Outline of Presentation

 Introduction and Brief Perspective of Islamic Banking

 Islamic Banking in the Global Prospectus
 Product Tree of Islamic Agricultural Finance
 Mode of Financing in Islam ( Musharakah & Modarabah )
 Bai ( Buying & Selling ) – Murabaha , Salam, Istisna
 Takaful – Islamic Insurance
 Takaful Products for Agricultural Finance
 Crop Takaful

Presented by
Zubair Mughal
CEO – AlHuda : Centre of Islamic Banking & Economics
Regional Head – Takaful Pakistan Limited.
 Industry Progress in Pakistan
Year 2001 2002 2003 2004 - 05 2006 - 07

2 3 4 10 18

•Meezan Bank •Meezan Bank (113)

•Al Baraka •Meezan Bank
•Al Baraka •Meezan Bank •Al Baraka (20)
•Meezan Bank
•MCB •Al Baraka •MCB (8)
•Al Baraka
•MCB •Alfalah(32)
•MCB
•Alfalah •SCB (8)
•Alfalah
•Bank AlHabib(4 )
•SCB
•HMB(4)
•Bank AlHabib
•Bank of Khyber(17)
•Habib AG Zur.
•Soneri Bank ( 4)
•Metropolitan
•HBL(1)
•Bank of Khyber
•Bank Islami(37)
•Soneri Bank
•DIB (20)
 6 Full fledge Banks having 228 •EGIBL (24)
and 12 Conventional Banks • Dawood(14)
•NBP(3)
have 103 SAIBBS and 10 Sub •RBS (3)

Branches till August, 08 •Askari(14)

•UBL (5)
 Total IB Branches = 341
Industry Progress in Pakistan
Industry Progress in Pakistan
Industry Progress in Pakistan
City - Wise Breakup
City - Wise Breakup
Industry Progress in Pakistan
Industry Progress in Pakistan
Industry Progress in Pakistan
Industry Progress in Pakistan
 Islamic products and services offered by 300+
Financial Institutions around the world

 Germany:4  UAE: 13
- Bank Sepah - Dubai Islamic Bank
.
 
- Commerz Bahrain: 26- Abu Dhabi Islamic
 Kuwait:Bank 9
United States: 20 Bank - HSBC
BankAmanah

- Bahrain Islamic - Kuwait Finance
- Al Manzil Financial Services - Deutsche
UK: 26 - Al Baraka House
Qatar: 4
- American Finance House Bank
- HSBC Amanah
- ABC Islamic Bank
- Qatar Islamic Bank
- Failaka Investments Switzerlan - CitiIslamic Investment Bank
- HSBC
Finance - Qatar International Islamic
d: 6
- Al Baraka
- Ameen Housing
Iran: 8 Pakistan: 21
International Ltd
Cooperative - Takafol UK Ltd India: 3
- The Halal Mutual
Bangladesh:
Turkey: 7
Investment Company
Egypt:
- J Aron & Co 12 - Faisal Finance 9
Ltd
- Alwatany Bank of Egypt
(Goldman Sachs) Institution Malaysia: 49
- Egyptian Saudi Finance  - Ihlas Finance2 - Pure Islamic Banks
Sudan: 9Saudi Arabia: 17
House (Bank Islam, Bank
- Al Rajhi

- SAMBA
Muamalat)
Rest - conventional
- Saudi Hollandi

- Riyadh Bank
Indonesia: 4
banks
Yemen: 5
International Overview
 The size of Islamic Financial Industry has reached US$ 300 Bln.
and its growing annually @ 15% per anum.
 51 countries have Islamic Banking Institutions
 27 Muslim countries including Bahrain, UAE, Saudi Arabia,
Malaysia, Brunei and Pakistan
 24 non-Muslim countries including USA, UK, Canada,
Switzerland, South Africa and Australia
International Overview
Leading foreign Banks have opened Islamic
Banking windows or subsidiaries such as:
• Standard Chartered Bank
• Citibank
• HSBC
• ABN AMRO
• UBS
International Overview
 In Feb 1999, Dow Jones introduced the Dow Jones
Islamic Market Index (DJIM) of 600 companies world
wide whose business complies with Islamic Shariah
laws
 At present there are more than 105 Islamic Funds
operational through out the world with a total fund
base of over USD 3.50 billion
International Overview
 Governments of Bahrain ,Malaysia and now Pakistan
have issued Islamic Bonds (Sukuk) in order to
facilitate Islamic Banks in managing their liquidity.
 Issuance of these bonds has also paved the way for
Shariah compliant Government borrowings
International Overview
 Institutions like Accounting and Auditing Organization for
Islamic Financial Institutions (AAOIFI) and Islamic Finance
Services Board (IFSB) have been formed.
 These institutions are playing a key role in setting up and
standardizing Shariah , Financial and Accounting standards for
Islamic Financial Institutions.
 Due to these collective efforts Islamic banking is now
recognized by IMF, World Bank and Basel Committee.
 PRODUCT TREE OF ISLAMIC AGRI FINANCE

Islamic Modes of
Agricultural Finance

Partnership Based Trade Based Rental Based

Modes Modes Modes

Musharaka Murabaha Ijarah

Mudaraba Musawama Diminishing
Salam Musharaka
Istisna
Partnership Based Modes of
Islamic Agricultural Finance
( Modarabah & Musharakah)
Musharakah
 Characteristics
 All parties share in the capital
 All parties share profits as well as losses
 Profits are distributed as per agreed ratio
 Loss is borne by the parties as per capital
ratio
 Every partner is agent of other
 MUSHARAKAH
May be in any
PROFIT agreed ratio
Rs. 100
Rs. 60 Rs. 40

Rs.1000 Rs.1000
PARTNER A VENTURE PARTNER B

Rs. 50 Rs. 50

LOSS
Rs.100
Must be according to
capital ratio
Mudarabah
 One partner (Rab al Mal) contributes capital
and the other (Mudarib) contributes his skills
or services to the venture
 Venture may for a fixed period or purpose
 Both share profit in pre-agreed ratio
 Loss is borne by Rab al Mal only, Mudarib
loses his services
 MUDARABAH
PROFIT
60 % 40 %

CAPITAL SERVICES

RABBUL MAL VENTURE MUDARIB

ALL MONETORY LOSS LOSS OF SERVICES

LOSS
Bai (Buying & Selling)

Trade Base Mode of

Islamic Agricultural
Finance
Basic Rules of Bai

 Existence of Product/Commodity

 Ownership of Product/Commodity

 Possession of Product/Commodity
 Unconditional basis

 Product have value/Price.

Basic Rules of Bai
 Bai on Such product which is permissible in Islam.

 Product Must be Identify, clear with all demanding

Qualities.

 Not based on any incident, struggle etc

 Price must be clearly identified.

Kinds of Bai
 Bai Musawamah
 Bai Murabaha
 Bai Surf
 Bai Salam
 Bai Istisna’
 Bai Eenna
 Bai Touliya
 Bai Wadhia
 Takaful
(Islamic Insurance )
 Introduction

“Takaful” is the Sharia Compliant brand

name for the Islamic alternative to
conventional insurance. Its based on the
principle of Ta’awan or mutual assistance.
Origins of Takaful

In the event of death caused by

someone from another tribe, the
member of the offender’s tribe would
share the “ blood money” (Khoon Baha)
to provide for the family of the victim.
Why Insurance ?
Is Some thing wrong with Concept ?

 Risk Aversion
 Assuring others
 Risk sharing
From the Holly Quran
 The need for insurance is shown in the
following verse of The Quran.
“ Those of you who die and leave widows
should bequeath for their widows a
year’s maintenance and residence”
(2.240)
From the Hadiths
 By Anas-bin-Malik, One day Prophet
Muhammad(PBUH) notced a bedouin
leaving his Camel without tying it. He
asked the bedouin, “Why don’t you tie
down your camel”? The Bedouin
answered, “ I put my trust in Allah
(SWT)”. The Prophet (PBUH) then
said,” Tie your camel first, then put
your trust in Allah(SWT)” <Tirmidhi>
What wrong with practice ?
The contract between the insurer & the
insured is technically wrong from the
sharia perspective because of
 Interest (Riba)

 Gharar (Uncertainty))

 Gambling (Qamar & Maisir)

 Risk Transfer Issue

Riba in Insurance
 Direct Riba
Excess on one side in case of exchange
between the amount of premium.

 Indirect Riba
The interest earned on interest based
investments
Gharar
 Lexically it means uncertainty and
technically it means the uncertainty of
the counteract or the subject matter.
 Wakala-Waqf Model

Share SHARE H O L D E R S’ F U N D (S.H.F.)

Holder

Mudarib’s Management
Wakalah Investmen Share of PTF’s Expense of Profit/Loss
Fee t Investment the
Income Income Company

Takaful
Operator

Investment by
the Company

WAQF Operational Claims &

Cost of Takaful Investment Reserves Surplus
/ ReTakaful Income (Balance)

P A R T I C I P A N T S’ T A K A F U L F U N D
(P.T.F.)
Participant
Different Models of Takaful
 Pure Mudarabah Model : The participants
and operator enter into modarabah Contract.
 Wakalah Model : An Agency Agreement is
made between participants and Operators on
the basis of Wakalah ( Agency agreements)
 Wakalah Based on Waqf Model : The
participant's donate the fund and operator
charge an agency fee.
 General Takaful Types
 General Takaful – offers all kinds
of non-life risk coverage. It is
normally divided into following
classes:

 Property Takaful
 Marine Takaful
 Motor Takaful
 Miscellaneous Takaful
Types of Family Takaful
 Term Life Takaful
 Whole Life Takaful
 Endowment Takaful
 Universal Takaful
 Marriage Plan
 Education Plan
Takaful Operators
 The number of Takaful operators worldwide is now
estimated at:
 152 Takaful companies
 9 Retakaful companies
 In 39 Countries.
 Average growth rate higher than conventional
insurance companies (around 25%).

 Non–Muslims increasingly opting for Takaful

products for commercial benefits.
 INTRODUCTION OF TAKAFUL
PAKISTAN LIMITED
 Takaful Pakistan is a joint venture of prestigious local
& foreign institutions, including:
 Emirates Investment Group (Sharjah).

 Al-Buhaira National Insurance Co. (U.A.E.)

 Al Raji Bank - KSA

 House Building Finance Corporation.

 Emirates Global Islamic Bank.

 Arif Habib Securities.

 Sitara Chemicals.

 Large initial paid-up Capital.

 INTRODUCTION OF TAKAFUL
PAKISTAN LIMITED
 Managed by dedicated professionals, committed to the cause.
 Only A rated Takaful Company in Pakistan
 ReTakaful arrangements with a consortium of internationally
reputed ReTakaful operators.
 Shariah Board comprises of eminent scholars.
 BancaTakaful, Crop Takaful and MicroTakaful products
 We intend to be the trend-setter for excellent Clients’ Servicing,
Operational bench marks and prudent Underwriting practices.
Thank You.