Islamic banking


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Islamic banking

  1. 1. WELCOME
  2. 2. INTRODUCTION  IslamicBanking is a banking or banking activity based on principles of Islamic (Shariah)  Shariah prohibits Riba  Investmentin business that provide goods or services is also known Haraam (forbidden
  3. 3. History
  4. 4. RibaThe word “riba” means excess, increase oraddition. It means the interest applied onloan.
  5. 5. Prohibition of Riba
  6. 6. Types of riba  Ribaal-nasi’ah : Interest on loans.  Ribaal-fadl : Excess over and above the loan paid in kind.
  7. 7. Reasons for prohibitionof riba  It is unjust.  It corrupts.  It implies improper appropriation of other people’s property.  It results in negative economic growth.  In demeans and diminishes human personality.
  8. 8. characteristics Avoiding riba Consuming money which comes from is condemned repeatly in Quran
  9. 9. Controversy aboutIslamic banking  There is no entity besides an individual state that may enforce a particular Islamic law.
  10. 10. Sharing risk When Islamic banks invest in a business venture, they assume risk proportional to the ratio of their contribution.
  11. 11. Halal investment If the forbidden items are a minor part of the business then it is considered permissible to invest as long as a portion of the profit is given to charity.
  12. 12. Principles
  13. 13. 1. Any predetermined payment over and above the actual amount of principal is prohibited : qard-el-hassan (literally good loan)
  14. 14. 2. The lender must share in the profits or losses arising out of the enterprise for which the money was lent : Shari’ah (Islamic law ) To reduce the burden of the borrower To encourage entrepreneurs in maximizing their efforts.
  15. 15. 3. Making money from money is not islamically accepted : Money advanced in business as a loan is debt of the business and not capital. They are discouraged to keep money idle.
  16. 16. 4. Gharar (uncertainty, risk or speculation) is also prohibited : The creditor advances the loan to win the blessings of Allah almighty. Bai bithaman ajil (sales with advanced payment) Istisna (contract to manufacture) Ijara (hire contract)
  17. 17. 5. Investment should only support practice or products that are not forbidden: Aim is to engage in only ethical investing and moral purchasing.
  19. 19.  Abdullah al Araby-1967 Nejatullah Siddiqui- 1961,1969 Al-Najjar-1971 Baqir al sadr -1961,1971 were main contributors
  20. 20.  First modern experiment with Islamic banking was undertaken in Egypt.
  21. 21.  Bankbased on profit sharing in the Egyptian town of Mit Ghamr in 1963
  22. 22. Dubai Islamic Bank (1975)
  23. 23. Islamic Banking is very similar toconventional Banking, but functionsin accordance with the injunctionsof the Sharia & Quran
  24. 24. Benefits andproblems
  25. 25. benefits  Not centered only on credit worthiness & ability to repay the loans & interest.  Considerationof ethical & moral values with its banking operation.
  26. 26.  Restrictedto useful goods and services. Relationship with depositors. Eliminates the barriers between the one who save & the one who invest.
  27. 27. problems  Supportspractices or products forbidden by Islamic Law.  Achievingconsistent Shariah supervision.  Managing the pool.
  28. 28. Islamic Banking VsConventional BankingThe two major difference between Islamic Banking and Conventional Banking: The pressure has been on RBI to introduce Islamic banking in country which would earn billions of dollars in investments.
  29. 29.  When Conventional banks involve in transaction with consumer they do not take the liability only get the benefit from consumer in form of interest whereas Islamic banks bear all the liability when involve in transaction with consumer. Getting out any benefit without bearing its liability is declared Haram in Islam.
  30. 30. Islamic Banking to boostgreen finance
  31. 31.  Green finance : sustainable environment development facing global warming, development of water resources. Infrastructuredevelopment can attract foreign investment if country opens up to Islamic banking.
  32. 32. Should RBI introduceIslamic Banking in India ?
  33. 33.  NEW DELHI They, however said the Bank approached RBI for offering consultancy services in this regard.
  34. 34. Islamic bank follows theShariah law of Banking
  35. 35. D.SUBBARAO, Governor ofthe Reserve Bank Of India As interest payment forms the basis of current banking principles, and therefore ,it is not possible to have Islamic Bank in India.
  36. 36. Mufti AbdulQadirBarkatullah
  37. 37. The blockades in the way tointroduction of islamic bankingsystem in india  The mindset of resistance to change  Bureaucracy  The political bickering
  38. 38. RBI to look into MalaysianIslamic banking model
  39. 39. PM held a wide ranging talks oneconomic issues with Malaysiancounterpart Mohd Abdul Razak
  40. 40. Space and scope of IslamicBanking in India
  41. 41. Working report of RBI  The51 page report on Islamic banking was submitted in Mumbai in July 2006.  Theworking group was headed by Mr. Anand Sinha,executive director, RBI.
  42. 42. LEGAL OPINIONExample : In Bai’Mu’ajjal, the bank resorts to purchase and resale of properties, which is not permissible as per the provisions of sections 8 and 9 of banking regulation act , 1949.
  43. 43. Kerala shows the way
  44. 44. news
  45. 45. Kerala HC okays IslamicBanking in India.
  46. 46. India says no to IslamicBanking
  47. 47. Islamic Banking on theupswing post-globalrecession : experts.
  48. 48. Banks from around theworld :
  49. 49. DUBAI ISLAMIC BANK Pvt. Ltd.
  50. 50.  1st Bank in the world. Formed in 1975. Recentlylaunched Cash Account Manager which offers complete business cash management solution for corporate customers.
  51. 51.  Atpresent DIBPL is growing with 59 branches across Pakistan in 26 cities. Alternatedistribution channels like ATM, Cash Deposit Machines, Phone Banking, SMS Banking, Internet & Mobile Banking.
  52. 52.  1sttime in Pakistan DIBPL has posted a profit of Rs. 77.8 million before tax for the quarter ended 31st March, 2009.
  53. 53. MEEZAN BANK:-
  54. 54.  Itis located in Karachi, Pakistan. Incorporated on January 27, 1997; started its operations as investment bank in August, 1997; Granted licence as commercial Islamic bank in January 2002.
  55. 55.  The Banks amin financial institutions are: Pak Kuwait Investment Company. Islamic Development Bank of Jeddah Shamil Bank of Bahrain.
  56. 56.  Ithas a 226 branches in 63 cities of Pakistan. 1st and largest bank awarded as Bes Islamic Financial Institution in Pakistan, by Global Finance magazine at its Annual Awards for The Worlds Best Islamic financial Institutions 2011.
  57. 57.  It was judged on the basis on the basis of:Contribution to the growth of Islamic Financing in the world- Successfully meeting customer needs.- Creating foundation for continued fast growth in the future.- Growth in assets, profitability, geographic reach, strategic relationships, new business development & innovations in product.
  58. 58. conclusion
  59. 59. 1. What is the meaning of the word “Shariah” ? a. Fiat currency b. Law of Islam c. Islamic jurisprudence
  60. 60. 2. What does riba al-nasi’ah mean ?a. Exploitation of loan borrowers. b.Legalized trade c.Interest on loan
  61. 61. 3. What does”usury” mean ? a. Illegal interest b. Spirit of sharingc.Interst forbidden by islam
  62. 62. 4. What does “Musharaka” mean ? a. Equity financing b. Issuing liquidity. c.Financial instrument.
  63. 63. 5. What does Mudaraba means ? a.Fictitious asset b.Trade financing c.Legitimate trade
  64. 64. 6. Who is the executive director of RBI ? a. Aarti Kapadiya b. Aamir Khan c. Anand Sinha
  65. 65. 7. Where is Meezan Bank located ? a. Nigeria b. Karachi , pakistan c. Malaysia
  66. 66. 8. What does “sukook ijara” mean ? a. Islamic leasing bond.b. Islamic bill of exchange. c. Islamic bank rules.
  67. 67. 9.What does “takaful” mean ? a. Shariah rules.b. Islamic insurance. c. Jurisdiction .
  68. 68. 10. What does “qard’el Hassan” mean ? a. Good loan. b. Good interest. c. Good bank.