Islamic banking

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the presentation will help you in understanding diffrent terms of islamic banking. also it will help you in finding the answers of your critics about islamic banking.

Transcript of Islamic banking

  • 1.Bismillah slide

2. Introduction to the topic Islamic banking 3. Outline of the presentation History of islamic banking Pakistan and islamic banking Introduction to bank Principles of islamic banking Islamic Financial Accounting Standards Islamic financial transaction terminology Islamic laws on trading Implementation of Islamic banking Islamic modes of financing Difference between islamic and commercial banking Objections on islamic banking Conclusion 4. History of Islamic Banking Islamic capitalism Currency: the gold dinar Early economic concepts and techniques Modern Islamic History: Institutional involvement 7os Dubai Islamic Bank 1975 5. Pakistan and Islamic banking Departmental Objectives: Rules and Regulations for Islamic banking in pakistan 6. Introduction of the Bank Meezan Bank Incorporated on January 27, 1997 Strategy Growth Shareholders & Shariah Board Technology 7. Introduction of the presenters Behzad karim khan Branch Manager Chawk shaheedan branch Multan Pakistan Khurram shehzad Assisstent Manager Chawk shaheedan branch Multan Pakistan. Shehzad butt Manager Operation Chawk shaheedan branch Multan Pakistan. 8. Outline of the presentation History of islamic banking Pakistan and islamic banking Introduction to bank Principles of islamic banking Islamic Financial Accounting Standards Islamic financial transaction terminology Islamic laws on trading Implementation of Islamic banking Islamic modes of financing Difference between islamic and commercial banking Objections on islamic banking Conclusion 9. Principles: 10. Because Islam forbids simply lending out money at interest ( Riba), Islamic rules on transactions (known as Fiqh al-Muamalat) have been created to avoid this problem. The basic technique to avoid the prohibition is the sharing of profit and loss, via terms such as : 1. profit sharing (Mudharabah) 2. safekeeping (Wadiah) 3. joint venture (Musharakah) 4. cost plus (Murabahah)and 5. leasing (Ijara). 11. Murabahah In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. The bank's profit cannot be made explicit and therefore there are no additional penalties for late payment. The goods or land is registered to the name of the buyer from the start of the transaction. 12. EIjara wa Eiqtina It is similar to real estate leasing sell the vehicle at a higher-than-market price to the debtor and then retain ownership of the vehicle until the loan is paid. 13. Musharaka al-Mutanaqisa The bank and borrower form a partnership entity, both providing capital at an agreed percentage to purchase the property. The partnership entity then rents out the property to the borrower and charges rent. 14. The bank and the borrower will then share the proceeds from this rent based on the current equity share of the partnership. If default occurs, both the bank and the borrower receive a proportion of the proceeds from the sale of the property based on each party's current equity. 15. Islamic banking is restricted to Islamically acceptable transactions, which exclude those involving alcohol, pork, gambling, etc. In theory, Islamic banking is an example of full-reserve banking, with banks achieving a 100% reserve ratio. 16. Shariah Advisory Council/Consultant 17. Shariah Supervisory Board (SSB) to advise them and to ensure that the operations and activities of the banking institutions comply with Shariah principles. A number of Shariah advisory firms have now emerged to offer Shariah advisory services to the institutions offering Islamic financial services. 18. In Meezan Bank Meezan Bank has extensive experience and expertise in developing and advising on the creation of Shariah-compliant financial products and services. The main objective of Meezan Banks Islamic Financial Advisory function is to assist Financial Institutions develop Islamic banking alternatives by sharing our expertise, research and success stories. 19. This function works under the guidance of Shariah Supervisory Board which comprises of renowned Islamic Scholars from both Pakistan and abroad. Successful implementation of the Islamic Banking model rests upon the principles of Islamic Shariah. A world-renowned Shariah Supervisory Board and a highly qualified and experienced in house Shariah Advisor are fundamental aspects of the Bank's core. 20. Members of the Board 1. Justice (Retd.) Muhammad Taqi Usmani (Chairman) 2. Dr. Abdul Sattar Abu Ghuddah 3. Sheikh Essam M. Ishaq 4. Dr. Muhammad Imran Ashraf Usmani (Shariah Advisor) The primary role of this Board is to maintain and further strengthen this commitment and to ensure strict Shariah-compliance in all areas of the Bank's operations. 21. Islamic Financial Accounting Standards 22. The Institute of Chartered Accountants of Pakistan issues Islamic Financial Accounting Standards (IFAS) for Islamic Mode of financing. IFAS 1 (issued in 2005) concerns Musharakah and Mudarabah. While, IFAS 2 (issued in 2007) relates to Ijarah. 23. Meezan Islamic Institution Deposit Account (MIIDA) With MIIDA, any IFI now has the opportunity to manage excess liquidity in an immediate and profitable manner by maintaining a checking account with Meezan Bank. MIIDA works on the principle of Mudarabah under which the customer is an Investor (Rab-ul-Maal), and the Bank is the Manager (Mudarib) of the funds deposited by the customer. 24. Usury in Islam 25. The original word used for usury was Riba, which literally means excess or addition. The criticism of usury in Islam was well established during the lifetime of the Islamic prophet Muhammad and reinforced by several verses in the Qur'an dating back to around 600 AD. A school of Islamic thought which emerged in the 19th Century, led by Sir Sayyed, argues for an interpretative differentiation between usury, or consumptional lending, and interest, or lending for commercial investment (Ahmed, 1958). 26. Outline of the presentation History of islamic banking Pakistan and islamic banking Introduction to bank Principles of islamic banking Islamic Financial Accounting Standards Islamic financial transaction terminology Islamic laws on trading Implementation of Islamic banking Islamic modes of financing Difference between islamic and commercial banking Objections on islamic banking Conclusion 27. Islamic Financial Transaction Terminology 28. Bai al Inah Agreement b/w customer and financer On spot purchase Payment in Installments 29. Bai Bithman Ajil Sale of good Deffered Payment Agreed Profit ratio 30. Bai Mujjal Credit sale Contract 31. Mudarabah Special partnership Comertial enterprise RUB Ul MAAL and MUDARIB 32. Murabahah Sale of goods Price include profit margen FIXED INCOME LOANS 33. Musawamah Negotiation of selling rate No Obligation to reveal other cost 34. Bai salam Contact Advance payment Later delivory 35. Outline of the presentation History of islamic banking Pakistan and islamic banking Introduction to bank Principles of islamic banking Islamic Financial Accounting Standards Islamic financial transaction terminology Islamic laws on trading Implementation of Islamic banking Islamic modes of financing Difference between islamic and commercial banking Objections on islamic banking Conclusion 36. Wadiah 37. In Wadiah, a bank is deemed as a keeper and trustee of funds. A person deposits funds in the bank and the bank guarantees refund of the entire amount of the deposit, or any part of the outstanding amount, when the depositor demands it. 38. Hibah Hibah usually arises in practice when Islamic banks voluntarily pay their customers a 'gift' on savings account balances, representing a portion of the profit made by using those savings account balances in other activities. 39. Ijarah Ijarah means lease, rent or wage. Generally, the Ijarah concept refers to selling the benefit of use or service for a fixed price or wage. 40. Types of Ijarah Ijarah thumma al bai' Ijarah-wal-iqtina 41. Ijarah thumma al bai' The first contract is an Ijarah that outlines the terms for leasing or renting over a fixed period, and the second contract is a Bai that triggers a sale or purchase once the term of the Ijarah is complete. 42. Ijarah-wal-iqtina A contract under which an Islamic bank provides equipment, building, or other assets to the client against an agreed rental together with a unilateral undertaking by the bank or the client that at the end of the lease period, the ownership in the asset would be transferred to the lessee. 43. Musharakah Musharakah is a relationship between two parties or more that contribute capital to a business and divide the net profit and loss pro rata. 44. Qardul Hassan 45. Qardul Hassan This is a loan extended on a goodwill basis, and the debtor is only required to repay the amount borrowed. 46. Sukuk Sukuk is the Arabic name for financial certificates that are the Islamic equivalent of bonds. However, fixed-income, interest- bearing bonds are not permissible in Islam. 47. Takaful 48. Insurance by combining the risks of many people enables each individual to enjoy the advantage provided by the law of large numbers. 49. Wakalah This occurs when a person appoints a representative to undertake transactions on his/her behalf, similar to a power of attorney. 50. Outline of the presentation History of islamic banking Pakistan and islamic banking Introduction to bank Principles of islamic banking Islamic Financial Accounting Standards Islamic financial transaction terminology Islamic laws on trading Implementation of Islamic banking Islamic modes of financing Difference between islamic and commercial banking Objections on islamic banking Conclusion 51. Islamic laws on trading 52. The main concept in Islam and the most