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‡ Philosophy of Islamic banking.

‡ Vision

‡ Objectives

‡ Inception of Islamic banking

‡ Current Status of Islamic banking

‡ Way Forward
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‡ Islam is a complete religion providing
comprehensive code of life

‡ Islam is not confined to some moral

teachings, some rituals or some modes of
worship

‡ It rather contains guidance in every sphere of

life including socio-economic fields

‡ If such guidance and rules are followed by, it

is very useful for the welfare and well being
of all human being.
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hllah (SWT) has ordained in Holy Quran

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Ñstablish Islamic Banking as banking of first

choice to facilitate implementation of an
equitable economic system providing a strong
foundation for establishing a fair and just
society for mankind
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ÿ





 


‡ Islam encourages fair and equitable

distribution of wealth. Hence, it does not
promote concentration of wealth in few hands

‡ Riba, Maysir & Gharar cause unfair distribution

of wealth

‡ hll permissible modes are beneficial for the

economy, however some of them are more
preferred and encouraged by Islamic Shari¶a
such as Contracts of Ñquities Ä




which facilitate equitable
distribution
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‡ Islamic banking, being a part of Islamic
Ñconomic System, should play an active role
to achieve this objective

‡ For this purpose, Islamic banking transactions

should primarily be based on
-- (Profit & Loss sharing
basis) so that the capital flows from wealthy
class to the poorer

‡ The ratio of equity based transactions to trade

based transactions should increase to achieve
the real benefits of Islamic banking
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å 
 


‡ Where Uqood ul Musharakat (Profit & loss

sharing contracts) are not possible or
feasible, Uqood Ul Mubadalat (Ñ change
contracts) such as Murabaha, Ijarah,
Diminishing Musharakah, Salam & Istisnaa
etc. may be used

‡ These asset backed transaction also cause to

decrease the level of inflation from the
economy, provided they are completely
genuine and Shariah compliant transactions.
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‡ Islamic Financial Institutions should evaluate

the e tent to which basic requirements of the
community have been fulfilled through Shari¶a
Compliant range of products

‡ h wide range of products fulfilling basic needs

of the masses increase people¶s confidence in
Islamic banking and its true spirit
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A 
 

 

‡ The long term sustenance and survival of

Islamic Financial Institutions demands high
level of Shari¶a Compliance and adherence to
Shari¶a principles

‡ Products which may  

 be Shari¶a
Compliant but defeats the true spirit of Islam
or gives way to 
must be discouraged

‡ h high reliance on such products raises

skepticism against the commitment and
integrity of industry participants
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›  
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›
ÿ. Cooperative banks in the sub-continent:
o Cooperatives in Hyderabad Dakan (ÿ
s)
o Cooperative bank in Karachi (ÿ s)
2. Pilgrimage fund in Malaysia (ÿ s) full-fledged bank in
ÿ 
. Saving bank in Mitghamr, Ñgypt (ÿ )

. Nasr Social Bank, Ñgypt (l l), was created as an interest-
free commercial bank
. Dubai Islamic Bank (ÿ 
)
. Islamic Development Bank (ÿ 
)
. In 8s different initiative were taken in Pakistan, Iran &
Sudan. Islamic Mutual funds started to emerges
8. In s hhOIFI, Harvard Islamic Finance Forum, Dow
Jones Islamic Inde were established
. In 2-, several Islamic Bonds (sukooks) were issued.
Key infrastructure institutes established including IFSB,
IRh (Islamic Rating hgency), CIBhFI, hRCIFI.
 › 



‡  + Islamic financial institutions

‡ $  -  bn in funds
‡ 2+ Shariah compliance mutual funds with $ bn funds
‡ 2+ International Islamic sukuks issued till 2 with a
 Growth in comparison with 2
‡ ÿ + Takaful companies operating world wide
‡ Post graduate degrees offered in Islamic banking by major
academic institutions
‡ Important database system (HIFIP)
‡ Shariah & hccounting Standards for the Industry (hhOIFI)
‡ Recognition by IMF, World Bank and Basel Committee

=
‡ 

 !
 › 



‡ More then  countries have ISLhMIC BhNKING

Institutions

± hppro  Muslim countries including Kuwait, Dubai,

Saudi hrabia, Iran Malaysia Brunei and Pakistan

± hppro 2 non-Muslim countries including USh, UK,

Canada, Switzerland, Srilanka, South hfrica and
hustralia
 › 



Different types of IFI have emerged globally

‡ Islamic Commercial Banks

‡ Islamic Investment Banks
‡ Islamic Units of conventional banks
‡ Islamic Funds
‡ Islamic House Financing Schemes
‡ International Financial Market
‡ International Institutions of Islamic Banking
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‡ Main Groups ‡ Many foreign banks now

have Islamic windows.
± DMI
± Citibank
± hl Baraka ± hNZ
± hl Rajihi ± hBN hMRO
± Kuwait Finance House ± Goldman Sachs
± Kleinwort
‡ In Pakistan Benson(German)

± Meezan Bank ± Hong Kong Shanghai

bank
± hl Baraka
± Saudi hmerican bank
± Saudi British Bank
± UBS hG
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‡ Legal framework in place, licenses available
for
± Islamic commercial bank
± Islamic Subsidiary of a conventional bank
± Stand alone Islamic branches of a
conventional bank
‡ Legal framework hybrid of Bahrain and
Malaysian model
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‡ Shariah Board established at SBP
‡ Islamic products available to cover 8 of
the services offered by conventional banks
‡ Liquidity management products being
developed
‡ Shariah audit developed by SBP
‡ Rupee denominated Sukooks has been
issued
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‡ Full Fledged Islamic Banks - â

ß Meezan Bank
ß hl Barakah Islamic Bank
ß Dubai Islamic Bank
ß Bank Islami Pakistan
ß Ñmirates Global Islamic bank
ß First Dawood Islamic Bank
‡ Many conventional banks operating Islamic Banking
Branches: Bank of Khyber,MCB, Bank hlfalah, Habib Metro
Bank, Bank hl Habib, Standard Chartered Bank, Soneri,
HBL, UBL, hskari, NBP, RBS etc. Äÿå
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‡ Branch network of IB participants by Dec,8 ±   å !

‡ hsset base of IB ±  å 
!

‡ Deposit base of IB ±  ÿâ

!

‡ Growth rate in åâ around â "

‡ Share of IB in the overall Banking system stands at A "

"#$%%&
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‡ Skepticism & Lack of awareness

‡ Lack of trained Human Resource

‡ Solutions for Liquidity Management

‡ Islamic Inter-bank Market

‡ Ñnsuring Shariah Compliance

‡ New Product Development & Research

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‡ hvailability of Takaful

‡ Weak Regulatory/Legal Frame work

‡ Risk Management Frame work

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In order to meet above mentioned objectives,

following steps will be helpful in moving
towards the right direction:

‡ Strict compliance to SSB / Sh Guidelines &

hhOIFI Shari¶a Standards

‡ Use of true modes such as Mudaraba /

Musharaka (Profit & Loss Sharing) which
includes Joint Ventures, Venture Capital,
Private Ñquity etc.

‡ Paying higher return to depositors and

charging lower financing charges as
compared to conventional banks in order to
boost public confidence
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‡ Legal / Ta ation laws should be modified to

facilitate asset backed transactions and true
implementation of Shari¶a guidelines

‡ Banks must carry out regular and organized

audit activity to ensure proper utilization of
depositors¶ funds and to avoid fake
transactions at customer end.

‡ Depositors¶ money should not be allocated to

high risk ± low profit asset classes in order to
raise profitability of shareholders
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‡ µFit & Proper criteria¶ for the eligibility to

become a Shari¶a hdvisor/SSB member must
be laid down in all jurisdictions

‡ hdequate resources must be allocated to

facilitate Research & Development and
education of masses
THhNK YOU