In this Presentation Islamic history, and Conventional Banking Systems, Functions, purpose and their modes of financing are explained in detailed.

2. ISLAMIC BANKING

3. Topic
Conventional & Islamic Banking
Presented By
BaBer Ali
BS-COM_7th
Roll No# 33

4. Presented to
Asst. Prof Syed Muhammad Abbas
Date: 24th Jan, 2019

5. Contents
 Definition Of Bank
 Types of Banking Systems
 Purpose of Conventional Banks
 Main Objective of Conventional Banks
 Classification of Banks
 Functions of Commercial Banks
 Kinds of Commercial Banks
 Why Islamic Banking?
 History of Islamic Banks
 History of IB in Pakistan
 The Performance of Islamic Banks
 IBI Network Expansion in Pakistan
 Modes of Financing
 Difference Between Islamic and Conventional Banking.

6. What is a Bank?
 Definition of Bank:
“A bank is a financial institution whose main business is to
accept money on deposits from some people and to advance loans
on interest to some others.”

7. Types of Banking Systems
 Islamic Banking
 Conventional Banking
 The main difference between Conventional
and Islamic banking system is that
Conventional is totally based on Interest
while Islamic banking is assets based
financing.

8. Purpose of Conventional Banks
 To provide services to the customers.
 Keep their money safe.
 Offer customers interest on their deposits.
 Lend money to the Firms, Customers etc.
 Offers financial advice and financial Services, Such as insurance.

9. Main Objective of Conventional
Banks
 Maximization of their Profits.
 For that they provide services like;
 Credits
 Foreign Currency Exchange,
 General banking
 And charge fee and commissions on that.

10. Classification of Banks
Central Bank
Commercial
Banks
Investment
Banks
Co-operative
Banks
Specialized
Banks

11. Functions of Commercial Banks
Primary
Functions
Accepting
deposits
Advancing
Loans
Discount
Bills of
Exchange

12. Functions of Commercial Banks
Secondary
Functions:
Collection
of Cheques
Collection
of Income
Payment of
Expenses
Acts as an
Agent
Provides
Locker
Facility
Foreign
Exchange
Dealer in
Securities
Trade
Information

13. Kinds of Commercial Banks
Scheduled Banks
Non-Scheduled Banks
Private Sector Banks
Public Sector Banks
Domestic Banks
Foreign Banks
Micro-Finance Banks
Co-operative Banks
Saving Banks
Investment Banks
Mortgage Banks
Exchange Banks
Agriculture Banks

14. Why Islamic Banking?
 The Primary Objectives of Islamic Economic System
are as Under:
 Equal Distribution of Wealth
 Social Justice
 These Objectives can never be achieved in InterestRiba
based Economic System.

15. History of Islamic Banks
 Very first proper Islamic banking model came into existence in
Egypt in 1963.
 Ahmed al najjar was founder and real visionary of the bank.
 In 1974, Islamic Development Bank was established due to an
efforts of OIC.
 Which was officially registered Islamic bank.
 In 1975, First Private held commercial Islamic bank was
established in Dubai.
 In 1977, Faysal Islamic Bank was formed in Egypt.

16. History of IB in Pakistan
 The first attempt was made in 1979 to Islamize the Banking
System in Pakistan.
 Changes were made in the Banking Companies Ordinance 1962.
 The first Islamic Bank in Pakistan was Meezan Investment Bank.
 It was established in 2002.
 It was given the license to offer complete range of Islamic products
and offered.

17. The Performance of Islamic Banks
 Islamic Banking Saw increase in it’s growth in both Assets and
deposits during 2nd quarter of 2015.
 Assets reached Rs 1,495 Billion during end of June 2015 compared
to Rs 1,302 billion in previous quarter.
 Similarly deposits were recorded at Rs 1,281 billion compared to
Rs 1,122 billion.
 The market share of both Islamic banking assets and deposits in
overall banking industry also increased by reaching 11.3% and
12.8% respectively.

18. IBI Network Expansion in Pakistan
 Branch network of IBI also witnessed increase during the second quarter
of 2015.
 Additional 105 branches were opened.
 Total number of Islamic banks reached 1,702.
 Established in all provinces of the country.
 Islamic banking services expanded to six new districts.
 That is Bhakkhar, Chiniot, Narowal and Rajanpur in Punjab.
 Bhimber and Kotli districts in AJK.

19. Modes of Financing
Islamic Banking Conventional Banking
Murabaha (Cost plus profit sale) Term Financing
Ijara (Leasing) Lease Financing
Mudarabah (Trustee profit
sharing)
Overdraft
Qard Hassan (Advancing Loans) Revolving Credit
Bai Salam (Commodity sale) CleanUnsecured Financing

20. Difference Between Islamic and Conventional Banking.
Conventional Banking Islamic Banking
Money is Product beside medium of
exchange and store of value.
Real asset is product, money is just
medium of exchange.
Time value is the basis for charging
interest on capital.
Profit on exchange of goods &
services is the basis for earning profit.
No loss sharing. Loss is also shared.
No assets based financing. Assets based financing.
Due to last point expansion of money
takes place which creates inflation.
Expansion of money is backed by real
assets so the inflation is minimized.
Due to inflation the prices of goods
increases in markets.
Due to control in inflation
little/negligible prices increase on
goods and services.

21. Difference Between Islamic and Conventional Banking.
Conventional Banking Islamic Banking
Real growth of wealth does not take place,
as the money remains in few hands.
Real growth in the wealth of the people of
the society takes place, due to multiplier
effect and real wealth goes into the
ownership of lot of hands.
Can Charge additional money incase of
defaulters.
It doesn’t charge any extra money from
the defaulters, but they are compelled to
pay fine in charity.
The status of a conventional bank, in
relation to its clients is that of creditor and
debtor.
The status of the Islamic bank in relation
to its clients is of a partner, investor and
trade buyer and seller.
The functions and working modes of
conventional banks are based fully
manmade principles.
The functions and operating modes of
Islamic banks are based on the rule of
Islamic Shari’ah.