Outline of Presentation

Introduction and Brief Perspective of Islamic Banking

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

Zubair Mughal
CEO AlHuda : Centre of Islamic Banking & Economics
Regional Head Takaful Pakistan Limited.

Industry Progress in Pakistan

Year

2001

Meezan Bank
Al Baraka

2002

Meezan Bank
Al Baraka
MCB

2003

Meezan Bank
Al Baraka
MCB
Alfalah

6 Full fledge Banks having 228

and 12 Conventional Banks
have 103 SAIBBS and 10 Sub
Branches till August, 08
Total IB Branches = 341

2004 - 05

10

Meezan Bank
Al Baraka
MCB
Alfalah
SCB
Bank AlHabib
Habib AG Zur.
Metropolitan
Bank of Khyber
Soneri Bank

2006 - 07

18

Meezan Bank (113)

Al Baraka (20)
MCB (8)
Alfalah(32)
SCB (8)
Bank AlHabib(4 )
HMB(4)
Bank of Khyber(17)
Soneri Bank ( 4)
HBL(1)
Bank Islami(37)
DIB (20)
EGIBL (24)
Dawood(14)
NBP(3)
RBS (3)
Askari(14)
UBL (5)

Industry Progress in Pakistan

Industry Progress in Pakistan

Industry Progress in Pakistan

City - Wise Breakup

City - Wise Breakup

Industry Progress in Pakistan

Industry Progress in Pakistan

Industry Progress in Pakistan

Industry Progress in Pakistan

Islamic products and services offered by 300+

Financial Institutions around the world
Germany:
4

UAE: 13

.
United States: 20

- Dubai Islamic Bank

- Abu Dhabi Islamic
Bank
Bahrain: 26
Kuwait:
9
- HSBC Amanah
- Bahrain Islamic Bank
- Kuwait Finance

- Bank Sepah
- Commerz
- Al Manzil Financial
- Al Baraka
Bank
House
UK: 26
Qatar: 4
- Deutsche
Services
- ABC Islamic Bank
- HSBC Amanah
- Qatar Islamic Bank
- American Finance House
- CitiIslamic Investment
Bank
Finance
- Qatar International
- Failaka Investments
Switzerla
Bank
- Al Baraka
Islamic
- HSBC
Iran:
8Pakistan:

nd:
6
International
Ltd
- Ameen Housing
- Takafol UK Ltd
21
Cooperative
- The Halal Mutual
India: 3
Turkey: 7
Investment Company

- Faisal Finance Banglades

Egypt:
- J Aron & Co
12
Ltd
h:9
- Alwatany Bank of Egypt Institution
Malaysia:
(Goldman Sachs)
49
- Ihlas Finance
- Egyptian Saudi Finance
2 - Pure Islamic Banks
Saudi Arabia: 17
Sudan: 9
House
(Bank Islam, Bank
- Al Rajhi
Muamalat)
- SAMBA
Rest - conventional
- Saudi Hollandi

Indonesia: 4
banks
- Riyadh Bank

Yemen: 5

International Overview

The size of Islamic Financial Industry has reached US$

300 Bln. and its growing annually @ 15% per anum.

51 countries have Islamic Banking Institutions

27 Muslim countries including Bahrain, UAE, Saudi

Arabia, Malaysia, Brunei and Pakistan

24 non-Muslim countries including USA, UK, Canada,

Switzerland, South Africa and Australia

International Overview
Leading foreign Banks have opened Islamic
Banking windows or subsidiaries such as:

Standard Chartered Bank

Citibank

HSBC

ABN AMRO

UBS

International Overview

In Feb 1999, Dow Jones introduced the Dow

Jones Islamic Market Index (DJIM) of 600
companies world wide whose business
complies with Islamic Shariah laws

At present there are more than 105 Islamic

Funds operational through out the world with a
total fund base of over USD 3.50 billion

International Overview

Governments of Bahrain ,Malaysia and now

Pakistan have issued Islamic Bonds (Sukuk) in
order to facilitate Islamic Banks in managing
their liquidity.

Issuance of these bonds has also paved the

way for Shariah compliant Government
borrowings

International Overview

Institutions like Accounting and Auditing Organization

for Islamic Financial Institutions (AAOIFI) and Islamic
Finance Services Board (IFSB) have been formed.

These institutions are playing a key role in setting up

and standardizing Shariah , Financial and Accounting
standards for Islamic Financial Institutions.

Due to these collective efforts Islamic banking is now

recognized by IMF, World Bank and Basel Committee.

PRODUCT TREE OF ISLAMIC AGRI FINANCE

Islamic Modes of
Agricultural Finance

Partnership Based
Modes

Musharaka
Mudaraba

Trade Based
Modes

Murabaha
Musawama
Salam
Istisna

Rental Based
Modes

Ijarah
Diminishing
Musharaka

Partnership Based Modes of

Islamic Agricultural Finance
( Modarabah & Musharakah)

Musharakah

Characteristics

All parties share in the capital

All parties share profits as well as losses
Profits are distributed as per agreed
ratio
Loss is borne by the parties as per
capital ratio
Every partner is agent of other

MUSHARAKAH
Rs. 60

PROFIT
Rs. 100

Rs.1000

PARTNER A

Rs. 40

Rs.1000

VENTURE

Rs. 50

Must be according to
capital ratio

May be in any
agreed ratio

PARTNER B

Rs. 50
LOSS
Rs.100

Mudarabah

One partner (Rab al Mal) contributes

capital and the other (Mudarib)
contributes his skills or services to the
venture
Venture may for a fixed period or purpose
Both share profit in pre-agreed ratio
Loss is borne by Rab al Mal only, Mudarib
loses his services

MUDARABAH
PROFIT
60 %

40 %

SERVICES

CAPITAL

RABBUL MAL

VENTURE

ALL MONETORY LOSS

MUDARIB

LOSS OF SERVICES
LOSS

Bai (Buying & Selling)

Trade Base Mode of

Islamic Agricultural
Finance

Basic Rules of Bai

Existence of Product/Commodity

Ownership of Product/Commodity

Possession of Product/Commodity
Unconditional basis

Product have value/Price.

Basic Rules of Bai

Bai on Such product which is permissible in

Islam.

Product Must be Identify, clear with all

demanding Qualities.

Not based on any incident, struggle etc

Price must be clearly identified.

Kinds of Bai

Bai
Bai
Bai
Bai
Bai
Bai
Bai
Bai

Musawamah
Murabaha
Surf
Salam
Istisna
Eenna
Touliya
Wadhia

Takaful
(Islamic
Insurance )

Introduction
Takaful is the Sharia Compliant brand
name for the Islamic alternative to
conventional insurance. Its based on the
principle of Taawan or mutual assistance.

Origins of Takaful
In the event of death caused by
someone from another tribe, the
member of the offenders tribe
would share the blood money
(Khoon Baha) to provide for the
family of the victim.

Why Insurance ?
Is Some thing wrong with Concept ?

Risk Aversion
Assuring others
Risk sharing

From the Holly Quran

The need for insurance is shown in
the following verse of The Quran.
Those of you who die and leave
widows should bequeath for their
widows a years maintenance and
residence (2.240)

From the Hadiths

By Anas-bin-Malik, One day Prophet

Muhammad(PBUH) notced a bedouin
leaving his Camel without tying it. He
asked the bedouin, Why dont you
tie down your camel? The Bedouin
answered, I put my trust in Allah
(SWT). The Prophet (PBUH) then
said, Tie your camel first, then put
your trust in Allah(SWT) <Tirmidhi>

What wrong with

practice ?
The contract between the insurer &
the insured is technically wrong from
the sharia perspective because of
Interest (Riba)
Gharar (Uncertainty))
Gambling (Qamar & Maisir)
Risk Transfer Issue

Riba in Insurance

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

Indirect Riba
The interest earned on interest based
investments

Gharar

Lexically it means uncertainty and

technically it means the
uncertainty of the counteract or
the subject matter.

Wakala-Waqf Model
SHARE

Share
Holder
Wakalah
Fee

H O L D E R S

Investmen
t
Income

F U N D (S.H.F.)

Mudaribs
Share of PTFs
Investment
Income

Management
Expense of
the
Company

Profit/Loss

Takaful
Operator
Investment by
the Company

WAQF

Participant

Operational
Cost of Takaful
/ ReTakaful

Investment
Income

Claims &
Reserves

Surplus
(Balance)

P A R T I C I P A N T S T A K A F U L F U N D
(P.T.F.)

Different Models of Takaful

Pure Mudarabah Model : The participants

and operator enter into modarabah Contract.
Wakalah Model : An Agency Agreement is
made between participants and Operators
on the basis of Wakalah ( Agency
agreements)
Wakalah Based on Waqf Model : The
participant's donate the fund and operator
charge an agency fee.

General Takaful Types

General Takaful offers all

kinds of non-life risk coverage. It
is normally divided into following
classes:

Property Takaful
Marine Takaful
Motor Takaful
Miscellaneous Takaful

Types of Family Takaful

Term Life Takaful

Whole Life Takaful

Endowment Takaful

Universal Takaful

Marriage Plan
Education Plan

Takaful Operators

The number of Takaful operators worldwide is

now estimated at:
152 Takaful companies
9 Retakaful companies
In 39 Countries.
Average growth rate higher than conventional
insurance companies (around 25%).
NonMuslims increasingly opting for
Takaful products for commercial benefits.

INTRODUCTION OF TAKAFUL
PAKISTAN LIMITED

Takaful Pakistan is a joint venture of prestigious local

& foreign institutions, including:
Emirates Investment Group (Sharjah).
Al-Buhaira National Insurance Co. (U.A.E.)
Al Raji Bank - KSA
House Building Finance Corporation.
Emirates Global Islamic Bank.
Arif Habib Securities.
Sitara Chemicals.
Large initial paid-up Capital.

INTRODUCTION OF TAKAFUL
PAKISTAN LIMITED

Managed by dedicated professionals, committed to the cause.

Only A rated Takaful Company in Pakistan

ReTakaful arrangements with a consortium of internationally

reputed ReTakaful operators.

Shariah Board comprises of eminent scholars.

BancaTakaful, Crop Takaful and MicroTakaful products

We intend to be the trend-setter for excellent Clients Servicing,

Operational bench marks and prudent Underwriting practices.

Thank You.