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- 1. ISLAMIC BANKING IN PAKISTAN
- 2. Group Members Ahsan Khan Fahad Suleman Faisal Nadeem Mudassar Naeem Sami ur Rehman
- 3. Outline Introduction • Conventional Banking • Islamic Banking Why Islam Prohibits Interest Advantage, Disadvantages and Problems with Islamic banking Islamic banking in Pakistan Difference between Islamic & Traditional Banking • Conclusion & Recommendations
- 4. Introduction Islamic Banking Conventional Banking
- 5. Advantages of Islamic Banking Relations with depositor Eliminate the barriers source of Halal Earning Justice and Fairness Liquidity Better Customer Relations No Fixed Obligation Transparency
- 6. Disadvantages Credit cards Profit and Loss sharing Restrict the practices
- 7. Islamic Banking in Pakistan History Famous Banks In Pakistan
- 8. Islamic Banking in World History Famous Banks In World
- 9. Order about Riba in Islam What is interest Why it is prohibited in Islam
- 10. Functions of Conventional banking Charge interest on fixed rate Examples Car loan Business loan
- 11. Functions of Islamic banking Service charges instead of interest Charges Varies Shares profit and loss Examples Car Business
- 12. Effects of Islamic banking on traditional banking Reduces trend of conventional banking Decrease in number of customers of conventional banking Conventional banks also started Islamic banking But was not so much liked by customers
- 13. Comparison Islamic Banking Traditional Banking Basis is Shariya Lend the money Risk Sharing Assured Profit Maximize profit according to Maximize without any limitations Shariya No concern with Islamic teaching Zakat No Extra Charges Investor, Trader, Buyer
- 14. Conclusion
- 15. Recommendations should be marketed properly More awareness about Islamic banking & its benefits should get separated from the traditional banks There should be more Banks. Islamic banks should open more branches in rural areas.
Notas del editor
- Conventional banking system was presented into the Muslim countries at a time when they were politically and economically weak and were following back, i.e. in the late 19th century. Initially, they focused mainly to the import export of the foreign businesses. The banks were generally confined to the capital cities and the local population remained largely untouched by the banking system. The local trading community avoided the “foreign” banks both for nationalistic as well as religious reasons. Local banks were established with the same view as the interest-based foreign banks. They started to enroot within the country to bring the banking system to more local people. With the passage of time, as countries became independent the need to involve in banking activities became mandatory and urgent. Governments, businesses and individuals started to handle business with the banks, with or without liking it. This state of affairs drew the attention and concern of Muslim intellectuals. The story of interest-free or Islamic banking begins here. As time went on it became difficult to engage in trade and other activities without making use of commercial banks. Even then many confined their involvement to transaction activities such as current accounts and money transfers. Borrowing from the banks and depositing their savings with the bank were strictly avoided in order to keep away from dealing ininterest which is prohibited by religion.islamic banking is banking activity which operate in accordance to the shariya know as fiqhulmuamalat which means islamic rules in transaction.the rules and practices are form quran and sunah and form other resources of islamic laws such as qiyaasijma and ijtihad there are two basic purpose of islamic banking one is sharing of profir and losss and other is prohibition of interest bcoz it is not premitted in islam or shariya now CONVENTIONAL BANKING is which operats on the modes of manmade rules these rules are made by stat bank and every bank doing conventional banking had to follow these rules when a person invest with this bank it give an appropriate percentage of money which had been dicided before so the basic aim ko conventional banking is to maximize the profit so they donot have any concern with zakat
- Islamic banking in PakistanIn mid-60 the efforts of making Pakistan’s banking system according to Islam were started. Gradually banks started taking interest in Islamic way of banking. A significant step was taken in mid-80.In December 2001; State Bank of Pakistan issued detailed criteria for setting up of Islamic banks. Meezan bank was first bank which introduces Islamic banking in Pakistan.Famous Islamic Banks in PakistanMeezan BankAlflah Islamic bankingDubai Islamic bankHSBC Islamic bankingMCB Islamic bankingStandard Chartered Islamic bankingDistribution of Profit & Loss It is necessary for the validity of Mudarabah that the parties agree, right at the beginning, on a definite proportion of the actual profit to which each one of them is entitled. The Shariya has prescribed no particular proportion; rather it has been left to their mutual consent. They can share the profit in equal proportions and they can also allocate different proportions for Rab-ul-MaalandMudarib. However in extreme case where the parties have not predetermined the ratio of profit, the profit will be calculated at 50:50.Islamic banking offers short term as well as long term loan. It depends on its customers that how to invest and which package should be chosen. Functions of Islamic bankingThe functions of Islamic banking are different from conventional banking. And it does not charge interest for giving loan. For example if we get loan from Islamic banking for a car then we will pay loan back to back in installments and we will also pay rent for the remaining amount. In this way, as more we will pay to bank our rent will decrease.In a same way we can get loan for house or for anything else.And if we have to get loan for business use, bank will not give us money but instead of that they will directly give payment to supplier from which we have to purchase products or raw material. Functions of Conventional bankingIn conventional banking if we have to get loan to buy a car bank will pay amount but will charge interest on fixed rate. And we will have to pay in installments but with additional interest charges which are decided before.And if we take loan for business purpose it will give us directly payment and will charge a fixed amount of interest.Effects of Islamic Banking on Traditional BankingWhen Islamic banking started it reduces trend of conventional banking for Muslims and they shifted to Islamic banking. Conventional banks lost a number of customers.But seeing this trend of people traditional banks also started Islamic banking just like MCB, Alflah Bank, Habib Bank in Pakistan to get their customers back. But some people think that they do not use money separately for Islamic and conventional banking. Therefore they avoid these banks and invest only in proper Islamic banks like Meezan Bank.
- Islamic banking in PakistanIn mid-60 the efforts of making Pakistan’s banking system according to Islam were started. Gradually banks started taking interest in Islamic way of banking. A significant step was taken in mid-80.In December 2001; State Bank of Pakistan issued detailed criteria for setting up of Islamic banks. Meezan bank was first bank which introduces Islamic banking in Pakistan.Famous Islamic Banks in PakistanMeezan BankAlflah Islamic bankingDubai Islamic bankHSBC Islamic bankingMCB Islamic bankingStandard Chartered Islamic bankingDistribution of Profit & Loss It is necessary for the validity of Mudarabah that the parties agree, right at the beginning, on a definite proportion of the actual profit to which each one of them is entitled. The Shariya has prescribed no particular proportion; rather it has been left to their mutual consent. They can share the profit in equal proportions and they can also allocate different proportions for Rab-ul-MaalandMudarib. However in extreme case where the parties have not predetermined the ratio of profit, the profit will be calculated at 50:50.Islamic banking offers short term as well as long term loan. It depends on its customers that how to invest and which package should be chosen. Functions of Islamic bankingThe functions of Islamic banking are different from conventional banking. And it does not charge interest for giving loan. For example if we get loan from Islamic banking for a car then we will pay loan back to back in installments and we will also pay rent for the remaining amount. In this way, as more we will pay to bank our rent will decrease.In a same way we can get loan for house or for anything else.And if we have to get loan for business use, bank will not give us money but instead of that they will directly give payment to supplier from which we have to purchase products or raw material. Functions of Conventional bankingIn conventional banking if we have to get loan to buy a car bank will pay amount but will charge interest on fixed rate. And we will have to pay in installments but with additional interest charges which are decided before.And if we take loan for business purpose it will give us directly payment and will charge a fixed amount of interest.Effects of Islamic Banking on Traditional BankingWhen Islamic banking started it reduces trend of conventional banking for Muslims and they shifted to Islamic banking. Conventional banks lost a number of customers.But seeing this trend of people traditional banks also started Islamic banking just like MCB, Alflah Bank, Habib Bank in Pakistan to get their customers back. But some people think that they do not use money separately for Islamic and conventional banking. Therefore they avoid these banks and invest only in proper Islamic banks like Meezan Bank.
- To gain money by giving money. To get profit on fixed rate on money when you r not responsible for lossWhy prohibit?=Islam prohibits its believers to get or pay riba on money because people want loan when they are in need of it or due to any emergency. To take advantage of other’s when they are in need of it is not fair and a sin. And sometimes lender may not be able to return money due to some reason which may lead to any kind of problem for him. Therefore it is not permissible in Islam to take or give interest on money.
- In conventional banking if we have to get loan to buy a car bank will pay amount but will charge interest on fixed rate. And we will have to pay in installments but with additional interest charges which are decided before.And if we take loan for business purpose it will give us directly payment and will charge a fixed amount of interest.And in the same way they give interest
- The functions of Islamic banking are different from conventional banking. And it does not charge interest for giving loan. For example if we get loan from Islamic banking for a car then we will pay loan back to back in installments and we will also pay rent for the remaining amount. In this way, as more we will pay to bank our rent will decrease.In a same way we can get loan for house or for anything else.And if we have to get loan for business use, bank will not give us money but instead of that they will directly give payment to supplier from which we have to purchase products or raw material.Same way investor get money in this way.
- When Islamic banking started it reduces trend of conventional banking for Muslims and they shifted to Islamic banking. Conventional banks lost a number of customers.But seeing this trend of people traditional banks also started Islamic banking just like MCB, Alflah Bank, Habib Bank in Pakistan to get their customers back. But some people think that they do not use money separately for Islamic and conventional banking. Therefore they avoid these banks and invest only in proper Islamic banks like Meezan Bank.
- Islamic banking:Basic function and operating modes are on the basis of Islam and Shariya.It promotes Risk sharing among both provider of capital and user of the fundsIt maximizes the profit but according to Shariya.In modern Islamic Banking there is strict rule of collecting and paying of zakat.There are no extra charges in Islamic BankingThe Islamic banks, give greater emphasis on the possibility of the projects.In relation to its clients, the status of Islamic bank is that of partners, investors and trader, buyer and seller.Conventional banking:Basis function is lending money to the needy investors in the form of loan.Investor is assured of predetermined profit on the basis of rate of interest.It aims at maximizing profit without any limitations.Banks give greater stress on credit-worthiness of the clients.No concern with Islamic teaching and Shariya.In conventional banking system if debtors become defaulter, extra money is charged.In relation to its clients, the status of a conventional bank is that of creditor and debtors.
- ConclusionIslamic financing is related to feature of the transaction, and quite often the principal feature itself. From this spring’s an important distinguishing feature of Islam where in Islamic financing is always based on illiquid assets that have intrinsic value. Profit to Islamic financing is generated through bona fide sale of these assets. Islam prohibits its believers to get or pay Riba on money because people want loan when they are in need of it or due to any emergency. Islamic banking is useful because the money earned by this type of banking is Halal. And some of the disadvantage of the Islamic banking it does not provide facility of credit cards. Islamic banks are working all across the world even now it is started in Europe. In Pakistan a significant step was taken in mid-80.In December 2001; State Bank of Pakistan issued detailed criteria for setting up of Islamic banks. Meezan bank was first bank which introduces Islamic banking in Pakistan. The functions of Islamic banking are different from conventional banking and the different banks are also working across the Pakistan. In Islamic banking does not charge interest for giving loan and if we take loan for business purpose it will give us directly payment and will charge a fixed amount of interest. When Islamic banking started it reduces trend of conventional banking for Muslims and they shifted to Islamic banking.
- slamic Banking should be marketed properlyIslamic banks should provide more awareness about the Islamic banking and its benefits.Islamic banks should get separated from the traditional banks so people can trust more on them.There should be more Banks.Islamic banks should open more branches in rural areas.