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COMPARISON
BETWEEN
ISLAMIC BANKING & CONVENTIONAL BANKING
PRODUCTS.
&
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ISLAMIC BANKING
INTRODUCTION:
Islamic banking has been defined as banking in consonance with the ethos and value
system of Islam and governed, in addition to the conventional good governance and
risk management rules, by the principles laid down by Islamic. Interest free banking
is a narrow concept denoting a number of banking instruments or operations, which
avoid interest. Islamic banking, the more general term is expected not only to avoid
interest-based transactions, prohibited in the Islamic Shariah, but also to avoid
unethical practices and participate actively in achieving the goals and objectives of
an Islamic economy.
Islamic banking refers to a system of banking or banking activity that is consistent
with the principles of Islamic law (Sharia) and its practical application through the
development of Islamic economics. Sharia prohibits the payment or acceptance of
interest fees for the lending and accepting of money respectively, (Riba, usury) for
specific terms, as well as investing in businesses that provide goods or services
considered contrary to its principles (Haraam, forbidden). While these principles
were used as the basis for a flourishing economy in earlier times, it is only in the late
20th century that a number of Islamic banks were formed to apply these principlesto private or semi-private commercial institutions within the Muslim community.
PHILOSOPHY OF ISLAMIC BANKING:
Basically the philosophy of Islamic Shariah & Islamic banking is to prohibit interest
but it does not prohibit us from 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 thecapital. 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.
http://en.wikipedia.org/wiki/Bankinghttp://en.wikipedia.org/wiki/Shariahttp://en.wikipedia.org/wiki/Islamic_economicshttp://en.wikipedia.org/wiki/Ribahttp://en.wikipedia.org/wiki/Usuryhttp://en.wikipedia.org/wiki/Haraamhttp://en.wikipedia.org/wiki/Principleshttp://en.wikipedia.org/wiki/Private_bankhttp://en.wikipedia.org/wiki/Commercial_bankhttp://en.wikipedia.org/wiki/Commercial_bankhttp://en.wikipedia.org/wiki/Private_bankhttp://en.wikipedia.org/wiki/Principleshttp://en.wikipedia.org/wiki/Haraamhttp://en.wikipedia.org/wiki/Usuryhttp://en.wikipedia.org/wiki/Ribahttp://en.wikipedia.org/wiki/Islamic_economicshttp://en.wikipedia.org/wiki/Shariahttp://en.wikipedia.org/wiki/Banking -
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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 deal with asset
management for the purpose of income generation. They will have to prudently
handle the unique risks involved in management of assets by adherence to bestpractices of corporate governance. Once the banks have stable stream of Halal
income, depositors will also receive stable and Halal income.
The forms of businesses allowed by Islam at the time the Holy Quran was revealed
included joint ventures based on sharing of risks & profits and provision of services
through trading, both cash and credit, and leasing activities. In the Verse II:275, Allah
the Almighty did not deny the apparent similarity between trade profit in credit sale
and Riba in loaning, but resolutely informed that Allah has permitted trade and
prohibited Riba.
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.
Besides trading, Islam allows leasing of assets and getting rentals against the usufructtaken by the lessee. All such things/assets corpus of which is not consumed with
their use can be leased out against fixed rentals. The ownership in leased assets
remains with the lessor who assumes risks and gets rewards of his ownership.
HISTORY OF ISLAMIC BANKING:
In early golden Islamic age, forms of proto-capitalism and free markets were present
in the Caliphate, where an early market economy and an early form ofmercantilismwere developed between the 8th-12th centuries, which some refer to as "Islamic
capitalism". A vigorous monetary economy was created on the basis of the
expanding levels of circulation of a stable high-value currency (the dinar) and the
integration ofmonetary areas that were previously independent.
http://en.wikipedia.org/wiki/Capitalismhttp://en.wikipedia.org/wiki/Free_markethttp://en.wikipedia.org/wiki/Caliphatehttp://en.wikipedia.org/wiki/Market_economyhttp://en.wikipedia.org/wiki/Mercantilismhttp://en.wikipedia.org/wiki/Monetary_economyhttp://en.wikipedia.org/wiki/List_of_circulating_currencieshttp://en.wikipedia.org/wiki/Stablehttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/Dinarhttp://en.wikipedia.org/wiki/Monetaryhttp://en.wikipedia.org/wiki/Monetaryhttp://en.wikipedia.org/wiki/Dinarhttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/Stablehttp://en.wikipedia.org/wiki/List_of_circulating_currencieshttp://en.wikipedia.org/wiki/Monetary_economyhttp://en.wikipedia.org/wiki/Mercantilismhttp://en.wikipedia.org/wiki/Market_economyhttp://en.wikipedia.org/wiki/Caliphatehttp://en.wikipedia.org/wiki/Free_markethttp://en.wikipedia.org/wiki/Capitalism -
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During this age, number of innovative concepts and techniques were introduced in
early Islamic banking which are still existing in this modern Islamic banking world,
including bills of exchange, the first forms ofpartnership (mufawada) such as limited
partnerships (mudaraba), and the earliest forms of capital (al-mal), capital
accumulation (nama al-mal), cheques, promissory notes, trusts (see Waqf), startupcompanies, , transactional accounts, loaning, ledgers and assignments.
Organizational enterprises similar to corporations independent from the state also
existed in the medieval Islamic world, while the agency institution was also
introduced during that time. Many of these early capitalist concepts were adopted
and further advanced in medieval Europe from the 13th century onwards.
HISTORICAL DEVELOPMENT:
Moreover, the development in the history of Islamic banking started when a system
of interest free banking is launched. History of interest free banking is divided intotwo parts, first I took it as an idea and secondly after implementing when it becomes
reality.
Interest-free banking as an idea
Interest-free banking seems to be of very recent origin. The earliest references to the
reorganization of banking on the basis of profit sharing rather than interest are
found in Anwar Qureshi (1946), Naiem Siddiqi (1948) and Mahmud Ahmad (1952) in
the late forties, followed by a more elaborate exposition by Mawdudi in 1950(1961).Muhammad Hamidullahs 1944, 1955, 1957 and 1962 writings too should be
included in this category. They have all recognised the need for commercial banks
and the evil of interest in that enterprise, and have proposed a banking system based
on the concept ofMudarabha - profit and loss sharing.
The coming into being of interest-free banks
The first private interest-free bank, the Dubai Islamic Bank, was also set up in 1975
by a group of Muslim businessmen from several countries. Two more private banks
were founded in 1977 under the name of Faisal Islamic Bank in Egypt and the Sudan.
In the same year the Kuwaiti government set up the Kuwait Finance House.
However, small scale limited scope interest-free banks have been tried before. One
in Malaysia in the mid-forties and another in Pakistan in the late-fifties. Neither
survived. In 1962 the Malaysian government set up the Pilgrims Management
Fund to help prospective pilgrims to save and profit. The savings bank established in
http://en.wikipedia.org/wiki/Bills_of_exchangehttp://en.wikipedia.org/wiki/Partnershiphttp://en.wikipedia.org/wiki/Limited_partnershiphttp://en.wikipedia.org/wiki/Limited_partnershiphttp://en.wikipedia.org/wiki/Capital_%28economics%29http://en.wikipedia.org/wiki/Capital_accumulationhttp://en.wikipedia.org/wiki/Capital_accumulationhttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Promissory_notehttp://en.wikipedia.org/wiki/Trustshttp://en.wikipedia.org/wiki/Waqfhttp://en.wikipedia.org/wiki/Startup_companieshttp://en.wikipedia.org/wiki/Startup_companieshttp://en.wikipedia.org/wiki/Transactional_accounthttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Ledgerhttp://en.wikipedia.org/wiki/Assignment_%28law%29http://en.wikipedia.org/wiki/Organizationhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Sovereign_statehttp://en.wikipedia.org/wiki/Agency_%28law%29http://en.wikipedia.org/wiki/Medieval_Europehttp://en.wikipedia.org/wiki/Medieval_Europehttp://en.wikipedia.org/wiki/Agency_%28law%29http://en.wikipedia.org/wiki/Sovereign_statehttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Organizationhttp://en.wikipedia.org/wiki/Assignment_%28law%29http://en.wikipedia.org/wiki/Ledgerhttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Transactional_accounthttp://en.wikipedia.org/wiki/Startup_companieshttp://en.wikipedia.org/wiki/Startup_companieshttp://en.wikipedia.org/wiki/Waqfhttp://en.wikipedia.org/wiki/Trustshttp://en.wikipedia.org/wiki/Promissory_notehttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Capital_accumulationhttp://en.wikipedia.org/wiki/Capital_accumulationhttp://en.wikipedia.org/wiki/Capital_%28economics%29http://en.wikipedia.org/wiki/Limited_partnershiphttp://en.wikipedia.org/wiki/Limited_partnershiphttp://en.wikipedia.org/wiki/Partnershiphttp://en.wikipedia.org/wiki/Bills_of_exchange -
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1963 at Mit-Ghamr in Egypt was very popular and prospered initially and then closed
down for various reasons. However this experiment led to the creation of the Nasser
Social Bank in 1972. Though the bank is still active, its objectives are more social than
commercial.
In the ten years since the establishment of the first private commercial bank in
Dubai, more than 50 interest-free banks have come into being. Though nearly all of
them are in Muslim countries, there are some in Western Europe as well: in
Denmark, Luxembourg , Switzerland and the UK. Many banks were established in
1983 (11) and 1984 (13). The numbers have declined considerably in the following
years.
In most countries the establishment of interest-free banking had been by private
initiative and were confined to that bank. In Iran and Pakistan, however, it was by
government initiative and covered all banks in the country. The governments in boththese countries took steps in 1981 to introduce interest-free banking. In Pakistan,
effective 1 January 1981 all domestic commercial banks were permitted to accept
deposits on the basis of profit-and-loss sharing (PLS). New steps were introduced on
1 January 1985 to formally transform the banking system over the next six months to
one based on no interest. From 1 July 1985 no banks could accept any interest
bearing deposits, and all existing deposits became subject to PLS rules. Yet some
operations were still allowed to continue on the old basis. In Iran, certain
administrative steps were taken in February 1981 to eliminate interest from banking
operations. Interest on all assets was replaced by a 4 percent maximum servicecharge and by a 4 to 8 percent profit rate depending on the type of economic
activity. Interest on deposits was also converted into a guaranteed minimum profit.
In August 1983 the Usury-free Banking Law was introduced and a fourteen-month
change over period began in January 1984. The whole system was converted to an
interest-free one in March 1985.
ISLAMIC BANKING IN PAKISTAN:
Islamization of banks and financial institution of Pakistan were started in 1977-78.
Pakistan was among the three countries in the world that had been trying to
implement interest free banking at Comprehensive. But as it was a mammoth task,
the switchover plan was implemented in phases. The Islamization measures included
the elimination of interest from the operations of specialized financial institutions
including HBFC, ICP and NIT in July 1979 and that of the commercial banks during
January 1981 to June 1985. The legal framework of Pakistan's financial and corporate
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system was amended on June 26, 1980 to permit issuance of a new interest-free
instrument of corporate financing named Participation Term Certificate (PTC). An
Ordinance was promulgated to allow the establishment of Mudaraba companies and
floatation of Mudaraba certificates for raising risk based capital. Amendments were
also made in the Banking Companies Ordinance, 1962 (The BCO, 1962) and relatedlaws to include provision of bank finance through PLS, mark-up in prices, leasing and
hire purchase.
ACCOUNTING AND AUDITING ORGANIZATIONS FOR FINANCIAL
INSTITUTIONS:
The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is
an Islamic international autonomous non-for-profit corporate body that prepares
accounting, auditing, governance, ethics and Shari'a standards for Islamic financial
institutions and the industry. Professional qualification programs (notably CIPA, the
Sharia Adviser and Auditor "CSAA", and the corporate compliance program) are
presented now by AAOIFI in its efforts to enhance the industrys human resources
base and governance structures.
AAOIFI was established in accordance with the Agreement of Association which was
signed by Islamic financial institutions on 1 Safar, 1410H corresponding to 26
February, 1990 in Algiers. Then, it was registered on 11 Ramadan 1411
corresponding to 27 March, 1991 in the State of Bahrain.
The objectives of AAOIFI are:
1. to develop accounting and auditing thoughts relevant to Islamic financial
institutions;
2. to disseminate accounting and auditing thoughts relevant to Islamic financial
institutions and its applications through training, seminars, publication of periodical
newsletters, carrying out and commissioning of research and other means;
3. to prepare, promulgate and interpret accounting and auditing standards forIslamic financial institutions; and
4. to review and amend accounting and auditing standards for Islamic financial
institutions.
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AAOIFI carries out these objectives in accordance with the precepts of Islamic Sharia
which represents a comprehensive system for all aspects of life, in conformity with
the environment in which Islamic financial institutions have developed. This activity
is intended both to enhance the confidence of users of the financial statements of
Islamic financial institutions in the information that is produced about theseinstitutions, and to encourage these users to invest or deposit their funds in Islamic
financial institutions and to use their services.
The Islamic Financial Services Board (IFSB):
The Islamic Financial Services Board (IFSB), which is based in Kuala Lumpur, was
officially inaugurated on 3rd November 2002 and started operations on 10th March
2003. It serves as an international standard-setting body of regulatory and
supervisory agencies that have vested interest in ensuring the soundness and
stability of the Islamic financial services industry, which is defined broadly to includebanking, capital market and insurance. In advancing this mission, the IFSB promotes
the development of a prudent and transparent Islamic financial services industry
through introducing new, or adapting existing international standards consistent
with Shari'ah principles, and recommend them for adoption.
the IFSB has issued seven Standards, Guiding Principles and Technical Notefor the
Islamic financial services industry. The published documents are on the areas of:
1. Risk Management2. Capital Adequacy
3. Corporate Governance
4. Supervisory Review Process
5. Transparency and Market Discipline
6. Recognition of Ratings on Shar`ah-Compliant Financial Instruments
7. Development of Islamic Money Markets
The IFSB is also working on five new standards and guidelines. They are:
8. Special Issues in Capital Adequacy9. Governance for Collective Investment Schemes
10.Corporate Governance in Takaful Operations
11.Shariah Governance
12.Market conduct.
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Major modes of Islamic banking:
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 declares his cost and profit. Islamic banks have adopted this as a
mode of financing. As a financing technique, it involves a request by the client to the
bank to purchase certain goods for him. The bank does that for a definite profit over
the cost, which is stipulated in advance.
IJARAH
Ijarah is a contract of a known and proposed usufruct against a specified and lawful
return or consideration for the service or return for the benefit proposed to betaken, or for the effort or work 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 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. The undertaking or the promise does not becomean integral part of the lease contract to make it conditional. The rentals as well as the
purchase price are fixed in such manner that the bank gets back its principal sum
alongwith with profit over the period of lease.
MUSAWAMAH
Musawamah is a general and regular kind of sale in which price of the commodity to
be traded is bargained between seller and the buyer 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, seller in Musawamah is not obliged to
reveal his cost. Both the parties negotiate on the price. 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.
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ISTISNAA
It is a contractual agreement for manufacturing goods and commodities, allowing
cash payment in advance and future delivery or a future payment and future
delivery. Istisnaa can be used for providing the facility of financing the manufacture
or construction of houses, plants, projects and building of bridges, roads and
highways.
BAI MUAJJAL
Literally it means a credit sale. Technically, it is a financing technique adopted by
Islamic banks that takes the form of Murabaha Muajjal. It is a contract in which the
bank earns a profit margin on his purchase price and allows the buyer to pay the
price of the commodity at a future date in a lump sum or in installments. It has to
expressly mention cost of the commodity and the margin of profit is mutually
agreed. The price fixed for the commodity in such a transaction can be the same as
the spot price or higher or lower than the spot price.
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
accrued are shared between the two parties on a pre-agreed basis, 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 each
partner strictly in proportion to respective capital contributions.
BAI SALAM
Salam means a contract in which advance payment is made for goods to be deliveredlater on. The seller undertakes to supply some specific goods to the buyer at a future
date in exchange of 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 are goods and 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.
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HISTORY:
Meezan Bank Limitedis a publicly listed company, first incorporated on January
27, 1997. It started operations as an Islamic investment bank in August of the same
year. In January, 2002, in an historic initiative, Meezan Bank was granted the Nations
first full-fledged commercial banking license dedicated to Islamic Banking, by
the State Bank of Pakistan.
Meezan Bank, stands today at a noteworthy point along the evolution of Islamic Banking in
Pakistan. The banking sector is showing a significant paradigm shift away from
traditional means of business, and is catering to an increasingly astute and
demanding financial consumer who is also becoming keenly aware of Islamic
Banking. Meezan Bank bears the critical responsibility of leading the way forward in
establishing a stable and dynamic Islamic Banking system replete with dynamic and
cutting-edge products and services.
The Banks main shareholders are leading local and international financial
institutions, including "Pak Kuwait Investment Company", the only AAA
rated financial entity in the country, the Islamic Development Bank of Jeddah, and
the renown Shamil Bank of Bahrain. The established position, reputation, strength
and stability, of these institutions add significant value to the Bank through Board
representation and applied synergies.
Vision:
Establish Islamic banking as banking of first choice to facilitate the implementation ofan equitable economic system, providing a strong foundation for establishing a fair
and just society for mankind.
http://wapedia.mobi/en/January_27http://wapedia.mobi/en/January_27http://wapedia.mobi/en/1997http://wapedia.mobi/en/Islamic_Bankinghttp://wapedia.mobi/en/State_Bank_of_Pakistanhttp://wapedia.mobi/en/Pak_Kuwait_Investment_Companyhttp://wapedia.mobi/en/AAA_ratedhttp://wapedia.mobi/en/AAA_ratedhttp://wapedia.mobi/en/AAA_ratedhttp://wapedia.mobi/en/AAA_ratedhttp://wapedia.mobi/en/Pak_Kuwait_Investment_Companyhttp://wapedia.mobi/en/State_Bank_of_Pakistanhttp://wapedia.mobi/en/Islamic_Bankinghttp://wapedia.mobi/en/1997http://wapedia.mobi/en/January_27http://wapedia.mobi/en/January_27 -
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Mission:
To be a premier Islamic bank, offering a one-stop shop for innovative value added
products and services to our customers within the bounds of Shariah, while
optimizing the stakeholders value through an organizational culture based on
learning, fairness, respect for individual enterprise and performance.
Services:
Bank is providing the following services all over the country and working as a full
fledged Islamic banking in a country.
Personal Banking and Finance
Corporate Finance
Commercial Finance Syndicated & Structured finance
Project Financing
Financial Advisory Services
Treasury
Car Ijarah - Car Financing
Easy Home - Home Financing
Asset Management.
MEEZAN BANK Car Ijarah, Pakistans FirstIslamic Car Financing
As a step towards Meezan Banks mission to provide a one-stop shop for innovative
value added Shariah compliant products, Meezan Banks Car Ijarah unit provides a
car financing, based on the principles of Ijarah and is free of the element of
interest.
" Car I jarah"
Car Ijarah is Pakistans first "Interest Free" car financing based on the Islamic
financing mode of Ijarah (Islamic leasing). This product is ideal for individuals
looking for car financing while avoiding an interest-based transaction.
Meezan Banks Car Ijarah is a car rental agreement, under which the Bank
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purchases the car and rents it out to the customer for a period of 3 to 5 years,
agreed at the time of the contract. Upon completion of the lease period the
customer gets ownership of the car against his initial security deposit.
Meezan Banks Car Ijarah is a car rental agreement, under which the Bank
purchases the car and rents it out to the customer for a period of 3 to 5 years,agreed at the time of the contract. Upon completion of the lease period the
customer gets ownership of the car against his initial security deposit.
Car Ijarah is unique and is approved by Meezan Banks Shariah Board
Car Ijarah, designed under the supervision of Meezan Banks Shariah Supervisory
Board, is unique to car leasing facilities provided by other banks. Rights &
liabilities of Owner v/s User
An Islamic Ijarah is an asset-based contract, i.e. the Lessor should have ownership ofthe asset during the period of the contract. Under Islamic Shariah, all ownership
related rights and liabilities should lie with the owner while all usage-related rights
and liabilities should lie with the user. A conventional lease contract does not
distinguish between the nature of these liabilities and places all liabilities on the user
of the asset, contradictory to Islamic Shariah. Under Ijarah, all ownership-related
risks lie with the Bank while all usage related risks lie with the user, thus making the
Lessor the true owner of the asset and making the income generated through the
contract permissible (Halal) for the Bank.
Continuation of lease rentals in case of total loss or theft of vehicle
If the leased vehicle is stolen or completely destroyed, the conventional
leasing company continues charging the lease rent till the settlement of the
Insurance claim. Under the Islamic system, rent is consideration for usage of the
leased asset, and if the asset has been stolen or destroyed, the concept of rental
becomes void. As such, in the above-mentioned eventualities, Meezan bank does not
charge the lease rental.
Permissibi li ty for Penalty of Late Payment of Rent under I slamic Shariah
In most contemporary financial leases, an extra monetary amount is charged,in their income, if the rent is not paid on time. This extra amount is the considered
as Riba and is Haram. Under Ijarah, the Lessee may be asked to undertake, that if he
fails to pay rent on its due date, he will pay certain amount to a charity, which will be
administered through the Islamic Bank. For this purpose the bank maintains a charity
fund where such amounts may be credited and disbursed for charitable purposes.
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Key Features of Car I jarah
1. Ease of acquiring any new locally assembled car
2. No upfront Insurance Payment
3. No advance Rental
4.
Available in tenures of 3, 4 and 5 years
5. Minimum security deposit as low as 15%
Car I jarah also features Used Vehicles
In addition to our leasing of new cars, Meezan Bank also provides the unique
opportunity of leasing second hand, locally assembled, vehicles as well. This feature
is specifically designed as a highly economical option. The Used Car Ijarah facility is
made available at a minimum-security deposit as low as 20%.
Used Car Selection Criter ia
The second hand car selected should be from its first owner.The vehicle should not be older than 5 years.
The minimum security deposit for a vehicle up to 2 years of age is 20%, while
minimum security deposit for a vehicle over 2 years of age is 30%.
At the time of termination of the Ijarah agreement, the vehicle should not be more
than 8 years old. This means that if a car is 5 years old, the Car Ijarah tenure is not
more than 3 years and if its 4 years old, the tenure may be set for a maximum 4 year
term.
This facility is for locally manufactured cars of Suzuki, Toyota, Honda & the new
model of Santro only.Second hand vehicles selected should not be worth more than
Rs. 1 million and less than Rs. 250,000/-. Meezan Bank will have the vehicle valued
by an independent valuation company accordingly.
Documentation:
Individuals/Self-Employed Professionals/Businessmen
1 Copy of NIC
2 Two recent passport sized photographs
3 Recent Utility Bill (Electric/Gas/Water) received at the residential address
4 Last Six Month Bank Statement
5 Last Six Month Bank Statement of Business (for Businessmen)
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6 Certified/Original copy of Recent Pay slip (for Salaried Individuals)
7 Copy of Rent Agreement (if applicable)
The details and the monthly payment for car ijarah financing scheme are given
below:
Calculations:
New Car Payment Details
Car Description:Honda CITY I-VTEC CVT 1.3 L(Vario)
Cost Price: Rs. 1,329,000.00/-
Tenure: 5 Years
Initial Payment
Security Deposit: Rs. 332,250.00/- (25%)
Processing Fee: Rs. 5,000.00/-
Total: Rs. 337,250.00/-
Monthly Payment
60 Monthly Rentals ofRs. 30,547.00/- approx.
If you wants to apply for used car then meezan Islamic banking is also providing
the facility of used car financing. The details of the car and monthly payments of
the used car are given below:
Old Car Payment Details
Car Description: Honda
Cost Price: Rs. 800,000.00/-
Tenure: 4 Years
Initial Payment
Security Deposit: Rs. 200,000.00/- (25%)
Evaluation Fee: Rs. 1,500.00/-
Processing Fee: Rs. 3,000.00/-
Total: Rs. 204,500.00/-
Monthly Payment
48 Monthly Rentals ofRs. 20,863.00/- approx.
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MEEZAN BANK HOME FINANCING:
Welcome to Pakistans long awaited totally Shariah-compliant Home Finance facility!One that is comprehensive, affordable, and totally hassle-free. For at Meezan Bank,
we are committed to meeting our customers needs, in a truly Shariah-compliant
manner coupled with dedicated service excellence. Meezan Banks Easy Home is the
answer youve been waiting for.
I slamic Financing on a Diminishing Musharakah basis:
With Easy Home you participate with Meezan Bank in a joint ownership of your
property, where the Bank will provide a certain amount of financing (usually up to80%). You agree to a monthly payment to the bank of which a component is for the
use of the home, and another for your equity share. In fact, the total monthly
payment is reduced regularly as your share in the property grows. When you have
made the full investment, which had been agreed upon, you become the sole owner
with a free and clear title to the property.
EASY HOME SHARIAH COMPLAINT:
As a Diminishing Musharakah it conforms to Shariah laws specifically related to
financing, ownership and trade. Taking ownership through a partnership and then
transferring complete ownership to the consumer instead of simply lending money is
the major factor that makes our product Shariah compliant. The nature of the
contract is a co-ownership and not a loan because the transaction is not based on
the lending and borrowing of money but on the joint ownership of an asset. Meezan
Bank shares in the cost of the asset being purchased, for example in the case of
buying a home. In conventional mortgages the interest charged is a mark-up on the
money lent. The profit charged by Meezan Bank is the utilization payment for your
use of our share throughout the life of the contract. Your payments to Meezan Bank
are completely riba-free.
PROFI T MARGIN CHARGED:
At Meezan Bank, the profit margin is directly correlated to market trends to provide
a competitive product to our customers. Shariah allows the use of any conventional
market factor as a benchmark to determine the profit rate of a particular product.
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The mere fact that the applied profit rate of our product is based on similar factors
used in determining the applied rate of interest of a mortgage does not render the
transaction or the contract invalid from the Shariah perspective, and neither does it
make the transaction an interest-bearing one. On the other hand, it is the underlying
structure of the product that determines its Shariah compliance.
PAYMENT PLAN:
In payment plan meezan bank used two models:
1. Step-up model
2. UMI MODEL
Step-up Model
The Step-up Payment plan is introduced for customers who intend to avail maximum
financing facility with lower installments. The step up model is based on Shariah
Compliant structure of Diminishing Musharakah. In this model, the banks share s
divided into more Musharakah units and in the initial half of the facility tenure, the
customer purchases one Musharakah unit from bank every month and in the later
half of the facility tenure, the customer purchases two Musharakah units from bank
every month. Thus the monthly installment during initial years is comparatively
lower which is easily affordable. This model is a Shariah Compliant Alternative
available to the customers who wish to avail maximum financing facility from bank.
UM I Model
Easy Home is structured under the concept of diminishing Musharakah where
Meezan Bank and Customer enter into a Musharakah Agreement whereby both the
parties provide their investments to be utilized for the purposes of
purchase/construct/renovate the property. The Joint ownership is created in the
property between Bank & customer by virtue of the Musharakah agreement. (This is
based on the principle ofShirkat ul Milk) Banks share is divided into units and is
given to the client on rent and Client promises to purchase Banks share (units) overthe tenure of transaction Client purchases the units every month and will eventually
become the owner of the property. Rental amount is adjusted according to the
banks share (units) remaining in the property. In UMI , the Musharakah unit price
remains constant throughout the financing period.
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Maximum F inancing Tenure
Now you can avail financing facility for maximum up to 25 years period.
Buy, Bui ld, Renovate, or Replace!
Buying a Home is Easy & Halal!
Choose it and be ready to move in. Meezan Bank will finance up to maximum
of 70%(Salaried, SEP, NRP) of the appraised value of your new home or up to a
value of Rs. 40 million, and a maximum of 60%(Businessman) up to a value of
Rs 5 Million with a financing tenor of up to 20 years.
Building a home is Easy & Halal!
For that special home you want to build yourself. Meezan Bank provides
financing up to 70%(salaried, SEP, and NRP) of the appraised value or Rs. 40
million, and a maximum of 60%(Businessman) up to a value of Rs 5 Million fora tenor of up to 20 years.
Renovating your home is Easy & Halal!
Making your home even better or just repairing it. Meezan Bank helps with
financing up to 30% and a financing tenor of up to 15 years.
Replacing your existing Mortgage is Easy & Halal!
The wait is over. Now continue to enjoy your home but with the added
satisfaction and peace of mind you have always wanted. Meezan Bank will
help you switch your existing liability over to us and let you enjoy the benefitsof Halal and totally flexible financing. Financing up to Rs. 40 million(Salaried,
SEP, NRP) and Rs 5 million(Businessman) and a tenor of up to 20 years.
Special Benefits of Easy Home
Flexible Financing Tailored to Support You
o High financing amounts
o Adequate financing against property value
o Flexibility to make partial prepayments
o Minimal processing charges
o Affordable and competitive installment amounts with a regular
reducing monthly rental
o Rate relaxation for select MNCs & LCGs
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Quick Processing Time
Absolutely hassle-free. Quick turn-around-times, with no burdensome
complexity or excess paper work. It is simple, halal, and easy!
Even the eligibility is Easy!
We at Meezan Bank, as prescribed by Islamic Shariah, seek to guarantee equalaccess to financing for all qualified applicants, while ensuring that the
qualification process is bias-free.
Non Resident Pakistanis
Non Resident Pakistanis can apply with peace of mind for the fastest
processing of their case.
Special Offer for Chartered Accountants
Qualified Chartered Accountants and Corporate CFOs can avail discounted
rates and flexible repayment option with no pre-payment charges on earlypayment either partially or full.
Special Offer for Easy Replacement Cases
Why paying high installment on high rate? Transfer your existing home finance
facility to Meezan Bank and avail attractive profit rate with flexible payment
options.
Easy Home Payment Plan SummaryCost Price:(PKR)
2,500,000 /- Total Units 103
CustomerShare: (PKR)
1,000,000 /-Unit Sale Price:(PKR)
14,563 /-
Bank Share:(PKR)
1,500,000 /-Monthly Rent PerUnit: (PKR)
192 /-
Profit Rate: 15.78 %Total StartingRent: (PKR)
6,575 /-
Tenure inYears:
10 Starting MonthPayment: (PKR)
6,575 /-
Segment: SalariedEasy HomeCategory:
Builder (Construction) (UMI)
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Tentative Payment Schedule
TrancheTrancheAmount(PKR)
MonthsRent(PKR)
Unit Price(PKR)
MonthlyPayment(PKR)
BalanceUnit Value(PKR)
BalanceUnits
1 500,000 0 500,000 103
1 6,575 6,575 500,000 103
2 6,575 6,575 500,000 103
2 500,000 3 6,575 6,575 1,000,000 103
4 13,150 13,150 1,000,000 103
3 500,000 5 13,150 19,725 1,500,000 103
6 19,725 19,725 1,500,000 103
7 19,725 19,725 1,500,000 103
8 19,725 19,725 1,500,000 103
9 19,725 19,725 1,500,000 103
10 19,725 19,725 1,500,000 103
11 19,725 19,725 1,500,000 103
12 19,725 19,725 1,500,000 103
Tentative Schedule to be revised on Anniversary
13 19,725 19,725 1,500,000 103
14 19,725 19,725 1,500,000 103
15 19,725 19,725 1,500,000 103
16 19,725 19,725 1,500,000 103
17 19,725 19,725 1,500,000 103
18 19,725 14,563 34,288 1,485,437 102
19 19,533 14,563 34,097 1,470,874 101
20 19,342 14,563 33,905 1,456,311 100
21 19,150 14,563 33,714 1,441,748 99
22 18,959 14,563 33,522 1,427,184 98
23 18,767 14,563 33,331 1,412,621 97
24 18,576 14,563 33,139 1,398,058 96
25 18,384 14,563 32,948 1,383,495 95
26 18,193 14,563 32,756 1,368,932 9427 18,001 14,563 32,565 1,354,369 93
28 17,810 14,563 32,373 1,339,806 92
29 17,618 14,563 32,182 1,325,243 91
30 17,427 14,563 31,990 1,310,680 90
31 17,235 14,563 31,799 1,296,117 89
32 17,044 14,563 31,607 1,281,553 88
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33 16,852 14,563 31,416 1,266,990 87
34 16,661 14,563 31,224 1,252,427 86
35 16,469 14,563 31,033 1,237,864 85
36 16,278 14,563 30,841 1,223,301 84
37 16,086 14,563 30,650 1,208,738 8338 15,895 14,563 30,458 1,194,175 82
39 15,703 14,563 30,267 1,179,612 81
40 15,512 14,563 30,075 1,165,049 80
41 15,320 14,563 29,883 1,150,485 79
42 15,129 14,563 29,692 1,135,922 78
43 14,937 14,563 29,500 1,121,359 77
44 14,746 14,563 29,309 1,106,796 76
45 14,554 14,563 29,117 1,092,233 75
46 14,363 14,563 28,926 1,077,670 7447 14,171 14,563 28,734 1,063,107 73
48 13,980 14,563 28,543 1,048,544 72
49 13,788 14,563 28,351 1,033,981 71
50 13,597 14,563 28,160 1,019,417 70
51 13,405 14,563 27,968 1,004,854 69
52 13,214 14,563 27,777 990,291 68
53 13,022 14,563 27,585 975,728 67
54 12,831 14,563 27,394 961,165 66
55 12,639 14,563 27,202 946,602 65
56 12,448 14,563 27,011 932,039 64
57 12,256 14,563 26,819 917,476 63
58 12,065 14,563 26,628 902,913 62
59 11,873 14,563 26,436 888,350 61
60 11,682 14,563 26,245 873,786 60
61 11,490 14,563 26,053 859,223 59
62 11,299 14,563 25,862 844,660 58
63 11,107 14,563 25,670 830,097 57
64 10,916 14,563 25,479 815,534 56
65 10,724 14,563 25,287 800,971 55
66 10,533 14,563 25,096 786,408 54
67 10,341 14,563 24,904 771,845 53
68 10,150 14,563 24,713 757,282 52
69 9,958 14,563 24,521 742,718 51
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70 9,767 14,563 24,330 728,155 50
71 9,575 14,563 24,138 713,592 49
72 9,384 14,563 23,947 699,029 48
73 9,192 14,563 23,755 684,466 47
74 9,001 14,563 23,564 669,903 4675 8,809 14,563 23,372 655,340 45
76 8,618 14,563 23,181 640,777 44
77 8,426 14,563 22,989 626,214 43
78 8,235 14,563 22,798 611,650 42
79 8,043 14,563 22,606 597,087 41
80 7,852 14,563 22,415 582,524 40
81 7,660 14,563 22,223 567,961 39
82 7,469 14,563 22,032 553,398 38
83 7,277 14,563 21,840 538,835 3784 7,086 14,563 21,649 524,272 36
85 6,894 14,563 21,457 509,709 35
86 6,703 14,563 21,266 495,146 34
87 6,511 14,563 21,074 480,583 33
88 6,320 14,563 20,883 466,019 32
89 6,128 14,563 20,691 451,456 31
90 5,937 14,563 20,500 436,893 30
91 5,745 14,563 20,308 422,330 29
92 5,554 14,563 20,117 407,767 28
93 5,362 14,563 19,925 393,204 27
94 5,171 14,563 19,734 378,641 26
95 4,979 14,563 19,542 364,078 25
96 4,788 14,563 19,351 349,515 24
97 4,596 14,563 19,159 334,951 23
98 4,405 14,563 18,968 320,388 22
99 4,213 14,563 18,776 305,825 21
100 4,022 14,563 18,585 291,262 20
101 3,830 14,563 18,393 276,699 19
102 3,639 14,563 18,202 262,136 18
103 3,447 14,563 18,010 247,573 17
104 3,256 14,563 17,819 233,010 16
105 3,064 14,563 17,627 218,447 15
106 2,873 14,563 17,436 203,883 14
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107 2,681 14,563 17,244 189,320 13
108 2,490 14,563 17,053 174,757 12
109 2,298 14,563 16,861 160,194 11
110 2,107 14,563 16,670 145,631 10
111 1,915 14,563 16,478 131,068 9112 1,724 14,563 16,287 116,505 8
113 1,532 14,563 16,095 101,942 7
114 1,341 14,563 15,904 87,379 6
115 1,149 14,563 15,712 72,816 5
116 958 14,563 15,521 58,252 4
117 766 14,563 15,329 43,689 3
118 575 14,563 15,138 29,126 2
119 383 14,563 14,946 14,563 1
120 192 14,563 14,755 0Total 1,308,425 1,499,989 2,815,000
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UBL was set up in 1959 and is today one of Pakistan's major banks in terms ofdeposits and advances with a huge domestic and international network. Its salient
features are:
Company Description:
UBL is a Banking Company, which is engaged in Commercial & Retail Banking and
related services domestically and overseas.
H istory of the Company:
UBL was established in 1959 and is one of the major commercial banks of Pakistan.
The Bank is making every effort to meet the up-coming challenges through strategic
planning and making the best use of the resources at its command. A professional
team was appointed in mid 1997 to restructure the bank and to commence
rightsizing. The management is also in the process of rationalizing the branch
network and identifying and recovering its doubtful and classified portfolio. It has
planned to institute major improvements in customer services and internal systems
to improve efficiency. It also intends to launch innovative products. The bank is
increasing resource mobilization through regular deposit campaigns and accelerating
the process of recovery of outstanding advances and non-performing assets.
Operational Structure:
UBL operates 1375 domestic and a subsidiary viz. United Executors and Trustees
Company Ltd. as on 30.06.2000. It has 20 overseas branches situated in the UK, USA,
UAE, Yemen, Bahrain and Qatar. It also operates one offshore branch in the Export
Processing Zone, Karachi and it has representative offices in Cairo-Egypt and Tehran-
Iran. It also has a joint venture Oman United Exchange Co., Oman Muscat and a
subsidiary United Bank A.G. Zurich, Switzerland set up in 1968. It has 21 ATMs with8 in the UAE, 3 in Bahrain, 1 in Doha, 7 in Islamabad and 2 in Karachi.
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Vision
To be a world class bank dedicated to excellence, and to surpass the highest
expectations of our customers and all other stakeholders.
MISSION:
Our mission is to:
1. Set the highest industry standard for quality across all areas of operation, on a
sustained basis;
2. Optimize people, processes and technology to deliver the best possible financial
solutions to our customers;
3. Become the most sought after investment;
4. Be recognized as the employer of choice.
UBL DRIVE ( CAR FINANCING )
UBL Drive is a unique auto financing product which offers you features, options
and flexibility unmatched by any other bank, because at UBL, You come first.New Car Financing
UBL Drive allows you to drive away in your own car by making a down paymentof just 15% and to top that with low monthly installments.
Pricing Plan
Tenure 1 to 2 years 3 to 4 years 5 to 6 years 7 yearsRate 20.00% 20.50% 21.00% 21.50%
Used Car FinancingWith UBL Drive you can buy your favorite used car (up to 5 years old) at the
most affordable rates.
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Pricing Plan
Tenure 1 to 2 years 3 to 4 years 5 yearsRate 21.00% 21.50% 22.00%
Car Replacement Plan
Drives Car Replacement Plan is the slogan name for a premier auto financing
product. Customers who intend to avail loan facility from UBL Drive under this
variant can readily have their existing cars replaced after a year of financing.
Product Features
Free Tracking Device
Option will be provided to the customers on affordable rates. this will be done incollaboration with the insurance companies on our panel.Free L ife I nsurance Coverage
Includes accidental death coverage and medical reimbursement to the customers
in case of any unforeseen circumstances.Zero Pre-Payment Penal ty
No penalty will be charged from the customer if the loan is been paid off after a
year.Payment H olidays
A unique concept whereby which payment breaks will be given to the customerson occasions such as Eid etc. Payment Holidays will be givenonce a year to the
customers.Payment Flexibil ity
Whereby which the customer will be provided the flexibility to change the loan
tenor, opt for partial payment of the outstanding principal amount.
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I nsurance OptionsUBL Drive offers you the following insurance options:
Comprehensive insurance
Insurance financing for the first year
Discounted rates with Trakker car security device
installed at customers' cost
Processing Charge
A processing charge of Rs. 5,000 will apply.
Financing Details
Vehicle Honda City I-DSI CVT 1.3L
Price Rs. 1,359,000
Tenure 5 Years
Security deposit
( 15%-50% )15%
Financed amount Rs. 1,155,150
Markup 18%Insurance co. NJI
Insurance rate 4.5%
Rates are inclusive of mandatory tracker unit cost, installation and annual monitoring charges.
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I nitial Cash Outlay
Security deposit Rs. 203,850
Insurance premium
1st Year Rs.61,155
Total upfront
payment Rs.265,005
Schedule of Bank Charges*
Application Processing Fee Rs.5,000/-(Non-Refundable)
Including 16% FED Charges
Early settlement charges 1. Termination prior to delivery of vehicle,
upto 11.60% of outstanding amount at thetime of settlement.2. Termination after delivery of vehicle, upto
5.80% of outstanding amount at the time of
settlement.
Partial Payment allowed upto 20% of Principalper annum
Charges upto 5.80% of Partial Paymentamount.
Re-possession Charges Actual - upto Rs.35,000/-
Plus FED @ 16% to be recovered
Late Payment Charges Upto Rs.600/- Flat per late payment
Monthly I nstalments
MonthsMonthly installment
w/o insuranceInsurance Total monthly payment
1-12 29,965 4,587 34,552
13-24 29,965 4,077 34,042
25-36 29,965 3,567 33,532
37-48 29,965 3,058 33,023
49-60 29,965 0 29,965
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UBL HOUSE FINANCE:
Owning a house of your very own is a cherished dream. A lot of planning and hard
work is involved in making this dream come true. That is why, at UBL we aim to
make your decision easier, by offering you the right ingredients that can help yourealize your dream with absolute convenience.
UBL Address empowers you to become the proud owner of a home by offering a
variety of product and pricing options that are flexible yet affordable. So choose the
best product option and pricing to suit your needs.
All product options are amortized and range over a tenor of 3 - 20 years.
Buying a HomeWhy rent when you can buy? Buying a home of your choice has never been
so easy. With a maximum financing limit of 70% you can easily buy a house
or apartment that best fits your requirements. So go ahead and start the
search for your dream home because with easy and affordable installments
you need not think of renting a house when youve got UBL Address.
Bui lding a Home
Have you ever settled for anything less than perfect? Theres nothing likebuilding your perfect home, your way. With every detail in place like the
elegant French windows or the perfectly manicured lush green lawn, just
the way youve always imagined. By chalking out well planned fund
tranches at each phase of the building process, UBL Address brings you
your dream house one step closer.
Land Plus ConstructionWhat do you do with an empty piece of land? Construct your dream house
with all the aesthetic details youve ever wished for. UBL Address helps you
through every stage of construction by providing you with well planned out
fund tranches so that you can better manage your construction.
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F loating Rate
Payment charges on early payment either partially or full.
Eli gibility Criteria
1. Minimum monthly income: Rs.50,000
2. Age: 23 to 65 years
3. Resident Pakistani
4. Self-employed businessman/professional or salaried individual
5. Minimum loan size: Rs. 500,000
Documentation Requirements
Copy Of NIC
Two recent Photographs each of primary as well as co-borrowers
Signed Lou (Letter of Understanding), which states the applicable rate at the time
of booking of loan.
General Income Documents for Salaried and SEB/SEP are given below. However,
your exact Documentation Requirement as per your specific Segment & Profession
will be communicated to you by our respective ROs.
Segments Docs Requi red
Salaried Employment Certificate confirming last 12 months work
experienceTax Document for the past 24 months
Current Salary Slip
Bank Statement for the last 12 months
SEB/SEP Last 3 years Tax Assessment Order or Registered
Partnership Deed
Bank Statement for the last 12 months
Salary Slip/Salary Certificate
Other Documents are required to substantiate the length of business
Markup RatesBoth Floating and Adjustable Rate Options are available. The Floating Rate Option is
subject to annual revision from the time of loan booking. Any change in the mark
up rate may be either upward or downward revision (if required) after every twelve
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(12) months from the date of the booking of the loan(upward or downward only to
the extent of Kibor).
Markup rates are calculated on the basis of the prevailing one year Karachi Inter-
Bank Offered Rate (KIBOR*) which is taken as the base rate. A margin that varies
from one pricing option to another is charged over and above the base rate, the
details of which are as follows:
Segments Pricing
Salaried KIBOR + 3.5% = Applicable Markup Rate
SEB/SEP KIBOR + 4.5% = Applicable Markup Rate
The applicable markup rate will be the rate prevailing at the month of booking. This
will be communicated to the applicant through the Repayment Schedule -
To know more about the applicable rates for various pricing options, please call UBLPhone Banking at 111-825-888.
* KIBOR is defined as the average rate ask side for one year tenure as published
on Reuters Page KIBOR or as published by Financial Market Association of Pakistan
in case Reuters Page in unavailable.
Penalty & Charges
Type of Penal ty &
ChargesAmount & penalty %age
Late Fees (per
installment)
Rs.1000
Appraisal Charges Rs 5,000
Legal Charges Rs 5,000
Life Insurance Optional
Property Ins Complimentary
Processing Charges Rs 5,000 (Non refundable)
Partial Payoff Max 6 monthly installments.
Penalty charges apply on amount exceeding Rs 50, 000 or 6
monthly installments.
8% for Year 1
5% in Year 2
3% in Year 3 & onwards
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In this option, you get a fixed rate for a period of 12 months, which gets
repriced annually. (Upward or downward, only to the extent of Kibor).
Cost Price: (PKR) 2,500,000 /-
Customer Share: (PKR) 1,000,000 /-
Bank Share: (PKR) 1,500,000 /-
Profit Rate: 15.78 %
Tenure in Years: 10
Segment: Salaried
Months Amount Interest Principal Balance
0 1500000
1 24200.24 18750 5450.24 1494550
2 24200.24 18681.87 5518.37 1489031
3 24200.24 18612.89 5587.35 1483444
4 24200.24 18543.05 5657.19 1477787
5 24200.24 18472.34 5727.91 1472059
6 24200.24 18400.74 5799.51 1466259
7 24200.24 18328.24 5872 1460387
8 24200.24 18254.84 5945.4 1454442
9 24200.24 18180.53 6019.72 1448422
10 24200.24 18105.28 6094.96 1442327
11 24200.24 18029.09 6171.15 1436156
12 24200.24 17951.95 6248.29 1429908
13 24200.24 17873.85 6326.39 1423582
14 24200.24 17794.77 6405.47 1417176
15 24200.24 17714.7 6485.54 1410690
16 24200.24 17633.63 6566.61 1404124
17 24200.24 17551.55 6648.7 1397475
18 24200.24 17468.44 6731.8 1390743
19 24200.24 17384.29 6815.95 1383927
20 24200.24 17299.09 6901.15 1377026
21 24200.24 17212.83 6987.42 1370039
22 24200.24 17125.49 7074.76 1362964
23 24200.24 17037.05 7163.19 1355801
24 24200.24 16947.51 7252.73 1348548
25 24200.24 16856.85 7343.39 1341205
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26 24200.24 16765.06 7435.18 1333770
27 24200.24 16672.12 7528.12 1326241
28 24200.24 16578.02 7622.23 1318619
29 24200.24 16482.74 7717.5 1310902
30 24200.24 16386.27 7813.97 1303088
31 24200.24 16288.6 7911.65 1295176
32 24200.24 16189.7 8010.54 1287166
33 24200.24 16089.57 8110.67 1279055
34 24200.24 15988.19 8212.06 1270843
35 24200.24 15885.54 8314.71 1262528
36 24200.24 15781.6 8418.64 1254110
37 24200.24 15676.37 8523.87 1245586
38 24200.24 15569.82 8630.42 1236955
39 24200.24 15461.94 8738.3 1228217
40 24200.24 15352.71 8847.53 121936941 24200.24 15242.12 8958.13 1210411
42 24200.24 15130.14 9070.1 1201341
43 24200.24 15016.76 9183.48 1192158
44 24200.24 14901.97 9298.27 1182859
45 24200.24 14785.74 9414.5 1173445
46 24200.24 14668.06 9532.18 1163913
47 24200.24 14548.91 9651.33 1154261
48 24200.24 14428.27 9771.98 1144489
49 24200.24 14306.12 9894.13 1134595
50 24200.24 14182.44 10017.8 112457751 24200.24 14057.22 10143.03 1114434
52 24200.24 13930.43 10269.81 1104165
53 24200.24 13802.06 10398.19 1093766
54 24200.24 13672.08 10528.16 1083238
55 24200.24 13540.48 10659.77 1072579
56 24200.24 13407.23 10793.01 1061786
57 24200.24 13272.32 10927.92 1050858
58 24200.24 13135.72 11064.52 1039793
59 24200.24 12997.41 11202.83 1028590
60 24200.24 12857.38 11342.87 1017247
61 24200.24 12715.59 11484.65 1005763
62 24200.24 12572.03 11628.21 994134.5
63 24200.24 12426.68 11773.56 982360.9
64 24200.24 12279.51 11920.73 970440.2
65 24200.24 12130.5 12069.74 958370.5
66 24200.24 11979.63 12220.61 946149.9
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67 24200.24 11826.87 12373.37 933776.5
68 24200.24 11672.21 12528.04 921248.4
69 24200.24 11515.61 12684.64 908563.8
70 24200.24 11357.05 12843.2 895720.6
71 24200.24 11196.51 13003.74 882716.9
72 24200.24 11033.96 13166.28 869550.6
73 24200.24 10869.38 13330.86 856219.7
74 24200.24 10702.75 13497.5 842722.2
75 24200.24 10534.03 13666.22 829056
76 24200.24 10363.2 13837.04 815219
77 24200.24 10190.24 14010.01 801209
78 24200.24 10015.11 14185.13 787023.8
79 24200.24 9837.8 14362.45 772661.4
80 24200.24 9658.27 14541.98 758119.4
81 24200.24 9476.49 14723.75 743395.782 24200.24 9292.45 14907.8 728487.9
83 24200.24 9106.1 15094.15 713393.7
84 24200.24 8917.42 15282.82 698110.9
85 24200.24 8726.39 15473.86 682637
86 24200.24 8532.96 15667.28 666969.8
87 24200.24 8337.12 15863.12 651106.6
88 24200.24 8138.83 16061.41 635045.2
89 24200.24 7938.07 16262.18 618783.1
90 24200.24 7734.79 16465.46 602317.6
91 24200.24 7528.97 16671.27 585646.392 24200.24 7320.58 16879.66 568766.7
93 24200.24 7109.58 17090.66 551676
94 24200.24 6895.95 17304.29 534371.7
95 24200.24 6679.65 17520.6 516851.1
96 24200.24 6460.64 17739.6 499111.5
97 24200.24 6238.89 17961.35 481150.2
98 24200.24 6014.38 18185.87 462964.3
99 24200.24 5787.05 18413.19 444551.1
100 24200.24 5556.89 18643.35 425907.7
101 24200.24 5323.85 18876.4 407031.3
102 24200.24 5087.89 19112.35 387919
103 24200.24 4848.99 19351.26 368567.7
104 24200.24 4607.1 19593.15 348974.6
105 24200.24 4362.18 19838.06 329136.5
106 24200.24 4114.21 20086.04 309050.5
107 24200.24 3863.13 20337.11 288713.4
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108 24200.24 3608.92 20591.33 268122.1
109 24200.24 3351.53 20848.72 247273.3
110 24200.24 3090.92 21109.33 226164
111 24200.24 2827.05 21373.19 204790.8
112 24200.24 2559.89 21640.36 183150.5
113 24200.24 2289.38 21910.86 161239.6
114 24200.24 2015.49 22184.75 139054.8
115 24200.24 1738.19 22462.06 116592.8
116 24200.24 1457.41 22742.83 93849.95
117 24200.24 1173.12 23027.12 70822.83
118 24200.24 885.29 23314.96 47507.87
119 24200.24 593.85 23606.4 23901.48
120 24200.24 298.77 23901.48 0
This will change with the 1 Year KIBOR rate.
COMPARISON:
An Islamic alternative to conventional car financing is Islamic Car Ijarah, which meets
the principals of Islamic Shari'ah. This is the ultimate solution or the best alternative
being considered. Lease is not originally a mode of financing. It is simply atransaction meant to transfer the usufruct of a property from one person to another
for an agreed period and an agreed upon consideration. Leasing can be used as a
mode of financing in the Islamic banks as an alternative to the conventional car
financing. (when we click more, then rest of the material should open up) However
the consideration of leasing as a mode of financing should be based on certain
conditions. It should be understood by all, using it as a mode of financing that it is
not sufficient to substitute the name of interest by the name of rent and the term
mortgage instead of the leased asset. There must be a significant difference betweenleasing and an interest-bearing loan. This form of lease is an alternative to car Ijarah
because it deals with the problem of interest by charging rent only after the car has
been delivered to the client or the lessee. Where as in the conventional car financing
the payment of the rent (interest) starts before the delivery of the car to the lessee
which is nothing but pure interest.
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Moreover in the leasing or Car Ijarah the risk is not entirely of the lessee as in the
case of conventional car financing. The lessee only has the risk of the damage to the
property done due to his negligence otherwise the bank bears all the liability of the
ownership of the car.
Thus car Ijarah is the best alternative chosen for the Islamic mode which is
permissible by Fiqh and Shariah.
One must refrain from making a direct comparison between Islamic banking and
conventional banking (apple to apple comparison). This is because they are
extremely different in many ways. The key difference is that Islamic Banking is basedon Shariah foundation. Thus, all dealing, transaction, business approach, product
feature, investment focus, responsibility are derived from the Shariah law, which
lead to the significant difference in many part of the operations with as of the
conventional
The foundation of Islamic bank is based on the Islamic faith and must stay within the
limits of Islamic Law or the Shariah in all of its actions and deeds. The original
meaning of the Arabic word Shariah is 'the way to the source of life' and is now used
to refer to legal system in keeping with the code of behaviour called for by the Holly
Qur'an (Koran). Amongst the governing principles of an Islamic bank are :
* The absence of interest-based (riba) transactions;
* The avoidance of economic activities involving oppression (zulm)
* The avoidance of economic activities involving speculation (gharar);
* The introduction of an Islamic tax, zakat;
* The discouragement of the production of goods and services which contradict the
Islamic value (haram)
On the other hand, conventional banking is essentially based on the debtor-creditor
relationship between the depositors and the bank on one hand, and between the
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borrowers and the bank on the other. Interest is considered to be the price of credit,
reflecting the opportunity cost of money.
Islamic law considers a loan to be given or taken, free of charge, to meet any
contingency. Thus in Islamic Banking, the creditor should not take advantage of the
borrower. When money is lent out on the basis of interest, more often that it leads
tosome kind of injustice. The first Islamic principle underlying for such kind of
transactions is "deal not unjustly, and ye shall not be dealt with unjustly" [2:279]
which explain why commercial banking in an Islamic framework is not based on the
debtor-creditor relationship.
The other principle pertaining to financial transactions in Islam is that there should
not be any reward without taking a risk. This principle is applicable to both labor and
capital. As no payment is allowed for labor, unless it is applied to work, there is no
reward for capital unless it is exposed to business risk.
Thus, financial intermediation in an Islamic framework has been developed on the
basis of the above-mentioned principles. Consequently financial relationships in
Islam have been participatory in nature.
Lastly, for the interest of the readers, the unique features of the conventional
banking and Islamic banking are shown in terms of a box diagram as shown below:-
Conventional Banks Islamic Banks
1. The functions and operating modesof conventional banks are based onfully manmade principles.
1. The functions and operating modesof Islamic banks are based on theprinciples of Islamic Shariah.
2. The investor is assured of apredetermined rate of interest.
2. In contrast, it promotes risk sharingbetween provider of capital (investor)and the user of funds (entrepreneur).
3. It aims at maximizing profit withoutany restriction.
3. It also aims at maximizing profit butsubject to Shariah restrictions.
4. It does not deal with Zakat. 4. In the modern Islamic bankingsystem, it has become one of theservice-oriented functions of theIslamic banks to be a Zakat CollectionCentre and they also pay out theirZakat.
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5. Lending money and getting it backwith compounding interest is thefundamental function of theconventional banks.
5. Participation in partnership businessis the fundamental function of theIslamic banks. So we have tounderstand our customer's businessvery well.
6. It can charge additional money(penalty and compounded interest) incase of defaulters.
6. The Islamic banks have no provisionto charge any extra money from thedefaulters. Only small amount ofcompensation and these proceeds isgiven to charity. Rebates are give forearly settlement at the Bank'sdiscretion.
7. Very often it results in the bank'sown interest becoming prominent. It
makes no effort to ensure growth withequity.
7. It gives due importance to thepublic interest. Its ultimate aim is to
ensure growth with equity.
8. For interest-based commercialbanks, borrowing from the moneymarket is relatively easier.
8. For the Islamic banks, it must bebased on a Shariah approvedunderlying transaction.
9. Since income from the advances isfixed, it gives little importance todeveloping expertise in projectappraisal and evaluations.
9. Since it shares profit and loss, theIslamic banks pay greater attention todeveloping project appraisal andevaluations.
10. The conventional banks givegreater emphasis on credit-worthinessof the clients.
10. The Islamic banks, on the otherhand, give greater emphasis on theviability of the projects.
11. The status of a conventional bank,in relation to its clients, is that ofcreditor and debtors.
11. The status of Islamic bank inrelation to its clients is that ofpartners, investors and trader, buyerand seller.
12. A conventional bank has toguarantee all its deposits.
12. Islamic bank can only guaranteedeposits for deposit account, which is
based on the principle ofal-wadiah,thus the depositors are guaranteedrepayment of their funds, however ifthe account is based on themudarabah concept, client have toshare in a loss position..