic concepts and techniques
Modern...
Pakistan and Islamic banking
• Departmental Objectives:
• Rules and Regulations for Islamic
banking in pakistan
Introduction of the Bank
Meezan Bank
Incorporated on January 27, 1997
Strategy
Growth
Shareholders & Shariah Board
Technol...
Introduction of the presenters
• Behzad karim khan “Branch Manager”
Chawk shaheedan branch Multan Pakistan
• Khurram shehz...
Outline of the presentation
• History of islamic banking
• Pakistan and islamic banking
• Introduction to bank
• Principle...
“Principles:”
•Because Islam forbids simply lending out
money at interest ( Riba), Islamic rules on
transactions (known as Fiqh al-Muama...
“Murabahah”
•In an Islamic mortgage transaction, instead of
loaning the buyer money to purchase the item, a
bank might buy...
“EIjara wa Eiqtina”
•It is similar to real estate leasing
•sell the vehicle at a higher-than-market price
to the debtor an...
“Musharaka al-Mutanaqisa”
•The bank and borrower form a partnership
entity, both providing capital at an agreed
percentage...
•The bank and the borrower will then share the
proceeds from this rent based on the current
equity share of the partnershi...
•Islamic banking is restricted to Islamically
acceptable transactions, which exclude those
involving alcohol, pork, gambli...
“Shariah Advisory
Council/Consultant”
•Shariah Supervisory Board (SSB) to advise them
and to ensure that the operations and activities
of the banking institutio...
“…In Meezan Bank”
•Meezan Bank has extensive experience and
expertise in developing and advising on the
creation of Sharia...
•This function works under the guidance of
Shariah Supervisory Board which comprises of
renowned Islamic Scholars from bot...
“Members of the Board”
1. Justice (Retd.) Muhammad Taqi Usmani (Chairman)
2. Dr. Abdul Sattar Abu Ghuddah
3. Sheikh Essam ...
“Islamic Financial Accounting
Standards”
•The Institute of Chartered Accountants of
Pakistan issues Islamic Financial Accounting
Standards (IFAS) for Islamic Mode ...
“Meezan Islamic Institution Deposit
Account (MIIDA) “
•With MIIDA, any IFI now has the opportunity to manage excess
liquid...
“Usury in Islam”
•The original word used for usury was Riba, which
literally means “excess or addition”.
•The criticism of usury in Islam w...
Outline of the presentation
• History of islamic banking
• Pakistan and islamic banking
• Introduction to bank
• Principle...
Islamic Financial Transaction
Terminology
Bai al Inah
• Agreement b/w customer and financer
• On spot purchase
• Payment in Installments
Bai Bithman Ajil
• Sale of good
• Deffered Payment
• Agreed Profit ratio
Bai Mujjal
• Credit sale
• Contract
Mudarabah
• Special partnership
• Comertial enterprise
• RUB Ul MAAL and MUDARIB
Murabahah
• Sale of goods
• Price include profit margen
• FIXED INCOME LOANS
Musawamah
• Negotiation of selling rate
• No Obligation to reveal other cost
Bai salam
• Contact
• Advance payment
• Later delivory
Outline of the presentation
• History of islamic banking
• Pakistan and islamic banking
• Introduction to bank
• Principle...
Wadiah
• In Wadiah, a bank is deemed as a keeper and
trustee of funds. A person deposits funds in
the bank and the bank guarantee...
Hibah
Hibah usually arises in practice when Islamic
banks voluntarily pay their customers a 'gift' on
savings account bala...
Ijarah
• Ijarah means lease, rent or wage.
• Generally, the Ijarah concept refers to selling
the benefit of use or service...
Types of Ijarah
• Ijarah thumma al bai'
• Ijarah-wal-iqtina
Ijarah thumma al bai'
The first contract is an Ijarah that outlines the
terms for leasing or renting over a fixed
period, ...
Ijarah-wal-iqtina
• A contract under which an Islamic bank
provides equipment, building, or other assets
to the client aga...
Musharakah
• Musharakah is a relationship between two
parties or more that contribute capital to a
business and divide the...
Qardul Hassan
Qardul Hassan
• This is a loan extended on a goodwill basis,
and the debtor is only required to repay the
amount borrowed.
Sukuk
• Sukuk is the Arabic name for financial
certificates that are the Islamic equivalent of
bonds. However, fixed-incom...
Takaful
• Insurance by combining the risks of many
people enables each individual to enjoy the
advantage provided by the law of la...
Wakalah
• This occurs when a person appoints a
representative to undertake transactions on
his/her behalf, similar to a po...
Outline of the presentation
• History of islamic banking
• Pakistan and islamic banking
• Introduction to bank
• Principle...
Islamic laws on trading
The main concept in Islam and the
most obvious and strict rule is as in the
verse
“ALLAH hath permitted sale and forbidden...
WHAT IS RIBA
• Riba is just any loan that includes an interest in any way. A
concept in Islamic banking that refers to cha...
Money in the Islamic view has just
three resources
• Farming
• Hunting
• Extracting raw materials from the earth
OTHER ISLAMIC LAWS
• No lying or cheating about the product that you are selling.
• Pay salaries to workers as soon as he ...
REPORT OF COUNCIL
• In 1977 council of islamic idealogy was charged with the
responsibilty of bringing about islamic econo...
3-Council suggested following methods for interest free banking
system
(a) Leasing
(b) Service charges
(c) Hire purchases
...
CRITICISM ON THE REPORT
• Many experts and scholars did critisism on the ground that
•
• Council has taken a superficial v...
IMPLEMENTATION OF
ISLAMIC BANKING
• Following are the stages involved in the implementation of
Islamic banking.
• STAGE-1
...
• STAGE-3
• In August 1981,HBFC was allowed to provide finance on rent
sharing basis for house building.Students were allo...
• STAGE -5
• From july 1,1984 to December 31st,1984 all banks in the
country were to make finance available on the basis o...
• STAGE-7
• From April 1985,all types of finances provided by the banks to
all clients were to be on Islamic basis only.
•...
Outline of the presentation
• History of islamic banking
• Pakistan and islamic banking
• Introduction to bank
• Principle...
Islamic Modes of Financing.
• 1.) LOANS FINANCING BY LENDING
• 2.) TRADE RELATED MODES OF FINANCING
• 3.) INVESTMENT MODE ...
1.)LOANS FINANCING BY LENDING
• a.) Interest Free Loans With Service Charges.
• The banks are permitted to lend funds free...
1.)LOANS FINANCING BY LENDING
• b.)Qarze Hasna
• Under the Qarze Hasna scheme interest free loans
are granted to the stude...
2.) TRADE RELATED MODES OF FINANCING
• a.) Mark Up or Bai Muajjal
• The mechanism of financing on the bases of mark up is ...
2.) TRADE RELATED MODES OF
FINANCING
• b.) Ijarah or Leasing
• Usufruct of an asset is passed to other party against
a per...
2.) TRADE RELATED MODES OF
FINANCING
• c.) Istisna,a
• It is a contractual agreement under which a bank provides
finance f...
3.) INVESTMENT MODE OF
FINANCING
a. Musharaka
• Musharaka is “a joint enterprises
formed for conducting business.
• All pa...
3.) INVESTMENT MODE OF
FINANCING
b.MUDARABA
• Partnership where in one partner provides the funds for another to invest in...
3.) INVESTMENT MODE OF FINANCING
• c. Participating Term Certificate(PTC):
• It is a method of financing which includes Fi...
Meezan Bank….Best Islamic Bank
• Meezan Bank’s Islamic Banking is geared towards providing comprehensive and
innovative fi...
Working Capital Finance Solutions
( for short term financing requirements)
• Murabaha and Istisna are designed to meet wor...
Project Financing, Expansion Solutions
(for medium and long term financing requirements)
Diminishing Musharakah : Meezan B...
Trade Related Services and Alliances
• Trade Related Services
• A complete range of products and services for importers
an...
Outline of the presentation
• History of islamic banking
• Pakistan and islamic banking
• Introduction to bank
• Principle...
Term certificates
Meezan bank provides a complete
range of short term and long term
deposit certificates with the flexibil...
Types of certificates:-
1. Certificate of Islamic investment
2. Meezan amdan certificate
3. Monthly mudarabah certificate
...
1.Certificate of Islamic investment
• Investment can made for 3 months, 6 months , 1
years, 2 years ,3 years and 5 years.
...
2.Meezan amdan certificate
• Minimum investment required is 100,000
• Minimum investment required for widows and senior
ci...
3. Monthly mudarabah certificate
• Minimum investment required is 100,000
• Monthly profit payment will be made to your
me...
4. Dollar mudarabah certificate
• Minimum investment required is USD 10,000
• You can invest your US dollar for period ran...
DIFFERENCE between Islamic and Commercial
Banking
Islamic Banking
1) Functions and
operations are based on
Sharia’h princi...
Difference between Islamic and Commercial
Banking
Islamic Banking
2) Promote risk-sharing
between provider of
capital (inv...
Difference between islamic and conventional
banking
Islamic Banking
3) Aim at maximising
profit but subject to
Sharia'h re...
Outline of the presentation
• History of islamic banking
• Pakistan and islamic banking
• Introduction to bank
• Principle...
Objections on Islamic Banking
• Financing on fixed rates of profits?
• Fixed profits in diff modes of financing. Whats the...
What we have told you
Recommendations
• increase the number of banks
Q nd A
Islamic banking
Islamic banking
Islamic banking
Islamic banking
Islamic banking
Islamic banking
Islamic banking
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Islamic banking

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Transcript of "Islamic banking"

  1. 1. Bismillah slide
  2. 2. Introduction to the topic Islamic banking
  3. 3. Outline of the presentation • History of islamic banking • Pakistan and islamic banking • Introduction to bank • Principles of islamic banking • Islamic Financial Accounting Standards • Islamic financial transaction terminology • Islamic laws on trading • Implementation of Islamic banking • Islamic modes of financing • Difference between islamic and commercial banking • Objections on islamic banking • Conclusion
  4. 4. History of Islamic Banking • Islamic capitalism • Currency: the gold dinar • Early economic concepts and techniques Modern Islamic History: • Institutional involvement 7o’s Dubai Islamic Bank 1975
  5. 5. Pakistan and Islamic banking • Departmental Objectives: • Rules and Regulations for Islamic banking in pakistan
  6. 6. Introduction of the Bank Meezan Bank Incorporated on January 27, 1997 Strategy Growth Shareholders & Shariah Board Technology
  7. 7. Introduction of the presenters • Behzad karim khan “Branch Manager” Chawk shaheedan branch Multan Pakistan • Khurram shehzad “Assisstent Manager” Chawk shaheedan branch Multan Pakistan. • Shehzad butt “ Manager Operation” Chawk shaheedan branch Multan Pakistan.
  8. 8. Outline of the presentation • History of islamic banking • Pakistan and islamic banking • Introduction to bank • Principles of islamic banking • Islamic Financial Accounting Standards • Islamic financial transaction terminology • Islamic laws on trading • Implementation of Islamic banking • Islamic modes of financing • Difference between islamic and commercial banking • Objections on islamic banking • Conclusion
  9. 9. “Principles:”
  10. 10. •Because Islam forbids simply lending out money at interest ( Riba), Islamic rules on transactions (known as Fiqh al-Muamalat) have been created to avoid this problem. •The basic technique to avoid the prohibition is the sharing of profit and loss, via terms such as : 1. profit sharing (Mudharabah) 2. safekeeping (Wadiah) 3. joint venture (Musharakah) 4. cost plus (Murabahah)and 5. leasing (Ijara).
  11. 11. “Murabahah” •In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. •The bank's profit cannot be made explicit and therefore there are no additional penalties for late payment. •The goods or land is registered to the name of the buyer from the start of the transaction.
  12. 12. “EIjara wa Eiqtina” •It is similar to real estate leasing •sell the vehicle at a higher-than-market price to the debtor and then retain ownership of the vehicle until the loan is paid.
  13. 13. “Musharaka al-Mutanaqisa” •The bank and borrower form a partnership entity, both providing capital at an agreed percentage to purchase the property. •The partnership entity then rents out the property to the borrower and charges rent.
  14. 14. •The bank and the borrower will then share the proceeds from this rent based on the current equity share of the partnership. •If default occurs, both the bank and the borrower receive a proportion of the proceeds from the sale of the property based on each party's current equity.
  15. 15. •Islamic banking is restricted to Islamically acceptable transactions, which exclude those involving alcohol, pork, gambling, etc. •In theory, Islamic banking is an example of full-reserve banking, with banks achieving a 100% reserve ratio.
  16. 16. “Shariah Advisory Council/Consultant”
  17. 17. •Shariah Supervisory Board (SSB) to advise them and to ensure that the operations and activities of the banking institutions comply with Shariah principles. •A number of Shariah advisory firms have now emerged to offer Shariah advisory services to the institutions offering Islamic financial services.
  18. 18. “…In Meezan Bank” •Meezan Bank has extensive experience and expertise in developing and advising on the creation of Shariah-compliant financial products and services. •The main objective of Meezan Bank’s Islamic Financial Advisory function is to assist Financial Institutions develop Islamic banking alternatives by sharing our expertise, research and success stories.
  19. 19. •This function works under the guidance of Shariah Supervisory Board which comprises of renowned Islamic Scholars from both Pakistan and abroad. •Successful implementation of the Islamic Banking model rests upon the principles of Islamic Shariah. •A world-renowned Shariah Supervisory Board and a highly qualified and experienced in house Shariah Advisor are fundamental aspects of the Bank's core.
  20. 20. “Members of the Board” 1. Justice (Retd.) Muhammad Taqi Usmani (Chairman) 2. Dr. Abdul Sattar Abu Ghuddah 3. Sheikh Essam M. Ishaq 4. Dr. Muhammad Imran Ashraf Usmani (Shariah Advisor) The primary role of this Board is to maintain and further strengthen this commitment and to ensure strict Shariah-compliance in all areas of the Bank's operations.
  21. 21. “Islamic Financial Accounting Standards”
  22. 22. •The Institute of Chartered Accountants of Pakistan issues Islamic Financial Accounting Standards (IFAS) for Islamic Mode of financing. •IFAS 1 (issued in 2005) concerns Musharakah and Mudarabah. While, IFAS 2 (issued in 2007) relates to Ijarah.
  23. 23. “Meezan Islamic Institution Deposit Account (MIIDA) “ •With MIIDA, any IFI now has the opportunity to manage excess liquidity in an immediate and profitable manner by maintaining a checking account with Meezan Bank. •MIIDA works on the principle of Mudarabah under which the customer is an Investor (Rab-ul-Maal), and the Bank is the Manager (Mudarib) of the funds deposited by the customer.
  24. 24. “Usury in Islam”
  25. 25. •The original word used for usury was Riba, which literally means “excess or addition”. •The criticism of usury in Islam was well established during the lifetime of the Islamic prophet Muhammad and reinforced by several verses in the Qur'an dating back to around 600 AD. •A school of Islamic thought which emerged in the 19th Century, led by Sir Sayyed, argues for an interpretative differentiation between usury, or consumptional lending, and interest, or lending for commercial investment (Ahmed, 1958).
  26. 26. Outline of the presentation • History of islamic banking • Pakistan and islamic banking • Introduction to bank • Principles of islamic banking • Islamic Financial Accounting Standards • Islamic financial transaction terminology • Islamic laws on trading • Implementation of Islamic banking • Islamic modes of financing • Difference between islamic and commercial banking • Objections on islamic banking • Conclusion
  27. 27. Islamic Financial Transaction Terminology
  28. 28. Bai al Inah • Agreement b/w customer and financer • On spot purchase • Payment in Installments
  29. 29. Bai Bithman Ajil • Sale of good • Deffered Payment • Agreed Profit ratio
  30. 30. Bai Mujjal • Credit sale • Contract
  31. 31. Mudarabah • Special partnership • Comertial enterprise • RUB Ul MAAL and MUDARIB
  32. 32. Murabahah • Sale of goods • Price include profit margen • FIXED INCOME LOANS
  33. 33. Musawamah • Negotiation of selling rate • No Obligation to reveal other cost
  34. 34. Bai salam • Contact • Advance payment • Later delivory
  35. 35. Outline of the presentation • History of islamic banking • Pakistan and islamic banking • Introduction to bank • Principles of islamic banking • Islamic Financial Accounting Standards • Islamic financial transaction terminology • Islamic laws on trading • Implementation of Islamic banking • Islamic modes of financing • Difference between islamic and commercial banking • Objections on islamic banking • Conclusion
  36. 36. Wadiah
  37. 37. • In Wadiah, a bank is deemed as a keeper and trustee of funds. A person deposits funds in the bank and the bank guarantees refund of the entire amount of the deposit, or any part of the outstanding amount, when the depositor demands it.
  38. 38. Hibah Hibah usually arises in practice when Islamic banks voluntarily pay their customers a 'gift' on savings account balances, representing a portion of the profit made by using those savings account balances in other activities.
  39. 39. Ijarah • Ijarah means lease, rent or wage. • Generally, the Ijarah concept refers to selling the benefit of use or service for a fixed price or wage.
  40. 40. Types of Ijarah • Ijarah thumma al bai' • Ijarah-wal-iqtina
  41. 41. Ijarah thumma al bai' The first contract is an Ijarah that outlines the terms for leasing or renting over a fixed period, and the second contract is a Bai that triggers a sale or purchase once the term of the Ijarah is complete.
  42. 42. Ijarah-wal-iqtina • A contract under which an Islamic bank provides equipment, building, or other assets to the client against an agreed rental together with a unilateral undertaking by the bank or the client that at the end of the lease period, the ownership in the asset would be transferred to the lessee.
  43. 43. Musharakah • Musharakah is a relationship between two parties or more that contribute capital to a business and divide the net profit and loss pro rata.
  44. 44. Qardul Hassan
  45. 45. Qardul Hassan • This is a loan extended on a goodwill basis, and the debtor is only required to repay the amount borrowed.
  46. 46. Sukuk • Sukuk is the Arabic name for financial certificates that are the Islamic equivalent of bonds. However, fixed-income, interest- bearing bonds are not permissible in Islam.
  47. 47. Takaful
  48. 48. • Insurance by combining the risks of many people enables each individual to enjoy the advantage provided by the law of large numbers.
  49. 49. Wakalah • This occurs when a person appoints a representative to undertake transactions on his/her behalf, similar to a power of attorney.
  50. 50. Outline of the presentation • History of islamic banking • Pakistan and islamic banking • Introduction to bank • Principles of islamic banking • Islamic Financial Accounting Standards • Islamic financial transaction terminology • Islamic laws on trading • Implementation of Islamic banking • Islamic modes of financing • Difference between islamic and commercial banking • Objections on islamic banking • Conclusion
  51. 51. Islamic laws on trading
  52. 52. The main concept in Islam and the most obvious and strict rule is as in the verse “ALLAH hath permitted sale and forbidden Riba.”
  53. 53. WHAT IS RIBA • Riba is just any loan that includes an interest in any way. A concept in Islamic banking that refers to charged interest.It is forbidden under Sharia, Islamic religious law. • Also known as “USURY”
  54. 54. Money in the Islamic view has just three resources • Farming • Hunting • Extracting raw materials from the earth
  55. 55. OTHER ISLAMIC LAWS • No lying or cheating about the product that you are selling. • Pay salaries to workers as soon as he finishes his job or even before his sweat dries! • Company decisions has to be taken and approved by all company partners not just by most of them • The Qur'an prohibits gambling (games of chance involving money) &gharar
  56. 56. REPORT OF COUNCIL • In 1977 council of islamic idealogy was charged with the responsibilty of bringing about islamic economic &banking system. • Pannel of experts submitted its report to the council in feburary 1980. • The report stated that, 1-Real alternative to interest in an islamic system is p&loss sharing deposits and qarz-e-hasna. 2-Government have to carry a through appraisal&reforms of tax system for interest free banking system.
  57. 57. 3-Council suggested following methods for interest free banking system (a) Leasing (b) Service charges (c) Hire purchases (d) Special facilities 4- Report also included suggestions regarding commercial banks,credit institutions and insurance companies.
  58. 58. CRITICISM ON THE REPORT • Many experts and scholars did critisism on the ground that • • Council has taken a superficial view of confronting problems. • Stategies are remarkable but there are serious hurdles to make them practiceable. • Some experts were of the point of view that some plans and schemes are not fully in accordance with islamic principles.
  59. 59. IMPLEMENTATION OF ISLAMIC BANKING • Following are the stages involved in the implementation of Islamic banking. • STAGE-1 • Interest was first eliminated from July 1979 from the transactions of NIT ,HBFC, ICP AND SBFC. • STAGE -2 • From first January 1981,profit and loss sharing saving and term deposits were introduced by commercial banks in place of simple saving and fixed deposits scheme.
  60. 60. • STAGE-3 • In August 1981,HBFC was allowed to provide finance on rent sharing basis for house building.Students were allowed Qarz- e-Hasna without interest. • STAGE-4 • In 1983,hire purchases system of financing was introduced
  61. 61. • STAGE -5 • From july 1,1984 to December 31st,1984 all banks in the country were to make finance available on the basis of Islamic modes of financing in addition to the existing interest based system • STAGE -6 • From Janauary 1985,all types of finances provided by the bank to the governments and their agencies were permissible on Islamic basis only.
  62. 62. • STAGE-7 • From April 1985,all types of finances provided by the banks to all clients were to be on Islamic basis only. • STAGE-8 • From july 1985,all deposits were to be on the basis of participation in profit and loss of banks except current account
  63. 63. Outline of the presentation • History of islamic banking • Pakistan and islamic banking • Introduction to bank • Principles of islamic banking • Islamic Financial Accounting Standards • Islamic financial transaction terminology • Islamic laws on trading • Implementation of Islamic banking • Islamic modes of financing • Difference between islamic and commercial banking • Objections on islamic banking • Conclusion
  64. 64. Islamic Modes of Financing. • 1.) LOANS FINANCING BY LENDING • 2.) TRADE RELATED MODES OF FINANCING • 3.) INVESTMENT MODE OF FINANCING
  65. 65. 1.)LOANS FINANCING BY LENDING • a.) Interest Free Loans With Service Charges. • The banks are permitted to lend funds free of interest. • They are to recover only the actual service charges from the user of the funds . • The maximum service charges permissible to each bank is determined by the state bank of Pakistan.
  66. 66. 1.)LOANS FINANCING BY LENDING • b.)Qarze Hasna • Under the Qarze Hasna scheme interest free loans are granted to the students who do not have sufficient means to pursue their education. • The students are given interest free loans for carrying on the studies both with in Pakistan and outside the country . • For repayment of the loan are grace period of two years is granted after competition of studies
  67. 67. 2.) TRADE RELATED MODES OF FINANCING • a.) Mark Up or Bai Muajjal • The mechanism of financing on the bases of mark up is as follows:-  The customer contacts the bank for financing the purchase of goods .  The bank purchases the required goods and sales these to him on the price mutually agreed between the bank and the customer .  The agreed price which is based on bases of the banks cost plus a profit margin of the bank (mark up).  The payment can be made by customer in lumpsum or in installments over a specific period of time.
  68. 68. 2.) TRADE RELATED MODES OF FINANCING • b.) Ijarah or Leasing • Usufruct of an asset is passed to other party against a periodic rent payment Process of Ijaarah The customer approaches the Bank with a request for financing and enters into a promise to lease agreement. • The Bank purchases the item required for leasing and receives title of ownership from the vendor • The Bank makes payment to the vendor • The Bank leases the asset to the customer after execution of lease agreement. • The customer makes periodic payments as per the contract.
  69. 69. 2.) TRADE RELATED MODES OF FINANCING • c.) Istisna,a • It is a contractual agreement under which a bank provides finance for the manufacturing of goods and commodities . • Istisna’a can be used for providing the facility of financing the manufacture or construction of houses, plants, projects, building of bridges, roads and highways.
  70. 70. 3.) INVESTMENT MODE OF FINANCING a. Musharaka • Musharaka is “a joint enterprises formed for conducting business. • All parties share in the capital. • All parties share profits as well as losses. • Profits are distributed as per agreed ratio. • Loss is borne by the parties as per capital ratio. • Every partner is agent of other.
  71. 71. 3.) INVESTMENT MODE OF FINANCING b.MUDARABA • Partnership where in one partner provides the funds for another to invest in a commercial enterprise. • The investment comes from the “Rabb-ul-Maal”(Investor). • The management and work is an exclusive responsibility of the “Mudhaarib” (WorkingPartner). • Venture may for a fixed period or purpose.
  72. 72. 3.) INVESTMENT MODE OF FINANCING • c. Participating Term Certificate(PTC): • It is a method of financing which includes Fixed investment especially for balancing, modernization and expansion of the existing industrial units. • d. Equity Participation: • It means sharing risks and rewards of the ownership in a business. Under this mode of investment, the bank purchases the shares of public company at market price.
  73. 73. Meezan Bank….Best Islamic Bank • Meezan Bank’s Islamic Banking is geared towards providing comprehensive and innovative financial solutions to their clients.  1.Working Capital Finance Solutions ( for short term financing requirements)  2.Project Financing, Expansion Solutions (for medium and long term financing requirements)  3.Term Certificates (Riba-free Term Deposit Certificates)  4.Alliances , Trade and Participating Trem Certificate  5.Different Schemes of Meezan Bank
  74. 74. Working Capital Finance Solutions ( for short term financing requirements) • Murabaha and Istisna are designed to meet working capital requirements. • Murabaha : Meezan Bank purchases the commodity and sells it after adding an agreed profit. Thus, it is not a loan given on interest - it is sale of a commodity on a deferred price. • Istisna’a Istisna Finance is used to cater for the working capital requirements of a business involved in the manufacturing of goods.
  75. 75. Project Financing, Expansion Solutions (for medium and long term financing requirements) Diminishing Musharakah : Meezan Bank and the customer participate in the joint ownership of an asset. Ownership of the asset is divided into a number of units and the customer periodically purchases these units from the bank over a specified period. Over time, the customer purchases all units owned by the bank, making him or her the sole owner of the asset. • Ijarah : In contrast to diminising Musharakah, it is based on the provision of the tangible assets on rental basis for an agreed period of time. • Meezan Bank’s Car Ijarah unit provides car financing based on the principles of Ijarah and is free of the element of interest.
  76. 76. Trade Related Services and Alliances • Trade Related Services • A complete range of products and services for importers and exporters are available. Based on various modes of Islamic Finance, the solutions have been designed to suit the needs of their customers. • Alliances Meezan Bank has alliances and trade will Halal industries. • When a particular offer is given to Meezan Bank by any company then Proper research is conducted by the Meezan Bank to know all necessary information of industry and then Board gives the permission to do business with this particular company or not.
  77. 77. Outline of the presentation • History of islamic banking • Pakistan and islamic banking • Introduction to bank • Principles of islamic banking • Islamic Financial Accounting Standards • Islamic financial transaction terminology • Islamic laws on trading • Implementation of Islamic banking • Islamic modes of financing • Difference between islamic and commercial banking • Objections on islamic banking • Conclusion
  78. 78. Term certificates Meezan bank provides a complete range of short term and long term deposit certificates with the flexibility of monthly , quarterly ,semi-annual , and annual returns
  79. 79. Types of certificates:- 1. Certificate of Islamic investment 2. Meezan amdan certificate 3. Monthly mudarabah certificate 4. Dollar mudarabah certificate
  80. 80. 1.Certificate of Islamic investment • Investment can made for 3 months, 6 months , 1 years, 2 years ,3 years and 5 years. • Profit payment options are monthly, quarterly , or at maturity • Minimum investment required for quarterly and on maturity payment is 50,000 and for monthly profit payment is 200,000
  81. 81. 2.Meezan amdan certificate • Minimum investment required is 100,000 • Minimum investment required for widows and senior citizens is 50,000 • Investment can made for 5 ½ years and 7 years • Profit payment is made at monthly basis
  82. 82. 3. Monthly mudarabah certificate • Minimum investment required is 100,000 • Monthly profit payment will be made to your meezan bank account
  83. 83. 4. Dollar mudarabah certificate • Minimum investment required is USD 10,000 • You can invest your US dollar for period ranging from 3 months, 6 months, 1 year and 3 years • Profit payment will be made either at maturity or on a six-monthly basis
  84. 84. DIFFERENCE between Islamic and Commercial Banking Islamic Banking 1) Functions and operations are based on Sharia’h principles Conventional Banking 1)Functions and operations are based on fully man made principles
  85. 85. Difference between Islamic and Commercial Banking Islamic Banking 2) Promote risk-sharing between provider of capital (investor) and user of funds (entrepreneurs) Conventional Banking 2) Investor is assured of pre-determined rate of interest
  86. 86. Difference between islamic and conventional banking Islamic Banking 3) Aim at maximising profit but subject to Sharia'h restrictions Conventional Banking 3) Aim at maximising profit without any restrictions
  87. 87. Outline of the presentation • History of islamic banking • Pakistan and islamic banking • Introduction to bank • Principles of islamic banking • Islamic Financial Accounting Standards • Islamic financial transaction terminology • Islamic laws on trading • Implementation of Islamic banking • Islamic modes of financing • Difference between islamic and commercial banking • Objections on islamic banking • Conclusion
  88. 88. Objections on Islamic Banking • Financing on fixed rates of profits? • Fixed profits in diff modes of financing. Whats the differrence between lending in islam and loans in commercial banking? • Money is the commodity. Then why it can not be lended and earn an over profit in shape of rent while other commodities i-e car, house can earn the same? • Islamic banking is non valid because it deals with commercial based SBP?
  89. 89. What we have told you Recommendations • increase the number of banks
  90. 90. Q nd A
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