this document contains a detailed comparison of the Islamic banking system and conventional banking system. we take the examples of HBL and Meezan bank limited

1. Difference
between Islamic
and conventional
banks
Prepared by:
M.Danish
MBA Finance
University of Narowal

2. Sr# Table of Contents Slide#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Meezan Islamic bank vs. Habib Bank Ltd
Introduction and history
Primary and secondary objectives of both banks
Division of Departments
Category of both banks
Bank customer relationship
Functions of both banks
Product and services of both banks
Loan types of both banks
Target groups and Target objectives of both banks
Modes of financing of both banks
Source of financing of both banks
Risk sharing
Corporate social responsibility programs of both banks
Money transfer rules
Principles of both banks
3
4
5
6
6
7
8
9
10
11
12
13
14
15
16
1

3. Definition
Conventional Bank
 A conventional bank is
a type of financial
institution that provides
services such as
accepting deposits,
making business loans,
and offering basic
investment product and
that deals with interest.
Islamic Bank
It refer to banking
services offered while
complying with the rules
of Shariah which
prohibits following:
 Riba (gain on debt)
 Excessive uncertainty
 Gambling
2

4. Introduction & History
Habib Bank Limited
HBL was the first
commercial bank to be
established in Pakistan
1941.
1700 branches in
Pakistan and 55 branches
across the country .
The Government of
Pakistan privatized HBL in
2004.
Meezan Islamic Bank
Meezan bank was the
first premiere Islamic
bank it commenced
operations in 2002 when
state bank of Pakistan
issue license to Islamic
banks.
550 branches in Pakistan
It Headquarted in Karachi.
3

5. Primary and Secondary Objectives
Habib Bank Limited
Primary Objectives
 Profit maximization
 Secondary Objectives
 Customers Satisfaction
 Advancing loan to public
for economic uplift
Meezan Islamic Bank
Primary Objective:
 Promote banking that
conform and comply with
the Sharia
Secondary objectives
 Secondary objectives is to
promote the establishment
of investment companies or
other business enterprises
which works according to
Shariah laws.
4

6. Division of Departments
Habib Bank Limited
 Sales division
 Credit Administration Division
 Human Resource Division
 Finance Division
 Treasury and International Division
 Information Technology Division
 Operation Division
 Audit and inspection Division
 General service Division
 Law Division
 Marketing division
Meezan Islamic Bank
 Credit Administration Division
 Human Resource Division
 Finance Division
 Treasury and International Division
 Information Technology Division
 Operation Division
 Audit and inspection Division
 General service Division
 Law Division
 Marketing division
5

7. Habib Bank Limited
 Habib Bank is a
Conventional Bank
which is privately
owned.
Meezan Islamic Bank
 It is an Islamic Bank and
Meezan Islamic Bank is
also Privately owned.
Category of both banks
Bank customers relations
In case of deposit
Bank(debtor) and
Customer(creditor )
In case of Loan
Bank ( creditor ) and
Customer(debtor
In case of mudarba
Bank (mudarib) and customer
(Rab-ul-mall)
In case of musharka
Bank and customers are partners
6

8. Functions
Habib Bank Limited
 Accepting Deposits
 Saving Deposits
 Advancing of Loans
 Cash Credit
 Demand Loans
 Short-term Loans
 Overdraft Facility
 Discounting Bills of
Exchange
 Agency Functions
Meezan Islamic Bank
The functions of both Banks
are either same but all the
transactions in a Islamic
bank is free from RIBA.
7

9. Products and Services
Habib Bank Limited
 ATM
 Internet banking
 Mobile banking
 Phone banking
 Debit card
 Credit cards
 Utility Services
 Locker Facility
 HBL home loan
 HBL personal loan
 HBL car loan
Meezan Islamic Bank
 Free Online banking
 Sms Service
 ATM And Visa Cards
 Utility Services
 Accidental Death and
Disability Coverage of up to
PRs.1,000,000
 Meezan car ijarah
 Meezan easy home
 Meezan bike ijarah
 Meezan consumer Ease 8

10. Loan Types
Habib Bank Limited
 Demand loans
 Short term loans
 Secured loan
 Unsecured loan
 Auto Loan
 House Loan
 Gold Loan
Meezan Islamic Bank
 Meezan Bank Easy
Home
 Meezan Car Ijarah
 Meezan Bike Ijarah
 Meezan Consumer
Ease
9

11. Target groups and target
objectives
Habib Bank Limited
 They target the general
public to raise their
level of income and
profit.
Meezan Islamic Bank
 They target the whole
world not only the
people in Muslim
countries. Because
they wants to promote
Islamic banking all
over the world as it is
beneficial for mankind.
10

12. Sources of financing
Habib bank Limited.
 Banks own capital
 Deposits
 Loan from other
banks
 Reserve funds
 State Bank of
Pakistan
Meezan Islamic Bank
 Murabaha
 Ijarah
 Musharikah
 Mudaraba
 Istisnah
 Reserve funds
11

13. Modes of financing
Habib Bank Limited.
 Financing lending
 Investment related
financing
Meezan islamic Bank
 Financing lending
 Trade related financing
 Investment related financing
 Profit and loss sharing
banking system
 Mudaraba
 Musharaka
 Murabaha (cost plus sale)
12

14. Risk sharing
Habib Bank Limited
 In case of lose or
natural disaster they
only provide
relaxation on the
amount of markup
and did not share
lose.
Meezan Islamic Bank
 They promote the
concept of risk
sharing and share
the risk with
customer on agreed
terms or percentage
13

15. Corporate social responsibility
Habib Bank Limited
 Donations to for games and
in hospitals .
 184.9 million Rs donation for
social and educational
development of under
privileged people.
 Energy conservation and
environmental protection by
restricting unnecessary
lighting and implementing the
law of tobacco control.
Meezan Islamic Bank
 Donation to educational and
health institutions .
Education
 IBA National Talent Hunt
Program
 TVET Reform Support
Programme
Healthcare
 The Indus Hospital
 Omair Sana Foundation OSF)
 Shaukat Khanum Memorial
Cancer Hospital(SKMCH
14

16. (Money gram) Money transfer
rules
Habib bank limited
 They did not transfer
amount up to 500000
 They charge 430PRs
for money transfer.
Meezan Islamic bank
 They charge 38.4 Rs
on transfer of money
to other banks in
Pakistan.
 Remittances to Rs
500000 cab be
transfer without bank
account
15

17. Priciples of both banks
Habib bank limited
 Purely on interest
 Liability and risk not
involved
 Ethical standards
 Money as a potential
capital
Meezan Islamic Bank
 Prohibition of interest
 Ethical standards
 Moral and social
values
 Liability and
business risk
16