Presentation on theme: "Outline of Presentation"— Presentation transcript:
1 Outline of Presentation Introduction and Brief Perspective of Islamic BankingIslamic Banking in the Global ProspectusProduct Tree of Islamic Agricultural FinanceMode of Financing in Islam ( Musharakah & Modarabah )Bai ( Buying & Selling ) – Murabaha , Salam, IstisnaTakaful – Islamic InsuranceTakaful Products for Agricultural FinanceCrop TakafulPresented byZubair MughalCEO – AlHuda : Centre of Islamic Banking & EconomicsRegional Head – Takaful Pakistan Limited.
2 Industry Progress in Pakistan Year2001Meezan BankAl BarakaMCBAlfalahSCBBank AlHabibHabib AG Zur.MetropolitanBank of KhyberSoneri Bank20022003210Meezan Bank (113)Al Baraka (20)MCB (8)Alfalah(32)SCB (8)Bank AlHabib(4 )HMB(4)Bank of Khyber(17)Soneri Bank ( 4)HBL(1)Bank Islami(37)DIB (20)EGIBL (24)Dawood(14)NBP(3)RBS (3)Askari(14)UBL (5)18436 Full fledge Banks having 228 and 12 Conventional Banks have 103 SAIBBS and 10 Sub Branches till August, 08Total IB Branches = 341
12 Islamic products and services offered by 300+ Financial Institutions around the world United States: 20- Al Manzil Financial Services- American Finance House- Failaka Investments- HSBC- Ameen Housing CooperativeGermany:4- Bank Sepah- Commerz Bank- Deutsche BankSwitzerland: 6UK: 26- HSBC Amanah Finance- Al Baraka International Ltd- Takafol UK Ltd- The Halal Mutual Investment Company- J Aron & Co Ltd (Goldman Sachs)Bahrain: 26- Bahrain Islamic Bank- Al Baraka- ABC Islamic Bank- CitiIslamic Investment BankMalaysia: 492 - Pure Islamic Banks (Bank Islam, Bank Muamalat)Rest - conventional banksSaudi Arabia: 17- Al Rajhi- SAMBA- Saudi Hollandi- Riyadh BankUAE: 13- Dubai Islamic Bank- Abu Dhabi Islamic Bank- HSBC AmanahQatar: 4- Qatar Islamic Bank- Qatar International IslamicKuwait: 9- Kuwait Finance HouseIran: 8Egypt: 12- Alwatany Bank of Egypt- Egyptian Saudi FinanceIndonesia: 4Sudan: 9Pakistan: 21India: 3Bangladesh:9Turkey: 7- Faisal Finance Institution- Ihlas Finance HouseYemen: 5.
13 International Overview The size of Islamic Financial Industry has reached US$ 300 Bln. and its growing 15% per anum.51 countries have Islamic Banking Institutions27 Muslim countries including Bahrain, UAE, Saudi Arabia, Malaysia, Brunei and Pakistan24 non-Muslim countries including USA, UK, Canada, Switzerland, South Africa and Australia
14 International Overview Leading foreign Banks have opened Islamic Banking windows or subsidiaries such as:Standard Chartered BankCitibankHSBCABN AMROUBS
15 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 lawsAt present there are more than 105 Islamic Funds operational through out the world with a total fund base of over USD 3.50 billion
16 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
17 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.
18 PRODUCT TREE OF ISLAMIC AGRI FINANCE Islamic Modes ofAgricultural FinancePartnership BasedModesTrade BasedModesRental BasedModesMusharakaMudarabaMurabahaMusawamaSalamIstisnaIjarahDiminishingMusharaka
19 Partnership Based Modes of Islamic Agricultural Finance ( Modarabah & Musharakah)
20 Musharakah Characteristics All parties share in the capital All parties share profits as well as lossesProfits are distributed as per agreed ratioLoss is borne by the parties as per capital ratioEvery partner is agent of other
21 MUSHARAKAH May be in any agreed ratio PROFIT Rs. 100 Rs. 60 Rs. 40 PARTNER APARTNER BVENTURERs.1000Rs.1000Rs. 50Rs. 50LOSSRs.100Must be according tocapital ratio
22 MudarabahOne partner (Rab al Mal) contributes capital and the other (Mudarib) contributes his skills or services to the ventureVenture may for a fixed period or purposeBoth share profit in pre-agreed ratioLoss is borne by Rab al Mal only, Mudarib loses his services
23 MUDARABAH PROFIT 60 % 40 % VENTURE RABBUL MAL MUDARIB SERVICESCAPITALRABBUL MALMUDARIBALL MONETORY LOSSLOSS OF SERVICESLOSS
24 Trade Base Mode of Islamic Agricultural Finance Bai (Buying & Selling)Trade Base Mode of Islamic Agricultural Finance
25 Basic Rules of Bai Existence of Product/Commodity Ownership of Product/CommodityPossession of Product/CommodityUnconditional basisProduct have value/Price.
26 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 etcPrice must be clearly identified.
27 Kinds of Bai Bai Musawamah Bai Murabaha Bai Surf Bai Salam Bai Istisna’Bai EennaBai TouliyaBai Wadhia
29 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.
30 Origins of TakafulIn 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.
31 Why Insurance ? Is Some thing wrong with Concept ? Risk Aversion Assuring othersRisk sharing
32 From the Holly QuranThe 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)
33 From the HadithsBy 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>
34 What wrong with practice ? The contract between the insurer & the insured is technically wrong from the sharia perspective because ofInterest (Riba)Gharar (Uncertainty))Gambling (Qamar & Maisir)Risk Transfer Issue
35 Riba in Insurance Direct Riba Indirect Riba Excess on one side in case of exchange between the amount of premium.Indirect RibaThe interest earned on interest based investments
36 GhararLexically it means uncertainty and technically it means the uncertainty of the counteract or the subject matter.
37 WAQF Wakala-Waqf Model S H A R E H O L D E R S’ F U N D (S.H.F.) Wakalah FeeInvestmentIncomeMudarib’s Share of PTF’s Investment IncomeManagement Expense ofthe CompanyProfit/LossTakaful OperatorInvestment bythe CompanyWAQFOperational Cost of Takaful / ReTakafulInvestmentIncomeClaims &ReservesSurplus (Balance)ParticipantP 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.)
38 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.
39 General Takaful TypesGeneral Takaful – offers all kinds of non-life risk coverage. It is normally divided into following classes:Property TakafulMarine TakafulMotor TakafulMiscellaneous Takaful
40 Types of Family Takaful Term Life TakafulWhole Life TakafulEndowment TakafulUniversal TakafulMarriage PlanEducation Plan
41 Takaful OperatorsThe number of Takaful operators worldwide is now estimated at:152 Takaful companies9 Retakaful companiesIn 39 Countries.Average growth rate higher than conventional insurance companies (around 25%).Non–Muslims increasingly opting for Takaful products for commercial benefits.
43 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 - KSAHouse Building Finance Corporation.Emirates Global Islamic Bank.Arif Habib Securities.Sitara Chemicals.Large initial paid-up Capital.
44 INTRODUCTION OF TAKAFUL PAKISTAN LIMITED Managed by dedicated professionals, committed to the cause.Only A rated Takaful Company in PakistanReTakaful arrangements with a consortium of internationally reputed ReTakaful operators.Shariah Board comprises of eminent scholars.BancaTakaful, Crop Takaful and MicroTakaful productsWe intend to be the trend-setter for excellent Clients’ Servicing, Operational bench marks and prudent Underwriting practices.