Money &

Banking
Group Members

Syed Owais Ali (SP07-BB-0135)

M. Moez Siddiqui (SP07-BB-
0106)
M. Laraib (SP07-BB-
0082)
Pawan Kumar (SP07-BB-
0128)
Shahbaz Nawaz (Sp07-BB-
0150)
What is Islamic
Banking?
 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 Shariah.

 Interest free banking is a narrow concept denoting a

number of banking instruments or operations, which
avoid interest.
History
 Steps for Islamization of banking and financial system 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/national level.
 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.
Continued
 The legal framework of Pakistan's financial and corporate
system was amended on June 26, 1980 to permit issuance of
a Shariah compliant instrument of corporate financing
named Participation Term Certificate (PTC).

 Separate Interest-free counters started operating in all the

nationalized commercial banks on January 1, 1981 to
mobilize deposits on profit and loss sharing basis.
 Major modes of
Islamic Banking and
Finance
Modes Of Islamic
Banking
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.

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 be taken, or for the effort or work proposed to
be expended.
Continued
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.
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.
Continued
Istisna′ a:
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.

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.
Continued
Mudarbah:
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

Musharkah:
Musharkah means a relationship established under a contract
by the mutual consent of the parties for sharing of profits and
losses in the joint business.
Continued
Bai′ Salam:
Salam means a contract in which advance payment is made
for goods to be delivered later on. The seller undertakes to
supply some specific goods to the buyer at a future date in
exchange of an advance price fully paid at the time of
contract.
Dubai Islamic Bank
Part of the Big Five Islamic
The World’s First Islamic Bank
Banks in the world

The largest Islamic Bank in UAE Globally recognized Leader

Amongst the top 4 Banks in and Innovator in Islamic Banking
the country

Strong Domestic Franchise

Nearly 600,000 retail customers
Government ownership 34%
49 branches / nearly
300 ATMs, CDM
An Integral, Recognized player
in the Islamic Finance sector
Mega Deals
US$ 3.52 Bn Sukuk issue for Nakheel
(Dubai World)
• US$ 3.5 Bn Sukuk issue for PCFC
(Govt of Dubai)
• US$ 2 Billion Sukuk for Dubai Civil
Aviation for expansion project of Dubai
International Airport
• US$ 600m Government of Malaysia
Sukuk
• US$ 600m Pakistan Sovereign Sukuk
• US$ 550m Sukuk for Emirates Airlines
• US$ 530m Lead Arranger for Qatar Gas
II
Awards & Accolades (2005-’07)
Best Bank in UAE, 2006: The Banker
• Best Islamic Bank in ME, 2006:
Euromoney
• Best Debt house UAE, 2005: Euromoney
• Best Sukuk House, 2005: Euromoney
• Award for Finance (2005): Shaikh
Mohammed Bin Rashid Business Award
• Quality Recognition Award, 2005: JP
Morgan Chase
• Banking Achievement Award for the
Middle East, by Emerging Markets
Publication during the IMF Conference in
New York, Oct’07
Products and
Services
Current Account
 The Current Account is offered in Pak Rupees, USD, GBP,
EUR, JPY and any other approved currency by the central
Bank/Policy of the Bank.

 The minimum initial deposit requirement shall vary for

each of the above categories as determined by the bank
from time to time.

 The minimum initial deposit (opening deposit) requirement

shall vary for each of the above categories of the
currencies.
Continued
 Subject to availability of sufficient balance the depositor is
free, at any time, to withdraw from its Current Account any
amount.

 No minimum amount restriction for withdrawing money at

the counter.

 The depositor is entitled to certain privileges as per the

product policy.
Continued
 The statement of account can be generated
monthly/quarterly/semi-annually and annually.

 All persons are, subject to the terms and conditions, eligible

to open the Current Account

 The Bank is not obliged to pay any profit on such accounts.

Likewise the customer may not bear any loss.
Types Of Current
Accounts
a) Individual or Joint Account
b) Minor’s Account
c) Purdah Observing Ladies Account

d) Illiterate/Photo Account.
e) Sole Proprietorship Account

f) Partnership Account
Continued
g) Limited Liability Company Account.

h) Association, Society, Educational Institutes, Club

Account
i) Trust Account

j) Executors and Administrators Account.

k) Agent’s Account.
Process Flow
Branch Level Activities
 Account Holder shall complete and sign the DIB
Account Opening Form (AOF)
 The Account Holder must be introduced by an
existing account holder
 The Account Holder must read and sign the Banking
Services Agreement
 Account Holder’s signature on the Signature
specimen card will be obtained
Continued
 The Account Holder signs the ATM/VISA Debit
Card Application Form along with its Terms &
Conditions. (If he opts for such card)
 Account Holder produces the required Documents
 Branch/Operations Manager will check the AOF
and having ensured that if the same is complete and
sign the AOF
Continued
 After successful completion of the Compliance and
KYC checks, the account opening officer enters the
customer name and CNIC/Passport number and other
information in the account opening module. System
will generate a serial number (Customer Information
File – CIF). Annexure ‘’ACT-Y1’’

 After the generation of the CIF the account opening

officer will generate the account number according to
the customer information provided in accounting
opening form. Annexure ‘’ACT-Y2’’
Continued
 The Account Opening Form is to be scanned along
with its attached document(s).

 Original Documents to be filed in the Account

Holder’s Current Account Opening file. (Account
number to be assigned later after the AOF is
completely processed at the Back Office and account
number is allotted to the batch number/CIF)
BACK OFFICE LEVEL
ACTIVITIES
 COD will feed the relevant details from the AOF into
the core banking system.
 After the necessary variables in the system are made
the system will check the customer information
through necessary KYC and AML filters.
 If missing then, proper KYC and Due Diligence as
prescribed by the Bank’s KYC Policy is to be
completed.
Continued
 Account Number is to be assigned and
communicated to the Branch for their record

 Cheque book request is to be sent to the cheque

book printers through NIFT (this will be done at
the account holding branch, once Back Office
completes its process and assign the account
number) (approx. turnaround time: 3 days)
Continued
 ATM/VISA Debit Card information to be fed in the
system and the request is then queued at the production
center in the back office. (approx. turnaround time: 1
day)

 ATM/VISA Debit Card PIN and Tele-banking PIN

Mailers requests are queued in the system (approx.
turnaround time: 1 day).
Continued
 ATM/VISA Debit Card is to be placed in the Welcome
pack and the Pack is to be sent to account holding branch
for delivery to the Account Holder along with the cheque
book. (This will be done at least 3 days after the account
opening request). The Account Holder will be informed to
collect the PIN from the branch or provide the bank with
the address at which the same can be dispatched.

 The Branch will deliver the Welcome Pack to the

customer either through courier or physically hand over
the same to the customer or his authorized representative
after obtaining acknowledgement on the copy of the
receipt.
Islamic Banking Global
Scenario
 Over the last three decades Islamic banking and finance
has developed into a full-fledged system and discipline
reportedly growing at the rate of 15 percent per annum.
 Today, Islamic financial institutions, in one form or the
other, are working in about 75 countries of the world.
 In Malaysia, Bahrain, Pakistan and a few other countries of
the Gulf, Islamic banks and financial institutions are
working as a system parallel with the conventional system.
 In Britain, the Financial Services Authority has issued
Islamic banking license to the Islamic Bank of Britain,
which has been sponsored by Gulf and UK investors.
 The United States of America has appointed Dr.
Mahmoud El Gamal, an eminent economist/expert on
Islamic banking to advise the US Treasury and
Government departments on Islamic finance in June 2004.
 Both US and Britain have over two dozens of
Islamic financial institutions each for providing
Riba free financing facilities to their Muslim
communities.