Islamic Banking

Islamic modes of financing
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PRESENTED TO
Ms. Shehla Sohail
PRESENTED BY
Acknowledgement
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All praises to ALLAH Almighty who has blessed us with
knowledge to accomplish the task of completing this project.
We all are very thankful to our respected course teacher Ms.

Shehla Sohail who had assigned us this valuable project. It is our
worthy instructor’s kindness that we are at this level of
knowledge. And under her supervision, now we feel that we
know the introduction of business finance very well.
Table of contents
• ISLAMIC BANKING
• FUNDAMENTALS OF ISLAMIC FINANCE
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• PRINCIPLES ON WHICH ISLAMIC BANK WORKS
• RIBA
• MODES OF ISLAMIC BANKING
• FACILITIES OFFERED BY ISLAMIC BANKING
• TYPES OF ACCOUNTS
• COMPARISION OF ISLAMIC BANKING AND CONVECTIONAL BANKING
• Albaraka bank
• Mezaan bank
• conclusion
Islamic banking:
Refers to a system of banking or banking activity that is consistent with the
principles of Islamic law (Sharia) and its practical application through the
development of Islamic economics. Sharia prohibits the payment or acceptance of
interest fees for loans of money (Riba, usury), for specific terms, as well as
investing in businesses that provide goods or services considered contrary to its
principles (Haraam, forbidden).
History
During the Islamic Golden Age, early forms of proto-capitalism and free markets
were present in the Caliphate, where an early market economy and an early form of
mercantilism were developed between the 8th-12th centuries, which some refer to
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as "Islamic capitalism". A vigorous monetary economy was created on the basis of
the expanding levels of circulation of a stable, high-value currency (the dinar) and
the integration of monetary areas that were previously independent.
A number of economic concepts and techniques were applied in early Islamic
banking, including bills of exchange, the first forms of partnership (mufawada) such
as limited partnerships (mudaraba), and the earliest forms of capital (al-mal), capital
accumulation (nama al-mal), cheques, promissory notes, trusts (see Waqf),
transactional accounts, loaning, ledgers and assignments. Organizational
enterprises independent from the state also existed in the medieval Islamic world,
while the agency institution was also introduced during that time. Many of these
early capitalist concepts were adopted and further advanced in medieval Europe
from the 13th century onwards.
Modern Islamic banking
Interest-free banking seems to be of very recent origin. The earliest references to
the reorganization of banking on the basis of profit sharing rather than interest.
Commercial banks and their perceived "necessary evil," have proposed a banking
system based on the concept of Mudarabha - profit and loss sharing
In the next two decades interest-free banking attracted more attention, partly
because of the political interest it created in Pakistan and partly because of the
emergence of young Muslim economists. Works specifically devoted to this subject
began to appear in this period. The early 1970s saw institutional involvement. The
Conference of the Finance Ministers of the Islamic Countries held in Karachi in
1970, the Egyptian study in 1972, the First International Conference on Islamic
Economics in Mecca in 1976, and the International Economic Conference in
London in 1977 were the result of such involvement. The involvement of institutions
and governments led to the application of theory to practice and resulted in the
establishment of the first interest-free banks. The Islamic Development Bank, an
inter-governmental bank established in 1975, was born of this process.
The first modern experiment with Islamic banking was undertaken in Egypt under
cover without projecting an Islamic image—for fear of being seen as a
manifestation of Islamic fundamentalism that was anathema to the political regime.
The pioneering effort, led by Ahmad Elnaggar, took the form of a savings bank
based on profit-sharing in the Egyptian town of Mit Ghamr in 1963. This experiment
lasted until 1967 (Ready 1981), by which time there were nine such banks in
country.
In 1972, the Mit Ghamr Savings project became part of Nasr Social Bank which,
currently, is still in business in Egypt. In 1975, the Islamic Development Bank was
set-up with the mission to provide funding to projects in the member countries. The
first modern commercial Islamic bank, Dubai Islamic Bank, opened its doors in
1975. In the early years, the products offered were basic and strongly founded on
conventional banking products, but in the last few years the industry is starting to
see strong development in new products and services.
Islamic Banking is growing at a rate of 10-15% per year and with signs of consistent
future growth. Islamic banks have more than 300 institutions spread over 51
countries, including the United States through companies such as the Michigan-
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based University Bank, as well as an additional 250 mutual funds that comply with
Islamic principles. It is estimated that over US$822 billion worldwide sharia-
compliant assets are managed according to The Economist. This represents
approximately 0.5% of total world estimated assets as of 2005. According to CIMB
Group Holdings, Islamic finance is the fastest-growing segment of the global
financial system and sales of Islamic bonds may rise by 24 percent to $25 billion in
2010
Microfinance
Microfinance is a key concern for Muslims states and recently Islamic banks also.
Microfinance is ideologically compatible with Islamic finance, capable of Shariah-
compliancy, and possesses a sizeable potential market. Islamic microfinance tools
can enhance security of tenure and contribute to transformation of lives of the
poor.The use of interest found in conventional microfinance products and services
can easily be avoided by creating microfinance hybrids delivered on the basis of the
Islamic contracts of mudaraba, musharaka, and murabaha. Already, several
microfinance institutions (MFIs) such as FINCA Afghanistan have introduced
Islamic-compliant financial instruments that accommodate sharia criteria.
Philosophy of Islamic banking and finance
Islamic Shariah prohibits ‘interest’ but it does not prohibit all gains on capital. It is
only the increase stipulated or sought over the principal of a loan or debt that is
prohibited. Islamic principles simply require that performance of capital should also
be considered while rewarding the capital. The prohibition of a risk free return and
permission of trading, as enshrined in the Verse 2:275 of the Holy Quran, makes
the financial activities in an Islamic set-up real asset-backed with ability to cause
‘value addition’.
Islamic banking system is based on risk-sharing, owning and handling of physical

goods, involvement in the process of trading, leasing and construction contracts
using various Islamic modes of finance. As such, Islamic banks deal with asset
management for the purpose of income generation. They will have to prudently
handle the unique risks involved in management of assets by adherence to best
practices of corporate governance. Once the banks have stable stream of Halal
income, depositors will also receive stable and Halal income.
The forms of businesses allowed by Islam at the time the Holy Quran was revealed
included joint ventures based on sharing of risks & profits and provision of services
through trading, both cash and credit, and leasing activities. In the Verse II:275,
Allah the Almighty did not deny the apparent similarity between trade profit in credit
sale and Riba in loaning, but resolutely informed that Allah has permitted trade and
prohibited Riba. Profit has been recognized as ‘reward’ for (use of) capital and
Islam permits gainful deployment of surplus resources for enhancement of their
value. However, alongwith the entitlement of profit, the liability of risk of loss on
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capital rests with the capital itself; no other factor can be made to bear the burden
of the risk of loss. Financial transactions, in order to be permissible, should be
associated with goods, services or benefits. At macro level, this feature of Islamic
finance can be helpful in creating better discipline in conduct of fiscal and monetary
policies.
Besides trading, Islam allows leasing of assets and getting rentals against the
usufruct taken by the lessee. All such things/assets corpus of which is not
consumed with their use can be leased out against fixed rentals. The ownership in
leased assets remains with the lessor who assumes risks and gets rewards of his
ownership.
Riba
The word "Riba" means excess, increase or addition, which according to Shariah
terminology, implies any excess compensation without due consideration
(consideration does not include time value of money). The definition of riba in
classical Islamic jurisprudence was "surplus value without counterpart", or "to
ensure equivalency in real value", and that "numerical value was immaterial."
The Qur'an is clear about the prohibition of Riba, which is sometimes defined as
excessive interest. "O You who believe! Fear Allah Almighty and give up that
remains of your demand for usury, if you are indeed believers."
Principles on which Islamic banks works:
Islamic banking has the same purpose as conventional banking except that it
operates in accordance with the rules of Shariah, known as Fiqh al-Muamalat
(Islamic rules on transactions). The basic principle of Islamic banking is the sharing
of profit and loss and the prohibition of riba (usury). Common terms used in Islamic
banking include profit sharing (Mudharabah), safekeeping (Wadiah), joint venture
(Musharakah), cost plus (Murabahah), and leasing (Ijar).
In an Islamic mortgage transaction, instead of loaning the buyer money to purchase
the item, a bank might buy the item itself from the seller, and re-sell it to the buyer
at a profit, while allowing the buyer to pay the bank in installments. However, the
bank's profit cannot be made explicit and therefore there are no additional penalties
for late payment. In order to protect itself against default, the bank asks for strict
collateral. The goods or land is registered to the name of the buyer from the start of
the transaction. This arrangement is called Murabaha. Another approach is EIjara
wa EIqtina, which is similar to real estate leasing. Islamic banks handle loans for
vehicles in a similar way (selling the vehicle at a higher-than-market price to the
debtor and then retaining ownership of the vehicle until the loan is paid).
An innovative approach applied by some banks for home loans, called Musharaka
al-Mutanaqisa, allows for a floating rate in the form of rental. The bank and
borrower form a partnership entity, both providing capital at an agreed percentage
to purchase the property. The partnership entity then rents out the property to the
borrower and charges rent. The bank and the borrower will then share the proceeds
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from this rent based on the current equity share of the partnership. At the same
time, the borrower in the partnership entity also buys the bank's share of the
property at agreed installments until the full equity is transferred to the borrower and
the partnership is ended. If default occurs, both the bank and the borrower receive
a proportion of the proceeds from the sale of the property based on each party's
current equity. This method allows for floating rates according to the current market
rate such as the BLR (base lending rate), especially in a dual-banking system like in
Malaysia.
There are several other approaches used in business transactions. Islamic banks
lend their money to companies by issuing floating rate interest loans. The floating
rate of interest is pegged to the company's individual rate of return. Thus the bank's
profit on the loan is equal to a certain percentage of the company's profits. Once
the principal amount of the loan is repaid, the profit-sharing arrangement is
concluded. This practice is called Musharaka. Further, Mudaraba is venture capital
funding of an entrepreneur who provides labor while financing is provided by the
bank so that both profit and risk are shared. Such participatory arrangements
between capital and labor reflect the Islamic view that the borrower must not bear
all the risk/cost of a failure, resulting in a balanced distribution of income and not
allowing lender to monopolize the economy.Islamic banking is restricted to
islamically acceptable transactions, which exclude those involving alcohol, pork,
gambling, etc. The aim of this is to engage in only ethical investing, and moral
purchasing.
In theory, Islamic banking is an example of full-reserve banking, with banks
achieving a 100% reserve ratio. However, in practice, this is not the case, and no
examples of 100 per cent reserve banking are observed.
Islamic banks have grown recently in the Muslim world but are a very small share
of the global banking system.
Shariah Advisory Council/Consultant
Islamic banks and banking institutions that offer Islamic banking products and
services (IBS banks) are required to establish a Shariah Supervisory Board (SSB)
to advise them and to ensure that the operations and activities of the banking
institutions comply with Shariah principles. On the other hand, there are also those
who believe that no form of banking that involves interest payments can ever
comply with the Shariah.
A number of Shariah advisory firms have now emerged to offer Shariah advisory
services to the institutions offering Islamic financial services. Issue of
independence, impartiality and conflicts of interest have also been recently voiced.
The WDIBF World Database for Islamic Banking and Finance has been developed
to provide information about all the websites related to this type of banking.
Fundamentals of Islamic finance
The term “Islamic banking” refers to a system of banking or banking activity that is
consistent with Islamic law (Shariah) principles and guided by Islamic economics. In
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particular, Islamic law prohibits usury, the collection and payment of interest, also
commonly called riba in Islamic discourse. In addition, Islamic law prohibits
investing in businesses that are considered unlawful, or haraam (such as
businesses that sell alcohol or pork, or businesses that produce media such as
gossip columns or pornography, which are contrary to Islamic values). In the late
20th century, a number of Islamic banks were created to cater to this particular
banking market.
Bai' al 'inah (sale and buy-back agreement)
Bai' al inah is a financing facility with the underlying buy and sell transactions
between the financier and the customer. The financier buys an asset from the
customer on spot basis. The price paid by the financier constitutes the
disbursement under the facility. Subsequently the asset is sold to the customer on a
deferred-payment basis and the price is payable in installments. The second sale
serves to create the obligation on the part of the customer under the facility.
Bai' bithaman ajil (deferred payment sale)

This concept refers to the sale of goods on a deferred payment basis at a price,
which includes a profit margin agreed to by both parties. Interest payment can be
avoided as the customer is paying the sale price which is not the same as interest
charged on a loan. The problem here is that this includes linking two transactions in
one which is forbidden in Islam.
Bai' muajjal (credit sale)
Literally bai' muajjal means a credit sale. Technically, it is a financing technique
adopted by Islamic banks that takes the form of murabahah muajjal. It is a contract
in which the bank earns a profit margin on the purchase price and allows the buyer
to pay the price of the commodity at a future date in a lump sum or in installments.
It has to expressly mention cost of the commodity and the margin of profit is
mutually agreed. The price fixed for the commodity in such a transaction can be the
same as the spot price or higher or lower than the spot price. Bai' muajjal is also
called a deferred-payment sale. However, one of the essential descriptions of riba
is an unjustified delay in payment or either increasing or decreasing the price if the
payment is immediate or delayed.
Mudarabah
"Mudarabah" is a special kind of partnership where one partner gives money to
another for investing it in a commercial enterprise. The investment comes from the
first partner who is called "rabb-ul-mal", while the management and work is an
exclusive responsibility of the other, who is called "mudarib".
The Mudarabah (Profit Sharing) is a contract, with one party providing 100 percent
of the capital and the other party providing its specialist knowledge to invest the
capital and manage the investment project. Profits generated are shared between
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the parties according to a pre-agreed ratio. Compared to Musharaka, in a
Mudaraba only the lender of the money has to take losses.
Musawamah
Musawamah is the negotiation of a selling price between two parties without
reference by the seller to either costs or asking price. While the seller may or may
not have full knowledge of the cost of the item being negotiated, they are under no
obligation to reveal these costs as part of the negotiation process. Musawamah is
the most common type of trading negotiation seen in Islamic commerce.
Bai salam
Bai 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. It
is necessary that the quality of the commodity intended to be purchased is fully
specified leaving no ambiguity leading to dispute. The objects of this sale are goods
and cannot be gold, silver, or currencies based on these metals. Barring this, Bai
Salam covers almost everything that is capable of being definitely described as to
quantity, quality, and workmanship.
Basic features and conditions of Salam
1. The transaction is considered Salam if the buyer has paid the purchase price
to the seller in full at the time of sale. This is necessary so that the buyer can
show that they are not entering into debt with a second party in order to
eliminate the debt with the first party, an act prohibited under Sharia. The
idea of Salam is to provide a mechanism that ensures that the seller has the
liquidity they expected from entering into the transaction in the first place. If
the price were not paid in full, the basic purpose of the transaction would
have been defeated. Muslim jurists are unanimous in their opinion that full
payment of the purchase price is key for Salam to exist. Imam Malik is also
of the opinion that the seller may defer accepting the funds from the buyer
for two or three days, but this delay should not form part of the agreement.
2. Salam can be effected in those commodities only the quality and quantity of
which can be specified exactly. The things whose quality or quantity is not
determined by specification cannot be sold through the contract of salam.
For example, precious stones cannot be sold on the basis of salam, because
every piece of precious stones is normally different from the other either in its
quality or in its size or weight and their exact specification is not generally
possible.
3. Salam cannot be affected on a particular commodity or on a product of a
particular field or farm. For example, if the seller undertakes to supply the
wheat of a particular field, or the fruit of a particular tree, the salam will not
be valid, because there is a possibility that the crop of that particular field or
the fruit of that tree is destroyed before delivery, and, given such possibility,
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the delivery remains uncertain. The same rule is applicable to every
commodity the supply of which is not certain.
4. It is necessary that the quality of the commodity (intended to be purchased
through salam) is fully specified leaving no ambiguity which may lead to a
dispute. All the possible details in this respect must be expressly mentioned.
5. It is also necessary that the quantity of the commodity is agreed upon in
unequivocal terms. If the commodity is quantified in weights according to the
usage of its traders, its weight must be determined, and if it is quantified
through measures, its exact measure should be known. What is normally
weighed cannot be quantified in measures and vice versa.
6. The exact date and place of delivery must be specified in the contract.
7. Salam cannot be affected in respect of things which must be delivered at
spot. For example, if gold is purchased in exchange of silver, it is necessary,
according to Shari'ah, that the delivery of both be simultaneous. Here, salam
cannot work. Similarly, if wheat is bartered for barley, the simultaneous
delivery of both is necessary for the validity of sale. Therefore the contract of
salam in this case is not allowed.
Hibah (gift)
This is a token given voluntarily by a debtor to a debitor in return for a loan. Hibah
usually arises in practice when Islamic banks voluntarily pay their customers a 'gift'
on savings account balances, representing a portion of the profit made by using
those savings account balances in other activities.
Ijarah
Ijarah means lease, rent or wage. Generally, Ijarah concept means selling the
benefit of use or service for a fixed price or wage. Bank makes available to the
customer the use of service of assets / equipments such as plant, office
automation, motor vehicle for a fixed period and price.
Advantages of Ijarah
• Ijarah provides the following advantages to the Lessee:
• Ijarah conserves the Lessee' capital since it allows up to 100% financing.
• Ijarah gives the Lessee the right to access the equipment on payment of the
first installment. This is important as it is the access and use (and not
ownership) of equipment that generates income.
• Ijarah arrangements aid corporate planning and budgeting by allowing the
negotiation of flexible terms
• Ijarah is not considered Debt Financing so it does not appear on the Lessee'
Balance Sheet as a Liability. This method of "off-balance-sheet" financing
means that it is not included in the Debt Ratios used by bankers to determine
financing limits. This allows the Lessee to enter into other lease financing
arrangements without impacting his overall debt rating.
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• All payments towards Ijarah contracts are treated as operating expenses and
are therefore fully tax-deductible. Leasing thus offers tax-advantages to for-
profit operations.
• Many types of equipment (i.e computers) become obsolete before the end of
their actual economic life. Ijarah contracts allow the transfer of risk from the
Lesse to the Lessor in exchange for a higher lease rate. This higher rate can
be viewed as insurance against obsolescence.
• If the equipment is used for a relatively short period of time, it may be more
profitable to lease than to buy.
• If the equipment is used for a long period but has a very poor resale value,
leasing avoids having to account for and depreciate the equipment under
normal accounting principles.
Ijarah thumma al bai' (hire purchase)
Parties enter into contracts that come into effect serially, to form a complete lease/
buyback transaction. The first contract is an Ijarah that outlines the terms for leasing
or renting over a fixed period, and the second contract is a Bai that triggers a sale
or purchase once the term of the Ijarah is complete.
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. The undertaking or the promise does not
become an integral part of the lease contract to make it conditional. The rentals as
well as the purchase price are fixed in such manner that the bank gets back its
principal sum along with profit over the period of lease.
Musharakah (joint venture)
Musharakah is a relationship between two parties or more, of whom contribute
capital to a business, and divide the net profit and loss pro rata. This is often used
in investment projects, letters of credit, and the purchase or real estate or property.
Qard hassan/ Qardul hassan (good loan/benevolent loan)
This is a loan extended on a goodwill basis, and the debtor is only required to repay
the amount borrowed. However, the debtor may, at his or her discretion, pay an
extra amount beyond the principal amount of the loan (without promising it) as a
token of appreciation to the creditor. In the case that the debtor does not pay an
extra amount to the creditor, this transaction is a true interest-free loan.
Sukuk (Islamic bonds)
Sukuk, plural of ‫ صك‬Sakk, is the Arabic name for financial certificates that are the
Islamic equivalent of bonds.
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Takaful (Islamic insurance)
Takaful is an alternative form of cover that a Muslim can avail himself against the
risk of loss due to misfortunes. Takaful is based on the idea that what is uncertain
with respect to an individual may cease to be uncertain with respect to a very large
number of similar individuals.
Wadiah (safekeeping)
In Wadiah, a bank is deemed as a keeper and trustee of funds. A person deposits
funds in the bank and the bank guarantees refund of the entire amount of the
deposit, or any part of the outstanding amount, when the depositor demands it.
Wakalah (power of attorney)
This occurs when a person appoints a representative to undertake transactions on
his/her behalf, similar to a power of attorney.
Largest Islamic banks
Islamic banking
Merchant bank
Mutual bank
Mutual savings bank
National bank
Offshore bank
Private bank
Savings and loan
association
Savings bank
Swiss bank
Current practices
Generally speaking, all interest-free banks agree on the basic principles. However,
individual banks differ in their application. These differences are due to several
reasons including the laws of the country, objectives of the different banks,
individual bank’s circumstances and experiences, the need to interact with other
interest-based banks, etc. In the following paragraphs, we will describe the salient
features common to all banks.
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Deposit accounts
All the Islamic banks have three kinds of deposit accounts: current, savings and
investment.
Current accounts
Current or demand deposit accounts are virtually the same as in all conventional
banks. Deposit is guaranteed.
Savings accounts
Savings deposit accounts operate in different ways. In some banks, the depositors
allow the banks to use their money but they obtain a guarantee of getting the full
amount back from the bank. Banks adopt several methods of inducing their clients
to deposit with them, but no profit is promised. In others, savings accounts are
treated as investment accounts but with less stringent conditions as to withdrawals
and minimum balance. Capital is not guaranteed but the banks take care to invest
money from such accounts in relatively risk-free short-term projects. As such lower
profit rates are expected and that too only on a portion of the average minimum
balance on the ground that a high level of reserves needs to be kept at all times to
meet withdrawal demands.
Investment account
Investment deposits are accepted for a fixed or unlimited period of time and the
investors agree in advance to share the profit (or loss) in a given proportion with the
bank. Capital is not guaranteed.
Modes of financing
Banks adopt several modes of acquiring assets or financing projects. But they
can be broadly categorised into three areas: investment, trade and lending.
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Investment financing
This is done in three main ways: a) Musharaka where a bank may join another
entity to set up a joint venture, both parties participating in the various aspects of
the project in varying degrees. Profit and loss are shared in a pre-arranged
fashion. This is not very different from the joint venture concept. The venture is
an independent legal entity and the bank may withdraw gradually after an initial
period. b) Mudarabha where the bank contributes the finance and the client
provides the expertise, management and labour. Profits are shared by both the
partners in a pre-arranged proportion, but when a loss occurs the total loss is
borne by the bank. c) Financing on the basis of an estimated rate of return.
Under this scheme, the bank estimates the expected rate of return on the
specific project it is asked to finance and provides financing on the
understanding that at least that rate is payable to the bank. (Perhaps this rate is
negotiable.) If the project ends up in a profit more than the estimated rate the
excess goes to the client. If the profit is less than the estimate the bank will
accept the lower rate. In case a loss is suffered the bank will take a share in it.
Trade financing
This is also done in several ways. The main ones are: a) Mark-up where the
bank buys an item for a client and the client agrees to repay the bank the price
and an agreed profit later on. b) Leasing where the bank buys an item for a
client and leases it to him for an agreed period and at the end of that period the
lessee pays the balance on the price agreed at the beginning an becomes the
owner of the item. c) Hire-purchase where the bank buys an item for the client
and hires it to him for an agreed rent and period, and at the end of that period
the client automatically becomes the owner of the item. d) Sell-and-buy-back
where a client sells one of his properties to the bank for an agreed price payable
now on condition that he will buy the property back after certain time for an
agreed price. e) Letters of credit where the bank guarantees the import of an
item using its own funds for a client, on the basis of sharing the profit from the
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sale of this item or on a mark-up basis.
Lending
Main forms of Lending are: a) Loans with a service charge where the bank lends
money without interest but they cover their expenses by levying a service
charge. This charge may be subject to a maximum set by the authorities. b) No-
cost loans where each bank is expected to set aside a part of their funds to
grant no-cost loans to needy persons such as small farmers, entrepreneurs,
producers, etc. and to needy consumers. c) Overdrafts also are to be provided,
subject to a certain maximum, free of charge.
Services
Other banking services such as money transfers, bill collections, trade in foreign
currencies at spot rate etc. where the bank’s own money is not involved are
provided on a commission or charges basis.
Comparison:
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Conventional Banks Islamic Banks
1. The functions and operating modes 1. The functions and operating modes
of conventional banks are based on of Islamic banks are based on the
fully manmade principles. principles of Islamic Shariah.
2. The investor is assured of a 2. In contrast, it promotes risk sharing

predetermined rate of interest. between provider of capital (investor)
and the user of funds (entrepreneur).
3. It aims at maximizing profit without 3. It also aims at maximizing profit but

any restriction. subject to Shariah restrictions.
4. It does not deal with Zakat. 4. In the modern Islamic banking

system, it has become one of the
service-oriented functions of the Islamic
banks to be a Zakat Collection Centre
and they also pay out their Zakat.
5. Lending money and getting it back 5. Participation in partnership business

with compounding interest is the is the fundamental function of the
fundamental function of the Islamic banks. So we have to
conventional banks. understand our customer’s business
very well.
6. It can charge additional money 6. The Islamic banks have no provision

(penalty and compounded interest) in to charge any extra money from the
case of defaulters. defaulters. Only small amount of
compensation and these proceeds is
given to charity. Rebates are give for
early settlement at the Bank’s
discretion.
7. Very often it results in the bank’s 7. It gives due importance to the public
own interest becoming prominent. It interest. Its ultimate aim is to ensure
makes no effort to ensure growth with growth with equity.
equity.
8. For interest-based commercial 8. For the Islamic banks, it must be

banks, borrowing from the money based on a Shariah approved
market is relatively easier. underlying transaction.
9. Since income from the advances is 9. Since it shares profit and loss, the
fixed, it gives little importance to Islamic banks pay greater attention to
developing expertise in project developing project appraisal and
appraisal and evaluations. evaluations.
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10. The conventional banks give 10. The Islamic banks, on the other
greater emphasis on credit-worthiness hand, give greater emphasis on the
of the clients. viability of the projects.
11. The status of a conventional bank, 11. The status of Islamic bank in
in relation to its clients, is that of relation to its clients is that of partners,
creditor and debtors. investors and trader, buyer and seller.
12. A conventional bank has to 12. Islamic bank can only guarantee
guarantee all its deposits. deposits for deposit account, which is
based on the principle of al-wadiah,
thus the depositors are guaranteed
repayment of their funds, however if the
account is based on the mudarabah
concept, client have to share in a loss
position..
Conclusion
Keeping all facts in view Islamic banking is far more better and productive as
compared to convectional banking as it has been stated in Quran too and is
prohibited
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About the bank:
Al Baraka Bank (Pakistan) Limited (formerly Emirates Global Islamic Bank Limited)
commencing its operations in February 2007, operates with a network of 89
branches. Al Baraka Bank is currently 49.6% owned by ABG through its subsidiary
Al Baraka Islamic Bank B.S.C. – Bahrain (ABIB).
The remaining shareholding is mainly held by Emirates Investment Group (EIG),
UAE and Al Rajhi family, Saudi Arabia. ABIB is in the process of increasing its
stake in Al Baraka Bank by end-Dec10. Subsequently, a right issue of PKR 800mln
will be done within 1QCY2011 to meet the MCR
requirement of PKR 7bln as at December 2010.
Al Baraka Banking Group (ABG), incorporated in the Kingdom of Bahrain, is one of
the largest Islamic banking and financial services institution in the world. ABG with
an asset base of USD 15bln at end-Sep10 and rated “BBB-” for long-term and “A3”
for short-term by Standard and Poor's has an international network of 11
subsidiaries and 2 representatives offices with over 300 branches
in 13 different countries in Asia, GCC region, middle east and Africa. Going forward,
the bank would have eleven member BoD comprising representatives of sponsoring
groups and three independent directors. Mr. Shafqaat Ahmed – CEO – is a
professional banker with over four decades of experience.
Mission statement
To meet the financial needs of communities across the world by conducting
business ethically in accordance with the Sharia, practicing the highest professional
standards and sharing the mutual benefits with the customers, staff and
shareholders who participate in our business success. Total branches of alBaraka
bank are 90.
19
PARTNERSHIP - Our shared beliefs create strong bonds that form the basis of long
term relationships with customers and staff.
• DRIVEN - We have the energy and perservance it will take to make an

impact in our customer’s lives and for the greater good of the society.
• NEIGHBOURLY - We value and respect the communities we serve. Our

doors are always open; our customers always experience a warm-hearted,
hospitable welcome and accommodating service.
• PEACE OF MIND - Our customers are rest assured that their financial
interests are being managed by us to the highest ethical standards
AL BARAKA’S RANGE OF PRODUCTS & SERVICES
• Al Baraka Bank (Pakistan) Limited in Pakistan, offers a comprehensive

range of banking products and services, to suit and serve customers in
individual, retail, corporate, SME and consumer categories.
Sharia advisor
Justice (R) Khalil-ur-Rehman Khan

Justice Khalil-Ur-Rehman Khan is the Shariah Advisor and the Chairman of the
ABPL Shariah Committee. He is a world renowned Islamic Scholar of Pakistan and
has held numerous positions in various boards of prestigious Islamic institutions.
Justice (R) Khalil-ur-Rehman has served as Chairman on the Shariah Appellate

Bench of the Supreme Court of Pakistan and has been the Rector of the
International Islamic University, Islamabad. In addition, he is the former Chief
Justice of the Lahore High Court. He has also been the Chairman of the Religious
Board for Mudarabas.
Justice Khalil ur Rehman has authored the landmark judgment on Riba in 1999 on
the basis of which new impetus has been provided to Islamic finance in the country.
20
Mufti Abdullah Najeebul Haq Siddiqi
Mufti Abdullah Najeebul Haq Siddiqi is the Deputy Shariah Advisor for ABPL. He is
associated with Dar-ul-uloom, Karachi and has specialized in Islamic Fiqh and
Fatawa. He graduated from Darul uloom Karachi as Aalim-e-Deen and has
obtained certification in Islamic Banking Finance and Economics from the Centre
for Islamic Economics.
Cooperate banking
Al Baraka Bank (Pakistan) Limited offers a wide range of banking products and
services, fully complying with Shariah principles, to meet the needs of business
entities, falling in the Corporate SME and Consumer categories:
• Import Financing
• Export Financing
• Working Capital Financing
• Infrastructure Financing
• Project Financing>
• Financing of other Business needs
All financing/investment facilities comply with Shariah-compliant modes of

financing, such as:
• Murabahah ( Sale/Purchase/Trading)
• Musharaka (Partnership)
• Ijarah (similar to Leasing)
• Istisna’a (Offered at selected branches. click for details...)
• Salam (Offered at selected branches
Products and service
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Al Baraka Bank (Pakistan) Limited reaffirms its commitment to continue its tradition
providing banking services in compliance with Shariah, to its valued Clientele. Our
commitment is to remain customer-focused in all our efforts and to provide seamles
solutions to our customers
Corporate Banking
Account Types
Al Baraka Car Finance
Al Baraka Housing Finance
ATM Facility
Debit Cards (POS)
Murabaha Financing
Import Letters of Credit Sight, Usance, Standby etc.
Export Financing, bills negotiation
Islamic Export Refinance
Forex Sale & Purchase Major Currencies
Letter of Guarantee Financial, Bid, Performance, etc.
Online Banking
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Safe Deposit Lockers
Bills & Remittances
ATM facility
 Cash when you need it, 24 hours a day, 7 days a week
 Available at thousands of ATM’s on the 1-Link & M-Net Network throughout

Pakistan
 Very Competitive charges
Debit Card
• Your BaraKash card doubles up to serve as your Debit Card also
• Just shop at any of the member outlets and pay by direct debit to your Al
Baraka account - you don't have to carry cash on shopping!
Online banking
• Connecting all our branches on-line in real-time
• Deposit into, Withdraw from or Check Balances in, your account at any Al
Baraka Branch in any city, from any Al Baraka branch in any city, as you
wait!
Convenient for both: Individuals and Business People
Locker
(only at Lahore and Islamabad Branches)
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PREFERENCE CRITERIA FOR ALLOTMENT
• Working Ladies
• Housewives
• Professionals
ADDED ADVANTAGE
• Maximum security with "Dual Lock System"
• Each Locker with a separate Box and your private lock for added protection
* Key Deposit RS 500 - Non Refundable. Yearly Locker Rental to be recovered in

advance.
Financial highlights
The primary function of PACRA is to evaluate the capacity and willingness of an

entity to honor its obligations. Our ratings reflect an independent, professional and
impartial assessment of the risks associated with a particular instrument or an
entity.
PACRA’s comprehensive offerings include instrument and entity credit ratings,
insurer financial strength ratings, fund ratings, asset manager ratings and real
estate gradings. PACRA’s opinion is not a recommendation to purchase, sell or
hold a security, in as much as it does not comment on the security’s market priceor
suitability for a particular investor.
The Pakistan Credit Rating Agency Limited
PACRA ASSIGNS RATINGS TO AL BARAKA BANK (PAKISTAN)

LIMITED
The Pakistan Credit Rating Agency (PACRA) has assigned the long-term and short-
term entity ratings of “A” (Single A) and “A2” (A Two) respectively to Al Baraka
Bank (Pakistan) Limited (Al Baraka Bank). These ratings denote a low expectation
of credit risk emanating from a strong capacity for timely payment of financial
commitments.
The ratings reflect Al Baraka Bank's association with a strong sponsoring group –
Al Baraka Banking Group (ABG). It incorporates the impact of positive synergies
emanating from the recent merger in terms of common operating platform,
improved profile, and extended market outreach. While progressing towards the
integration process, the management is well geared to benefit from
24
the expanded franchise through developing a sound business plan. However, the
management's ability in developing a profitable business stream in the medium
term while successfully restraining the high cost structure remains to be seen. The
efficacy of the risk management framework aimed at improving the overall asset
quality of the bank also remains important.
Financial statement
ALBARAKA ISLAMIC BANK B.S.C. (C)
(Incorporated in Bahrain with limited liability)
PAKISTAN BRANCHES
INTERIM CONDENSED BALANCE SHEET AS AT MARCH 31, 2010
(Unaudited) (Audited)
Note March 31, 2010 December 31, 2009
Rupees in '000
ASSETS
Cash and balances with treasury banks 3 ,623,573 3 ,911,176
Balances with other banks 6 ,185,487 7 ,708,198
Due from financial institutions - -
Investments 6 1 ,703,721 1 ,702,599
Financing and investing assets 7 1 4,800,449 1 4,755,162
Operating fixed assets 8 3 09,941 3 02,611
Deferred tax assets 7 ,807 2 6,580
Other assets 1 ,010,346 8 98,634
2 7,641,324 2 9,304,960
LIABILITIES
Bills payable 1 84,197 1 94,771
Due to financial Institutions 2 ,304,530 2 ,263,689
Deposits and other accounts 2 0,949,417 2 2,636,323
Sub-ordinated loans - -
Liabilities against assets subject to finance lease - -
Deferred tax liabilities - -
Other liabilities 1 ,431,565 1 ,457,160
2 4,869,709 2 6,551,943
NET ASSETS 2 ,771,615 2 ,753,017
REPRESENTED BY
Head office capital account 9 3 ,035,953 3 ,041,775
Reserves - -
Accumulated loss (278,050) ( 301,460)
2 ,757,903 2 ,740,315
Surplus on revaluation of assets - net of tax 10 1 3,712 1 2,702
2 ,771,615 2 ,753,017
CONTINGENCIES AND COMMITMENTS 11 - -
25
The annexed notes 1 to 15 form an integral part of these financial statements.
SHAFQAAT AHMED AYYAZ AHMAD
Country Head Chief Financial Officer

PAKISTAN BRANCHES
INTERIM CONDENSED PROFIT & LOSS ACCOUNT
FOR THE PERIOD ENDED MARCH 31, 2010 (UNAUDITED)
Quarter Ended Quarter Ended

Note March 31, 2010 March 31, 2009
Head office capital account 9 3 ,035,953 3 ,041,775
Reserves - -
Accumulated loss (278,050) ( 301,460)
2 ,757,903 2 ,740,315
Surplus on revaluation of assets - net of tax 10 1 3,712 1 2,702
2 ,771,615 2 ,753,017
CONTINGENCIES AND COMMITMENTS 11 - -
PAKISTAN BRANCHES
INTERIM CONDENSED PROFIT & LOSS ACCOUNT
661,069 618,071
463,654 538,738
Net spread 197,415 79,333
Provision against non-performing financings - net (58,888) (188,399)
Provision for diminution in the value of investments - (9,044)
Bad debts written off directly - -
(58,888) (197,443)
Net spread / (loss) after provisions 138,527 (118,110)
Fee, commission and brokerage income 41,376 27,363
Dividend income 133 1,067
Income from dealing in foreign currencies 25,488 3,393
Gain on sale of securities - net - -
Unrealized gain/ (loss) on revaluation of investments
classified as held for trading - 25,236
Other income 8 626
Total non-markup income 67,005 57,685
26
205,532 (60,425)
Administrative expenses 159,765 166,760
Other provisions / write offs - -
Other charges 30 14
Total non-mark up expenses 159,795 166,774
45,737 (227,199)
Extra ordinary/unusual items - -
45,737 (227,199)
Taxation – Current 3,666 107
- Prior years - -
- Deferred 18,661 (70,959)
22,327 (70,852)
23,410 (156,347)
(Accumulated loss) / unremitted profit brought forward (301,460) (19,912)
(Accumulated loss) / unremitted profit (278,050) (176,259)
12 - -
12 - -
Rupees in '000
Diluted Earnings per share
PROFIT / (LOSS) BEFORE TAXATION
Profit / return on financings, investments and
Non markup income
OTHER EXPENSES
Return on deposits and other dues expensed
PROFIT / (LOSS) AFTER TAXATION
Basic Earnings per share

PAKISTAN BRANCHES
INTERIM CONDENSED STATEMENT OF COMPREHENSIVE INCOME

March 31, 2010 March 31, 2009
Profit / (Loss) for the year 23,410 (156,347)
Other comprehensive income - -
23,410 (156,347)
Rupees in '000
PAKISTAN BRANCHES
27
INTERIM CONDENSED CASH FLOW STATEMENT
CASH FLOW FROM OPERATING ACTIVITIES Rupees in '000
Profit / (Loss) before taxation 45,737 (227,199)
Dividend income (133) (1,067)
45,604 (228,266)
Adjustments:
Depreciation (including Ijarah assets) 48,927 19,510
Amortization 282 465
Provision against non-performing financings 58,888 188,399
Provision for diminution in the value of investments - net - 9,044
Gain on sale of fixed assets (8) (626)
Unrealized loss / (gain) on revaluation of investments -
classified as held for trading - (25,236)
Other provisions / write offs - -
108,089 191,556
153,693 ( 36,710)
(Increase) / decrease in operating assets
Held-for-trading securities - (7,325)
Financings (143,334) 285,000
Others assets (excluding advance taxation) (60,222) (207,800)
(203,556) 69,875
Increase / (decrease) in operating liabilities
Bills payable (10,574) ( 46,332)
Due to financial institutions 40,841 240,620
Deposits and other accounts (1,686,906) ( 112,563)
Other liabilities (excluding current taxation) (29,125) 198,681
(1,685,764) 280,406
(1,735,627) 313,571
Income tax paid (55,284) ( 4,311)
Net cash used in / generated from operating activities (1,790,911) 309,260
CASH FLOW FROM INVESTING ACTIVITIES
Dividend received 262 1,267
Investments in operating fixed assets (17,517) ( 40,242)
Sale proceeds from disposal of fixed assets 145 632
Net cash used in investing activities (17,110) ( 38,343)
Increase / (decrease ) in cash and cash equivalents (1,808,021) 270,917
Cash and cash equivalents at beginning of the period 9,327,599 6,226,363
Cash and cash equivalents at end of the period 13 7,519,578 6,497,280
SHAFQAAT AHMED
Country Head
AYYAZ AHMAD
Chief Financial Officer

28
PAKISTAN BRANCHES
INTERIM CONDENSED STATEMENT OF CHANGES IN EQUITY
Head office Unremitted Total

capital profit /
account (Accumulated loss)
Balance as at January 01, 2009 2,420,129 ( 19,912) 2,400,217
Loss for the period - ( 156,347) ( 156,347)
Remittances made to head office - - -
Exchange gain on revaluation of capital deposit 29,478 - 29,478
Balance as at March 31, 2009 2,449,607 ( 176,259) 2,273,348
Loss for the period - ( 125,201) ( 281,548)
Remittances from head office 510,601 - 510,601
Exchange gain on revaluation of capital deposit 81,567 - 111,045
--------------------------Rupees in '000-----------------------
Balance as at January 01, 2010 3,041,775 ( 301,460) 2,740,315
Profit for the period - 23,410 23,410
Remittances from head office - - -
Exchange loss on revaluation of capital deposit (5,822) - (5,822)
Balance as at March 31, 2010 3,035,953 ( 278,050) 2,757,903
AYYAZ AHMAD
Chief Financial Officer
SHAFQAAT AHMED
Country Head
(Incorporated in Bahrain with limited liability) - PAKISTAN BRANCHES
ALBARAKA ISLAMIC BANK B.S.C.(C) - PAKISTAN BRANCHES
7 FINANCINGS AND INVESTING ASSETS
In Pakistan
Murabaha financing 9,682,237 9,667,814
Export refinance under Islamic scheme 2,776,790 2,577,874
Musharaka financing 1,284,837 1,327,475
Payment against guarantees 5,674 5,674
13,749,538 13,578,837
Net investment in ijarah - In Pakistan
Ijarah financing 1,125,650 1,323,577
Ijarah assets - net (7.1) 446,437 319,322
1,572,087 1,642,899
Financings against bills - payable outside Pakistan 298,742 294,457
Financings - gross 15,620,367 15,516,193
Specific provision for non-performing financing 811,648 752,925
General provision against consumer financing 8,270 8,106
819,918 761,031
Financings - net of provision 14,800,449 14,755,162
This represents net book value of the assets given on Ijarah.
29
Category of Classification Domestic Overseas Required Held
Substandard 2 39,397 - 32,001 32,001
Doubtful 1 83,397 - 58,842 58,842
Loss 9 25,763 - 720,805 720,805
1 ,348,557 - 811,648 811,648
OPERATING FIXED ASSETS
Property and equipment (8.1) 179,747 184,975

Capital work-in-progress 126,832 114,821
Intangible assets 3,362 2,815
309,941 302,611
March 31, 2010 December 31,
2009
March 31, 2010 December 31,
2009
Rupees in '000
Classified Financings Specific Provision
Financings and investing assets include Rs. 1,348,557 thousands (2009:Rs.
1,383,296 thousands) which have been
placed under non-performing status as detailed below:-
March 31, 2010
ALBARAKA ISLAMIC BANK B.S.C.(C) - PAKISTAN BRANCHES
8.1 Operating fixed assets
Balance Balance as Balance For Balance as Book value
as at as at as at the period / as at as at
January 01, Additions / March 31, January 01, March 31, March 31, Rate
Particulars 2010 (Deletions) 2010 2010 2010 2010 %
Furniture and fixture 37,553 72 37,613 14,417 797 15,204 22,409 10
(12) ( 10)
Computer and office
equipments 133,268 3,359 136,466 79,903 4,187 84,064 52,402 20
(161) ( 26)
Vehicles 40,993 1,239 42,232 20,673 1,793 22,466 19,766 20
--
Leasehold improvements 128,148 10 128,158 39,994 2,994 42,988 85,170 10
-
2010 339,962 4,680 344,469 154,987 9,771 164,722 179,747
(173) ( 36)
2009 265,008 79,816 339,962 122,394 37,287 154,987 184,975
( 4,862) (4,694)
Report
AUDITORS’ REPORT TO THE DIRECTORS ON REVIEW OF

INTERIM FINANCIAL INFORMATION
30
Introduction
We have reviewed the accompanying condensed interim statement of financial

position of Albaraka Islamic Bank B.S.C (C) [Pakistan Operations] as at 30 June
2010 and the related condensed interim profit and loss account, condensed interim
statement of comprehensive income, condensed interim statements of cash flows
and condensed interim statement of changes in equity, together with the notes
forming part thereof for the six-months’ period then ended (herein- after referred to
as “condensed interim financial information”). Management is responsible for the
preparation and presentation of this interim financial information in accordance with
approved accounting standards as applicable in Pakistan for interim financial
reporting. Our responsibility is to express a conclusion on this interim financial
information based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements
2410, “Review of Interim Financial Information Performed by the Independent
Auditor of the Entity”. A review of interim financial information consists of making
inquiries, primarily of persons responsible for financial and accounting matters, and
applying analytical and other review procedures. A review is substantially less in
scope than an audit conducted in accordance with
International Standards on Auditing and consequently does not enable us to obtain
assurance that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the accompanying interim financial information is not prepared, in all material
respects, in accordance with approved accounting standards as applicable in
Pakistan for interim financial reporting.
2010
Print View
PLS SAVING
Type of Deposit Quarters

Jan - Mar Apr - Jun Jul - Sep Oct - Dec
PLS Savings 5.55% 5.52% 5.52% --
INCENTIVE ACCOUNTS
31
Incentive
6.60% 6.48% 6.48% --
Accounts
Below Rs. 100,000 5.02% 5.04% 5.04% --
KHAZANA ACCOUNTS

Khazana Accounts Jan - Mar Apr - Jun Jul - Sep Oct - Dec
Rs. 250,000 to
7.13% 6.96% 7.00% --
Rs. 4,999,999
Rs. 5,000,000 to Rs. 9,999,999 7.26% 7.20% 7.20% --
Rs. 10,000,000 to Rs. 24,999,999 7.40% 7.32% 7.32% --
Rs. 25,000,000 to Rs. 49,999,999 7.53% 7.44% 7.44% --
Rs. 50,000,000 to Rs. 99,999,999 7.66% 7.56% 7.50% --
Rs. 100,000,000 to Rs.
7.79% 7.68% 7.68% --
249,999,999
Rs. 250,000,000 to Rs.
8.06% 7.92% 7.92% --
499,999,999
Rs. 500,000,000 and Above 8.58% 0.00% 8.52% --
7 Days Notice (applicable on
deposits accounts below Rs. 5.02% 5.04% 5.04% --
250,000/-)
TERM DEPOSITS

Term Deposits Jan - Mar Apr - Jun Jul - Sep Oct - Dec
7 Days Notice 5.02% 5.04% 5.04% --
1 Month 6.60% 6.48% 7.02% --
3 Months 8.19% 8.04% 8.20% --
6 Months 8.85% 8.76% 8.83% --
32
1 Year 10.17% 9.48% 10.56% --
2 Years 10.70% 9.96% 10.68% --
3 Years 11.23% 10.56% 11.04% --
5 Years 12.15% 11.52% 11.52% --
MAHANA AMADANI SCHEME
Quarters
1 Year 11.55% 10.27% 10.30% --
2 Years 11.80% 10.66% 10.60% --
3 Years 12.05% 11.04% 11.00% --
4 Years 13.05% 11.52% 11.50% --
5 Years 14.10% 12.01% 12.00% --
AMI ACCOUNTS

AMI Accounts Jan - Mar Apr - Jun Jul - Sep Oct - Dec
3 Months 8.22% 8.05% 8.22% --
6 Months 8.87% 8.72% 8.81% --
1 Year 10.21% 9.49% 10.53% --
2 Years 10.70% 9.98% 10.72% --
3 Years (Monthly Payment) 11.32% 10.53% 11.00% --
5 Years 12.17% 11.49% 11.54% --
FOREIGN CURRENCY SAVINGS ACCOUNTS

(NEW & OLD SCHEME) Jan - Mar Apr - Jun Jul - Sep Oct - Dec
Saving Accounts - US$ 0.11% 0.11% 0.05% --
Saving Accounts - GBP 0.11% 0.11% 0.05% --
Saving Accounts - Euro 0.11% 0.11% 0.05% --
Saving Accounts - DM 0.11% 0.11% 0.05% --
33
FOREIGN CURRENCY SAVINGS ACCOUNTS - TERMS DEPOSITS

(NEW & OLD SCHEME) Jan - Mar Apr - Jun Jul - Sep Oct - Dec
Saving Accounts - US$ 0.27% 0.26% 0.16% --
Saving Accounts - GBP 0.27% 0.26% 0.16% --
Saving Accounts - Euro 0.27% 0.26% 0.16% --
Saving Accounts - DM 0.27% 0.26% 0.16% --
34
MEEZAN BANK
Nature of the Organization
Meezan Bank is a commercial bank which receives deposits from the people
who have it spare and invests it with those who are in need of them. It has got the
license of commercial banking from the State Bank of Pakistan and is registered
under the legislation of Banking Companies Ordinance 1962. It has dedicated itself
to do business of banking according to Islamic rules and regulations and is
supervised by a Shariah Board who keeps an eye on the operations of the bank
and ensures that the same must be in accordance with the teachings of Islam
and there must be no element of Riba in it
35
ACCOUNT OPENING AT MEEZAN BANK
These accounts at Meezan Bank are divided into three categories. These are as
follows.
1. Business Account
2. Personal Account
3. Club Society Account
1) Business Account
This account is related to the business community. This account is also further
subdivided into three categories.
a) Sole proprietor account
b) Partnership account Limited
c) Company account
a) Sole proprietor accounts

These accounts are the account opened by businesses, which are owned by single
persons. The following documents are required to open the account.
Document required
• Introducer of account who is already account holder of the bank
• Copy of NIC
• Request on letterhead of the company
• Every signature must be stamped with company stamp
• Declaration of sole proprietorship
b) Partnership account
These are the accounts specifically opened for the partnership firms. The documents
required for this type of account are as follows.
Document required:
Introducer of account who is already account holder of the bank

• Copy of NIC of the entire partners
36
• Request on letterhead of the firm
• Every signature must be stamped with company stamp
• Partnership deed
• Partnership mandate
c) Limited company accounts

This account is related to limited companies either public limited or private
limited. The documents required to open this type of account are as follows:
Document required:
Introducer of account who is already account holder of the bank

• Copy of NIC of all the Directors Request on letterhead of the company Copy
of certificate of Incorporation Memorandum and Article of Association List of
Director
• Copy of Board Resolution [prescribe format] Certificate of Commencement of
Business. Latest copy of Form A & Form 29
• Power of Attorney/Mandate [if required]
2) Personal Account
The accounts related to persons other than companied and partnership firms
are called personal accounts. These are further subdivided into three categories:
a) Personal account
b) Joint account
a) Personal account:
Personal account is own by only one person and not more than this. This
account can be current or saving depending upon the will of the customer.
Documents required:
Introduction of nay account holder of BAL or any other bank
Copy of NIC
37
b) Joint account:
Joint accounts are those accounts that are owned by 2 or more persons. This
account may also be either saving or current depending on the customer’s will.
Documents required:
Introduction of nay account holder of BAL or any other bank
Copy of NIC of all the member of joint account
3) Club Society Account

The account opened by any NGO or any non-profit firm falls in this category. For
opening of such type of account the bank has to get permission from the head office. If
head office gives permission, the bank opens this account other wise refuse to do so.
Documents required:
Copy of rules
Certificate copy of resolution [prescribed format]
Accounts On the Basis Of Currency

This account is also divided into two categories. These are as follows:
1. Local Currency account
2. Foreign Currency Account
1. Local Currency account:

The account dealing with the local currency is called local currency
account.
2) Foreign Currency Account:

The account dealing with the foreign currency is called foreign
currency account. This account is further subdivided into following.
• USD
• GBP
38
• Euro
• JPY
RUPEE CURRENT ACCOUNT
RIBA FREE
Meezan Bank is offering Riba-Free Current Account, a flexible Rupee based
account that is ideal for individuals and businesses looking for Shariah compliant
banking and professionalism both under one roof.
The Meezan Bank Current Account is a comprehensive Halal method of

acquiring a secure and easily maintainable Riba Free bank account.
Bundled with 24/7 and special banking services, the Meezan Bank Current
Account is an innovative value added account which provides customers both ease of
utility and unmatched service quality.
Key features of the Riba -Free Current Account
• Free Online Banking services at all Meezan Bank branches nationwide
• Instant access to funds at any online branch
• No restriction on withdrawals or number of transactions
• Bank balance certificates & duplicate statements of account
• Stop Payment & Hold Mail instructions
• 24/7 Card your ATM & Debit Card in one
• 24/7 Call Center with complete Tele-banking services
• Personal financial consultancy services
• Specialized 8 to 8 Banking at selected branches
RUPEE SAVING ACCOUNT

A unique bank account that offers the opportunity to earn Halal profits, while
enjoying a range of added benefits. It can be opened with a minimum amount of only
Rs.10000. The profit on this account is calculated and paid on a monthly basis, and
39
comes with a variety of free benefits, no restrictions on transactions, priority banking
and more.
• Minimum amount required to open account = Rs.10,000

• Riba Free COII Holders may open accounts without any minimum
balance requirements
Riba Free Rupee Saving Account works under the principles of Mudarabah and is
strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking
transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah
Advisor and the Shariah Supervisory Board.
Key features
Apart from first class service and personalized attention that our customers get
when they bank with us, we offer the following additional conveniences:
• Instant access to funds at any online branch.
• No restriction on withdrawals or number of transactions
• Bank balance certificates & duplicate statements of account
• Stop Payment & Hold Mail instructions
DOLLAR SAVING ACCOUNT

Meezan Bank is pleased to offer Riba-Free Dollar Saving Account, a foreign-
currency based investment opportunity that is set up on the principles of Shariah and as
a result is free from the element of markup.
With a minimum of only $100 a Dollar Saving Account can be opened under a
Mudarabah arrangement that is strictly in conformity with the principles of Islamic
Shariah. The return earned on the Mudarabah pool is calculated every month and
40
the profit ratio for all investors is declared at the beginning of the month. On maintaining
a minimum average monthly balance of $ 500, profits are disbursed every month.
Additional Features
Apart from first class service and personalized attention, the following additional
conveniences are also provided:
• Personalized cheque books
• No restriction on withdrawals or number of transactions.
• Monthly profit payment
• Taking stop payment instructions
• Taking hold mail instructions
• Issuance of duplicate statement of account
KAROBARY MUNAFA ACCOUNT

Karobari Munafa is a savings account specifically tailored for large Corporate or
Govt. controlled entities. It allows customers to earn higher returns on surplus cash
balances. It has no preset transaction limits and comes with a variety of free packaged
benefits.
Key Features
• Profit will be calculated on a Daily Product Basis
• Minimum balance requirement for account opening is Rs. 1 Million
• No restriction on deposits and withdrawals Free facilities: chequebooks and
payorders Dedicated account / relationship manager
The Karobari Munafa Account works under the principles of Mudarabah and is
strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking
transactions are in strict adherence to the Islamic Shariah, monitored by our Shariah
41
MEEZAN BACHAT ACCOUNT
Meezan Bachat Account is a unique saving account that provides high monthly
returns with the flexibility to withdraw savings if needed. Thus Meezan Bachat Account
offers a higher expected rate of return with the convenience of a savings account.
With a Meezan Bachat Account, higher the profit with a higher account balance.
Profit is given even if balance falls below Rs. 25,000/- in any one month. Profit is
credited to account every month and is calculated with reference to the minimum
balance maintained in the account during the preceding month.
The Riba-Free Meezan Bachat Account works under the principles of

Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit
calculation and all banking transactions are in strict adherence to the Islamic Shariah,
monitored by Shariah Advisor and the Shariah Supervisory Board.
Key Features
• Highest expected rate of return
• Riba-free profit paid every month
• Minimum balance for account opening is just Rs.25,000/-
• Maximum balance limit for getting highest profit rate is Rs. 1,000,000/-
• Waiver of application fee for Car Ijarah & Easy Home for accounts with
minimum balance of Rs. 500,000
• Free bank balance certificates.
• 24/7 Internet Banking – free and instant access to your account(s) anytime
&
• Anywhere Personal financial consultancy services
CERTIFICATE OF ISLAMIC INVESTMENT

42
The Riba Free Certificate of Islamic Investment Certificate is a Shariah
compatible investment certificate with a minimum investment of Rs. 50,000 and
tenures from 3 months to 5 years. Profit on investment may be earned on the following
basis:
• Monthly profit on 1, 2, 3 and 5 years (Minimum Investment Rs. 200,000)
• Quarterly profit on 1, 2, 3 and 5 years
• At maturity profit payment for all tenures
• Withdraw investment any time during the course of investment. (Profit shall be
paid only after completion of one month of investment)
Riba-Free Certificate of Islamic Investment (COII) works under the principles of

Mudarabah and is strictly in conformity with the rules of Islamic Shariah. Profit
calculation and all banking transactions are in strict adherence to the Islamic Shariah,
monitored by Shariah Advisor and the Shariah Supervisory Board.
Invest in Certificate of Islamic Investment

Riba-Free COII is available at all branches of Meezan Bank Ltd. To make an
investment the bank requires customers to maintain either a current or a saving
account with Meezan Bank. In order to open an account, fill in the Account Opening
Form, bring in the required documents, and get introduced by an existing banker.
Additional Features
• Enjoy a range of valuable features including:
• High and very competitive returns
• Long-term security ensured
• Pre-mature withdrawal options available
• Free Online Banking services at any of our branches
MEEZAN AMDAN CERTIFICATE

The Riba-Free Meezan Aamdan Certificate (MAC) is a long-term deposit
43
certificate with an exceptionally high monthly profit designed especially for those
individuals and corporations who are in need of regular stream of monthly income. MAC
is a monthly income (mahana aamdani) certificate with a variety of free packaged
benefits.
Working under the principles of Mudarabah, the Meezan Aamdan Certificate and
is strictly in conformity with the rules of Islamic Shariah. Profit calculation and all
banking transactions are in strict adherence to the Islamic Shariah, monitored by
Shariah Advisor and the Shariah Supervisory Board.
Key Features
• Enjoy a range of valuable features including: High and very competitive returns
• Ensured Long-term security
• Minimum investment amount: Rs. 100,000/-
• Special attraction for Widows and Senior citizens with minimum investment of
PKR 50,000/-
• Available tenures of 5½ years and 7 years
• Profit payment on monthly basis
• Pre-mature withdrawal options available. Free cheque book
• Free ATM withdrawals on investment of Rs.500,000/- and above ( 5 per
month)
• Free Internet banking facility
MONTHLY MUDARBA CERTIFICATE

Riba Free Monthly Mudarabah Certificates is a flexible rupee based
investment which has been designed to give a monthly return. The minimum
investment required is only Rs. 100,000 and receive profit for each complete month of
investment with the Bank.
44
Working under the principles of Mudarabah and in strict conformity with the rules
of Islamic Shariah, the Profit calculation of Monthly Mudarabah Certificates and all
other banking transactions are in strict adherence to the Islamic Shariah, monitored by
Shariah Advisor and the Shariah Supervisory Board.
The weightings used for profit calculation of the Monthly Mudarabah

Certificate are in the following tiers:
Rs. 100K up to Rs. 4.99 Mn
Rs. 5.00 Mn up to Rs. 9.99 Mn
Rs. 10 Mn up to Rs. 49.99 Mn
Rs. 500 Mn & above
Additional Features
During relationship the following additional benefits are also provided:
• A 100% halal investment in strict compliance with Shariah

• Monthly profit payment to your current or saving account with us
• Bank balance certificates
• Free Online Banking services at all Meezan Bank branches
• Specialized 8 to 8 Banking and Ladies Banking at selected branches
MEEZAN PROVIDENCE CERTIFICATE
Meezan Providence Certificate is a long-term investment certificate specially

designed to cater to the needs of corporate and business concerns for purposes of
investing their Provident, Pension and Gratuity Funds.
45
As any prudent investor, main concerns would be total security along with the
best returns possible, especially as these funds are a trust from employees and one
that bears an important responsibility.
Meezan Providence rests on the well known and solid financial strength of
Meezan Bank, which has a strong and credible balance sheet with excellent
operating profitability, including a capital adequacy ratio that has placed the Bank at
the top of the industry, a long-term entity rating of A+, and a short-term entity rating of
A1. Furthermore, our sterling track record shows consistently beneficial and highly
competitive returns for broad range of investors.
Finally, comes the benefit of truly Halal returns, a benefit may not have had the
opportunity to enjoy before and one that can now pass on to employees, many of
whom would be grateful for such an opportunity.
Riba-Free Meezan Providence Certificate (MPC) works under the works under
the principles of Mudarabah and is strictly in conformity with the rules of Islamic
Shariah. Profit calculation and all banking transactions are in strict adherence to the
Islamic Shariah, monitored by Shariah Advisor and the Shariah Supervisory Board.
Key Features
• Enjoy a range of valuable features including:
• A 100% halal investment in strict compliance with Shariah
• High Returns
• Long-term security ensured
• Minimum investment amount: PKR 1,000,000
• Available tenures of 2, 3, 5 and 7 years
DOLLAR MUDARABAH CERTIFICATE

The Riba Free Dollar Mudarabah Certificate is a flexible dollar based investment
which has been designed under the principles of Mudarabah and is strictly in
conformity with the rules of Islamic Shariah.
46
The Certificate works under the principles of Mudarabah and is strictly in
conformity with the rules of Islamic Shariah. Profit calculation and all banking
transactions are in strict adherence to the Islamic Shariah, monitored by Shariah
Key Features
Enjoy a range of valuable features including:
• High and very competitive returns

• Six monthly profit payments to your current or saving account with us
• Long-term security ensured. Minimum investment amount: USD 10,000/-
• Available tenures of 3 months, 6 months, 1 year, and 3 years
CAR IJARAH-AUTO FINANCE
Car Ijarah, Pakistan’s First Islamic Car Financing

As a step towards Meezan Bank’s mission to provide a one-stop shop for
innovative value added Shariah compliant products, Meezan Bank’s Car Ijarah unit
provides a car financing, based on the principles of Ijarah and is free of the element of
markup.
Car Ijarah is Pakistan’s first Markup Free car financing based on the Islamic
financing mode of Ijarah (Islamic leasing). This product is ideal for individuals looking
for car financing while avoiding a markup-based transaction.
Meezan Bank’ Car Ijarah is a car rental agreement, under which the Bank
purchases the car and rents it out to the customer for a period of 3 to 5 years, agreed at
47
the time of the contract. Upon completion of the lease period the customer gets
ownership of the car against his initial security deposit.
Car Ijarah also features Used Vehicles!

In addition to leasing of new cars, Meezan Bank also provides the unique
opportunity of leasing second hand, both locally assembled and imported vehicles. This
feature is specifically designed as a highly economical option. The Used Car Ijarah
facility is made available at a minimum-security deposit as low as 20%. Financing
of used cars are subject to a selection criteria.
Shariah Compliance
Car Ijarah, designed under the supervision of Meezan Banks Shariah
Supervisory Board, is unique to car leasing facilities provided by other banks.
Key Features of Car Ijarah
• Low monthly rental
• Rental paid after delivery, not in advanced
• Fastest processing and delivery
• Tracker option available
• Minimum security deposit as low as 10%
• All new, used, local, imported and luxury vehicles can be financed
WORKING CAPITAL FINANCE
Working Capital Finance Solutions

(For short term financing requirements)
Parts of the wide range of Shariah complaint solutions for the customers
are Murabaha and Istisna’a, designed to meet working capital requirements. For
example, if you need finance for purchasing raw materials for your industry or are
trading in goods then you could use Mudarabah or Istisna’a to meet your financial
needs.
Murabaha
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One of the most common modes of finance employed by Islamic Banks,
Murabaha is based on the exact requirements of each customer. It can be defined as a
sales transaction where Meezan Bank purchases the commodity and sells it after
adding an agreed profit. Thus, it is not a loan given on markup - it the sale of a
commodity on a deferred price.
Hence Murabaha involves the purchase of a commodity by Meezan Bank on

behalf of a customer and the subsequent resale to the customer on cost-plus-profit
basis. The cost and profit margin to the bank is expressly disclosed to the customer.
Simply put, rather than advancing money to the customer, Meezan Bank buys
the commodity from a third party and sells it to the customer at an agreed price, which
includes an element of profit.
So what is the difference between Murabaha and a Sale?

A simple sale in Arabic is called Musawamah - a sale that does not involve
disclosing or referring to the cost of goods sold. However, when the cost price is
disclosed to the client, it is called Murabaha.
Istisna’a
Istisna’a is a sale transaction where a commodity is transacted before it comes

into existence. It is an order to manufacture a specific commodity for the purchaser. The
manufacturer (our customer) uses its own material to manufacture the required goods.
In Istisna’a, price is fixed with the consent of all parties involved. Similarly all other
necessary specifications of the finished product are agreed beforehand.
Istisna’ as a mode of financing

Istisna Finance is used to cater for the working capital requirements of a
business involved in the manufacturing of goods. It is ideally suited for exporters and
49
manufacturers who have export orders in the shape of Sight/Usance Letter of Credit/
Sight Export Contract D/P/ Usance Export Contract D/A.
PROJECT FINANCING, EXPANSION AND BMR
Project Financing, Expansion or BMR Requirement Solutions

(For medium and long term financing requirements)
Two of the most commonly used Islamic financing solutions availed by

businesses today, Diminishing Musharakah and Ijarah are ideal for expansion of
businesses, BMR requirements or other medium to long term financing requirements.
Diminishing Musharakah
Using this financing model, Meezan Bank and the customer participate in
the joint ownership of an asset. The asset is divided into a number of units and
the customer periodically purchases these units from the bank over a specified period.
Over time, the customer purchases all units owned by the bank, making him or her
sole owner of the asset or the commercial enterprise.
Diminishing Musharakah is most commonly used for the financing of fixed

assets, projects, homes and automobiles.
Ijarah
In contrast to diminishing musharakah, this mode of financing is based on the
provision of the required tangible assets, such as property, machinery, etc, on rental for
an agreed period of time. The concept is similar to “leasing”, which is common in
conventional banking. However there are some specific prohibitions which render
conventional leasing to be forbidden under Shariah.
Ijarah is commonly used for long and medium term fixed asset financing, project
financing and for retail products such as homes and automobiles.
50
ISLAMIC EXPORT REFINANCE SCHEME
Islamic Export Refinance Facility

The launch of this product made Meezan Bank the first Islamic bank in
Pakistan to offer Refinance facilities with complete compliance to Shariah. This product
provides for all the unique requirements of exporters and is available in both Part- I and
Part-II as per the original Export Refinance Scheme of the State Bank of Pakistan.
LETTER OF GUARANTEE FACILITY

A complete range of products and services for importers and exporters are
available. Based on various modes of Islamic Finance, the solutions have been
designed to suit the needs of our customers. Some of the key services offered include:
Letter of Guarantee Facility

• Products for Exporters
• Export bills for collection
• Export (Sight) bills purchase under Salam Arrangement
• Export (Usance) bills purchase under Murabaha Arrangement
• Products for Importers
• Sight Letter of Credit

• Usance Letter of Credit
ADVISORY SERVICES
Realizing the increasingly diverse needs of our customers for advisory and
structured finance transactions, a specialized unit focusing on Investment Banking has
been established at Meezan Bank. The Investment Banking department provides
unique structuring capability using complex Shariah structures for transactions so as
meet customer need. Meezan Bank as torchbearer of Islamic Banking has made a
51
significant contribution in the Investment Banking industry by playing leading roles in
business transactions amounting to PKR 53 billion in the year 2007.
Key Services
• Syndication Structuring
• Privatization Mandates
• Mergers & Acquisitions
• Advisory Services
MONEY TRANSFER
The Meezan Bank’s remittance services are simple and reliable. They are
available at your doorstep through a wide and efficient network of corresponding banks
worldwide. Only leading global financial institutions form this network of correspondent
banks.
Advantages of Meezan Home Remittance:

• Quick Remittance in major currencies i.e. USD, GBP, EUR, JPY, CHF, SGD,
AUD
• Extensive branch network in all major cities of Pakistan
• Instant online transfer within our branch network without any charges
• Free Internet banking facility
Easy Guidelines for Money Transfer

To remit money to Pakistan, simply give instructions to existing bank for money
transfer by providing the name of preferred Meezan Bank branch and beneficiary
account number.
DOLLAR MUDARABAH CERTIFICATE
The Riba Free Dollar Mudarabah Certificate is a flexible dollar based investment
which has been designed under the principles of Mudarabah and is strictly in
conformity with the rules of Islamic Shariah.
52
The Certificate works under the principles of Mudarabah and is strictly in
conformity with the rules of Islamic Shariah. Profit calculation and all banking
transactions are in strict adherence to the Islamic Shariah, monitored by Shariah
Key Features
• Enjoy a range of valuable features including: High and very competitive returns
• Six monthly profit payments to current or saving account with Long-term security
ensured. Minimum investment amount: USD 10,000/- Available tenures of 3
months, 6 months, 1 year, and 3 years
DOLLAR SAVING ACCOUNT

Meezan Bank is pleased to offer Riba-Free Dollar Saving Account, a foreign-
currency based investment opportunity that is set up on the principles of Shariah and as
a result is free from the element of markup.
With a minimum of only $100 a Dollar Saving Account can be opened under a
Mudarabah arrangement that is strictly in conformity with the principles of Islamic
Shariah. The return earned on the Mudarabah pool is calculated every month and
the profit ratio for all investors is declared at the beginning of the month. Maintaining a
minimum average monthly balance of $ 500, profits that shall be disbursed every
month.
Additional Features
Apart from first class service and personalized attention that our customers get when
they bank with us, the following additional conveniences to our customers are also
offered:
• Personalized cheque books
• No restriction on withdrawals or number of transactions.
53
• Monthly profit payment
• Taking stop payment instructions
• Taking hold mail instructions
• Issuance of duplicate statement of account
MEEZAN BANK TREASURY
Meezan Bank’s treasury is guided by Shariah with the objective of reviewing,

streamlining, and controlling the bank’s domestic and international treasury related
operations. Treasury caters to the branches and customers for their entire
foreign exchange requirement with efficiency and professionalism. Ready/ spot as well
as all forward cover services are provided to branches/customers within Shariah
guidelines. Customers are also provided advice on a regular basis about the currency
movement by our dealing room augmented by market outlook (without any commitment
& obligation)
Treasury has enhanced its market activity with increased depth and enhanced
volumes, making an impact in the inter-bank FX market. Due to its good relationship
with other treasuries, the institution has the ability to generate sufficient amount of
liquidity at a time through inter-bank market on Shariah-approved Musharaka basis.
Meezan Bank conducts Commodity Murhaba transaction to optimize its returns

on its dollar portfolio, besides participating in local/ international sukuk issues, e.g.
WAPDA, Qatar, Dubai sukuks, etc. This treasury is the only treasury in Pakistan with a
mandate to provide Shariah compliant investment opportunities in capital market that
provides halal income ultimately to shareholders
ONLINE BANKING
Meezan Bank now offers the facility of on-line banking to its customers through
54
its countrywide network of branches. Customers can use the ATMs or the banking
counters of any branch for day-to-day banking needs, irrespective of branch where they
maintain their accounts.
For Corporate customers centralized Cash Management facility is also offered

through on-line banking.
PHONE BANKING
"Meezan Phone banking” is available to all customers on a countrywide basis.
Customers can dial 111-225-111 (without any city code/prefix) from their
respective cities i.e. 21 cities where Meezan Bank is present, and get prompt services
from the Centralized Phone Banking Services.
• Customers enjoy 24x7 Round the Clock Phone Banking Services.

• Meezan Bank is the first bank in Pakistan to offer Centralized UAN
connectivity from 21 cities to its Call Center with Hunting & ACD facilities.
HOME FINANCE
PRODUCTS OF HOME FINANCE
Buy Your Home

With this facility, no longer need to just dream about the home. Meezan Bank
will provide up to Rs: 7.50 million or 70% of the purchase price of the property
(whichever is less), so that can realize dream and enter the reality of owning a
home!. Payment period ranges from 3 to 20 years.
Build Your Home

Family! No problem. Meezan Bank will provide up to Rs: 7.50 million, or 70% of
the estimated value of constructed property to enable to say good-bye to rent forever!
Even with a plot, need finance to construct a home, which excites everyone if doesn’t
have a plot, Meezan Bank will provide up to 60% of the value of the plot that is selected
to purchase! Do Meezan Bank excite imagination? Payment period ranges from 3 to 20
55
years.
Renovate Your Home

Already own a home, but need extra space for a growing family. Simply apply for
financing of up to Rs: 2.50 million or 30% of the surveyed value of home (whichever is
less) and get the extra space. Stretch payments for up to 7 years
Start it Together
The crown jewel of our Home Finance Scheme, the golden opportunity for
someone starting a career to buy an already constructed housing unit so early in life!
Meezan Bank offer a moratorium of up to 3 years in Principal payments, for a financing
of up to 20 years. You service only the mark-up element initially, and principal
repayment starts after the end of monitories period. Home Start is specially designed
for young people to have there own home
Transfer
Does existing instalment on a home finance leave with nothing to spend? Do not
worry any more because Meezan Bank have genuinely low rates and payment options
that could leave more funds with each month. With BTF, repaying home finance will be
easier to payback. Transfer up to Rs: 7.50 million or 100 % of the existing finance,
whichever is less. Stretch repayment period for up to 20 years again.
Steps To Arrange a Home
• Meezan Bank provide with all the information need about Meezan Bank Home
Finance. This can be through a face-to-face meeting with Meezan Bank
Relationship Officer, or over the telephone, or through the post.
• Give Meezan Bank some basic information about the income and the amount
needed so that Meezan Bank can give an agreement in principle.
• Once decided on the amount desired, complete an application form and pass
it on to Meezan Bank, together with the required documents.
• Meezan Bank will make some inquiries about financial circumstances.
• Meezan Bank will carryout a valuation of the property and verification of income.
56
• Once Meezan Bank have carried out all the initial processing, Meezan Bank will
send its offer through a “Facility Advice Letter”.
• Sign the Facility Advice Letter and return it.
• Documentation Control Center will get in touch to complete Finance & Security
documentation including legal opinion on the title, documents of the property and
also the insurances.
• Sign the Finance Agreement and Charge documents.
• Legal advisor will accompany the customer to the Registrar’s office on the
appointed date with cheque against the financing for conveyance of the
property and home finance begins.
FINANCIAL STATEMENT
To analyse the financial position of Meezan Bank, different tools are use, which
includes Ratio Analysis, Common size Analysis of the last five years.
Introduction and Importance of Financial Analysis

Financial analysis involves the use of various financial statements. These
statements do several things. First the balance sheet and the second is income
statement.
The balance sheet summarizes the assets, liabilities, and owner’s equity of a
business at a point in time, while the income statement summarizes revenues and
expenses of a firm over a particular period of time. A conceptual framework for financial
analysis provides the analyst with an interlocking means for structuring the analysis.
Balance Sheets of Last Five Years
57
2005 2006 2007 2008 2009
ASSETS Rupees in ‘000’
Cash And Balances With Treasury 3,956,93 5,897,39 5,644,02 5,763,71 8,387,43
Banks 8 4 8 0 2
2,855,82 4,134,87 3,729,54 1,344,97 5,260,46
Balances With Other Banks 3 5 9 4 7
3,700,00 8,850,00 18,108,0 34,499,5
-
Due From financial institutions 0 0 00 00
1,606,49 2,877,55 10,535,1 14,286,9 23,290,3
Investments 0 4 85 49 09
19,740,8 27,031,0 34,576,3 39,768,4 44,188,0
Financings 86 16 39 81 66
1,032,96 1,880,51 2,416,37
305,585 531,262
Operating Fixed Assets 3 5 5
Deferred tax asset 204,172
2,210,10 2,266,52 2,810,49 4,123,44 5,935,41
Other Assets 0 2 4 1 3
30,675,8 46,438,6 67,178,5 85,276,0 124,181,
22 23 59 70 734
Liabilities
1,192,16 1,057,01 1,249,21
260,732 563,228
Bills Payable 0 7 0
2,981,71 4,285,21 2,415,60 4,008,49 8,468,42
Due To Financial Institutions 4 2 6 6 5
22,769,2 34,449,4 54,582,3 70,233,8 100,333,
Deposits And Other Accounts 62 41 53 75 051
Sub-Ordinated Loans - - - - -
Liabilities Against Assets Subject
- - - - -
To Finance Lease
Deferred Tax Liabilities 170,274 398,304 430,377 453,038 -
1,469,25 1,979,07 2,851,40 3,548,66 4,946,58
Other Liabilities 8 9 7 6 9
27,651,2 41,675,2 61,471,9 79,301,0 114,997,
40 64 03 92 275
3,024,58 4,763,35 5,706,65 5,974,97 9,184,45
Net Assets 2 9 6 8 9
Represented By
2,036,58 3,779,87 3,779,89 4,925,96 6,650,04

Share capital 2 9 7 1 8
58
1,050,09
407,235 528,085 720,785 845,022
Reserves 2
1,219,22 1,390,39
527,123 448,427 570,114
Unappropriated profit 8 5
2,970,94 4,756,40 5,719,91 6,341,09 9,090,53
0 9 0 7 5
Advance Against Issue of Right
Shares
Surplus / (Deficit) on Revaluation (366,11
53,642 6,950 (13,254) 93,924
of Investments 9)
3,024,58 4,763,35 5,706,65 5,974,97 9,184,45
2 9 6 8 9
HORIZONTAL ANALYSIS OF BALANCE SHEET
2005 2006 2007 2008 2009

% % % % %
ASSETS Rupees in ‘000’
Cash And Balances With Treasury
100 149 143 146 212
Banks
Balances With Other Banks 100 145 131 47 148
Due From financial institutions 000 100 239 489 932
Investments 100 179 656 889 1,450
Financings 100 137 175 201 224
Operating Fixed Assets 100 174 338 615 791
Deferred tax asset 000 000 000 000 100
Other Assets 100 103 127 187 269
Liabilities
Bills Payable 100 216 457 405 479
Due To Financial Institutions 100 144 81 134 284
Deposits And Other Accounts 100 151 108 308 441
Sub-Ordinated Loans 000 000 000 000 000
Liabilities Against Assets Subject
000 000 000 000 000
To Finance Lease
Deferred Tax Liabilities 100 234 253 266 -
Other Liabilities 000 135 194 242 337
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Net Assets 100 157 189 198 304
Represented By
Share capital 100 186 186 242 327

Reserves 100 130 177 208 258
Unappropriated profit 100 85 231 108 264
Income Statement of Last Five Years
Description 2005 2006 2007 2008 2009

Rupees in ‘000’
Profit / return earned on
financings, investments and 1,459,22 2,704,28 4,573,75 6,803,21 10,102,0
placements 9 0 2 3 60
Return on deposits and other dues 1,464,17 2,451,96 3,088,33 4,969,91
expensed 690,418 3 8 4 6
1,240,10 2,121,78 3,714,87 5,132,14
Net spread income 768,811 7 4 9 4
Provision against non-performing 1,430,53

financings (net) 68,811 121,581 435,018 428,436 6
Provision / (reversal) for diminution
in the value of investments (29,831) 1,297 878 288,884
88,640
Bad debts written off directly - - - - -
1,519,17
38,980 122,878 435,896 717,320 6
1,117,22 1,685,88 2,997,55 3,612,96
Net spread after provisions 729,831 9 8 9 8
OTHER INCOME
Fee, commission and brokerage
income 174,750 216,216 321,685 431,725 529,260
Dividend income 92,569 165,228 104,345 243,585 189,973
Income from dealing in foreign
currencies 77,961 201,519 392,319 304,692 752,904
Capital gain on sale of securities 209,402 116,993 533,093 47,001 76,160
Unrealized (loss) / gain on
revaluation of Investments
classified as ‘held for trading’ 57,792 (32,455) (31,453) (23,014)
60
Impairment on reclassification of
securities from held for trading to (362,75
available for sale securities 1)
Other income 9,677 23,060 27,904 66,670 49,507
1,347,89 1,597,80
Total other income 622,151 690,561 3 707,908 4
1,351,98 1,807,79 3,033,78 3,705,46 5,210,77
2 0 1 7 2
OTHER EXPENSES
1,022,99 1,755,76 2,626,60 3,530,16
Administrative expenses 718,384 1 1 6 1
Other provisions / write offs - 5,948 86,263 (60,859)
Other charges 482 4,776 2,884 287 1,747
1,027,76 1,764,59 2,713,15 3,471,04
Total other expenses 718,866 7 3 6 9
Extraordinary / unusual items -
1,269,18 1,739,72
PROFIT BEFORE TAXATION 633,116 780,023 8 992,311 3
1,440,37
Taxation - current - for the year 4,671 8,314 271,452 314,790 4
- Prior years 39,002 (60,572) - -
(726,00
- Deferred 169,988 228,030 34,235 56,334 2)
213,661 175,772 305,687 371,124 714,372
1,025,35
PROFIT AFTER TAXATION 419,455 604,251 963,501 621,187 1
Unappropriated profit brought 1,219,22
forward 191,559 527,123 448,427 8 570,114
1,131,37 1,411,92 1,840,41 1,595,46
Profit before appropriations 611,014 4 8 5 5
Basic earnings per share

(Rupees) 1.46 1.88 1.96 1.26 1.71
61
References
www.google.com
www.answers.com
www.wikipedia.com
www.meezanbank.com
www.albarakabank.com
62

Islamic Banking

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Islamic Banking

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Islamic modes of financing

Ms. Shehla Sohail

We all are very thankful to our respected course teacher Ms.

Islamic banking system is based on risk-sharing, owning and handling of physical

Bai' bithaman ajil (deferred payment sale)

Largest Islamic banks

2. The investor is assured of a 2. In contrast, it promotes risk sharing

3. It aims at maximizing profit without 3. It also aims at maximizing profit but

4. It does not deal with Zakat. 4. In the modern Islamic banking

5. Lending money and getting it back 5. Participation in partnership business

6. It can charge additional money 6. The Islamic banks have no provision

8. For interest-based commercial 8. For the Islamic banks, it must be

• DRIVEN - We have the energy and perservance it will take to make an

• NEIGHBOURLY - We value and respect the communities we serve. Our

AL BARAKA’S RANGE OF PRODUCTS & SERVICES

• Al Baraka Bank (Pakistan) Limited in Pakistan, offers a comprehensive

Justice (R) Khalil-ur-Rehman Khan

Justice (R) Khalil-ur-Rehman has served as Chairman on the Shariah Appellate

• Working Capital Financing

• Financing of other Business needs

All financing/investment facilities comply with Shariah-compliant modes of

• Ijarah (similar to Leasing)

• Istisna’a (Offered at selected branches. click for details...)

• Salam (Offered at selected branches

Products and service

Al Baraka Car Finance

Al Baraka Housing Finance

Debit Cards (POS)

Import Letters of Credit Sight, Usance, Standby etc.

Export Financing, bills negotiation

Islamic Export Refinance

Forex Sale & Purchase Major Currencies

Letter of Guarantee Financial, Bid, Performance, etc.

Bills & Remittances

 Cash when you need it, 24 hours a day, 7 days a week

 Available at thousands of ATM’s on the 1-Link & M-Net Network throughout

 Very Competitive charges

• Your BaraKash card doubles up to serve as your Debit Card also

• Connecting all our branches on-line in real-time

Convenient for both: Individuals and Business People

(only at Lahore and Islamabad Branches)

• Maximum security with "Dual Lock System"

* Key Deposit RS 500 - Non Refundable. Yearly Locker Rental to be recovered in

The primary function of PACRA is to evaluate the capacity and willingness of an

The Pakistan Credit Rating Agency Limited

PACRA ASSIGNS RATINGS TO AL BARAKA BANK (PAKISTAN)

ALBARAKA ISLAMIC BANK B.S.C. (C)

(Incorporated in Bahrain with limited liability)

INTERIM CONDENSED BALANCE SHEET AS AT MARCH 31, 2010

ALBARAKA ISLAMIC BANK B.S.C. (C)

INTERIM CONDENSED PROFIT & LOSS ACCOUNT

FOR THE PERIOD ENDED MARCH 31, 2010 (UNAUDITED)

Quarter Ended Quarter Ended

ALBARAKA ISLAMIC BANK B.S.C. (C)

Quarter Ended Quarter Ended

ALBARAKA ISLAMIC BANK B.S.C. (C)

Head office Unremitted Total

OPERATING FIXED ASSETS

Property and equipment (8.1) 179,747 184,975

AUDITORS’ REPORT TO THE DIRECTORS ON REVIEW OF

We have reviewed the accompanying condensed interim statement of financial

Type of Deposit Quarters