1. Introduction to Islamic Banking
Lecture 01

2. Starting in the Name of Allah, The Most Beneficent, The Most Merciful
بسم الله الرحمن الرحيم
Starting in the Name of Allah,
The Most Beneficent, The Most Merciful

3. Importance of Trade in Islam
Islam has given an immense importance to trade
The nobility of this profession is obvious from the fact that it was the chosen profession of prophet Muhammad (PBUH).
WHY ISLMIC BANKING
Before explaining the concept “what is Islamic Banking” the elaboration of concept “why Islamic Banking” is very important.
Islam is a complete code of life that provides guidance regarding each aspect of life.

4. WHY ISLAMIC BANKING…Contd
The primary objectives of Islamic Economic System are as under.
Achievement of Falah (Well being of mankind)
Fair and Equitable Distribution (With Zakat & Sadaqat)
Provision of Basic Human Needs (Social Security – Tax)
Establishment of Social Justice (Tax & Legal Activities)
Promotion of Brotherhood and Unity
Achievement of Moral and Material Development (With Tax & Fiscal Mgt – Zakat)
Circulation of Wealth (With no hoarding policy)
Elimination of Exploitation
These objectives can never be achieved in Interest / Riba based economic systems.

5. Belief in Divine Guidance:
The foremost belief around which all the Islamic concepts revolve is that the whole universe is created and controlled by One. The only One God.
He has created man and appointed him as His vicegerent on the earth to fulfill certain objectives through obeying His commands.
These commands are not restricted to some modes of worship or so-called religious rituals.
They, on the contrary, cover a substantial area of almost every aspect of our life.

6. Common interface between Islamic and contemporary banks
Same purpose: Financial intermediation
Same Objective: Profit
Successful Operation of Islamic banks has shown that financial intermediation is possible even without interest.

7. DIRECT FINANCING Financial Flow Households Businesses
Flow of Real goods

8. Financial Institutions
Indirect Financing
Return on Investment
Return on Investment
Business
Households
Financial Institutions
Financial Resources
Financial Resources
Goods
Goods
Goods

9. STRUCTURE OF FINANCIAL MARKETS
Supervisory Bodies
Indirect Finance
Direct Finance
Bonds
Equities
Depository
Institutions
Contractual
Savings
Institutions
Investment
Intermediaries
Secondary
Markets
Commercial
Banks
Insurance
Companies
Mutual
Funds
Primary
Markets
Saving & Loan
Associations
Pension
Funds
Venture
Capitals
Investment
Banks
Dealers and
Brokers
Stock
Exchanges
Over-the-Counter
Exchange

10. Islamic Banks and Other businesses
ALL BUSINESSES
Financial Institutions
All Banks
Islami
Banks

11. Social and Moral Norms Should not indulge in Riba
Should not indulge in fraudulent behavior
Should not pursue people by force.
Should assure fairness to all parties.
No financing of socially undesirable goods such as alcohol, drugs, pornography.
Should not be in practices such as cheating, bribing, fraudulent practices.

12. Uses of Funds Sources of Funds Murabaha Musharakah Current Account
Mudarabah
Ijarah
Qard z Hasana
Sources of Funds
Current Account
PLS Accounts
Investment Account

13. “An Economic System is a systematic way of
performing economic activities in order to address
and solve economic problems”

14. The Major Economic Systems:
Capitalism (Free system)
Communism/Socialism (Controlled system)
Mixed Economies.
The Islamic Economic System (The guided system)

15. Capitalism:
Capitalism which is prevailed in the most part of the globe as an economic system has the following basic principles
Personal Profit Motive
Private Property
The market forces (the forces of demand and supply) are used as mechanism for the solution of economic problem in capitalism.

16. Socialism:
Communism/Socialism which is emerged in contrast to the capitalism and prevailed as an economic system in communist countries has the following basic principles.
Collective Property
Collective Interest
Equitable Distribution of Income
Planning (Economic planning) is used as mechanism for the solution of basic economic problems in communism/ socialism.

17. THE ISLAMIC ECONOMIC SYSTEM
A Guided System
Sources of Guidance
The Holy Quran
Hadiths
Islamic Fiqah

18. Islam - A Complete Way of Life
- Covers all aspects of life Including:
Personal
Social
Legal
Political
Economics

19. Regarding Economics, Islam Explains
- Halal (permissible) Economic Activities
- Haram (non- permissible) Economic Activities
- Considered Halal Economic Activities as worship
- Considered Haram Economic Activities as Sin

20. THE BASIC PRINCIPLES OF ISLAMIC ECONOMIC SYSTEM
ALLAH – The absolute owner of all Economic resources.
Human Beings – The trustees of Allah for the management and use of economic resources.
The Economic Resources will be used as per the instruction of Allah Almighty.
The Economic Resources entrusted to mankind by Allah Almighty will be available for society’s welfare and betterment.

21. PROHIBITED ECONOMIC ACTIVITIES
Monopoly in all forms.
Hoarding.
Gambling and Betting in all forms.
Cheating in quality, quantity, weight or any other specifications of the goods and services.
Speculation.
All types of fraudulent sale.
All trade malpractices.
Interest in all forms and levels.
Bribes Activities. Etc.

22. THANKS