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Imran javaid (1018)
Muhammad Yasir (1547)
Nabeel Mastan (0781)
Naveed Ikram (0992)
Sarwar Ali (3104)
Shafiq saleem (0805)
...
What is Islamic Banking
 Banking in compatibility with the culture and value
system of Islam.
 Follows the principles la...
History Of Islamic Banking (1979)
 ICP & NIT, began the process of eliminating interest
from their overall financial oper...
History Of Islamic Banking (1980 –
1981)
 Participation Term Certificate (PTC) was launched,
which was a new interest-fre...
History Of Islamic Banking (1984 –
1985)
 7 major amendments were made in the LAW with the
name of Banking & Financial Se...
Current State of Islamic Banking in
Pakistan
 In 2001, the State Bank of Pakistan issued its first
Islamic Banking Policy...
Shariah Compliance Mechanism for
Islamic Banking
 SBP also crafted a Shariah Compliance Mechanism, to
ensure that the cus...
3 Major Pillars
 Shariah Board: Which checks and approves all the
policies, guidelines and criteria for Advisors
 Sharia...
Permissible for an Islamic bank to
impose penalty for late payment:
In Islamic law it is permissible to penalize a debtor ...
Can Islamic banks claim solatium or
liquidated damages on account of late
payment/default by the clients?
The contemporary...
Modes of Islamic banking and
finance.
 MURABAHA (Cost plus profit sale)
 IJARAH (Leasing)
 IJARAH-WAL-IQTINA (Asset Lea...
History of Islamic banking in Pakistan
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History of Islamic banking in Pakistan

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History of Islamic banking in Pakistan

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History of Islamic banking in Pakistan

  1. 1. Imran javaid (1018) Muhammad Yasir (1547) Nabeel Mastan (0781) Naveed Ikram (0992) Sarwar Ali (3104) Shafiq saleem (0805) Talha Shoaib Mayet (1484) Essentials Of Islamic Finance History Of Islamic Banking In Pakistan
  2. 2. What is Islamic Banking  Banking in compatibility with the culture and value system of Islam.  Follows the principles laid down by Islamic Shariah.  Interest free banking.  Performance of capital should also be considered while rewarding the capital.  Based on risk-sharing, owning and handling of physical goods, involvement in the process of trading, leasing and construction contracts
  3. 3. History Of Islamic Banking (1979)  ICP & NIT, began the process of eliminating interest from their overall financial operations.  ICP launched a new Investor scheme in October 1980, which was solely based on the system of Profit and Loss sharing.  The HBFC also eliminated the interest from their operations completely in July 1, 1979.
  4. 4. History Of Islamic Banking (1980 – 1981)  Participation Term Certificate (PTC) was launched, which was a new interest-free corporate financing instrument.  A two-Tier Fund structure was launched in 1981, which introduced the concept of Modaraba.  A new law was formed for this to promote Shariah compliant businesses.  Most commercialized banks started offer interest free products based on profit and loss sharing.
  5. 5. History Of Islamic Banking (1984 – 1985)  7 major amendments were made in the LAW with the name of Banking & Financial Services Ordinance, 1984.  From July 1, 1985, all commercial banking in Pak Rupees was made interest-free.  Banking Tribunals Ordinance, 1984 was approved, which provided a new way to ensure recovery non- interest based financed amount. 2002 is marked as a year when the first Islamic Bank in Pakistan was given the license to offer complete range of Islamic products and offered.
  6. 6. Current State of Islamic Banking in Pakistan  In 2001, the State Bank of Pakistan issued its first Islamic Banking Policy.  This policy stated that the Islamic Banking should be promoted side-by-side with the conventional banking.  Al-Meezan investment bank was issued the first license and started working as the first of the Islamic banks in Pakistan.  All the conventional banks were also offered licenses to offer Islamic Banking Services as a subsidiary or separate branches.
  7. 7. Shariah Compliance Mechanism for Islamic Banking  SBP also crafted a Shariah Compliance Mechanism, to ensure that the customers can trust the product`s adherence to Islamic Financial Products. 3 Major Pillars of this policy are:  Shariah Board  Shariah Advisors  Shariah Audit System
  8. 8. 3 Major Pillars  Shariah Board: Which checks and approves all the policies, guidelines and criteria for Advisors  Shariah Advisors: Which provides Islamic guidance to the banks and give the customers complete peace of mind when dealing with Islamic Services/Products  Shariah Audit System: Which examine the institution’s performance on a regular basis and identify incidences of incorrect or incomplete transactional flows.
  9. 9. Permissible for an Islamic bank to impose penalty for late payment: In Islamic law it is permissible to penalize a debtor who is financially sound but delays payment of debt without any genuine reason. Such act of the debtor is unjust as the Prophet (PBUH) has said, "A rich debtor who delays payment of debt commits Zulm”. If clients do not honor their commitment in respect of timely payment of a debt created in installment sale, it could cause irreparable loss to the system, the banks and financial institutions and ultimately to savers and the economy. The jurists allow punishment (T´azir) to such borrower in the form of fine.
  10. 10. Can Islamic banks claim solatium or liquidated damages on account of late payment/default by the clients? The contemporary Shariah scholars have evolved a consensus that banks are authorized to impose late fees on the delinquent. But proceeds of such penalty are to be used for charity purposes. Liquidated damages can be given to banks in case of default on the part of banks’ clients provided it is based on actual financial loss. However, some Shariah Boards allow Islamic banks to charge from the defaulter the rate realized by them on their Murabaha portfolio during a specific period. They also recommend that the financial condition of the client be taken into account.
  11. 11. Modes of Islamic banking and finance.  MURABAHA (Cost plus profit sale)  IJARAH (Leasing)  IJARAH-WAL-IQTINA (Asset Leasing)  MUSAWAMAH (Bargain Sale)  ISTISNAA (Sale on Order)  BAI MUAJJAL (Credit Sale)  MUDARABAH (Trustee Profit Sharing)  MUSHARAKAH (Joint venture profit sharing)  BAI SALAM (Commodity Sale)

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