ibi-090426014554-phpapp02
TRANSCRIPT
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Presented by:
JUNAID ZAMIR
TARIQ ALI KHAN
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Index
- What is Islamic Banking
- Terminologies
- Principles
- History
- How it is Different ?
- Overview
- Performance of various Banks
- Islamic Banks in Pakistan
- Business Model ofa Conventional Bank
- Business Model ofa Islamic Bank
- SWOT analysis
- Future- Key Challenges- Problems- Recommendations
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What is Islamic Banking
A system of financial activities consistent withShariah, based on Islamic principles which at the corerefuses collecting interest, transactions involving
uncertainty and speculation.
It is based on the Islamic economic system.
It is not restricted to Muslims only.
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Terminologies
Takaful (Islamic Insurance)Takaful is an
alternative form of cover that a Muslim can avail
himself against the risk of loss due to
misfortunes.
Sukuk (Islamic Bonds) the Arabic name for a
financial certificate but can be seen as anIslamic equivalent of bond.
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PRODUCTTREE
Islamic Modes of Finance
Trade Based
Modes
Partnership Based
Modes
Rental Based
Modes
Musharaka
MudarabaMurabaha Ijarah
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Terminologies
MurabahaIt is a contract for purchase and resale and allows thecustomer to make purchases without having to take outa loan and pay interest. Bank purchases the goods on
behalf of the customer, and re-sells them to thecustomer on an agreed profit margin and the customerpays the sale price for the goods over installments.
MusharakaIt means partnership. It involves you placing your capitalwith another person and both sharing the risk andreward with profit sharing ratio, but losses mustbe proportionate to the amount invested.
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Terminologies
MudarabaIt refers to an investment on your behalf by a moreskilled person. It takes the form of a contract betweentwo parties, one who provides the funds and the otherwho provides the expertise and who agree to the divisionof any profits made in advance. The Bank would makeShariaa compliant investments and share the profitswith the customer, in effect charging for the time andeffort. If no profit is made, the loss is borne by thecustomer and Islamic Bank of Britain takes no fee.
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Terminologies
IjarahIjara is a form of leasing. It involves a contract where the
bank buys and then leases an item. For example auto
ijarah is simply an agreement under which the vehicleshall be given to you on rent for a period, agreed at the
time of the contract. Bank purchase the vehicle and it out
to the consumer for a period upon completion of the
ijarah period the consumer get owner ship of the vehicle
through a separate sale agreement.
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Principles
It works on Islamic set guidelinesconsisting of Risk Sharing, IndividualRights & Duties, Property Rights,Purity of Contracts, Commitments,Transparencies & Fair Deals.
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Any predetermined payment over & above the actual
amount of principal is prohibited (interest) the only loan it
allows is qard-ul-hassna whereby lender does not
charge any interest.
The Islamic financial system employs concept of
participation , utilizing funds on a profit-and- loss-sharing
basis.
Principles
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The pioneering effort, led by Ahmad Elnaggar, took the
form of a savings bank based on profit-sharing in the
Egyptian town of Mit Ghamr in 1963.
This experiment
lasted until 1967 by which time there were nine such
banks in the country.
In 1973, the Islamic Development Bank was set-up.
History
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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). These
institutions however, are required to separate the funds
and activities of Islamic banking transactions from that of
the conventional banking business
History
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History
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
and by whatever name it may be called. 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 SupremeC
ourt ofP
akistan)
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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
History
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How it is Different ?
Islamic Orders not to use Money as a
commodity.
They operate under the concept of lender-
borrower relationship and the profits generated
through this relationship are divided between thetwo parties as per agreement.
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Howdoes it works ?
The bank entirely depends upon the fixed
deposits and does not borrows money from the
central bank.
Bank gives loan on basis of mutual agreement.
Marjorly focuses on sales transaction.
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Overview
Islamic Banking is growing rapidly in Pak it has
been expected that by 2012 total share in
Banking sector will be 12%.
Present Islamic Banking share is 5%
Growth rate is 50%
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Assets Rs 276 Bn (asset base of entire Banking
System Rs 5,653 Bn)
Profit Rs 1.8 Bn dec-08
Deposits Rs 201.7 Bn (17.7%)
Overview
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Performanceofvarious Banks
Bank Name Profit (March 30, 2009) (Millions)
Allied Bank 4,157
BankIslami (53)
MCB 15,375
National Bank 15,459
Meezan Bank 621
Standard Chartered 630
UBL 8,333
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Islamic Banks in Pakistan
Dubai Islamic Bank Pakistan Limited
Meezan Bank
Dawood Islamic Bank Limited
AlBaraka Islamic Bank
Bank Islami
Emirates Global Islamic Bank Limited
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Branch Network
Dubai Islamic Bank Pakistan Limited branches 25 in10 cities
Meezan Bank 166 branches in 40 cities
Dawood Islamic Bank Limited 19 branches in 9cities
BankIslam102 branches in 49 cites
Emirates Global Islamic Bank Limited (EGIBL) 41branches in 24 cities
Total branch network of combine islamicbanks 353 Branches in almost all big citiesof Pakistan.
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Business Model of a Conv
entional Bank
Creditor(Depositor)
Individuals
Corporate
FIs
SMEs
Public Sector
Funds Lent
Debtor
PLS Saving
AccountTerm Deposit
Equity
Modeof
Credit
InterestInterest
Conventional
Bank
Interest based
pool managed bybank
Withdrawal
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Key Challenges FacingIslamic Banks:
Shariah interpretations
Shariah experts Product development and execution
Competition from conventional banking
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SWOT analysis
S: religious appeal, Zakat, Innovative aspect, all bigger bankscarry a Islamic portfolio because of its success.
W: Lack of standardization, There are differences in theoryand practice, Misinterpretation of Islam
O: fastest growing religion in the world, Traditional interestbased banking losing its value, New markets have beenemerged in non Islamic regions.
T: loopholes are present in its proper implementation,Research in products, Environment for Islamic banking in westhas been declined after 9/11
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Problems
The problem with these shariah boards is that they give conflicting
opinions that result in confusion and doubts.
They approve 1 product and the other may reject
Jorban a Muslim scholar disapproved the penalty imposed on
defaulting.
Britain had rejected Islamic mortgage as it based on interest based
structure.
Malaysia has proposed to setup standards for both IB and IF. such
standards would result in consensus instead of confusion or conflict.
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Future
Replace conventional Banking system with
Islamic banking System.
Expand their Branch Network.
2012 total share in Banking sector will be 12%.
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This is evident not only from the growing number
of banks established specifically for practicing
shariah compliant finance, but also from the
increasing number of conventional banks suchas Citibank, HSBC, RBS, Standard Chartered,
UBS, etc engaging in shariah compliant
operations.
Future
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Product Innovation- Ensuring innovative Shariah compliant products.
Service and product Differentiation.
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.
To remove conflicting confusions and doubts from the mind of a general
customer
Islamic Banking rules should be uniform worldwide.
Recommendations
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Thank you