Introduction to Banking
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Transcript of Introduction to Banking
Al- Sadiq (A.S) Institute of Islamic Banking, Finance & Takaful
By: Jawaid IqbalRajab 8, 1429 Saturday July 12, 2008
Classification of businesses by activity
Manufacturing BusinessMerchandising Business Service Business
Classification of businesses by formation
Sole ProprietorshipPartnership Company (Private/Public)
Bottom Line / Equation
Assets = Liabilities + Capital
The name bank derives from the Italian word banco "desk/bench. In Italy, Florentines bankers, used to make their transactions above a desk covered by a green tablecloth.(Source: http://en.wikipedia.org/wiki/Bank)
Definition A banker or bank is a financial institution whose primary activity is to act as a payment agent for customers, and to borrow and lend money.
Bank as a payment agent Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, and ATM.
Bank as a borrower Banks borrow money by accepting funds deposited on current and savings accounts, accepting term deposits and by issuing debt securities such as bonds i.e. TFCs.
Bank as a lender Banks lend money by making advances to customers on current account, by making installment loans, and by investing in marketable debt securities and other forms of lending.
Other Functions Provide safe custody Lockers Issue letter of credits, guarantees Issue demand drafts and pay orders Provide foreign exchange Provide reports on the creditworthiness of customers
New Concepts Telephone Banking Mobile Banking Internet Banking Branchless Banking
Rank 2 Citigroup Inc
Score 135,271 ($m) 119,783 ($m) 115,790 ($m) 114,928 ($m) 81,940 ($m) 78,730 ($m) 78,088 ($m) 77,462 ($m) 69,716 ($m) 67,378 ($m)Source: Euromoney Magazine
1 Bank Of America Corporation 3 JP Morgan Chase & Co. 4 HSBC 5 Mitsubishi UFJ Financial Group 6 Royal Bank Of Scotland Group 7 ING Groep NV 8 Crdit Agricole 9 Wachovia Corporation 10 BNP Paribas
money + money (interest)
IslamicBank Goods & Services Client
What is Islamic Banking?What prompted Islamic Banking? Islamic Finance Perspectives
Islamic Banking is interest free Asset Backed banking governed by the principles of Islamic Shariah
Islamic Banking distinguishes from Conventional Banking in four basic principles:1. 2. 3. 4. Interest Free Transactions. Risk Sharing Asset & Service Backing Contractual Certainty( Gharar free contracts)
Interest free banking?
Profit and loss sharing? Ethical banking?
Emergence of Arab nationalism and the search for identity Oil shocks and petrodollars (US$ 145 per barrel)Privatization and the individuals right to choose
More than 350 Islamic Banks/FIs in 50 countries current market size US$ 700 billion
Estimated annual growth rate 20% , total assets exceeding US$ 1 trillion by 2016.