Faisal Bank Albarkat (1)

Project on:

Islamic Banking

(Faysal Barkat Islamic Banking)

Submitted To:

Sir Saleem Mirrani

Submitted By:

: Adnan Manzoor (8232)

: Muhammad Iltaf (8256)

: Fahad Ali (8266)

MBA 4th (Morning)

Department of Banking and Finance

Government College University Faisalabad

Acknowledgement

We would like to express our deepest appreciation to all those who provided us the

possibility to complete this project. A special thanks we give to our respected teacher Sir.

Saleem Mirrani Lecturer Department of Banking and Finance who provides us complete

guideline in completion of our whole project with the topic of “Islamic Banking’’. We are really

grateful and honored to his marvelous guidance, generous support, sympathetic behavior,

scholastic attitude, research oriented approach and tremendous help throughout our project.

We are also very thankful to those who help in our work in which different bankers i.e Basit Gill

relationship officer faysal bank Barkat Islamic branch and and Imran Sahazad relationship

Manager- Liability faysal bank Islamic banking branch. We are also thankful to our friends and

fellows who show their interest in our project and help us during our work.

CHAPTER No 01

Introduction of Islamic Banking

What is Islam?

The Arabic meaning of Islam is submission to God/Allah; the creator of the universe. It is a

comprehensive and balanced system of life about the spiritual and the temporal realms.

What is Bank?

The financial institution that accept deposits from SSUs (the individuals who have surplus

spending units), lend to SDUs (the individuals who have spending deficit units) and renders

different services to its customers.

What is Islamic Banking?

The riba free banking and Banking according to the Islamic sharia or Islamic rules and regulations is

called Islamic banking.

In whole the world conventional banking becomes popular that is based on interest that is not allowed in

Islam. So the people who dislike riba are interested in doing transactions in accordance with Islamic rules

and shria, so then the concept of Islamic banking was introduce by Islamic scholars which is purely is

based on Quran and Sunna. This concept fulfills the desire of people who like Islam. But now a day’s

people are using negative word of mouth regarding Islamic banking e.g they said that there is no

difference between Islamic banking and conventional banking. Actually they are wrong in their

comments as each Islamic bank is bound to follow Islamic rules.

Difference between Islamic Banking and Conventional Banking:

Conventional Banking Islamic Banking

1. The functions and operating modes of

conventional banks are based on fully

manmade principles.

1. The functions and operating modes of

Islamic banks are based on the principles of

Islamic Shariah.

2. The investor is assured of a

predetermined rate of interest.

2. In contrast, it promotes risk sharing

between provider of capital (investor) and

the user of funds (entrepreneur) on agreed

rates basis.

3. It aims at maximizing profit without any

restriction.

3. It also aims at maximizing profit but

follow the Shariah restrictions.

4. It does not deal with Zakat. 4. In the modern Islamic banking system, it

has become one of the service-oriented

functions of the Islamic banks to be

a Zakat Collection Centre and they also pay

out their Zakat.

5. Lending money and getting it back with

compounding interest is the fundamental

function of the conventional banks.

5. Participation in partnership business is the

fundamental function of the Islamic banks.

So we have to understand our customer's

business very well.

6. It can charge additional money (penalty

and compounded interest) in case of

defaulters.

6. The Islamic banks have no provision to

charge any extra money from the defaulters.

Only small amount of compensation and

these proceeds is given to charity. Rebates

are given for early settlement at the Bank's

discretion.

7. Very often it results in the bank's own

interest becoming prominent. It makes no

effort to ensure growth with equity.

7. It gives due importance to the public

interest. Its ultimate aim is to ensure growth

with equity.

8. The status of a conventional bank, in

relation to its clients, is that of creditor and

debtors.

8. The status of Islamic bank in relation to

its clients is that of partners, investors and

trader, buyer and seller.

9. A conventional bank has to guarantee all

its deposits.

9. Islamic bank can only guarantee deposits

for deposit account, which is based on the

principle of Al-Wadiah, thus the depositors

are guaranteed repayment of their funds,

however if the account is based on the

Mudarabah concept, client have to share in a

loss position..

Purpose of Study:

Our purpose of studying the subject of Islamic banking is to get knowledge about the rules and

regulations that have been defined by Islam regarding banking system and then examining that

either these rules are practically followed by Islamic banks or not. So that we can able to clarify

the concept of people who say that there is no difference between Islamic and conventional

banking.

Project Overview:

This project is on the subject of Islamic banking. In which we have discussed different rules and

regulations explained by the Islam regarding Islamic banking. For this purpose we have choose

Faiysal bank branch Liyqat road Faisalabad. There are three chapters and the first chapter is on

introduction that includes subject intro, bank history and finally the branch intro. In second

chapter we have discussed different services and products that this branch is providing to its

clients. It also includes documentation and procedures that are used in banking operations of

branch for delivering its services to customers. At the end in third chapter we have compare

these services and products with the theory that we have studied. Finally we have concluded that

either faysal bank is following Islamic rules or not in its operations. At the end of project we

have given conclusion of our finding.

History:

Faysal Bank Limited (FBL) is a subsidiary of Shamil Bank of Bahrain E.C. (Islamic Bankers)

which is controlled and managed by the Dar Al-Maal Al-IslamiTrust (DMI).

Faysal Bank started operations in Pakistan in 1987, first as a branch set-up of Faysal Islamic

Bank of Bahrain and then in 1995 as a locally incorporated Pakistani bank under the present

name of Faysal Bank Limited. On January 1, 2002, Al Faysal Investment Bank Limited, another

group entity in Pakistan, merged into Faysal Bank Limited which resulted in a larger, stronger

and much more versatile institution. In fact it has the highest share capital amongst private banks

in Pakistan and is amongst the largest in terms of equity

DMI is headed by H.R.H Prince Mohamed Al Faisal Al Saud with its Head Office in Geneva,

Switzerland. It has been one of the leading contributors to the development of Islamic-banking in

the world, particularly with regard to promoting new modes of investments compatible with

Islamic Shariah, through its network of over 20 financial and business companies, represented in

15 countries around the world.

Shamil Bank of Bahrain E.C. (Islamic Bankers) came into existence when the board of DMI

decided to merge Faysal Islamic Bank of Bahrain and Islamic Investment Company of the Gulf.

Based on the pioneering experience of Islamic banking of both, a new entity, Shamil Bank of

Bahrain E.C was formed. The amalgamation process was completed in June 2000, with an

objective to further enhance and consolidate the financial base and to optimize the operational

economies.Shamil Bank continues to thrive with its Islamic-principles and a strong asset base of

US$ 2.9 billion and equity of more than US$ 230 million. The Bank is fully committed to the

regionand continues to hold a 60 percent controlling interest in Faysal Bank Limited,

Pakistan.

FBL was the first Bank to start Islamic-banking in Pakistan under the name of FIBB. Its strict

compliance to Shariah gives a distinctive edge over other conventional Financial Institutions.

The Bank is governed by strict Islamic banking rules and is not allowed to invest in any

government / institutional securities or financial investment schemes that are interest based.

Since 1987, FIBB operations have been extended to Pakistan in the form of full commercial

operations.

Vision:

“The introduction of a just and equitable financial system by being a world class multi-purpose

financial institution, providing a range of specialized services, working on Shariah principles.”

Values:

The mission statement translates into our objectives:

To comply with the spirit of Islamic Shariah this will govern our entire business by

translating it into modern financial products and services.

To strives for halal profit, prudent growth and pursuit of improved efficiency.

To focus on serving our customers and shareholders by building relationships based on trust

and mutual benefit.

To inculcate a culture of teamwork within the Bank by introducing staff training and

development programs.

Q. What is the philosophy of Islamic banking and finance?

Islamic shariah prohibits ‘interest’ but it does not prohibit all type of gains on capital. It is

only the increase stipulated or sought over the principal of a loan or debt that is

prohibited. Islamic principles simply require that performance of capital should also be

considered while rewarding the capital. The prohibition of a risk free return and

permission of trading, as enshrined in the Verse 2:275 of the Holy Quran, makes the

financial activities in an Islamic set-up real asset-backed with ability to cause ‘value

addition’.

Islamic banking system is based on risk-sharing, owning and handling of physical goods,

involvement in the process of trading, leasing and construction contracts using various

Islamic modes of finance. As such, Islamic banks trade and/or invest in assets/business

deals for the purpose of income generation.

Profit has been recognized as ‘reward’ for (use of) capital and Islam permits gainful

deployment of surplus resources for enhancement of their value. However, along with the

entitlement of profit, the liability of risk of loss on capital rests with the capital itself; no

other factor can be made to bear the burden of the risk of loss. Financial transactions, in

order to be permissible, should be associated with goods, services or benefits. At macro

level, this feature of Islamic finance can be helpful in creating better discipline in conduct

of fiscal and monetary policies.

Objective of Faysal AlBarkat Islamic Bank:

Bank according to your beliefs – Our Barkat Islamic Banking is purely dedicated to Shariah

compliant banking services. With our well experienced staff, we ensure that your Islamic

banking needs are fulfilled. Moreover our Shariah advisor is a qualified mufti who oversees

business of these dedicated branches and ensures its compatibility and compliance with Shariah

principles.

Following are the main modes of Islamic banking and finance;

MURABAHA

Literally it means a sale on mutually agreed profit. Technically, it is a contract of sale in which

the seller discloses his cost and profit. Islamic banks have adopted this as a mode of financing.

As a financing technique, it involves a request by the customer to the bank to purchase certain

goods for him. The bank does that for a definite profit over the cost, which is included in the

Selling Price. To provide credit to the Customer, Islamic Banks normally allow the deferment of

Selling Price to a future date or dates. Deferment of Price is not an essential feature of Murabaha.

In practice, however, Murabaha has become synonymous with Murabaha Muajjala where Selling

Price is deferred. In such transactions, the Selling Price can be the same as Cash Price or it can

be higher or lower.

MUSAWAMAH / BAI MUAJJAL

Musawamah is a general and regular kind of sale in which price of the commodity to be traded is

agreed between the seller and the buyer through the normal process of bargaining, without any

reference to the price paid or cost incurred by the former. Thus, it is different from Murabaha in

respect of pricing formula. Unlike Murabaha, the seller in Musawamah is not obliged to reveal

his cost. All other conditions relevant to Murabaha are valid for Musawamah as well.

Musawamah can be used where the seller is not in a position to ascertain precisely the costs of

commodities that he is offering to sell. Like Murabaha, Musawamah can be on the basis of spot

payment of Price or it can be a credit sale. If latter, it is referred to as Bai Muajjal. Selling Price

can be equal to or higher or less than the cash price. Usually it is higher and this is explicitly

allowed in shariah.

IJARAH

Ijarah is a contract of a known usufruct against a specified and lawful return or consideration for

the service or return for the benefit proposed to be taken, or for the effort or ork proposed to be

expended. In other words, Ijarah or leasing is the transfer of usufruct for a consideration, which

is rent in case of hiring of assets or things, and wage in case of hiring of persons.

IJARAH-WAL-IQTINA

A contract under which an Islamic bank provides equipment, building or other assets to the

customer against an agreed rental together with a unilateral undertaking by the bank or the

customer that at the end of the lease period, the ownership in the asset would be transferred to /

acquired by the lessee under a separate Agreement of Sale. The undertaking or the promise does

not become an integral part of the lease contract. The rentals are fixed in such manner that the

bank gets back its principal sum alongwith with profit over the period of lease.

BAI SALAM

Salam means a contract in which advance payment is made for goods to be delivered later on.

The seller undertakes to supply some specific goods to the buyer at a future date in exchange for

an advance price fully paid at the time of contract. It is necessary that the quality of the

commodity intended to be purchased is fully specified leaving no ambiguity leading to dispute.

The objects of this sale may be any kind of goods but cannot be gold, silver or currencies.

Barring this, Bai Salam covers almost everything, which is capable of being definitely described

as to quantity, quality and workmanship.

MUDARABAH

A form of partnership where one party provides the funds while the other provides expertise and

management. The latter is referred to as the Mudarib. Any profits earned are shared between the

two parties in a pre-agreed ratio, while loss is borne only by the provider of the capital.

MUSHARAKAH

Musharakah means a relationship established under a contract by the mutual consent of the

parties for sharing of profits and losses in the joint business. It is an agreement under which the

Islamic bank provides funds, which are mixed with the funds of the business enterprise and

others. All providers of capital are entitled to participate in management, but not necessarily

required to do so. The profit is distributed among the partners in pre-agreed ratios, while the loss

is borne by the partners strictly in proportion of their respective capital contributions.

CHAPTER No 2

Services of Faysal Al Barkat Islamic Bank

Barkat Kamil Business Account:

An account that not only provides return on your investments, but offers the option to avail a

wide variety of free of charge banking services to suit your banking needs. A suitable solution

for businessmen as well as individuals that are looking for free banking services due to their

business banking needs.

Designed on foundation of ‘Mudarabah’, Barkat Islamic Banking is the ‘Mudarib’ (manager of

the funds) and the customer is the ‘Rabb-ul-Maal’ (owner of funds). These deposits are deployed

in Shariah compliant modes such as Ijarah, Murabaha and Musharakah.

Product Features and Benefits

Previous Month’s – Minimum Average Monthly balance of Rs. 100,000 required to avail

free of charge services.

A range of FREE services:

o Cheque books

o Payorders

o Duplicate account statements.

o Online banking services.

o Account balance and maintenance certificates.

o Online intercity clearing as well as same day clearing.

o Visa Debit card.

Unlimited transaction facility.

Profit calculated on monthly average balance and paid monthly.

Online access to your account through any Faysal Bank branch.

24-hour access to your account through Faysal Bank’s Call Centre, ATM network, and

all other 1-Link / MNET ATMs country-wide.

A host of conveniences through the Faysal Bank ATM network:

o Instant funds transfer

o Utility Bill Payment

o Cash deposit (at selected Faysal Bank ATMs)

SMS Alert facility.

Dedicated Relationship Manager to advise you, as per your needs.

Current Account:

Barkat Islamic Current Account is a value added product which enables you to derive maximum

benefits from your deposits. It is a suitable solution for individuals as well as business entities

looking for a checking account based on Islamic Financing principles. This flexible account is

based upon Qard, (loan on demand). This makes it free of interest and the principle is guaranteed

to you, the depositor. You can be rest assured that your funds will be utilized in strict adherence

to Shariah principles, as all deposits are allocated in a specific pool of funds which are further

invested in Islamic assets.

Product Features and Benefits:

Nationwide access to your account through any Faysal Bank branch.

24-hour access to your account through Faysal Bank’s Call Centre and ATM network,

as well as all other 1-Link / MNET ATMs country-wide.



Instant Funds Transfer

Utility Bill Payment

Cash deposit (at selected Faysal Bank ATMs)

SMS Alert facility

Saving Account:

Barkat Islamic Saving Account provides higher returns on your investments and is best-suited

solution for individuals as well as business entities that are looking for competitive returns on

their savings based on Islamic Financing principles.

Designed on the foundation of ‘Mudarabah’, Barkat Islamic Banking is the ‘Mudarib’ (manager

of the funds) and you, the customer are the ‘Rabb-ul-Maal’ (owner of funds). These deposits are

deployed in Shariah compliant modes such as Ijarah, Murabaha and Musharakah. The rate of

profit on your deposit will be determined through a Shariah approved mechanism for the

calculation of weightages are announced at the beginning of each calendar month and shall be

applicable for that month only.

Barkat Islamic Saving deposits will share in the profit earned by the Islamic Banking Branches

of Faysal Bank. Losses, if any, will be shared by each depositor in the proportion of investment.

Monthly weightages for profit distribution shall be calculated and displayed at all Barkat Islamic

Banking branches as well as our website.


Account can be opened with as low as Rs. 100.

No average deposit balance required to earn profit.

Unlimited transaction facility.


Tiered profit structure: the higher the tenor and balance of your deposit, the higher your

expected profit amount.


24-hour access to your account through Faysal Bank’s Call Centre at 111 06 06 06

Faysal Bank ATM network and all other 1-Link / MNET ATMs country-wide.


o Instant funds transfer

o Utility Bill Payment

o Cash deposit (at selected Faysal Bank ATMs)

SMS Alert facility.

Investment Certificate:

Barkat Investment Certificate (BIC) is a suitable solution for investors who are looking for high

returns on their investments, with absolute Shariah compliance. It is a convenient and secure

financial solution for individual account holder as well as a business entity who seeks to

capitalize on an opportunity under a hybrid arrangement of Musharakah and Mudarabah Islamic

modes of financing. The deposit is allocated to a specific pool of funds that are invested in

Islamic assets, governed by predefined weightages that are based on the Profit and Loss Sharing

(PLS) mechanism in adherence to the Shariah principles. Monthly weightages for profit

distribution along with historical rate sheets shall be are displayed at all Barkat Islamic Banking

branches and our website.

Product Features & Benefits:

Minimum investment amount Rs. 50,000/-.

A range of tenures: 1 month, 3 months, 6 months and 1 year.

Monthly as well as maturity profit payment options available.

Options for automatic renewal.

Premature withdrawal option available with no penalty charges.

Dedicated Relationship Manager to advise you, as per your needs.

Foreign Currency Account:

Barkat Islamic – Foreign Currency Current Account enables you to derive maximum benefits

from your foreign currency deposits. This flexible account is based upon Qard, (loan on

demand), which makes it free of interest and the principle is guaranteed to the customer. The

customer can be rest assured that the funds will be utilized in strict adherence to Shariah

principles, as all deposits are allocated in a specific pool of funds which are further invested in

Islamic assets.


Choice of currency – USD $, GBP and Euro.

Minimum Balance required USD $ 500 or equivalent.

Nationwide access to your account through any Faysal Bank branch.

24-hour access to your account through Faysal Bank’s Call Center.

Service Charges are as per Faysal Bank’s Schedule of Charges.

Foreign Currency Saving Account:

An account that provides greater returns on your investments and is a suitable solution for

individuals as well as business entities that are looking for competitive returns on their savings

based on Islamic Financing principles.

Opened on the basis of ‘Mudarabah’, where Barkat Islamic Banking is the ‘Mudarib’ (manager

of the funds) and you, the customers are the ‘Rabb-ul-Maal’ (owner of funds). These deposits are

deployed in Shariah compliant modes such as Ijarah, Murabaha and Musharakah. The rate of

profit on your deposit will be determined through a Shariah approved mechanism for calculation

of weightages which will be announced at the beginning of each calendar month and shall be

applicable for that month only. Barkat Islamic Foreign Currency Saving deposits will share in

the profit earned by the Islamic Banking Branches of Faysal Bank. Losses, if any, will be shared

in the proportion of investment by each depositor. Monthly weightages for profit distribution

shall be calculated and displayed at all Barkat Islamic Banking branches as well as our website


Available in USD.

Account can be opened with a minimum balance of $ 1000

No average deposit balance required to earn profit

Unlimited transaction facility


Tiered profit structure: the higher the tenor and balance of your deposit, the higher your

expected profit amount

E-Statement:

Banking at your fingertips! Your e-statement service allows you to keep track of all your

banking transactions, now you can receive your account statements directly in your email.


Convenience: Barkat e-statement service enables you to view your current and saving

account activities, anywhere, anytime. All you have to do is access your personal e-mail

account, at your convenience.

Free: This facility comes to you at no extra cost. All you need is a personal e-mail

address to which your e-statements will be sent.

Flexibility: You can receive daily* or monthly e-statements at, up to 2 different email

addresses.

Security: While printed statements run the risk of being misplaced, your e-statement is

more secure.

Murabaha:

‘Murabaha’ is a term of Islamic FIQH and it refers to a particular kind of sale in which the seller

discloses the cost of goods being sold at as well as the margin of profit. The payment of price in

case of Murabaha may be on the spot or it may be deferred, as agreed upon by the parties.

Murabaha transactions are subject to the following rules, without which this transaction is not

valid:

Feature and Benefits:

Barkat Murabaha can be used by individuals, sole-proprietorships, partnerships and

corporate entities.

Purchase of inventories, raw materials, semi-finished / finished goods, stores & spares

and all kinds of consumables can be made through Barkat Murabaha.

BarkatMurabaha is an ideal mode for short term credit (up to 12 months) as it offers

flexible credit terms to match the Customers’ cash-flow.

Documentation Required for Bank Islamic Murabaha:

Brief profile of business

Copy of CNIC of the individual / proprietor (original must be shown)

06 month bank statement

Bank certificate, if proprietorship concern

Proof of income

Basic Customer Fact Sheet

Audited/Management accounts, if proprietorship concern

Details of facilities availed from other Financial Institutions

Copy of NTN certificate (original must be shown)

Form ‘3’ (for Public Limited Companies Only)

Copy of Memorandum and Articles of Association

Certificate of incorporation and commencement of Business

Copy of Form ‘A’ & ‘29’

Certified copy of partnership deed

Facility request letter duly signed & stamped

Full details of proposed assets to be purchased

Auto Finance:

Barkat Auto Finance based on Diminishing Musharakah. Barkat Auto Finance is based on

Diminishing Musharakah, where you participate with Barkat Islamic Banking in a joint

ownership of your vehicle and the Bank provides a certain amount of financing. You agree to a

monthly payment to the Bank of which one component is rent for use of the vehicle, and the

other is for you to increase your ownership of the vehicle. Once you have made the full payment,

which has been agreed upon, you become the sole owner with a free and clear title to the vehicle.


Avail the financing of new, used and imported vehicle for personal use

Quick processing with minimum documentation

No Limit on financing amount starts from as low as Rs. 100,000 and minimum equity

requirement of as low as 20%

Multiple options for tenure up to 5 years

Installment repayment to start ONLY after delivery of the vehicle and no processing fee

until approval of financing

Built-in Takaful (Islamic Insurance) expense for the entire financing tenure. The bank

will arrange Takaful for the vehicle from a reputable Takaful company and will facilitate

you in claim processing

Maximum safety of your vehicle ensured through the tracker installation.

Rs.1,800,000Rs.630,000

565%35%Rs.1,170,000

23.02%

BOOKING GREATER THEN 2 MONTHS

*PAYMENTS:(A) DOWN PAYMENT / CUSTOMER'S MUSHARKA SHARE Rs.630,000(B) DOCUMENTATION CHARGES Rs.5,800

PAYABLE IN FORM OF CROSS CHQ. OR PAY-ORDER Rs.635,8001REPAYMENT SCHEDULE:

YEAR TOTAL MONTHLY INSTALLMENT

1 Rs.33,297(**) 2 Rs.33,297(**) 3 Rs.33,297(**) 4 Rs.33,297

(**) 5 Rs.33,297

TOTAL Rs.1,964,523

Note:

Fill values in highlighted fields.

Other Credit commitment are not Included in the calculation.

Finance amount may be changed due to other credit commitments.

Max: age of applicant on completion of facility term - Salaried (60) yrs & Business / Self Employeed Professionals.(65)

SEP = Self Employed Professional (Doctor, Engineer, Architect etc)

Minimum age of applicant should be 21 yrs

Repayment will start after delivery of the vehicle.

First month installment will only constitute the rent amount. Rent calculation is based on actual number of days from vehicle delivery till the end of first month.

Down payment & processing fee will be received after approval of financing.

No limit on financing amount, starts from as low as Rs. 100,000 and minimum equity requirement as low as 20%

Tenure options from 1 to 5 years

Built-in Takaful coverage for the entire financing tenure.

Pricing is variable, based on annual revision of 1 year KIBOR.

TOTAL COST OF VEHICLE

CUSTOMER'S MUSHARKA SHARE %

TENURE IN YEARS

BANK'S MUSHARKA SHARE %

CUSTOMER'S MUSHARKA SHARE (in RS)

Faysal Bank Limited - Barkat Auto FinanceEMI CALCULATION SHEET

BANK'S MUSHARKA SHARE (in RS)PRICING

Ready Delivery/Booking

Home Finance

Barkat Home Finance based on Diminishing Musharkah. Barkat Home Finance is based on

Diminishing Musharkah, where you participate with Barkat Islamic Banking in the joint

ownership of your property, where the bank provides a certain amount of financing. You agree to

a monthly payment to the bank of which one component is rent for the use of the property and

the other is for you to increase your ownership in the home. Once you have made the full

payment, which has been agreed upon, you become the sole owner with a free and clear title to

the property.


Various product options to suit your need:

o Home Buyer – Purchase a readymade home of your choice.

o Home Refinance – Transfer an existing Mortgage to Barkat Islamic Banking.

o Home Renovation – Give a new look to your existing home.

Finance up to 75% of the appraised value of your new home or up to PKR 50 million

(whichever is lower)

Maximum convenience from 1 up to 20 years

Easy to make partial prepayments

Minimal documentation & processing fee

Quick processing time

Property takaful coverage

Accidental death takaful coverage

Basic Banking:

Barkat Islamic Basic Banking Account is a current account that enables small depositors the

comfort of banking in a secure and customer friendly environment.


Account can be opened with an initial deposit of Rs. 1000/- only.

No minimum balance maintenance charges.

2 free deposits and 2 free withdrawals per month through cash / clearing. In case of

additional transactions, charges as per Schedule of Charges are applicable.

Free of charge Annual Statement of account. Standard charges apply if more than one

statement is required.

Unlimited free-of-charge withdrawals through Faysal Bank ATMs.

Service Charges are as per Faysal Bank’s Schedule of Charges.

Documentation Required

Duly filled Customer Relationship Form (CRF) along with Specimen Signature Card.

Proof of income.

Copy of CNIC (Original CNIC must be shown at the time of account opening).

Chapter No 3

Analysis

In this chapter we are going to analyze the services which are in actual according to the Islamic

rules and regulations and what actually Faisal bank Al barkat is offering to their customer. Faisal

bank Albarkat basically is offering the services not in purely Islamic ways but also it is the

mixture of both conventional and Islamic just like hybrid services they are offering. Faisal bank

started its operations as Islamic bank recently that is why maturity of Islamic services does not

exist in the service delivery.

Faisal bank albarkat is basically offering the deposits facilities saving account and current

account and kamil business account.

Analysis of Deposits

Saving Account:

Faisal bank albarkat is offering saving account to its clients. This account is maintained under the

MUDARABA contract. In this service faisal bank takes deposits from the customer and make a

Mudaraba contract with the customer. Bank acts as Modarib and customer as a rab ul maal.

Bank told the approximate profit to the customer not in exact. Mostly it is 50, 50 percent

distributed to the both parties in this bank.

It is not actually based on the profit and loss basis but also here is confirm profit is given to the

customer never bear the loss. ”. We asked the reason they said in our bank there is no chance of

loss because our portfolio is too strong. They said that “Weightages for each calendar month will

be pre-announced and applied as per rules to determine the actual amount of profit payable to

each depositor. Profit will be paid every month. In practice they use the kibor for determining the

profit minimum criteria for loan profit is kibor. Rate of Profit on deposits will be determined

through a shariah approved weightage mechanism

Business Kamil Account

Faisal bank albarkat is offering business kamil account to its clients. There is unrestricted

Mudaraba relationship between depositor and bank. Designed on foundation of ‘Mudarabah’,

Barkat Islamic Banking is the ‘Mudarib’ (manager of the funds) and the customer is the ‘Rabb-

ul-Maal’ (owner of funds). In our point of view this is not an Islamic way of mudaraba reason is

this profit on this mudaraba is dependent upon the regulations given by state bank of Pakistan but

also profit of mudaraba is based on purely profit and loss basis. And in mudaraba profit sharing

ratio is decided already at the time of establishment of contract but they do not decide the ratio of

profit distribution. But also they tell the approximate rate of profit to depositor and on the day of

profit distribution it is distributed at the rate of 50, 50 percent.

Current Account

Current account is offered by the faisal bank albarkat in riba free account form. In this account

no profit is paid to the investor and his amount is used under pure Islamic way. In our point of

view this type of account is not breaching the Islamic rules.

Analysis of Financing

In financing faisal bank albarkat is offering only one service that is AUTO FINANCING. This

facility is based on the MUSHARKAH business. In their website it is mentioned that they are

offering this service under diminishing musharkah in practice they are offering this service on

just musharkah. But their operations procedure is strange not based on pure Islamic system. The

different features of this auto finance facility is following.

First thing is that when they buy a car on the request of client faisal bank does not

transfer its ownership to its own name but also it is directly transferred to the name of

client. But in Islamic point of view seller must have the ownership of car at the time of

sale which does not exist in reality.

Faisal bank does not take funds from the client just like the investment of other partner

but also all payment for the purchase of car is made by the bank itself. Only bank takes

the down payment that is 20% of total value of car.

According to the Islamic jurisprudence in musharkah asset or property cannot be lent out

as lease to the third party as “Imam Abu Hanifa said” but in faisal bank it is mentioned

in agreement that the client can lent out this car to the third party by saying that I have

paid some installment if you want to buy this you pay the remaining installment and get

ownership of car from me.

It has been mentioned in website that they are bearing the expenses of takaful of car but

in actual client bears the expenses of takaful.

Unit of price and rent and takaful charges are settled by the bank on the basis of

instructions received from the SBP. Because their unit of price involves the rent and

takaful and kibor plus rate e.g if one installment is of Rs 20000/- it means in this amount

the rent, unit of price and takaful charges are included. This installment is fixed for a

year.

Price of installment changes with the passage of time but here case is that reason of

changing the price is not to decline the value of car but also due to change in kibor rates it

is changed.

Customer is bearing the kibor interest rate and this is 10.5% now a days and 9% is plus

and 5% is of takaful expenses which totally 24.5% this becomes the total cost of one

installment. Which is totally different from the Islamic point of view.

If customer fails to make payment then customer down payment perform the functions of

security this is also against the Islamic rule. Because it is not mentioned in the agreement

about the use of down payment.

If we say that the faisal bank is running its operations under sharia compliance it will not

be right. Because Islamic rules under diminishing musharkah are something else and

rules which they are using are something else. In car financing here is no concept of

deciding the unit of price after revaluation of asset at the time of settlement of each

installmen so that actual price can be charged from the client. When they decide fixed

amount of installment then it becomes the form of riba. Neither bank has ownership of

subject matter at the time of delivery which is also non Islamic. Then how we can say

that faisal bank albarkat is Islamic bank. There is no relation of Islamic bank with fixed

interest or kibor and this bank is offering different services under riba or fixed interest.

Conclusion

After doing this project we concluded that thefaisal bank al barkat is not following the

Islamic rules and regulations but also they are offering these services under their own

made rules. Faisal bank is dealing with halal products this is their focus and in these

services bank must follow the Islamic rules. This is so called Islamic bank not a pure

Islamic bank. Mufti Muhib ur Rehman is the sharia advisor of faisal bank albarkat. In

auto financing bank is not following the actual rules of diminishing musharkah as it is

based on KIBOR plus.

Faisal Bank Albarkat (1)

Documents

Transcript of Faisal Bank Albarkat (1)