Islamic Banking in Pakistan. Literature review.

1992 Quran and Sunnah are the fundamental source of Islam, and Prophet Muhammad Peace be upon him, provide us guidelines for economic activities and details for the economic systems that how economic activities can be carried on should be organized. (Khan S. Mohsin and Mirakhor, Abbas, 1992) 2008 Several initiatives in Islamic banking introduced by Pakistani banking sector but these are much resemble to the traditional banking instruments, Pakistani banks now considering the drastic change in procedures. The effect of islamization on banking sector has been moderate, the main reason for this reality is that the banks in Pakistan opted to introduce those instruments which is most resemble to the interest base finance aside, and large thinking of people is the fact that these banking sector are owned by state of Pakistan. (Cornelisse and Steffelaar, 2008) 1983 The practices and dealing of paying and receiving interest (riba) is prohibited in Islam, between individual, business, organizations and between state and to other individuals. (Saddiqi, Muhammad Nijatullah, 1983) 1991 Regarding Islamic banking and people of Pakistan and those who are interested to the Islamic economy and practices have been endeavoring to establish Islamic economic concept and theories which confirm the Islamic ideologies (A study macro economic and development, 1991). 1981 Islam is complete religion and complete way of life; provide guidelines for each and every aspect of human life and activities including social, economic, financial and every aspect, as every human need economic involvement for life survival so economic is the important aspect of human life. Islam has provided a complete model for developing healthy society. With the day to day increasing and expanding scope of Islamic finance world wide, there is a rapid proliferation solution that caters to all most all financial requirements and need. (Ahmed, Khurshid, 1981). 1998 Riba is involved, whenever a contract involves for guaranteed gain/profit for one party. Ali Remona, (2005). According to FTWA, the proposed arrangement will have these dealings, Shirkat al milk, having joint ownership in property, giving the share of financier to the client on rent, and promise from the client or customer to purchase the share of financier, actual purchase of share at different stages, and adjustment of the rental according to the remaining shares. (Muhammad Taqi Usmani, 1998) 2004 The Quran forbid Riba( interest), Muslim need money and bank need to make living, so system is for ban, for example Muslim holding mortgage for house, while bank can own the house and make arrangement, to buy it off over the numbers of years. (Moore, Charies, 2004)

2004 As the structure of the country is totally Islamic, so some banks have decided to transfer the system of interest into free interest system, means the financial activities will be non interest base, but the procedures by their selves is un Islamic declared by the federal shariat court(FSC), the banks were to go appeal in Supreme court of Pakistan, in the light of the SCP, order the government of Pakistan form a committee to judge the strength and risk of conversion interest base system into Islamic financial system. Because it was not possible to convert the interest banking system into free interest system the times were to short, so the state bank issued the criteria for the conversion of interest banking into free interest banking system (Islamic system) to promote the concept of Islamic banking. (Hussein, Dr Ishrat, 2004) 2002 To develop the Islamic banking in the country the Pakistan government is issued a licenses for new Islamic banks, this is the first time of issuance of licenses for Islamic banks in decades if was just done for the purpose to promote the Islamic banking network in the country. (Bokhari, Farhan, 2002) The governor of the state bank reiterated the central bank promise to promote and develop Islamic banking on sound footings, decide to provide a detail and regulatory framework to establish Islamic banks as a separate banking system. (Hussain Dr. Ishrat , 2004). 2005 The state bank of Pakistan plans to issue two licenses to overseas banks to promote the Islamic banking structure in the country and attract more investor in this regard to invest more and comply with shariah and promote Islamic finance. Zamir, Haris and (Nambiar, 2005). 2003 Dr. Ishrat Hussain has pressured upon banks to adopt best international practices for corporate governance, he said that the country economy situation must be kept in mind that the challenges are facing by the financial institutions the board should be vigilant in this area also, specially he directed the Islamic banks to be sound corporate, environment of trust, ethics, responsible behavior and check and balance . (Hussain, Dr, Ishrat, 2003) 1992 Islamic banking is totally a system of free interest banking, and believe on sharing profit and risk, rather than payment of interest, in the interest economy the rate of interest which is fixed by central bank follow by other private interest base banking system to conduct the transaction and dealing, few western take its seriously that it is the need for modern business, and the Islamic banking system avoid this interest, now many Muslim countries trying to develop free interest banking system which is totally on Islamic principles and comply shariah. (The economist, 1992)

2005 The total numbers of Islamic banks in the country has license now increased to five. Mizan bank, bank islami Pakistan, albaraka bank and emirates global islmaic bank are the other bank which having Islamic banking license. Mezan and albaraka are operating in a country with a 36 branches, beside these about 31 branches of nine conventional banks are also providing exclusively Islamic banking services in country. (Zamir, Haris and Nambair, 2005) Problem to Islamic banking as reported by state bank of Pakistan. are Corruption, lack of effective enforcement, inefficiency in the system, minimum income level, minimum equity requirement, and area restrictions etc. The economist. (Islam and changes of interest rate)

References:
Bukhari, Farhan, (2002) Finacail times London (UK) online, 25th July.

Hussain, Dr, Ishrat, (2003) the bank to adopt best international practices in corporate governance, available from www.sbp.org/press/2003. Hussain, Dr, Ishrat, (2004) state bank issues Islamic banking, available also www.sbp.org/press/2005. Khan Masood Waqar, (1991), interest free Islamic economic system, review of Islamic economics, journal of international association for Islamic economics, Crown well press Ltd, Broughton Gifford, Wiltshire. Cornelisse, P. and Steffelaar, W. (2008). Islamic Banking in Practice: the Case of Pakistan. Development and Change Volume 26 Issue 4, Published Online: 22 Oct 2008, 2009 Institute of Social Studies. Khan S Mohsin and Mirahor Abbas, (1992), Islam and the economic system, review of Islamic economics, journal of international association for Islamic economics, Crown well press Ltd, Broughton Gifford, Wiltshire. Meezan bank Ltd, (online) 24 dec, 2005 also available www.meezanbank.com/easy Meezan bank Ltd, (online) www.meezanbank.com/network. 03 January 2005 also available

Sadiqi Muhammad, Nijatullah, (1983), Interest free banking, banking without interest, Leicester UK, the Islamic foundation. Zamir, Haris and Zambiar, (2005), Pakistan pushes Islamic banking, Bloomberg news Tuesday, sep, 06, 2005, and Pakistan daily The news, Aug, 03, 2005. Hussian Dr, Ishrat, (2004) Evolution of Islamic banking, state bank of Pakistan, published, dec, 02, 2004. Also available at www.sbp.org/press/2005