Implementation of islamic banking in pakistan by m.hashaam


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Implementation of islamic banking in Pakistan by M.Hashaam
University: Allama Iqbal Open University, Islamabad
ASC: Punjab Computer College, Garhi Shao Lahore

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Implementation of islamic banking in pakistan by m.hashaam

  1. 1. Commercial and Investment Banking Topic: Implementation of Islamic Banking in Pakistan Presented to: Ali Afzal Presented by: M.Hashaam Roll No. : AM552381 Class : MBA (B&F) 4th Semester
  2. 2. Acknowledgment First of all thanks of Allah who is most beneficent and the most merciful whose blessings are abundant and favors are unlimited. It is my pleasure to acknowledge the guidance and support of Teachers for their endless guidance. Prepared By: M.Hashaam 3
  3. 3. History of Islamic Banking    The pioneering effort, led by Ahmad Elnaggar, took the form of a savings bank based on profitsharing in the Egyptian town of Mit Ghamr in 1963 In 1973, the Islamic Development Bank was setup The first Islamic bank in Malaysia was established in 1983. In 1993, commercial & merchant banks were allowed to offer Islamic banking products and services under the Islamic Banking Scheme (IBS). Prepared By: M.Hashaam 4
  4. 4. History of Islamic Banking in Pakistan  The Islamic Summit of Lahore, Pakistan held in 1974 recommended the creation of Islamic Banks and Islamic Development Bank.  On 14 Ramadan 1420, the Shariah Bench of the Supreme Court of Pakistan gave its landmark decision banning interest in all its forms. The court also specified a step by step approach to rid the country of the evil of interest. (The Historic Judgment on Interest by the Supreme Court of Pakistan) Prepared By: M.Hashaam 5
  5. 5. History of Islamic Banking in Pakistan After 55 years after its creation in the name of Islam, Pakistan became the first Muslim country to officially declare modern bank interest as “ar-riba” declared haram by Qur'an Prepared By: M.Hashaam 6
  6. 6. Introduction Of Islamic Banking
  7. 7. Introduction of Islamic Banking Islamic banking is the banking system which is run in accordance with the Islamic laws and the Shari a` board; that guides the institutions. Islamic banking is the banking that is guided by Islamic law ( Shari a`) principles and guided by Islamic economics. In particular, Islamic law prohibits the collection and payment of interest, also commonly called Riba in Islamic discourse”. Prepared By: M.Hashaam 8
  8. 8. Islamic Banking in Pakistan Islamic banking shows dramatic improvements and developments in Pakistan. Islamic banking is taken as national policy and it is supported but there exist dual banking structure in the Muslim countries. Mostly the banks of conventional system are also opening their separate Islamic banking divisions and branches. Prepared By: M.Hashaam 9
  9. 9. Islamic Banking in Pakistan The expectation of increase in growth of networking of Islamic banking system is increasing. The Islamic banking has increased in terms of branches, deposits, capital funds, sources. The ratio of income to expenses is high which indicates increasing profitability of the sector. Prepared By: M.Hashaam 10
  10. 10. Riba or Interest “Riba” literally means increase, addition, expansion or growth. It is however not every increase or growth, which is prohibited by Islam. In shariah, Riba technically refers to the premium that must be paid without any consideration. Prepared By: M.Hashaam 11
  11. 11. Qur’an Reference The interest is prohibited in Islamic ways of banking as it is also obvious from Quran. In Quran, in Sura Al-Imran, Allah said that; “O you who believe! Do not devour Riba multiplying it over and keep your duty to Allah that you may prosper” (3:130).  ‫اے ایمان والو! دو گنا اور چوگنا کر کے سود مت کھایا‬ ‫کرو، اور اللہ سے ڈرا کرو تاکہ تم فلح پاؤ‬ Same kind of prohibition regard fixed interest is also lead in Sura Al-Rum(39) , Al-Nisa(160-161) and Al-Baqarah(275-281) of Quran. Prepared By: M.Hashaam 12
  12. 12. Hadith Reference This Hadith is reported by  Hazrat Ali Radi-AllahuAnhu "Every loan that derives a benefit (to the creditor) is riba."   Prepared By: M.Hashaam 13
  13. 13. Difference between conventional banking and Islamic banking Prepared By: M.Hashaam 14
  14. 14. money Bank Client money + money (interest) Conventional Banking System Prepared By: M.Hashaam 15
  15. 15. Bank Goods & Services Client money Islamic Banking System Prepared By: M.Hashaam 16
  16. 16. Basic Principles of Islamic Banking       Sanctity of contracts. Risk sharing. No Riba / Interest. Economic purpose / activity. Fairness. No valid subject matter. Prepared By: M.Hashaam 17
  17. 17. Islamic Mode of Financing Prepared By: M.Hashaam 18
  18. 18. IMPLEMENTATION OF ISLAMIC BANKING Following are the stages involved implementation of Islamic banking. in the STAGE-1  Interest was first eliminated from July 1979 from the transactions of NIT ,HBFC, ICP AND SBFC. Prepared By: M.Hashaam 19
  19. 19. 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. 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 Prepared By: M.Hashaam 20
  20. 20. 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 January 1985,all types of finances provided by the bank to the governments and their agencies were permissible on Islamic basis only. Prepared By: M.Hashaam 21
  21. 21. 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 Prepared By: M.Hashaam 22
  22. 22. SWOT Analysis     S: religious appeal, Zakat, Innovative aspect, all bigger banks carry a Islamic portfolio because of its success W: Lack of standardization, There are differences in theory and practice, Misinterpretation of Islam O: fastest growing religion in the world, Traditional interest based banking losing its value, New markets have been emerged in non Islamic regions T: loopholes are present in its proper implementation, Research in products, Environment for Islamic banking in west has been declined after 9/11 Prepared By: M.Hashaam 23
  23. 23. Conclusion Islamic banks "bear the risk" when involve in any transaction. 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. Prepared By: M.Hashaam 24
  24. 24. Recommendation’s Top quality service to ensure that service standards of IB Institutions is at par with conventional. Aggressive Marketing to ensure that Islamic Banking reaches the tipping point in quickest possible time Prepared By: M.Hashaam 25
  25. 25. Prepared By: M.Hashaam 26
  26. 26. Questions ? Prepared By: M.Hashaam 27