The document discusses various types of banks and their functions. It describes 10 types of banks: 1) commercial banks that provide loans to businesses, 2) savings banks that encourage savings, 3) industrial banks that provide long-term loans to industries, 4) mortgage banks that provide housing and land loans, 5) central banks that act as banks for other banks and control a country's currency, 6) exchange banks that finance foreign trade, 7) consumer banks that provide loans for purchases, 8) agricultural banks that finance agriculture, 9) international banks that provide loans to foreign entities, and 10) merchant banks that specialize in international finance and business loans. It also discusses electronic banking services like ATMs, direct deposit, pay by

1. Unit Two
Islamic Banking Theory and Paretic
Abdulahi Abukar “ ABAJEY”

2.  A bank’s job is to provide
customers with financial
services that help people
better manage their lives.
As technology advances and
competition increases,
banks are offering different
types of services to stay
current and attract
customers.
Abdulahi Abukar “ ABAJEY”

3.  Type 1. Commercial Banks
Commercial banks are established with an objective to help
businessmen. These banks collect money from general
public and give short-term loans to businessmen by way
of cash credits, overdrafts, etc.
Commercial banks provide various services like collecting
cheques, bill of exchange, remittance money from one
place to another place.
These banks were specially recognized to profit from giving
loans to private persons and companies.
They uses the money deposit as a loan to make profit.
Abdulahi Abukar “ ABAJEY”

4. Type 2. Saving Banks
Saving banks are establish to create saving
habit among the people. These banks are
helpful for salaried people and low income
groups.
The deposits collected from customers are
invested in bonds, securities, etc. At present
most of the commercial banks carry the
functions of savings banks.
Postal department also performs the
functions of saving bank.
Abdulahi Abukar “ ABAJEY”

5.  Type 3. Industrial Banks / Development
Banks
Industrial / Development banks collect cash by
issuing shares & debentures and providing long-term loans
to industries.
The main objective of these banks is to provide long-term
loans for expansion and modernisation of industries.
In India such banks are established on a large scale after
independence. They are Industrial Finance Corporation of
India (IFCI), Industrial Credit and Investment Corporation of
India (ICICI) and Industrial Development Bank of India
(IDBI).
Abdulahi Abukar “ ABAJEY”

6. Type 4. Mortgage Banks / Land Development
Banks :
There are a banking that is sup division of
commercial banking that providing loans
for housing and land .
Also there central banking has a banking
divisions that is meant to provide cheap
or affordable loans for buying land and
housing.
Abdulahi Abukar “ ABAJEY”

7. Type 5. Central / Federal / National Bank
Every country of the world has a central bank.
In Somalia, Central Bank of Somalia, in U.S.A,
Federal Reserve and in U.K, Bank of England.
These central banks are the bankers of the
other banks. They provide specialized functions
i.e. issue of paper currency, working as bankers
of government, supervising and controlling
foreign exchange.
A central bank is a non-profit making institution. It
does not deal with the public but it deals with
other banks. The principal responsibility of
Central Bank is thorough control on currency of
a country.
Abdulahi Abukar “ ABAJEY”

8.  Type 6. Exchange Banks
Hong Kong Bank, Bank of Tokyo, Bank
of America are the examples of
Foreign Banks. These banks are mainly
concerned with financing foreign
trade. Following are the various
functions of Exchange Banks :-
Remitting money from one country to
another country, Discounting of foreign
bills, Buying and Selling Gold and
Silver, and Helping Import and Export
Trade.
Abdulahi Abukar “ ABAJEY”

9.  Type 7. Consumers Banks Consumers
bank is a new addition to the existing type of
banks. Such banks are usually found only in
advanced countries like U.S.A. and Germany.
The main objective of this bank is to give
loans to consumers for purchase of the
durables like Motor car, television set,
washing machine, furniture, etc. The
consumers have to repay the loans in easy
installments.
Abdulahi Abukar “ ABAJEY”

10. Type 8.International Banks:
They are private lending institutes that provide
huge sums of money to foreign companies and
persons or clients. They offer and lend money
to national banks. International banks are also
located in offshore markets.
An offshore market has little regulations, low tax
rates, and strict banker-customer
confidentiality laws. Leading offshore markets
include the Bahamas, Cayman Islands, Dubai,
Hong Kong, and Singapore.
Abdulahi Abukar “ ABAJEY”

11. Type 9. Agricultural Banks:
Agriculture has its own problems and
hence there are separate banks to finance
it. These banks are organized on co-
operative lines and therefore do not work
on the principle of maximum profit for the
shareholders.
These banks meet the credit requirements
of the farmers through term loans short,
medium and long term loans.
Abdulahi Abukar “ ABAJEY”

12.  Type 10.'Merchant Bank'
A merchant bank “is a company that deals
mostly in International Finance, business
loans for companies and Underwriting”.
These banks are experts in international
trade, which makes them specialists in
dealing with multinational Corporation”. A
merchant bank may perform some of the
same services as an Investment Bank, but it
does not provide regular banking services to
the general public.
Abdulahi Abukar “ ABAJEY”

13. Merchant banking
Abdulahi Abukar “ ABAJEY”

14. Abdulahi Abukar “ ABAJEY”

15. Abdulahi Abukar “ ABAJEY”

16. Electronic banking, also known as electronic funds transfer (EFT), is
simply the use of electronic means to transfer funds directly from
one account to another, rather than by check or cash. You can use
electronic funds transfer to:
I. have your paycheck deposited directly into your bank or credit
union checking account.
II. withdraw money from your checking account from an ATM
machine with a personal identification number (PIN), at your
convenience, day or night.
III. use a smart card with a prepaid amount of money embedded in it
for use instead of cash at a pay phone, expressway road toll, or
on college campuses at the library's photocopy machine or
bookstores
Abdulahi Abukar “ ABAJEY”

17. Automated Teller Machines (ATMs)
also called 24-hour tellers are
electronic terminals which give
consumers the opportunity to bank at
almost any time.

18.  Direct Deposit and Withdrawal Services allow consumers
to authorize specific deposits, such as paychecks or social
security checks, to their accounts on a regular basis.
 Pay by Phone Systems let consumers phone their
financial institutions with instructions to pay certain bills
or to transfer funds between accounts.
 Point-of-Sale Transfer Terminals allow consumers to pay
for retail purchase with a check card, a new name for
debit card.
 Personal Computer Banking Services offer consumers the
convenience of conducting many banking transactions
electronically using a personal computer.
Abdulahi Abukar “ ABAJEY”

19. 1. What is a Bank?
2. Write some of the oldest surviving banks in the world.
3. When was the first bank opened in Somalia?
4. When was established the Central Bank of Somalia?
5. What are the Role Of Banking
6. What is ATM?
7. What are the types Of Bank and Define each of them?
8. What is E-Banking?
Abdulahi Abukar “ ABAJEY”

20. Abdulahi Abukar “ ABAJEY”