I Project ON SLAMIC B ANKING Islamic Banking Islamic Banking Islamic Bankin g MBA (Banking & Finance) 4th Term,

Session 2009-2011 Submitted ByClass Roll NumberExam Roll NumberRomana NargusA-1462 Submitted To $ir. Amanullah Khattak

DECLARTION E C L A R T I O N I declare that this project report entitled Evaluation of Islamic Banking is origi nal and bonafide work of my own in the partial fulfillment of the requirements f or the award of the Degree of MASTER OF BUSINESS ADMINISTRATION (Banking & Finance) and submitted to the Department of Business Administration, Gomal University Dera Ismail Khan, Khyber.Pakhton.Kh wa. The data that has been collected by me is truly authentic and contains true and complete information. Romana Nargus Class Roll No A-1 Exam Roll No 462

ACKNOWLEDGEMENT C K N O W L E D G E M E N T All praise to ALLAH, the most merciful, kind and beneficent, and the source of a ll knowledge, wisdom within and beyond our comprehension. He is the only God, wh o can help me in every field of life. All respect and possible tributes goes to my Holy Prophet Mohammad (SAW), who is forever guidance and knowledge for all hu man beings on this earth. I am proud to say that I am very grateful to my family whose kind prayers and cooperation helped me at every step of my work. Special thanks go to my formative Teachers for their cooperation for the sake of our know ledge. Romana Nargus

WHAT IS BANKING? In general terms, the business activity of accepting and safeguarding money owne d by other individuals and entities, and then lending out this money in order to earn a profit. WHAT IS ISLAMIC BANKING? Islamic banking is a banking activity which is consistent with the Islamic law ( Shariah), known as Fiqh-e-Muamalat (Islamic rules on transactions).The rules and practices of Fiqh-eMuamalat came from the Quran and the Sunnah, and other secon dary sources of Islamic law such as opinions collectively agreed among Shariah s cholars (Ijma), analogy (Qiyas) and personal reasoning (Ijtihad). PHILOSOPHY OF ISLAMIC BANKING A system of financial activities consistent with Shariah, based on Islamic princ iples which at the core refuses collecting interest, transactions involving unce rtainty and speculation. Anything else, which the Shariah (Islamic Law) deems Ha ram (unlawful) It is based on the Islamic economic system. It is not restricted to Muslims only . WHY ISLAMIC BANKING? Islam is a complete code of life that provides guidance regarding each aspect of life. The primary objectives of Islamic banking are. Equal Distribution of wealt h. Social Justice. Page | 1

WHY IT DIFFRERENT FORM CONVENTIONAL BANKING? Islamic banks deal with the assets management for purpose of income generation . Depositors will receive halal income against the trading being done by banks on halal basis. HALAL means permitted according to shariah. SHARIAH means Islamic law which is der ived from various sources The primary source is the Quran. In order, the secondary sources include, the Hadith, the Sunnah, Ijma (con sensus of Muslim scholars), Qiyas (analogy) and Ijtihad (personal reasoning) of the Muslim jurists. It covers every aspect of life. The term is used to refer to the Islam ic law. EVALUATION OF ISLAMIC BANKING To understand Islamic Banking necessitates understanding its roots. This is so b ecause any Paradigm is always constructed on preceding foundations. If the found ations are strong the institution is strong also. The whole picture of Islamic b anking cannot be visualized until its foundations are not explored historically. During the Islamic Golden Age, early forms of capitalism markets were present i n the early Islamic Kilafath, where an early market economy and an early form of mercantilism were developed between the 9th-12th centuries. The Islamic Financi al sectors, which are includes, Islamic banks, Islamic Windows, Islamic non-bank ing financial institutions, Fund management institutions and Islamic Mortgage co mpanies. There no longer confined to concept and ideas only with the first half of the 20th century. It is more or less is an obstruct concept but now it has be en given practical shape with various models and modes. ORIGIN OF ISLAMIC BANKING The first Islamic institution in Malaysia was the Muslims Pilgrims Savings Corpo ration set up in 1963. The first modern experimentation with Islamic banking was undertaken by Ahmad-ElNajjar, in the Egyptian civic of Mit Ghamr in 1963. Offer ing interest free banking in Egypt, this bank and branches were faced to close d ue to perceived threats by the Administration. In the seventies, a number of Isl amic banks came into reality in the Gulf, e.g. The Nasir Social Bank, incorporat ed in Egypt in 197l, was acknowledged an interest-free commercial bank. The Phil ippine Amanah Bank (PAB) was established in 1973, operates two windows for depos it transactions in commercial and Islamic. Page | 2

 The Islamic Development Bank (IDB) was established in 1974 by the Organization o f Islamic Countries (OIC), but it operations are free of interest and are openly based on Shariah principles. The evolution of the interest free banking concept to the 1970s when economics of Arab countries had started experiencing huge fin ancial benefits from price hike in the petroleum products. The Dubai Islamic Bank (1975) the first modern commercial Islamic Bank opened. T he Faisal Islamic Bank of Sudan established in (1977). The Faisal Islamic Bank o f Egypt established in (1977). The Bahrain Islamic Bank established in (1979). I n 1979 Pakistan becomes first nation to "Islamize" banking practices at state le vel. In July 1983 Malaysia opens its first official shariah-compliant bank, Bank Islam Malaysia. Other banks also offer Islamic products and are supervised by t he central bank, which is advised by a board of shariah scholars. September Sudan reforms banking system on Islamic principles after President Jaa far alNumeiri establishes shariah-law. Dual banking system develops, Islamic in the north, conventional in the south. In March 1984 Iran switches to interest-free banking at national level after pas sing a 1983 Islamic Banking law that was promised in the 1979 Islamic revolution . By 1985 Islamic financial products offered by more than 50 conventional banks ar ound the globe. Other major banks follow by the 1990s. The Feb 26, 1990 International Islamic accounting standards Organization, the Ac counting and Auditing Organization for Islamic Financial Institutions, establish ed in Bahrain by the IDB. In 1991 Indonesia s first officially-sponsored Islamic bank, Bank Muamalat, esta blished. By 2000 About 200 Islamic financial institutions have over $8 billion i n capital, over $100 billion in deposits, and manage assets worth more than $160 billion, according to economist Mohammad Nejatullah Siddiqi.About 40 percent ar e in the Middle East, another 40 percent in South and Southeast Asia, and the re maining 20 percent are split between Africa, and Europe and the Americas. In 2001 Malaysia s Financial Sector Master plan sets target for Islamic finance to make up 20 percent of finance sector by 2010. By 2009, its share of financial assets is about 17 percent. Page | 3

 In 2002 International standard setting Organization the Islamic Financial Servic es Board established in Kuala Lumpur. In 2004-2008 Investor interest in Islamic finance products grows strongly amid s teady rise in oil prices and petrodollars flowing through oil producing states. World oil prices peak at over $147 per barrel in mid-2008 before sliding sharply . The Sept 2004 Islamic Bank of Britain - the country s first shariah-compliant hi gh street bank opens in London. The Nov 2006 Dubai s main stock exchange, the Dubai Financial Market, announces it is restructuring itself into world s first Islamic bourse. The In 2008 Global credit crisis and economic slowdown send conventional financi al markets into steep tailspin and have chilling effect on Islamic finance as in vestors avoid risk and asset prices tumble. New Islamic bond issuance falls twothirds to a three-year low of $15.77 billion, Islamic Finance Information Servic e says. In Jan 2009 Singapore launches first Islamic bond program as it vies with Malays ia for market share. In Feb 2009 Indonesia, the world s most-populous Muslim country, sells its first retail sharia-compliant bonds, or sukuk. LIST TOP ISLAMIC BANKS IN PAKISTAN Dawood Islamic Bank Limited Dubai Islamic Bank Pakistan limited Meezan Bank Prem ier Islamic Bank In Pakistan AlBaraka Islamic Bank (Merged into Al Baraka Bank ( Pakistan) Limited) BankIslami Pakistan Limited Emirates Global Islamic Bank OVER VIEW OF ISLAMIC BANKING IN PAKISTAN Islamic Banking is growing rapidly in Pak it has been expected that by 2012 tota l share in banking sector will be 12%. Present Islamic Banking share is 5% Growt h Rate is 50% Page | 4

Assets Rs 276 Billion (asset base of entire Banking System Rs 5,653 Billion) fit Rs 1.8 Billion Dec-10 Deposits Rs 201.7 Billionn (17.7%) GROWTH OF ISLAMIC BANKING IN PAKISTAN Year Total Asset Size Annual Growth (%) (in $ Billions) 2009 2010 2011 650 1000 1414 54% 50% 2012 2000 50% 2013 2828 50% 2014 4000 50% Text References Islamic Banking & Finance theory & Practice by Muhammad Ayub. http://www.meezanb ank.com/docs/GIBcomplete.pdf Web References www.google.com Page | 5 www.scribd.com/shanza malik

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