IS ISLAMIC BANKING REALOR FAKE   Presented By:   Zeeshan Hyder 784/FMS/BBA-ITM18/F-10   Rizwan Mushtaq 754/FMS/BBA-ITM18/F...
Table of content   Introduction to Islamic banking   History   Principle of Islamic banking   Why Islamic banking   I...
Introduction Islamic banking refers to a financial  system which is consistent with  principles of Islamic law (or „shari...
Introduction (continued)   Based on QURAN and SUNNAH   Demands socio economic justice   Prohibits all kinds of RIBA   ...
History of Islamic banking 1980 CII presents report on the elimination of  Interest genuinely considered to be the first ...
History of Islamic banking(continued) 1997 Al-Meezan Investment Bank is  established with a mandate to pursue  Islamic Ba...
WHY ISLAMIC BANKINGThe primary objectives of        IslamicEconomic System are as under.Equal Distribution of wealthSoci...
ISLAMIC BANKING PRODUCTS AND             SERVICESCurrently available Islamic Banking Products and   services area) Partner...
Modes Of Islamic Banking MURABAHA MUSAWAMAH ISTISNA MUDARABAH MUSHARAKAH
MURABAHA(mark-up sale)   It comes from the Arabic word ribh    means profit. Murabaha is selling a    commodity as per th...
MUSAWAMAH An Islamic finance term that describes  a sale in which the seller is not obligated  to disclose the price paid...
ISTISNA Literally istina means "request for  production". It is kind of sale where a commodity is  transacted before it ...
MUDARABAH Mudarabah is a special kind of  partnership    where     one    partner  providers the capital (rabb-ul-maal) t...
MUSHARAKAH(profits and losssharing system)   It is an agreement between two    persons      or     more     (bank   and  ...
RIBA All increases in wealth or benefits accruing to a  person without any labour, risk, or expertise. One who wishes to...
RIBA - UNANIMITY     Banu Thaqif of Taif, not to forego      interest on their receivables; Banu      Amr ibnal Moghirah ...
RIBA - UNANIMITY (CONTD)“If you do not do so, then be sure ofbeing at war with Allah and hisMessenger. But, if you repent,...
   And if you repent, then you have your    principal. Wrong not, and you shall not    be wronged ”. {without inflicting ...
And fear the day when you shall be broughtback to Allah.Then shall every soul be paid what itearned and none shall be deal...
DIFFERENCE BETWEEN ISLAIC AND     CONVENTIOANL BANKINGIslamic            ConventionalBanking            Banking1) Function...
DIFFERENCE BETWEEN ISLAIC ANDCONVENTIOANL BANKINGIslamic Banking       Conventional Banking2) Promote risk-      2) Invest...
DIFFERENCE BETWEEN ISLAIC ANDCONVENTIOANL BANKINGIslamic Banking Conventional Banking3) Aim at           3) Aim at maximis...
DIFFERENCE BETWEEN ISLAIC AND      CONVENTIOANL BANKINGIslamic Banking          Conventional Banking4) Partners, investor ...
DIFFERENCE BETWEEN ISLAIC AND       CONVENTIOANL BANKINGIslamic Banking      Conventional                     Banking5)   ...
CONCLUSION   Islamic banking and finance are a part of Islamic    economic system, the basis of which revolves around    ...
Islamic banking real or fake? Research conducted by Zeeshan Hyder Khuwaja International Islamic University Islamabad
Islamic banking real or fake? Research conducted by Zeeshan Hyder Khuwaja International Islamic University Islamabad
Islamic banking real or fake? Research conducted by Zeeshan Hyder Khuwaja International Islamic University Islamabad
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Islamic banking real or fake? Research conducted by Zeeshan Hyder Khuwaja International Islamic University Islamabad

  1. 1. IS ISLAMIC BANKING REALOR FAKE Presented By: Zeeshan Hyder 784/FMS/BBA-ITM18/F-10 Rizwan Mushtaq 754/FMS/BBA-ITM18/F- 10 International Islamic University Islamabad
  2. 2. Table of content Introduction to Islamic banking History Principle of Islamic banking Why Islamic banking Islamic banking products and services Modes of Islamic banking Riba and its prohibition in Islam Why Islamic banking Different b/w Islamic and other banking conclusion
  3. 3. Introduction Islamic banking refers to a financial system which is consistent with principles of Islamic law (or „sharia’) and guided by Islamic economics. An Islamic bank is a deposit-taking banking institution whose scope of activities includes all currently known banking activities, excluding borrowing and lending on the basis of interest. It does not invest in that kind of activities which are prohibited in Islam
  4. 4. Introduction (continued) Based on QURAN and SUNNAH Demands socio economic justice Prohibits all kinds of RIBA Prohibits all forms of exploitation Provides equal opportunities to all Condemns accumulation of wealth in few hands Encourages acts of benevolence
  5. 5. History of Islamic banking 1980 CII presents report on the elimination of Interest genuinely considered to be the first major comprehensive work in the world undertaken on Islamic banking and finance. 1985Commercial banks transformed their nomenclature stating all Rupee Saving Accounts as interest-free. 1991 Procedure adopted by banks in 1985 was declared un-Islamic by the Federal Shariat Court (FSC). The Government and some banks/DFIs made appeals to the Shariat Appellate Bench (SAB) of the Supreme Court
  6. 6. History of Islamic banking(continued) 1997 Al-Meezan Investment Bank is established with a mandate to pursue Islamic Banking. 1999 The Shariat Appellate Bench of the Supreme Court of Pakistan rejects the appeals and directs all laws on interest banking to cease
  7. 7. WHY ISLAMIC BANKINGThe primary objectives of IslamicEconomic System are as under.Equal Distribution of wealthSocial justiceThese objectives can never be achievedin Interest/Riba based economic systems.
  8. 8. ISLAMIC BANKING PRODUCTS AND SERVICESCurrently available Islamic Banking Products and services area) Partnership based modes of financingMusharaka Finance, Mudaraba Finance,b) Trade based modes of financingMurabaha Finance, Salam financec) Rental based modes of financingIjarah Finance, Diminishing Musharaka Finance
  9. 9. Modes Of Islamic Banking MURABAHA MUSAWAMAH ISTISNA MUDARABAH MUSHARAKAH
  10. 10. MURABAHA(mark-up sale) It comes from the Arabic word ribh means profit. Murabaha is selling a commodity as per the purchasing price with a defined and agreed profit mark-up. The bank shares in the risk of ownership. Rather than simply advancing money to a client, the bank itself buys the goods from a third party on request of a customer. The bank then sells it to the customer for a pre-agreed price through a deferred payment scheme, usually in the form of installments.
  11. 11. MUSAWAMAH An Islamic finance term that describes a sale in which the seller is not obligated to disclose the price paid to create or obtain the good or service. This defers from murabaha, where a buyer knows the cost of the underlying asset. Musawamah usually occurs when it is difficult to determine what the cost of a particular good or service was, or when the good is comprised of a pool of products.
  12. 12. ISTISNA Literally istina means "request for production". It is kind of sale where a commodity is transacted before it comes into existence. It means to order a manufacturer to manufacture a specific commodity for the purchaser. If the manufacturer undertakes to manufacture the goods for him with material from the manufacturer, the transaction of istisna„ comes into existence
  13. 13. MUDARABAH Mudarabah is a special kind of partnership where one partner providers the capital (rabb-ul-maal) to the other (mudarib) for investment in a commercial enterprise. Generally, the investor will not participate in the everyday management of things in this type of agreement.
  14. 14. MUSHARAKAH(profits and losssharing system) It is an agreement between two persons or more (bank and customer)sharing both profits and losses. It is a joint enterprise where all the partners contribute capital and the client bring in know how. Profit/losses are shared on agreed ratios.
  15. 15. RIBA All increases in wealth or benefits accruing to a person without any labour, risk, or expertise. One who wishes to earn profit on his monetary investment must bear the loss or damage accruing to the business where his money capital is to be used. Nature of transaction important. ◦ Trading- Bai- Risk taking, value addition ◦ Leasing – Ijarah - Risk taking, value addition Exchange transaction – Monetary transactions ◦ Lending – a virtuous act; not a business ◦ Hand to hand exchange of currencies 16
  16. 16. RIBA - UNANIMITY  Banu Thaqif of Taif, not to forego interest on their receivables; Banu Amr ibnal Moghirah refused to pay interest; Referred to the H Prophet, the Revalation came:“O you who believe. Fear Allah, and give up the Riba that remains outstanding if you are (in truth) believer”. (11:278). 17
  17. 17. RIBA - UNANIMITY (CONTD)“If you do not do so, then be sure ofbeing at war with Allah and hisMessenger. But, if you repent, thenyou have your principal”. (11:279) 18
  18. 18.  And if you repent, then you have your principal. Wrong not, and you shall not be wronged ”. {without inflicting or receiving injustice} 19
  19. 19. And fear the day when you shall be broughtback to Allah.Then shall every soul be paid what itearned and none shall be dealt withunjustly. 20
  20. 20. DIFFERENCE BETWEEN ISLAIC AND CONVENTIOANL BANKINGIslamic ConventionalBanking Banking1) Functions and 1)Functions andoperations are operations are basedbased on on fully man madeSharia‟h principlesprinciples
  21. 21. DIFFERENCE BETWEEN ISLAIC ANDCONVENTIOANL BANKINGIslamic Banking Conventional Banking2) Promote risk- 2) Investor is assuredsharing between of pre-determined rateprovider of capital of interest(investor) and userof funds(entrepreneurs)
  22. 22. DIFFERENCE BETWEEN ISLAIC ANDCONVENTIOANL BANKINGIslamic Banking Conventional Banking3) Aim at 3) Aim at maximisingmaximising profit profit without anybut subject to restrictionsShariahrestrictions
  23. 23. DIFFERENCE BETWEEN ISLAIC AND CONVENTIOANL BANKINGIslamic Banking Conventional Banking4) Partners, investor 4) Creditor-Debtorand traders, buyer relationshipor seller relationship
  24. 24. DIFFERENCE BETWEEN ISLAIC AND CONVENTIOANL BANKINGIslamic Banking Conventional Banking5) Encourageasset-based 5) Based on moneyfinancing and trading. Money is abased on medium of exchangecommodity trading and not a commodity, its sale and purchase is prohibited in Islam.
  25. 25. CONCLUSION Islamic banking and finance are a part of Islamic economic system, the basis of which revolves around justice and morality. It is a very young concept in modern times yet it is emerging as one of the fastest growing areas of international finance. It facilitates the uplifting of economic standards of its clients by providing various types of lending contracts. Above all it is Shariah compliant, hence protects a Muslim from dealing with Riba, thus avoiding Allahs wrath and war. Let us all support Islamic banking venture, which is being provided by the establishment of Gulf African Bank. We pray and believe that the bank will strictly stick to Islamic principles and Shariah and uplift the living standards of all those who endeavour to do so in a decent manner – Amin.

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