bulletin oct dec 2008

7/29/2019 Bulletin Oct Dec 2008

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ISLAMIC BANKING BULLETI NOCTOBER-DECEMBER 2008

Islamic Banking Department

State Bank of Pakistan


2/27

IIISLA MICSLA MICSLA MICBBBA NKINGA NK INGA NK INGDDDEPARTMENTEPARTMENTEPARTMENTTo Promote and Regulate

Islam ic Banking Industry in

line with Best International

Practices, ensuring Shariah

C o m p l i a n c e A n d

Transparency

To M a k e I s l a m i c

Banking the banking of

first choice for the

providers and users of

financial se rvice s

Perv ez Said perv [email protected] g.pk +9221-9212495

I m ran A hm ad im ran.ah m [email protected] +9221-2453711

M . M azhar Kh an mazhar.k h [email protected] +9221-2453724

Sarf r az A hm ed ahm ed.sar fr [email protected] +9221-2453772

For Soft copy and pr evi ous issues pl ease v isit :

ht tp: / /www.sbp.org.pk/ ibd/Bul let in/Bul let in.asp

. .. .. . I shal l w atch w ith keenn ess th e w ork of y our Research Or gani zati on i n evolv -

ing banking practices compatible with Islamic ideas of social and economic life. The

econom ic system of th e W est h as created alm ost i nsolu ble probl ems for h um ani ty

and to m any of us it appears that on ly a mi racle can save it fr om disaster t hat i s not

facing the w orld. The adoption of W estern econom ic theory and pract ice wi l l n ot

help us in achi evin g our goal of creati ng a happy and contended people. W e m ust

work our destiny in our own way and present to the world an economic system

based on tr ue Islami c concept of equali ty of m anh ood and social justi ce. W e w il l

th ereby be fulf i l l in g our m ission as M uslim s and giv in g to hu m ani ty th e message of

peace w h ich alon e can save i t and secur e t he w el fare, happ iness an d pr osper i t y of

mankind........

Quaid-i-Azam's Speech On the occasion of the Opening Ceremony of The State Bank

of Paki stan on 1st July , 1948 available at h tt p://w w w .sbp.org.pk/about/h istory /

h_moments.htm


3/27

State Bank of Pakistan

Islamic Banking Bulletin

First of all on behalf of State Bank of Pakistan I would l ike to thank the

IFSB team for holding this important workshop in our country. IFSB as

an in ternational standard settin g body i s playing a signifi cant role to help

the Islamic financial services industry grow worldwide on a sound and

stable footin g. Th e hard work being put in for prepari ng various

Standards w herein best in tern ati onal practices are developed th rough

an exhaustive process involving thorough research, discussions, public

hearin gs, w ork shops/semi nars etc. is in deed laudable.

SBP has played a key role in providing an enabling environment and a

level playing field to the Islamic banking industry through the provision

of a facil i tative regulatory and supervisory framework. Our Shariah

compliance mechanism is the most comprehensive available in the

world. Pakistan is the only country which has issued Guidelines on

Islamic agriculture and microfinance. Similarly, SBP is the first centralbank to h ave in iti ated Shariah-compl iance inspection.

A s a result , th e ind ustr y h as experienced robust grow th . SBPs recent

achievement of being ranked as the second best central bank in

prom otin g Islamic bankin g is a reflection of t hi s effort.

SBPs next five years strategy for development of Islamic banking

industry envisages roll ing out of various international prudential

standards developed by IFSB as an im port ant pil lar. W e have

accordingly seized the opportunity by capitalising on IFSB's expertise

th rough h oldin g such w ork shops at t hi s junct ure. Bank s in Paki stan havealready adopted Basel II and adaptation of IFSB standards in Pakistan

w ould enable Islamic bankin g instit uti ons to perform on an equal footi ng

w ith the conventional in dustry thereby achieving the ul t im ate objective

of financial stability and soundness at the national level and smooth

int egration w ith the in ternational f in ancial infr astructur e.

Just to mention the progress the Islamic banking industry has made, let

me share with you that over a period of time, there is a healthy growth

of Islamic banking industry of Pakistan. The financing and investment

portfolio of local Islamic banks has reached Rs 185 billion in December

2008, compared w it h Rs 137.6 bil l ion in December 2007. M ark et share of

Islamic banks in the overall banking has been increased to 5 percent at

Islamic Bank in g Bullet in gives

an overview of the Is lamic

Banking Industry of Pakistan

and prov ides informat ion

regarding the developments

taking place in the industry

locall y and in ternationally.

Vol III No. 4Published on May 13, 20 09

SBP Deputy Governors Speech

In dustry Progress and M arket

Share

Comparativ e Consoli dated Bal-

ance Sheet

Book Review

Bank in Focus

M ode of Financing in Focus :

Shariah Compliance Framework

in Pakistan

FAQ s on I slamic Bankin g

Developm ents at IBD - SBP

Internat ional News

Islami c Bankin g Branch

Network

Provin ce-w ise Breakup of IBIs

Cities-wise Breakup of IBIs

Contacts Detail s of I BD (SBP)

Local N ews

CONTI NUED ON P AGE 23


4/27

October-December 20 08

4

I s l am i c b an k i n g r e m a i n e d r e si l i en t d u r i n g t h e

q u a r t e r u n d e r r e v i e w , d e s p i t e s o m e n e g a t i v es h o c k s w i t n e s s e d b y t h e b a n k i n g s e c t o r i n

P ak i st a n e sp e ci a l l y i n O c t o b e r 2 0 08 . M o r e

s p e c i f i c a l l y , t h e c o n v e n t i o n a l b a n k i n g

i n d u s t r y r e m a i n e d s u r r o u n d e d b y r u m o r s a t

t h e s t a r t o f O c t o b e r 2 0 0 8 , t h a t c u l m i n a t e d i n

p r e s s u r e o n r u p e e d e p o s i t s w i t h t h e

c o n v e n t i o n a l b a n k s .

T h e Q o Q g r o w t h i n a s s e t s , d e p o s i t s ,

f i n a n c i n g & i n v e s t m e n t , a n d n u m b e r o f

b r a n c h e s w a s 1 0 , 1 8 , 2 . 4 an d 4 0 p e r c e n t ,

r e s p e c t i v e l y . N u m b e r o f b r a n c h e s o f I s l a m i c

b a n k i n g i n s t i t u t i o n s h a s c r o s s e d 5 0 0 m a r k ,

w h i c h i s i n d e e d i m p r e s s i v e . T h i s g r o w t h i s a

c o n t i n u a t i o n o f g r o w t h m o m e n t u m s i n c e

C Y 0 2 . I n sp e ci f i c t e r m s, I s l am i c b a n k i n g g r e w

a t a y e a r l y a v e r a g e o f 3 7 p e r c e n t . D e s p i t e t h e

i n c r e a s e i n s i z e , t h e c o n t i n u a t i o n o f g r o w t h

r a t e i s c o m m e n d ab l e .

T h e r a p i d g r o w t h i n I sl a m i c b an k i n g i s

r e f l e ct e d i n g r o w i n g sh a r e o f I sl a m i c b a n k i n g

i n a s s e t s , d e p o s i t s a n d f i n a n c i n g o f b a n k i n gi n d u s t r y . T h e r e s p e c t i v e s h a r e o f I s l a m i c

b a n k i n g a s s e t s a n d d e p o s i t s a r e 4 . 9 a n d 4 . 8

p e r c e n t o f t h e b a n k i n g s e c t o r . O n t h e f a c e ,

t h e s e l o o k m o d e s t s h a r e s b u t g i v e n t h e

s m a l l e r t i m e f r a m e a n d o t h e r c o u n t r i e s

e x p er i e n c es t h i s i s r e al l y si g n i f i c an t .

Tot al A ssets 206 119 72 44 13

% of Banki ng Industry 4.0% 2.8% 2.0% 1.5% 0.5%

Deposits 147 84 50 30 8


Financing. & Investment 138 73 48 30 10


No. of Full Fledge Islamic Banks 6 4 2 2 1

No. of Convent ional Bank s w it h I slamic

Banki ng D ivisions12 12 9 9 3

No. of Branches 289 150 70 48 17

276

4.9%

202

4.8%

187

4.4%

6

12

514

(Rs. in bil l ion)

-

50

100

150

200

250

300

Dec-08

Dec-07

Dec-06

Dec-05

Dec-04

Dec-03

Years

Islamic Banking 2003 - 2008

Total Assets Deposits Financing. & Invest.

Rs

Tot al A ssets 251 276 10%

D eposit s 171 202 18%

Fin anci ng. & In vest. 182 187 2.4%

N o. of Branches 367 514 40%

P: Provisional D ata


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5

Cash and balances w it h tr easur y

banks22,334 21,786 -2%

Balances w it h oth er banks 9,900 22,337 126%

Du e from fin ancial in sti tut ions 11,622 20,397 76%

I nv estm ents 40,274 42,172 5%

Fin ancin gs 142,178 144,671 2%

Op erati ng fi xed assets 9,488 10,923 15%

D eferr ed tax assets 781 843 8%

Ot her assets 14,448 13,217 -9%

Bil ls payable 2,814 2,640 -6%

D ue to fi nancial in sti tu ti ons 12,525 17,447 39%

D eposit s and oth er account s 171,302 201,698 18%

Li abil it ies again st assets subj ect

to finance lease318 77 -76%

D eferred tax li abili ti es 691 1,126 63%

Ot her li abili ti es 15,240 17,580 15%

REPRESENT ED BY

Paid-up capital/Head office capi-

tal accoun t29,423 31,962 9%

Reserv es 1,004 1,913 90%

Un-appropr iated/Un-remitted

profi t1,641 1,818 11%

32,068 35,693 11%

Surpl us /(Deficit) on revaluation

of assets422 84 -80%

Rs. in M i l l i on

Islamic banking assets grew at QoQ 10 percent.

The assets mix have shown some interesting

changes. The l ow er grow th of f i nancing contrast

w it h substanti al i ncr ease in balance with other

banksand due f rom f inancia l inst i tu t ionscate-

gory shows a greater degree of risk aversion.

M oreover, there is a shi ft t ow ards inv estm ents as

w ell. Th ese trends are not sur pri sin g as th e con-

ventional banks are showing similar trends in

th e aft ermath of global fi nancial cri ses.

The f inancing & investment mix have changed

in favor of investments during Oct-Dec 2008.

Th e in crease I nv estm ent s sh ow s th e in crease in

in vestm ent avenues ari sin g from issuance of GoP

I jarah Sukuk . W hi l e slow down in the f inancing,

as di scusses earl ier , is a refl ection of gener al r isk

aversion by banks.

The breakup of f inancing activit ies remained

almost same as the previous quarter with a con-

centration of financing activities in trade/sale

based m odes. Th e part icip ator y m odes remain ed

sidelined with combined share of less than 2

percent in the overall f inancing. Specif ical ly,

M urabaha, Dim ini shi ng M usharaka and I jarah

are leadin g fin anci ng m odes w it h shares of 40.6,

30.5, and 20.5 percent in tot al fi nancin g, respec-

t ively. P: Provi sional D ata


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6

Th e share of oth er mod es, namely M udaraba,

M ush araka, Salam and I sti sna rem ained di sm al, at

0.2, 1.7, 1.8, 2.9 r especti vel y.

The deposits growth during the quarter re-

mained strong at 18 percent. This seems impres-

sive as the conventional banks deposits grew

onl y at l ess th an 2 percent.

The deposits breakdown shows that bulk of the

deposits are mobilized in fixed and saving ac-counts, which cumulatively account for around

65% of total deposits. This is increasing by

around 18% besides healthy growth in f inancial

in sti tu ti ons deposit s.

The Islamic banking windows at the end of the

quarter were 46. The deposit mobilized by these

w in dow s stood at Rs 4.4 bil li on. Th e share of de-

posits of windows has increased substantially,despite the fact that conventional banks faced

201,698 18%

180,664 12%

Fix ed deposit s 67,452 75,284 12%

Savi ngs deposit s 53,368 56,072 5%

Current Accounts

Remunerative

104 167 60%

Curr ent account s

N-Remunerative

38,293 47,269 23%

Others 2,522 1,871 -26%

21,034 120%

FI-Remunerative 9,526 20,946 120%

FI-Non Remunerat ive 37 88 138%

No of Islamic Banki ng W indow s 46

Deposit s mobi l ized th rough IBW s Rs. 4.396 Bil l ion

% of Islami c Bank ing D ivi sions total

Deposits7.42 %

Fixed

deposits

37.3%

Savings

deposits

27.8%

Current

accounts

Remunera

tive

0.9%

Current

accounts

22.6% Others

0.9%

FI

Remunera

tive

deposits

10.4%

BreakupofDepositsDecember2008

Murabaha

40.6%

Ijarah

20.5%

Musharaka

1.7%Mudaraba0.2%

Diminishing

Musharaka

30.5%

Salam

1.8%

Istisna

2.9%Others

1.8%

ModeofFinancingDecember2008

P: Provi sional D ata

Rs. In M i l l ion


7/27


7

slow dow n in deposits.

The earning and profitabil i ty rat ios remained

almost unchanged as from the previous quarter.

The markup income remained the major con-

t r ibu tor to the pro f i tab i l i t y wi th non-markup

income contr ibutor just a fraction. On the ex-

pense side, the markup and non-markup ex-

penses are alm ost at t he same level as w ell . Th eROA and ROE of Islamic banks have shown a

very sl ight declin e.

The asset quality of the Islamic banking institu-

tions also remained almost intact compared to

the previous quarter. There are slight slippages

in NPFs to financing, NPFs to net financing, and

provisioning to NPFs ratios. Nonetheless, the

Net NPF to Capital rat io has improved margin-al ly.

M ark -up In come to Total

A ssets7.9% 7.9%

M ark -up Expense to Total

A ssets 4.0% 4.1%

Net M ark -up In come to Total

A ssets3.9% 3.8%

Non- M ark- up Income to To-

tal Assets0.8% 0.8%

N on-M ark -up expense to

Tot al A ssets3.5% 3.5%

RO E (A verage Equit y) 5.65% 5.31%

RO A (A verage A ssets) 0.75% 0.69%

N PFs to Fin anci ng 2.2% 2.3%

Net NPFs to Net Financing 0.7% 0.8%

N et N PFs to Tot al A ssets 0.4% 0.4%

Prov isions to N PFs 65.9% 67.6%

N et N PFs to Tot al Capit al 3.3% 3.1%

M ur abaha 59,067 59,640 1%

Ij arah 30,656 30,173 -2%

M usharaka 2,421 2,469 2%

M udarbah 453 308 -32%

Dimin ish ing

M usharaka

43,434 44,812 3%

Salam 2,104 2,649 26%

Isti sna 3,566 4,268 20%

Qarz-e-H asna - 0%

Ot her s 2,535 2,650 5%

Am ount o f Non per -

formi ng Financing

3,122 3,420 10%

Prov ision against N PFs 2,057 2,311 12%

Net NPF

Breakup of Financing (Rs. In Millions)

*Annualized growth rates

Im portant Note:

The data used in this Bulletin is based

on unaudited Quarterly accounts sub-

mitted by IBIs for the quarter of De-

cember, 2008. The figures may vary

from the annual audited accounts of

2008 which provide full year coverage

of th e Islami c Bank in g In dustr y.

P: Provisional D ata


8/27


8

I slam ic Fin ance: A gui de for I nt er-

n at i onal Bu sin ess and I n vestm en tH abiba A nw ar and Roderick M i l lar

Global M ark et Briefings (In associati on w it h

th e Institut e of I slamic Bankin g and I nsurance )

$115.00

216 Paperback

9781846730788

Nov ember 2008

T hi s tim ely guide to I slamic f in ancial practice is aim ed atbanking professionals and corporate investors worldwide.

W ith sim i lar i t ies to 'ethical i nvestm ent' in the W est, Is-

lamic investment is based on socially-responsible princi-

pl es exclu di ng areas such as gam bl in g, alcoh ol, w eapon s

and product s th at are high- ri sk / h igh-r etur n. Islami c and

conventional banking have converged in recent years and

investors and asset managers have become increasingly

attracted to financial products and the institutions that

adhere to Shariah pri nciples. Th is impor tant book aim s to

support and inform investors by providing an accessible

guide to the principles and current practice of Islamic

bank in g and Shariah-compl iant f in ance.

Islamic Finance: A Guide for International Business and

Investment serves as a comprehensive guide; be it to a

novice wanting to learn the basics of Islamic finance or

even t o the experi enced practi ti oner, wh o is looki ng for a

refresher course. W ri tten by th e most n otable practi tio-

ners from the top institutions in the industry, this guide

has managed to cover the most crucial sectors in the in-

dustry such as Syn dicated and Str uctu red Fin ance, Capit al

M arkets, Retail Bank in g, Com m ercial Real Estate and

Project Financing and even Takaful (Islamic Insurance

concept). The flow of each chapter, which begins with

the introduction to Islamic Finance and ends with the

Regulatory issues, is almost seamless, not only making it

an easy read but providing an excellent insight into the

fundamentals and the latest developments of Islamic fi-

nance.

Raphael W ong, editor of I slamic Fin ance news.

"Designed as a guide for global business and investment,

th is book aim s to equip r eaders w it h a basic un derstand-

in g of th e principl es and cur rent pr actice of Islam ic bank-

in g and Shariah-compl iant f inance. Thi s Global M ark etBriefin gs publi cati on h as part icular r elevance in th e cur-

rent cl im ate, wi th th e failu re of deri vatives-based mark ets

tendin g to make Islami c financial instr um ent s mor e w ide-

spread. Th is is a wor th w hi le reading f or f inancial profes-sionals and students alike". Securities & Investment Re-

view , February 2009

This guide to Islamic finance covers the religious founda-

tions that affect banking and lending practices, trade fi-

nance, working capital, credit, commercial real estate

investment banking and regulatory issues so that financial

prof ession als and global in vestor s can be Shari '-a com pli -

ant . Editor A nw ar (European and in ternational commerce

law, The College of Law, London) has enlisted the help of

international bankers and analysts from firms such as the

Bank of Lon don and t he M iddl e East, Credit Suisse andth e Islamic Bank of Brit ain to explain th e fundamentals of

Shari'-a compliance, and how investors take advantage of

banking products that do not pay interest and yet sti l l

offer low risk and high returns. Human resources and

financial training for Islamic banking institutions is also

discussed.

M r. M ohamm ad A . Qayyum , Director General of th e In-

sti tut e of Islami c Bank in g and I nsurance (II BI) r emark s:

In the years to come, the growth in Islamic banking

looks set to continue to make rapid progress as more and

m ore, the great r eserves of w ealt h of M usli m s are di-

verted away from conventional banking practices. This

book is invaluable in understandin g how th e principl es of

Islamic financing and investments are being practised in

modern tim es.

W hi le the global economy remains uncertain, Islami c

Finance is steadily growing at an annual rate of 10-15 per

cent, and is estimated to be currently worth $800 bil l ion.

Although Islamic financial products do not pay interest

they can often be as advantageous, or more so, than con-

venti onal products. A nd at a tim e w hen deriv ati ves-basedmarkets have failed, Islamic financial instruments, based

on the firm establishment of underlying assets, are going

to be ever more popular.

Th is new book prov ides accessibl e advi ce and up- to- date

guidance for foreign investors helping them understand

th e principl es and cur rent pr actice of Islami c bank in g and

Shariah-compl iant fin ance:

outl ini ng the background to I slamic fin ance;

examining Islamic financial products including loans,

mortgages, trade finance, investment banking and

Takaful;

Book Review


9/27


9

exploring important regulatory issues.

W ith contr ibutions from l eading industry experts includ-

ing the Institute of Islamic Banking and Insurance,

D enton W il de Sapte LLP, State Bank of Paki stan, A l Rajhi

Bank , th e Islam ic Bank of Br itain, Pri cew aterhouseCoop-

ers and t he Bank of Lon don and th e M iddle East, th is new

book is an essential resource for organizations engaged in

business development, asset management, banking and

fin ance in an Islam ic context.

About the Author

Roderi ck M il l ar i s an experienced auth or and edit or. A f-

ter gaini ng an M BA in M adri d he has specialized in f i-nance, business start-ups, development economics and

recently management education. He has edited several

GM B tit les, inclu din g Doi ng Busin ess w it h... France,

Germany and India. He is the author of the Daily Ex-

press "Complete Guide to Family Finance" and "Start-up

and Run Your Own Business". Currently he runs

IED P.info, th e executi ve development w ebsit e. H abiba is

a graduate of Brunel University where she earned an LLM

in European and International Commercial Law in addi-

tion to a Postgraduate Diploma in Legal Practice fromTh e College of Law, Lon don, before joini ng GM B Pub-

lishing as an Editor-Analyst. Bringing an array of legal

experience from international internships, and a multi-

cultural background coupled with fluency in South Asian

languages, Habiba is involved in commissioning content

for GM B Research, l i aisin g w ith global cont ri butor s, and

project managin g a num ber of book publi cati ons.

PART ON E: Background t o Islamic Fin ance

1.1 Reli gious Foundati ons of I slami c Finance

1.2 Th e Developm ent of I slamic Finance in th e UK

1.3 Islamic A ltern ati ves to Conv entional Fin ance

1.4 Th e Insti tut ional In frastr ucture Supporti ng the Is-

lamic Fin ance Industry

PART T W O: Islamic Finance in Practice

2.1 Retail Bank in g: Cur rent and Savi ngs A ccount s and

Loans

2.2 Personal Fin ance: Credit Cards

2.3 I slami c M ort gages

2.4 Trade Finance

2.5 W ork in g Capit al

2.6 Comm ercial Real Estate and Pr oject Fin anci ng

2.7 Syn dicated and Str uctu red I slami c Finance

2.8 In vestm ent Bank in g

2.9 Islamic Capital M ark ets

2.10 Secondary M ark ets in I slami c Fin ance

2.11 Screening and Purification Criteria: Shariah Applica-

t ion t o Inv estm ents

2.12 Takaful

2.13 Takaful vs. Conventional Insurance

2.14 Human Resources and Training for Islamic Financial

Act iv i t ies

2.15 Taxati on

PART THREE: Regulatory Issues

3.1 Prudenti al, Regulatory and Supervisory Crit eri a

3.2 Basel I I and Capital A dequacy

3.3 Regulation s and Ch allenges in th e UK

3.4 Shari ah Supervi sory Boards and Shari ah Com pli ance

Book r eview taken from:

www.globalmarketbriefings.com/?id=2979A n d

w w w .bi-m e.com/m ain.php?

id=31487& t=1& c=129& cg=4& m set=1011

Biography from :

w w w .am azon.com/gp/product/product-

description/1846730783/

ref=dp_proddesc_0?

ie=UT F8& n=283155& s=book s

Book Review Continued from previous page


10/27


10

Bank in Focus

Du bai I slamic Bank Pakistan L im it ed was in corporated in

Paki stan as an u nli sted public l im it ed company on M ay

27, 2005 to carry out the business of an Islamic Commer-

cial Bank and commenced its operations as a scheduled

Islami c Comm ercial Bank on M arch 28, 2006.

Dubai Islamic Bank Pakistan Limited (DIBPL) is a 100%

owned subsidiary of Dubai Islamic Bank PJSC, UAE,

which takes pride in being the first Islamic Bank of the

w orl d. A s at D ecem ber 31, 2008, the i ssued, subscri bed

and paid-up capital of DIBPL stood at Rs 6,017.780 mil-

l i on w hereas th e auth orized capit al w as Rs. 8 bil l ion .

DIBPL has a branch network of 25 branches including 1

sub- branch spread over 10 cit ies, as of M arch 31, 2009.

Th is netw ork covers all 4 provi nces of Paki stan. 12 more

branches have been approved in the Annual Branch Ex-

pansion Plan.DI BPL h as a deposit per br anch r ati o greater

than Rs. 900 mil l ion per branch, which is the highestamongst all fu ll fl edged Islam ic bank s. Th e bank s str ategy

is to open up branches targeting greater value with a rela-

t iv ely smal ler f ootpr int.

DIBPL offers a full suite of Shariah compliant banking

products to meet the requirements of its customers. The

product r ange incl udes th e follow in g:

DIBPL is currently offering Home Finance and Auto Fi-

nance, based on th e Dim ini shi ng M usharkah m odel. On

the home finance side DIBPL offers three product vari-

ants:

H om e Pur chase.

Purchase of undivided share (Home Renovation).

Purchase of undivided share of property at other bank

(Balance T ransfer).

Dubai Islamic Auto Finance offers a quick, convenient

and fully Shariah compliant manner of financing a car.

DIBPL has established itself as the market leader on a

month-to-month acquisition basis in a very short span of

ti me. The str ength of D IBPLs consum er fin ance products

can also be judged by the fact that its delinquency rate is

low as compare to other players in th e market.

DIBPL offers a wide range of wealth management prod-

ucts including Current, Savings and Fixed deposits in lo-

cal and foreign currencies. In additi on, DI BPL was th e

fir st I slamic bank to in tr oduce V ISA debit card and Pri or-

ity Banking services under the brand Dubai Lounge to

it s cli ents.

D IBPL prov ides a wi de range of serv ices specifi call y d e-

signed to assist Pakistani businesses.

Cash M anagem ent Servi ces

Trade Related Services

In vestm ent Banki ng Services

Servi ces for Sm all and M edium sized Enterpr ises

An ever expanding network of correspondent banks al-

lows DIBPL clients to uti l ize the arrangement with nu-merous local and foreign commercial banks in meeting

th eir collection s and paym ent s requirement s.

W it h i ts team of h and-pi cked seasoned prof ession als,

DIBPL has become the Investment Bank of choice for

local and regional cl ients within a short span of time by

leveraging a unique blend of regional expertise and local

kn ow ledge to create tailor- m ade soluti ons for i ts custom -

ers. Guided by Shariah principles, DIBPL Investment

Bank ing of fers the foll ow ing serv ices:

Corporate Finance

Project Finance

M ergers & A cquisiti ons A dvisory

Privatization Advisory

Real Estate A dvi sory

Syn dicati ons (inclu ding equity )

Balance Sheet Opt im ization A dvisoryCapit al M ark et Issuances (m ail y Suk uk )

Dubai Islamic Bank Pakistan l imi ted (DIBPL )


11/27


11

Bank in Focus Continued from previous page

DI BPL takes great pr ide in being the bank er of choice for

major Sukuk arrangements in Pakistan, especially for the

public sector. For instance, in 2008, DIBPL was selectedas one of th e tw o str uctur ing banks for t he inaugural l ocal

currency GO P Ijarah Suk uk pr ogram.

Despite econom ic challenges ow in g due to th e crunch on

the national and international markets, DIBPL continues

to navigate the bank on the course set for 2008. DIBPL

financings have registered growth of 59.27% during 2008

and deposits growth by 57.99% during same period. The

current losses incurred by the bank are on account of up-

front investments in infrastructure, and are in l ine withfin ancial pr ojection s.

To ensure that every transaction complies with Islamic

Law, bank has in place a Shariah Board, comprising of

experienced Schol ars in th e field of I slami c Jur isprudence,

economics and banking. The Shariah Board ranks above

th e Board of D ir ectors and is em pow ered to issue Fatw as

on any matter pr oposed before it by th e different bu sin ess

uni ts of th e Bank .

Dr. Hussain Hamid Hassan is the Shariah Advisor of

DIBPL. He is an international ly renowned f igure in the

field of Shariah, Law and Islamic Finance. He received his

PhD from the Faculty of Shariah at A l-A zhar U niversi ty

in Cairo. H e also holds a M asters degree in law fr om t he

International Institute of Comparative Law, University of

New Yor k and a degree in Law and Economi cs fr om Cairo

University. He served as Assistant Professor, Associate

Professor and Professor of Shariah in the Faculty of Law

and Economics at Cairo University. He had been deputed

by th e Cair o Un iversit y as Chairm an of th e Post GraduateStudi es Departm ent, at Ki ng Abdul A ziz Uni versity , M ak-

kah Campus, Saudi A rabia.

Dr. Hassan served as General Director of the Research

and Reviving the Islamic Heritage Centre, King Abdul

A ziz Un iversity at M akk ah. I n t he year 1979, Dr. H assan

was deputed by the Cairo University to establish the In-

ternational Islamic University at Islamabad where he re-

m ain ed the President of th e said U niv ersity f or almost 20

years.

Som e of th e posit ion s held by Dr . H assan are as fol low s:

Legal A dvisor to t he President of th e Republic of Ka-

zakhstan

Econom ical A dvisor to the Prim e M in ister of th e Re-

publi c of K yr gestan.

Advisor to Chancellor IIUI / the President of the Is-lamic Republi c of Paki stan.

A dvisor to th e General Secretary of th e M uslim

W orld League, M akk ah, Saudi A rabia.

A dvisor to t he President of th e Islamic Conf erence of

th e M usli m W orld, Jeddah, Saudi A rabia.

Legal Advisor of the Society of the Revival of Na-

ti onal Herit age of the UA E.

Chairman, Shariah Supervision Board of Liquidity

M anagement Center, Bahrain.

Chairman, Shariah Supervision Board, Islamic Bank

of Sharjah.

Chairman, Shariah Supervision Board, Dubai Islamic

In surance and reinsurance Company (A M A N), Du -

bai.

Chairman, Shariah Supervision Board, Tamweel Fi-

nance Company

Chairman, Shariah Supervision Board, SALAM

BAN K Bahrain

Chairman, Shariah Supervision Board, Emirates &

Sudan Bank

Chairman, Shariah Supervision Board, First GulfBank

Chairman, Shariah Supervision Board, National

United Bank

M ember of t he Shariah Supervision Board, I slamic

D evelopment Bank , Jeddah.

Chairm an of Th e Assembly of M uslim Juri sts in

A merica, W ashin gton.

M ember for Eur opean I slami c Board f or Research &

Consultat ion, D ubl in.

(The infor mation pr ovided by: Du bai I slamic Bank )

For further information please visit www.dibpak.com


12/27


12

There

are

three

basic

condi

ons

for

validity

of

a

sale

in

Shariah:

Thetradedcommoditymustbeexisng;

The seller shouldhaveacquired theownershipof that

commodity;and

Thecommoditymustbe inthephysicalorconstrucve

possessionoftheseller.

ThereareonlytwoexceponstothisprincipleinShariah.i.e.

SalamandIssna.

Is

snaisprimarily

adeferred

delivery

sale

contract

similar

to Salam. It is similar to convenonal workinprogress fi

nancingforacapitalproject.Inpracce,itisusuallyusedfor

construconandtradefinancesuchaspreshipmentexport

finance.It isasaletransaconwhereacommodity istrans

actedbeforeitismanufactured.Itisanordertoamanufac

turertomanufactureaspecificcommodityforapurchaser.

Themanufacturer useshisownmaterialtomanufacturethe

required goods. In this mode of financing, price must be

fixedwithconsentofallparesinvolved.

1.IstsnaSaleContract.

Thebuyer expresseshisdesiretobuyacommodityandta

blesIssnarequesttothebankwithaspecificprice.Theline

of payment whether cash or deferred shall be subject to

agreement.

Thebankusuallycalculateswhatitwillactuallypayinparal

lelIssnacontactplustheprofititdeemsreasonable.

Thebankputs itselfunderobligaontomanufactureacer

taincommodityandtodeliver itinaspecificperiodsubject

toagreement(thebankputsintoconsideraonthatthedue

dateisthesameasoraertheduedateofitsreceipttothe

commodityintheparallelcontact.

2.TheparallelIstsnacontact.

Thebank expresses itsdesire inorderingthemanufacture

of thecommodity ithasundertakentomanufacture in the

first Issna contract (with the same specificaon as in the

firstcontract)andagreeswiththe

makeron theprice and thedate

ofdelivery.

Thesellerputshimselfunderobli

gaontomanufacturethespecific

commodityand to itsdeliveryon

theduedateagreedupon.

3. Delivery and receipt of the

commodity

Thesellerdeliversthemanufacturedcommoditytothebank

directlyortoanyparty intheplacedecidedbythebank in

thecontract.

Thebankdeliversthemanufacturedcommoditydirectlyby

itselftothepurchaserorauthorizesanypartytodeliverthe

commodity sasfies the specificaon he has demanded in

thecontract.Butslleachpartyisresponsibletothepartyit

contractedwith.

IstsnaBasedfinancialProducts:

Issnamodeoffinancingmaybeusedforfollowingfinancial

products:

Shorttermfinancingformanufacturers.

Workingcapitalandexportfinancing.

To finance construcon industry such as apartment

buildings,hospitals,schoolsanduniversies.

Housingfinanceschemes.

FinancingofITindustry

Infrastructurefinancing

Asamodeofinvestment,Issnacanplayanimportantrole

in economic development by encouraging the demand of

manufacturinggoods

and

their

financing

which

would

help

instabilizingthepricesofmanufacturedgoods.

ISTISNA ( )

Settl ement Risk

Price Risk

D eli very Risk

Possession Ri sk

FLOW OF ISTISNA TRA NSA CTION

Financier(Bank)

DDeelliivv eerryy ooff aasssseett

aatt ff uuttuurree ddaattee

PPaayymmeenntt ooff ppuurrcchhaassee

pprriiccee oonn ddeelliivv eerryy

DDeelliivv eerryy ooff aasssseett

aatt ff uuttuurree ddaattee

PPrrooggrreessss ppaayymmeenntt

ooff ppuurrcchhaassee pprriiccee

Entrepreneur Manufacturer


13/27


13

Shariah compliance is the most important aspect of

Islamic banking and f inance. The credibi l i ty of Is-

lamic Banking Institut ions (IBIs) not only depends

on th e f inancial h ealt h of the in stit ut i on but also on

its adherence to the Shariah. Under the current

strategy for promotion and development of Islamic

Bank in g as a parallel, vi able and com pati ble banki ng

system, State Bank of Pakistan has taken a number

of steps to ensure Shariah compliance by IBIs and

for standardization of Shari ah practices.

To br in g in harmon y and standardi zati on of Shariah

practices, the State Bank has put together a compre-

hensive compliance /harmonization framework.

This is based on a detailed analysis of international

and local industry practices. The framework consists

of mult iple elements uti l izing formal as well as in-

form al foru m s. How ever, i t is to menti on here that a

flexible approach has been adopted while devising

the said Shariah compliance/ harmonization frame-

work. This has been done to avoid revisiting the ex-perience of 1980s where a rigid model was applied

that resulted in a stalled process of product innova-

t ion and development. The aim this t ime is not to

standardize each and every practice just for the sake

of standardization only. Rather emphasis has been

on a market based approach wherein the industry

can on an on going basis provide Shariah compliant

banking services through a parallel and compatible

system.

The framework already put in place and new init ia-t ives undertaken by SBP which either directly con-

tributes to, or indirectly augments the process of

Standardization of Shariah practices in the Islamic

banking industry of Pakistan both in the local as

w ell as global cont ext.

Th is str uctur e has th e follow in g sali ent featu res:

Shari ah Board at SBP

Shari ah A dvi sors as per Fit & Proper Cri teri a Essenti als & M odel A greem ents of I slami c

M odes of Financing

Shari ah Comp li ance In specti on

M eeti ngs of Shari ah A dvi sors

Th e Sh ar iah Board of SBP advi ses on th e procedur es,

laws and regulations pertaining to Islamic Banking

in l in e w it h Shariah prin ciples. All th e instruction s /

guidelines pertaining to the Islamic banking Indus-

try are issued with the approval of SBP Shariah

Board. Con fl ict Resolut ion in Shariah Ru li ngs is also

managed through the Shariah Board of SBP as in

case of any dif ference of opin ion th e decision of SBPShari ah Board is considered f in al.

:

Each Islamic banking institution (i.e. Islamic Bank

and conventional bank having Islamic Banking

Branches) is requir ed to appoint a Shari ah A dvi sor as

per Fit and Proper Criteria prescribed by SBP. The

requirement for Shariah Advisors to meet the said

criteria ensures that they have adequate and rele-

vant education, knowledge and experience, which

in tur n pl ays a vit al r ole in h arm onizati on of Shariah

Practices in dif f erent Islamic banki ng i nstit ut i ons.

Shari ah advi sor of t he bank is responsibl e to ensur e

that all the products and services, operations and

documents of the bank are compliant / consistent

with the Shariah Rules and Principles outl ined for

the respective modes of financing. Before launching

any new products the banks are required to get for-

mal approval from the Shariah Advisor regarding

Shariah compliance of the product and its related

documents.

:

Essentials of Islamic modes of Financing entai l the

basic principles of Islamic modes of financing that

have to be observed by Islami c bank in g institut ions

while designing their product structures, manuals

policies etc. These essentials ensure compliance with

mi ni mu m Shariah Standards by t he Islamic banki nginstitut ions.


14/27


14

M odel A greements for I slamic M odes of Financing

has been introduced in order to facilitate the exist-

ing Islamic banks and the potential market playersin developing Islamic banki ng products in a harm o-

nized manner (without restr ict ing the process of

product inn ovat ion) .

SBP conducts Shari ah Comp li ance In specti on on th e

basis of recently developed Shariah Compliance In-

spection M anual for Islamic Bank in g Institut ions. I t

helps in identi fyi ng variat ion in procedures adopted

by dif ferent bank s. Th e decision s on Shari ah In spec-

tion findings are also a source that helps in achiev-

ing the goal of having standardized procedures for

Shari ah pr acti ces in th e Islam ic banki ng in dustr y.

:

W hen Shariah opini on i s required regardin g an I s-

lamic banking issue of mutual/collective interest, the

sam e is tak en up in th e meetin gs of Shari ah advi sors

for discussion and possibl e resolu ti on if so r equired.

I n case th e issue requir es detail ed stu dy/ clarif ication ,

a sub com m it tee is form ed from th e panel of Shari ahAdvisors to do some research and submit/present

th eir f in din gs to SBP. In case of n eed th e matter un -

der consideration may be taken to the SBP Shariah

Board f or i ts f inal resoluti on.

Since some of the learned Shariah Advisors are

based in ot her parts of th e globe li ke M iddl e East,

we also get feedback/views based on their global

prospective/experience through their representa-

tives.

1.

.

The introduction of international players in our Is-

lamic banking industry has further necessitated the

need to bring our industry at par with the global

Shariah standards. Shariah Standards developed by

Accounting and Audit ing Organization for the Is-lamic Financial Institut ions (AAOIFI) are an impor-

tant and effective source available for bringing in

th e desir ed standardization in th e Shari ah practices.

In order to br i ng our industry at par w i th the inter-national standards and also achieve standardization

of Shariah practices locally, a mechanism for adop-

tion/adaptation of these Shariah standards has been

developed by SBP. According to this mechanism the

meetings of Shariah Advisors Forum of are being

held wi th a v iew to thoroughly study the AAOIFI

Shariah Standards one by one, for their possible

adoption / adaptation in our m ark et.

2.

:

Instructions & Guidelines for Shariah Compliance

have been issued vide IBD Circular No. 02 of 2008.

Instructions for Shariah Compliance cover regula-

ti ons in areas related to appoin tm ent, dut ies/ r espon-

sibilit ies and report of Shariah Advisor; conflict

resolution in Shariah rulings; permissible modes of

financing and investment; essentials of Islamic

modes of f inancing; use of charity fund; introduc-

ti on of new produ cts & servi ces and schedule of ser-

vi ce charges.

Guidelines for Shariah Compliance cover areas like

In ternal Shariah compli ance, In ternal Shariah A udit ;

investment in shares; policy for profit distr ibution

w ith PLS account holders and f in ancial report in g &

general disclosur e r equirem ents.

3.

Islam ic Financial Servi ces Board (IFSB) pr omot es th e

development of a prudent and transparent Islamic

fin ancial servi ces indu stry th rough i nt roducing n ewor adapting existing international standards consis-

tent with Islamic Shariah principles. It has issued

standards/guidelines regarding Capital Adequacy,

Risk M anagem ent and Corpor ate Governance for

institutions offering Islamic financial services (other

th en Takaful ). SBP has alr eady adapted Ri sk M an-

agem ent Guidelin es for I slamic Bank ing I nstit ut i ons

vide IBD Circular No. 01 of 2008. Some other Stan-

dards (Corporate Governance, Capital Adequacy,

Tr ansparency and M ark et Di scipl in e and Supervi -sory Revi ew pr ocess) are also i n pr ocess of adapt a-

tions.


15/27


15

Q. 1 W hat is Islami c Bank in g?

Answer: Islamic banking is defined as banking systemwhich is in consonance with the spirit, ethos and value

system of Islam and governed by the pri ncipl es laid dow n

by Islami c Shariah. In terest free bank in g is a narrow con-

cept denoti ng a number of bank in g instr um ents or opera-

tions which avoid interest. Islamic banking, the more

general term, is based not only to avoid interest-based

transactions prohibited in Islamic Shariah but also to

avoid un ethi cal and un -social pr acti ces. In practi cal sense,

Islamic Banking is the transformation of conventional

money lending into transactions based on tangible assets

and real services. The model of Islamic banking systemleads towards the achievement of a system which helps

achieve economic prosperity.

Q. 2 W hat is th e phil osophy of I slamic bank ing?

A nsw er: The phil osophy of I slamic banki ng takes th e lead

from Islamic Shariah. According to Islamic Shariah, Is-

lamic banki ng cann ot deal in tr ansactions involv in g inter-

est/riba (an increase stipulated or sought over the princi-

pal of a loan or debt). Further, they cannot deal in the

transactions having the element of Gharar 1 or M aiser2.

M oreover, t hey cannot deal i n any tr ansaction, t he sub-ject m at ter of w h ich i s i nval id (h aram in the eyes of I s-

lam). Islamic banks focus on generating returns through

investment tools which are Shariah compliant as well.

Islami c Shariah l in ks the gain on capital w it h i ts perf orm -

ance. Operating within the ambit of Shariah, the opera-

tions of Islamic banking are based on sharing the risk

which may arise through trading and investment activi-

ties using contracts of various Islamic modes of finance.

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 asset-backed in an

Islami c set- up w it h abil i ty to cause value additi on.

Q. 3 W hat is meant By Riba?

A nsw er: Th e w ord "Riba" m eans excess, in crease or addi-

tion, which correctly interpreted according to Shariah

terminology, implies any excess compensation without

due consideration (consideration does not include time

value of money). This definition of Riba is derived from

the Quran and is unanimously accepted by all Islamic

scholars. 3

The meaning of Riba has been clarified in the followingverses of Q ur an (Sur ah A l Baqarah 2:278-9)

"O those who believe; fear Allah and give up what sti l l

remains of t he Riba if y ou are beli evers. But i f y ou do n ot

do so, then be warned of w ar fr om A llah and H is M essen-

ger. If you repent even now, you have the right of the

return of your pr incipal ; nei ther wi l l you do wrong nor

w i l l y ou be w ronged."

Q. 4 W hat is interest? Is there any diff erence betw een int er-

est an d Ri ba?

Answer: The origination of term interest dates back to

17th century with the emergence of banking system at

global level. Interest means giving and/or taking of any

excess am ount in exchange of a loan or on debt . H ence, it

carr ies th e sam e meanin g/value as th at of Riba as defin ed

in the previous question. Further, i t is narrated that theloan that draws interest is Riba.4 There is consensus

amon g the M usli m scholars of all t he fiqh s th at i nterest i s

Riba in all its forms and manifestations. 5

Q. 5. W hat are different k in ds of Riba?

A nsw er: There are tw o ki nds of Riba:

1. Riba-An-Nasiyah/Riba-Al-Quran

2. Riba-Al-Fadl

1. Riba A n Nasiy ah/Ri ba A l-Q uran:

In th e Holy Qur an, A llah (SW T) says in Sura Al -Baqarah

(2-279):

..A nd if y ou repent , yours is your pr incipal

It is reported by H ari th ibe Abi U sam ah i n hi s M usnad

that Sayyidna Al i Radi-Al lahu Anhu reportedly referred

th at t he H oly Proph et said:

"Every loan that derives a benefit (to the lender) is riba"6.

Exampl e of Riba-al-N asiy ah/I nterest: If M r. A l ends

Rs.100 to M r. B (a borrow er) w ith a condit i on that M r.

B shall return him Rs.110 after one month. In this case,

th e ext ra am oun t of Rs. 10 is Riba or I nt erest.

2. Riba-al-Fadl:

Abu Said al Khudri Radi-Allahu anhu narrated that

H oly Proph et (Peace be upon hi m ) said:

"Gold for gold, si lver for si lver, wheat for wheat, barley

for barley, dates for dates and salt for salt, like for like,

payment made hand by hand. If anyone gives more orasks for m ore, he has dealt in ri ba. Th e receiv er and giver

are equally guilty " 7


16/27


16

Conti nu ed from previ ous page

Based on aforesaid definition, it may be noted that eco-

nom ically speaki ng it w ould be irr ation al t o exchange one

ki l ogram of w heat w ith one and a hal f k i logram of w heatin a spot exchange. Th erefore, some fuqaha have poin ted

out that Riba-al-Fadl has been prohibited because if it

was left un-prohibited it could be used as a subterfuge for

getting Riba-al-Nasiyah. Of the six commodities specified

in the hadith, two (gold and silver) unmistakably repre-

sent commodity money used at that time. One of the ba-

sic characteristics of gold and silver is that they are

monetary commodities. As a matter of fact, each of the six

commodities mentioned in the hadith has been used as a

m edium of exchange at some ti me or t he other.

Du ri ng the dark ages, only t he fir st form (Riba A n Nasi-yah) was considered to be Riba. However, the Holy

Prophet (peace be upon him) also classified the second

for m (Riba-al-Fadl) also as Riba8.

Q. 6 W hat are t he r evelations/verses in H oly Qur an re-

gardi ng prohibi ti on of Riba/interest?

Answer: There are four sets of revelations about Riba

w hi ch w ere revealed on diff erent occasions.

1. First Revelation: In Surah-Ar-Rum, verse 39 , dealing

in riba has been discouraged in the foll ow ing w ords:

"And whatever riba you give so that it may increase in

the wealth of the people, it does not increase with Al-

lah." [Surah A r- Rum 30:39]

2. Second Revelation : M usli m s have been in for m ed about

the practice of taking riba by Jews in Surah An-Nisaa:

"A nd because of t heir ch arging ri ba w hi le they w ere pro-

hi bited from it." [Surah A n- N isaa 4-161]

3. Th ir d Revelati on: Riba/I nt erest has been aboli shed in

th e thir d verse of Surah A l-

i - ' I mr an. The prohibi t ion of r iba is laid down i n the fol-

low ing words:

"O those who believe do not eat up riba doubled and re-

doubled." [Surah A l-e-I mr an 3- 130]

4. Fourth Revelati on: In t he fourt h revelation , Riba has

categorically been prohi bited

in all i t s form s. The foll ow ing set of verses is found in th e

Sur ah A l- Baqarah, v erse

275-281 in the fol low ing w ords:

"Those who take interest wil l not stand but as stands

whom the demon has driven crazy by his touch. That is

because they have said: 'Trading is but like riba'. And Al-

lah has permi tt ed tr adin g and prohi bited ri ba. So,

w hoever r eceiv es an advi ce fr om h is Lord and stops, he isallowed what has passed, and his matter is up to Allah.

And the ones who revert back, those are the people of

Fire. There they r emain for ever. A llah destr oys riba and

nourishes charities. And Allah does not l ike any sinful

disbeli ever. Sur ely th ose w ho believe and do good

deeds, establ ish Salah an d pay Z akah, have th eir re-

w ard w ith their Lord, and th ere is no fear for them, nor

shall th ey grieve. O th ose w ho believe, f ear A ll ah and

give up w hat sti l l remains of th e riba if you are be-

l i evers. But if you do n ot, th en l isten t o th e declaration of

w ar from Al lah and H is M essenger. A nd if you repent ,

yours is your principal. Neither you wrong, nor be

w ronged. A nd if th ere be one in m isery, th en deferment

ti l l ease. A nd th at you leave

it as alm s is far bett er for you, if y ou really kn ow . An d be

fearfu l of a day w hen you

shall be returned to Allah, then everybody shall be paid,

in full, what he has earned. And they shall not be

wronged." [Surah Al-Baqarah 2:275-281]

To be continued .

1 Excessiv e level of un certaint y or am bigui ty cr eated due

to th e lack of i nform ation or contr ol in a contract.

2 Game of Chance

3 Dr . M uhamm ad Im ran Ashr af Usmani (2002), M eezan

Banks Guide to Islamic banking, Darul Ishaat, Karachi,

Paki stan, p 45

4 Dr . M uhamm ad Im ran Ashr af Usmani (2002), M eezan

Banks Guide to Isalmic banking, Darul Ishaat, Karachi,

Paki stan, p 48

5 Dr . M uhamm ad Im ran Ashr af Usmani (2002), M eezan-

bank s Guide to Islami c Bank ing Darul Ishaat,

Karachi, Paki stan, p 45

6 A l- Syu ti , A l- Jam e al-Saghir V .2, P.94

7 Sahih M uslim , Karachi , V.2, P.25

8 Dr . M uhamm ad Im ran Ashr af Usmani (2002), M eezan-

bank s Guide to Islami c Bank ing Darul Ishaat,

Karachi, Paki stan, p 45

Excerpt fr om FA Qs published by I BD, SBP and available at

http://www.sbp.org.pk/departments/ibd/FAQs.pdf


17/27


17

Impact study on IFSB Standard of Capital Adequacy

was completed and it is in process of implementa-

t i on in Islamic Bank in g Industr y of Paki stan.

A draft on standard of Corporate Governance was

sent to all stakeholders for their feedback and com-

ments/suggestions.

Initial drafts on Standards of Transparency and

M ark et Di scipl in e and Superv isory Review Proc-

ess are sent t o vari ous stakeh ol ders for com m ents.

Exposure Drafts on Guiding Principles on Shariah

Governance System and Conduct of Business for

Institutions offering Islamic Financial Services are

sent to all I BIs for th eir feedback.

Currently, IBIs are fol lowing different practices of

pool m anagement & profit distr i buti on. So th ere is a

need standardize and align these practices with thebest international practices. Accordingly, IBD has

in it iated a stu dy on Pool M anagement Pr acti ces in

IBI s. I t s hoped th at th e study w il l r esult i n im prove-

m ent and standardization of Pool M anagem ent and

Profit D istr i buti on M echani sm. The study i s l ik ely

to be fin alized by end of Jun -09.

SBP had evolved a three pronged strategy for pro-

motion of Islamic Banking is to allow, i.e., (1) new

full fledged Islamic banks in the private sector, (2)

the conventional banks to set up Islamic banking

subsidiaries and (3) the existing conventional banks

to open Stand-alone Islamic banking branches.

However, Conventional Banks are much incl ined

towards conversion of existing conventional

br anches to I slam ic br anches. SBP has allow ed con-

version of f ew convent ion al branch es on case to casebasis. Ther efore, it w as deemed n ecessary t o develop

guidelines for conversion of existing conventional

branches in to Islamic Banking branches. In this re-

gard, the draft parameters / guidelines will be circu-lated am ong th e stakehol ders for th eir f eedback.

IBD is current ly working on the Product Develop-

ment M anuals for I slamic M icrofi nance and I slamic

SM E financing w ith an objectiv e to provi de in dustr y

w it h detai l ed procedures and guidelin es for provi d-

in g Shari ah compl iant solu ti ons for th ese sector s.

Keeping in view of the representation of PBA Sub

Committee on Islamic Banking regarding practical

issues in implementation of this standard for the re-

porting year ending December 31, 2008, all IBIs

were directed to al low implementation of this stan-

dard w.e.f January 01, 2009 through IBD Circular

N o. 1 of January , 2009.

SayingsofHolyProphet(P.B.U.H)

..Nothing of his brother is lawful for a Muslim

exceptwhathehimself gives willingly. Sodonotwrong yourselves. O People! Every Muslim is the

brotherofeveryotherMuslim,andallthe Muslims

form one brotherhood. And your slaves; see that

you feed them with such food as you eat

yourselves, and clothe themwith the clothes that

you yourselves wear. Take heed not to go astray

after me and strike one anothers necks. He who

(amongst you) has any trust with him, he must

returnittoitsowner...

Source: The Last Sermon of The Holy Prophet

(P.B.U.H)

(KhutbatulHajjatul

Wida,

Seerat

Ibne

Hesham)


18/27


18

The State Bank of Pakistan is launching a Special Pi-

lot Project in Sindh from th e curr ent K harif season t o

improve the availabil i ty of agricultural credit to the

farm ers on fast t rack basis.

Disclosing this while presiding over the mid-term

review meeting of the Agricultural Credit Advisory

Committee (ACAC) at SBP the State Bank Governor,

Syed Salim Raza said that the project would initially

be launched in seven agri. in tensiv e distr icts of Sin dh

in cludin g H yderabad, Tando A ll ahy ar, M ir purk has,

Lark ana, Sangh ar, N aw abshah and Kh air pur . H e said

that the project, which is being launched from 15th

M arch, w ould be part icipated by 13 different banks

havi ng agri designated br anch es in th ese distr icts. He

said that SBPs pilot project will help to increase out-reach of agri. credit to underserved areas of Sindh

and added that the banks are meeting 47 percent of

the total credit requirement of farmers. The rest is

bein g met th rough i nf orm al resources.

The meeting was informed that the State Bank has

issued guidelines for Islamic Agricultural Credit and

in th is regard pr oducts are bein g developed for i m ple-

mentation through Islamic Banking Institut ions. Be-

sides, steps are being taken to increase the outreach

of m icro agri Credit for small and m arginalized farm -

ers through microfinance banks.

Banks assured the committee that they wil l try their

utmost to meet the annual agricultural credit dis-

bursement target indicated by the central bank. Some

part icipants of the meeting highlighted various bot-

t lenecks that are hampering growth of agri. credit

disbursement. W hi le respondi ng to th ese poin ts, th e

SBP Governor said that a smaller group should be

consti tut ed w hi ch w il l m eet on quart erly basis to de-vi se a meani n gful str ategy to resolv e th ese issues.

The countrys 89 per cent adults are not using any

banking services and Baluchistan is the most severely

affected province in terms of financial exclusion com-

pared to three other federating units, a survey spon-

sored by th e W orld Bank and U K- based D FID re-

vealed.Access to Finance Survey (A2FS) has been jointly

funded by th e Departm ent f or In ternational Develop-

ment of UK (DFID ), the W or ld Bank (W B) and the

Swiss Agency for Development and Cooperation

(SDC), at the request of the ministry of finance.

There are 71 per cent adult Pakistanis who think that

th ey can easily l iv e their l i fe w ith out a bank account .

Only 11 per cent of the adult population is banked

but almost a quarter of these people say that they

w ith draw fun ds im mediately, t he surv ey states.

M ore th an h alf of t he adult popul ation th at is f in an-

cially excluded comprises predominantly of house-

w iv es an d stu dent s. M oreov er, across all education al

levels th ere are large group s of people w ho are fi nan-

cially excluded. Amazingly, even among the post-

graduate people 13 per cent have not heard and do

not understand what is a PLS/Savings account.

Awareness and understanding about relatively more

sophisticated formal financial terms is even lower.

This trend is visible even among the graduate andpostgraduate people. For example only about 50 per

cent of the graduate respondents have heard about

and understand what is meant by credit and ATM

cards,

Awareness and understanding about Islamic banking

is also low across education grou ps. For exam pl e, on ly

about half of the population with over graduate and

postgraduate educati on have heard and un derstood it .

Overall , only 12 per cent understand what is meant

by th e Islamic bank in g.

ht tp://w w w .dail yt im es.com.pk/default .asp?page=2009%5C03%

5C07%5Cstory_7-3-2009_pg5_2

htt p: / /ww w .thenew s.com.pk/pr i nt1.asp?id=168153

M arch 20, 2009


19/27


19

Dawood Islamic Bank Limited has received Rs. 1 bil-

l ion (US$ 12.9 M i l l i on) investm ent f rom U nicorn I n-

vestment Bank Limited, based in Bahrain, this was

stated in a statement issued from Banks head office

in Karachi on T uesday.

Un icorn alr eady had a 22.2% equity stake in Daw ood

Islami c Bank pr ior t o the current investm ent. W ith

the new investment the equity of Unicorn Invest-

ment Bank, in Dawood Islamic Bank has increased to

37% percent

A am ir K han M anagin g Dir ector and H ead Global Pri-

vate Equity of Unicorn Investment Bank and a foun-

der Director of Dawood Islamic Bank said that the

decision to in vest i n D aw ood Islamic Bank, at a t im e

w hen th e global confidence in f in ancial inst it ut i ons is

at its lowest ebb in Pakistan, is based on excellentopportunities that are available in the Islamic bank-

ing sector of Pakistan. The stake in Dawood Islamic

Bank provides Unicorn with access to the Pakistan

m ark et w it h i t s 160 mi l l ion i nh abitants, 97 percent of

w hom are M uslim s, he added.

The inv estm ent by U nicorn I nvestm ent Bank, w ould

fur th er boost t he abil i ty of th e Daw ood Islamic Bank

to provide support to trade and industry through its

various Riba free banking products Said Rafique Da-

w ood, Chairm an D aw ood Islamic Bank .

Th e interest of U nicorn in D IBL r eflects th e strength

of the Islamic Banking System of Pakistan which has

withstood the current turmoil in the global f inancial

markets proving to the world that Shariah compliant

f inancing is more transparent and trust worthy. Is-

lami c deposit s represented 4 percent of t otal deposit s

in Pakistan in 2008, but this figure is projected to

reach 10 percent of total deposits, or approximately

U S$13 bil li on, by 2014.

Dawood Islamic Bank, launched in 2007 with an ini-

tial paid-up capital of Rs. 3 billion, is being operated

str ict ly in compliance with the principles of Shariah

and all its products are subject to the approval of its

Shariah board headed by the renowned Islamicscholar Professor M uft i M uneeb U r Rehm an.

D aw ood Islam ic Bank is focusin g on th e grow in g seg-

ment of im porters and exporters th at are reluctant to

uti l ize bank f inancing with the fear of breaching Is-

lami c laws as defin ed in th e Qu ran and Sun nah.

The Dawood Islamic bank has a branch network of

21 branches spread over the major cities of Pakistan,

including Karachi, Lahore, Islamabad, Faisalabad,

M ul tan, Sialk ot, I qbalabad and Joharab

Al-Huda-CIBE organized a national Road Show by

conducting over 300 awareness interactive pro-

grammes in Islamic Banking and Takaful, covering100 cities throughout Pakistan starting on 25th

M arch, 2009 from Kh yber spread over a wh ole

month to be concluded in Karachi on Apri l 25th

2009.

The prime objective of this programme was to pro-

mote logical awareness in Islamic Banking and Taka-

ful to the businessmen and industrialists. This cara-

van of Islamic Financial Road Show wil l include 35

chambers of commerce and industry, over 40 private

and public sector universities, 20 press clubs, over 25

trade and business associations and over 200 public

awareness meetings at different Islamic Banking

Branches of t he I slami c Bank s.

In addit ion f ive hundred thousand information leaf-

lets on basic learning in Islamic finance and Takaful

wil l be distr ibuted to the part icipants of al l the pro-

grams and indirectly almost f ive mil l ion people wil l

be att ached in t hi s programm e.

The road show wil l include a f leet of vehicles andpassin g thr ough N W FP, Federal Capital, A J& K, Pun-

jab and Sindh pr ov in ces. The Ro ad Show w i l l com -

htt p: / /ww w .onli nenews.com.pk/details.php?id=142527

http: / /www.brecorder.com/index.php?

id=5289& currPageNo=1& query=&search=& term=& supDate=

M arch 12, 2009


20/27


20

In yet anoth er act of conci l i at ion on th e part of W est-

ern r eli gions tow ards Islam, t he V ati can n ewspaper

O sservator e Romanohas voi ced i ts approv al of I slami c

finance. The Vatican paper wrote that banks should

look at the rules of Islamic finance to restore confi-

dence amongst their clients at a time of global eco-nom ic cr isis. Th e ethi cal pr in ciples on w hi ch I slamic

finance is based may bring banks closer to their cli-

ents and to the true spir i t which should mark every

financial service, the Osservatore Romano said.

W estern bank s coul d use tool s such as th e I slam ic

bonds, known as sukuk, as collateral. Sukuk may be

used to fund the car industry or the next Olympic

Games in London, the article says.

The Vatican article is only one of many articles that

h ave recent ly appeared on t he acceptance by W estern

govern m ents and bank ers of an I slami c fi nancin g sys-

tem . M ore than accepti ng it , they seem t o be w elcom-

ing it, though they are certainly being pressured into

this by unnamed forces bowing to the dictates of Is-

lam.

Last D ecem ber, th e French Senate looked at w ays to

eliminate legal hurdles, particularly levies, for Islamic

financial services and products in France and the po-

tential for listing companies on the Paris Stock Ex-

change. Senate sour ces said t h at th is area of t he f in an-

cial market is worth from 500 to 600 bi l l ion dol lars

and coul d grow by an average 11 percent a year.

French Fi nance M in ister Ch ri sti ne Lagarde h as an-

noun ced Frances in tenti on t o m ake Pari s t he capit al

of Islamic finance and announced several Islamic

banks would open branches in the French capital in

2009.

November 27, 2008 provides the fol lowing informa-

ti on, in addit ion to t he facts present ed above:

A revolut ion in the banking wor ld . Af ter London,

w here th e first I slami c bank opened it s doors in Sep-

tember 2004, France could authorize banks respecting

Shariah l aw to open i n 2009 (...) H erv de Charette,

presid en t of th e Fr anco-A rab Ch am ber of Com m er ce

emphasizes that import ing Islamic banking into

France w ould h elp th e in tegrati on pr ocess. Th e main

obstacle: Islamic banking arouses fear because it is

associated, wrongly, with religious fundamentalism,

even w ith the f i nancing of terror i sm, deplores Elys

Jouini, professor of economics at the University of

Pari s. (...)

Th e w orld econom ic cr isis has changed t he ball game.

From New York to Hong Kong, al l the f inancial cen-

ters on the planet are grabbing the bill ions of dollars

amassed by the oil-rich monarchies of the Gulf. To

tap in to t hi s m ann a (...) is th e stated goal of Chr isti ne

Lagard e. W e are determ in ed to m ake of Pari s a great

cent er for I slami c fin ance, declared the Finance M in -

ister as she inaugurated the second French forum on

Islamic bank ing.

Th e global econom ic cri sis has handed th e proponentsof I slamic f i nance a golden opportun ity t o show that

it is a better alt ernative to W estern- sty le capit ali sm .

Th at, at l east, w as w hat M alaysian Deputy Pri m e

M in ister N ajib Razak t old partici pant s at an Islami c

economic conference in K uala Lum pur l ast m onth .

Islamic finance, argued Datuk Seri Najib, could be-

come a model f or ch ange because it proh ibi ts many of

th e ri sky activ it ies th at t r i ggered th e curr ent cri sis. H e

m ay h ave a poin t.

Islamic banking complies with syariah (Islamic) law

by using returns on assets to pay investors instead of

htt p: / /ww w .brusselsjournal.com/n ode/3819

M arch 12, 2009

h t tp : / /www. thema lays ian ins ide r . com/ index .php /

business/18436-crisis-presents-golden-opportunity-

for- islamic-f inance

February 17 2009


21/27


21

interest.

M ost I slam ic scholars also agree that deri vati ves andhedge funds are haram (forbidden), as is short-selling

and speculation. As a result, argue its supporters, the

US$1 tril l ion (S$1.49 tril l ion) global Islamic banking

industry has emerged largely unscathed in the credit

crunch.

W hether th i s w i l l r esu l t in fur ther grow th in t he in-

dustr y as W estern capit ali sm decli nes, how ever, i s

another matter ent irely. The rapid growth of retai l

Islamic banking and services in Asia is stil l l imited by

a var iety of regulatory impediments. Arabic termssuch as M udh arabah (pr ofit sharin g) and W ahdi ah

(safekeeping) are also unfamiliar to most Asians, in-

cludin g many M usli ms.

Some believe that all this is about to change. Celent, a

Boston-based financial research and consulting firm,

released a report last month on the Islamic banking

in dustr y in th e Asia-Pacifi c region t hat suggested th at

the global financial crisis had made the Asia-Pacific

region seem far m ore att ractive to M iddl e Eastern i n-

vestor s th an t he W est.

W it h assets valued at U S$43 bill ion by t he end of

2007, M alaysia already h as th e th ir d biggest I slam ic

bank ing m ark et i n t he w orld after I ran and Saudi A ra-

bia. Investors from Saudi Arabia, United Arab Emir-

ates, Bahrain and Qatar, said the Celent study, were

beginnin g to channel th eir funds to developing coun-

tries like China, India, and Indonesia. The report

id enti fi ed Pak istan, Bangl adesh, and I nd onesia as hav-

in g part i cular l y good potenti al for growt h.

In terest in gly, non- M uslim m ajor i ty n at ion s in th e

region have already begun to recognise the potential

significance of Islamic financial instruments. Singa-

pore, for exam ple, laun ched its first Islam ic bond pro-

gram m e last m onth .

Similar plans to sell Islamic debt have been an-

noun ced by T hailand and Japan. Th e Hon g Kong gov-

ernment has also expressed an interest in promoting

the territory as an Islamic finance hub. And financial

institutions in South Korea have reportedly been lob-bying the government to adopt the necessary legal

and regulatory framework to enable Islamic financial

transactions in the country.

But to suggest that Islamic banking is set to growstrongly despite the global financial crisis may be

stretching things a litt le too far. Last years credit

crunch hit Islamic bonds much harder than other

forms of debt as sharply lower international oil prices

depriv ed oil -r ich M iddl e Eastern i nv estor s of cash.

A ccordin g to ratin g agency S& P, corporate and gov-

ernment sales of sukuk (syariah compliant bonds)

reached US$30.8 bill ion in 2007, but plunged 56 per

cent last year to just US$13.6 bill ion. By comparison,

conventional international bonds and emerging-market debt dropped 5 per cent and 15 per cent, re-

spectively

N ot surpri sin gly, I ndon esia delayed it s fi rst suk uk sale

tw ice last year.

Targeting mostly local investors, it eventually issued

the bonds in January. Japan is also holding back on its

plans, while Thailand has yet to set a date. As in the

case of Singapore, the Indonesian move is probably

best seen as an indication of the fact that the sukuk

market is stil l active rather than ready for a resur-

gence.

That said, the fact that many governments are trying

to spend their way out of the current economic

dow nt urn suggests th at in terest in Islam ic fi nance w il l

remain strong for some time. This is because tight

global credit markets are forcing cash-strapped re-

gional governments to seek out alternative sources of

funding.

The new global order that emerges from the currenteconomi c dow nturn is un l ik ely to invo lve the w hole-

sale replacement of W estern fi nancial system s w it h

I slam ic on es. But h istori cal w atersheds such as th e

one we are now entering do tend to be accompanied

by im portant systemi c changes.

If the new dispensation to emerge from the current

crisis involves fresh ways of discouraging speculation

and attempts to tie the global financial system more

closely t o th e real econom y, N ajib m ay perhaps regard

himself as at least partly vindicated. The StraitsT imes


22/27


22

M ald ives M onetary A uthor i ty (M M A) w i l l no t ob-

str uct any attempt t o open I slamic Bank s in M aldi ves

by suitable parties and that despite interested parties

being asked to submit formal applications for bank

operating licenses, no submission has yet been made,

M M A Govern or Fazeel N ajeeb has said.

Speak in g to M iadh u D aily , Fazeel exp ressed as I s-

lamic Bank in g is a new concept t o M aldiv es, w ork on

establ ishi ng necessary r egul atory system i s un derw ay.

He said even though the regulatory system is not set

up, once a for m al appli cati on i s receiv ed, every effort

to i ssue license, w it h t he consul tation and approv al of

M M A Board, w il l be made. He said th ere is no poli t i-cal agenda to delay the introduction of Islamic bank-

in g to M aldiv es.

H e also said as al l w orks of M M A are very w ell or-

gani zed and carr ied out in a responsible mann er th ere

is sim ply no chance of deviating or viol at in g the au-

thoritys rules and regulations. He further said he had

no in tention of respondin g to cr i t i cism s from govern-

ment institut ions or other bodies through the media

and such responses will be only given to government

institut ions directly.

Bri efing th e m edia , Govern or designated to M aldi ves

by Islamic D evelopm ent Bank Sheikh M ohamed Sha-

heem A li Saeed said th at he has receiv ed in form ati on

th e M M A is posin g obstacles to t he path of establi sh-

in g and in troducti on of Islamic Bank in g in M aldi ves.

Expressing his concern over the matter, IDB Gover-

nor to M aldi ves Shi ekh Shaheem said t hat he in tends

to consult with the President on the matter and that

he wil l br ief the media fol lowing the consultat ions

w it h th e President.

Th e Shariah bank in g system can offer I ndon esia hope

in the m idst of t he current global econom ic slow dow n

because Islamic banking has not been affected, the

President said at the openi ng of th e W orl d Islam ic

Economi c Forum (W IEF) in Jakarta on M onday.

"Islamic banking should take a front seat because it

has not been affected by the crisis," President Susilo

Bam bang Y udh oyono said.

Yudh oyono added th at r ecentl y m any count r ies in the

W est h ad w arm ed to Shariah bank in g because it d oes

not incorporate dubious assets in investments and is

risk-free.

"I n t he W est, Shari ah bank s h ave a m ission because

countries are increasingly welcoming them," Yud-hoy ono said , as quot ed by kompas.com.

The domestic Shariah banking industry has shown

promising growth results, which have been increasing

fr om year to y ear, h e said.

"W e hope in fut ur e In donesia w il l serv e as a Shariah

econom ic hub. W e invi te investors to develop th is

sector."

According to data at Bank Indonesia, the amount of

f inancing provided by the country's Islamic bankinginst i tut i ons had grow n fr om a mere Rp 5.53 tr i l l ion i n

2003 to Rp 27.94 tri l l ion i n 2007 and Rp 38.19 tri l l ion

in 2008.

The 2008 figure constituted about 3 percent of the

total am ount of nat ional bank f in ancing.

The amount of assets managed by the country's

Shariah banks also rose from 1.4 percent of the coun-

try's national bank assets in 2005, to 1.6 percent in

2006, 1.8 percent in 2007 and 1.8 percent , or about Rp

50 tr i l l i on in 2008.

http://miadhu.com.mv/news.php?id=9427

27 Febru ary 2009

ht tp://w w w .thejakartapost.com/new s/2009/03/02/sby

-future-sharia-banking-indonesia.html

M arch 3, 2009


23/27


23

The central bank said there were currently 1,470

Shariah bank offices across the country, and that they

had disbursed Rp 326 bill ion in loans for micro- and

sm all -scale fi rm s as of t he end of 2008.

M usli m president s, prim e mi ni sters and pr in ces on

M onday cal led on t he w orld t o adopt Islamic f i nancialpractices to overcome the global crisis and urged Is-

lamic banks to undertake missionary work in the

w est to pr omot e Shariah banki ng.

Almost every speaker at the opening of the fifth

W orld Islam ic Economi c Forum (W IEF) in Jakarta

lambasted the excesses of irresponsible, unregulated

western financial markets for tr iggering the crisis,

and t outed Shariah banki ng as a fr am ewor k for a mor e

stable global fi nanci al system.

But while Islamic banking could play a useful role, it

w ould n ot be a silver bul let f or t he crisis. Bank ers at

the conference said greater standardization of struc-

tures, improved transparency and more innovative

produ cts w ere needed for th e industry t o develop.

Islamic financial institutions do not pay interest and

require transactions to be backed by real assets. Their

assets com pri se onl y a few per cent of t he global

banking industry but they have suffered less than

their conventional counterparts because they did not

deal in subprime mortgages or complex structured

products.

But some, particularly in the Gulf, are starting tostruggle as values of their underlying assets, notably

property , start to t um ble and l iquidi ty t ightens.

The polit icians were extremely bullish in Jakarta.

M usa H i tam, W IEF chai r man said : Our

[conventional] gurus have failed us in theory and in

practice. W e need a new approach.

Susilo Bambang Yudhoyono, the Indonesian presi-

dent, told the 1,550 delegates from 36 countries that

Islam ic banki ng should n ow be able to take a leader-ship role. Islamic bankers should therefore do some

m issionary w ork i n th e w estern w orld to promote the

concept of Shariah banking, for which many in the

w est are more th an r eady n ow .

M r Y udh oyono also proposed the creati on of an I s-

lamic W orld Expendit ure Support Fund to help the

m any least developed M uslim -m ajor i ty count r ies.

Standard & Poors, the rati ng agency, said last w eek

that while Islamic f inancial inst i tut ions had strong

lon g-term prospects, the im m ediate futu re w as un cer-

tain.

M uk ht ar H ussain , global chief executi ve of HSBC

Amanah, agreed that Shariah banking had an impor-

tant role to play and should seek to become more

mainstream, but said growth was hampered by its

im matur i ty and size.

h t tp : / /w w w . f t . com/cm s/s/0 /0 f74e17a-0757-11de-

9294-000077b07658.html?nclick_check=1

M arch 2 2009

Th e n e w s s e c t i o n o f I s l a m ic Ba n k in g

Bu l l e t i n i s b a se d o n i n f o r m a t i o n o b t a in e d f r o m l o c al

a n d i n t e r n a t i o n a l p r i n t a n d ele c t r o n i c m e d ia.

th e end of Decem ber 2008, compared w ith 4 percent at end

of December 2007. Similarly, branch network of Islamic

banks has crossed 500 branches in December 2008,

compared with 289 branches in December 2007 whereas

total assets of Islamic banking has reached Rs 271.1 billion

in December 2008 compared with Rs 205.2 bil l ion in

D ecem ber 2007.

I would l ike to congratulate the participants from Islamic

banking industry as well as SBP for having availed the

opportuni ty to interact wi th experts from IFSB. This

exercise wil l surely facil i tate the implementation of the

standards developed by IFSB.

(Speech of deputy Governor on closin g ceremony of l ectur e

series

arranged by SBP in coordination with

Islami c Fin ancial Servi ces Board, M alaysia)

COVER STORY CONTINUED FR OM P 3


24/27


24

A lBaraka Islam ic Bank 30

Bank Islam i Paki stan Li m it ed 70

Daw ood Islam ic Bank Lim -

ited15

D ubai Islami c Bank Paki stan Lt d 23

Emi rates Global I slami c Bank 42

M eezan Bank Lt d 127

A skari Bank Lim ited 18

Bank A lfalah Ltd 48

Bank A l H abib 6

H abib Bank Ltd 1

H abib M etropol i tan Bank 4

M CB Bank Ltd 11

N ati onal Bank of Paki stan 4

Soneri Bank Lt d 6

Standard Chartered Bank 11

Th e Bank of Kh yber 16

Th e Royal Bank of Scotland 3

Un i ted Bank Ltd 5

Daw ood Islam ic Bank Lim -

ited6

D ubai Islami c Bank Paki stan Lt d 2

M eezan Bank Ltd 33

Bank Islam i Paki stan Li m it ed 32

A skari Bank Lim ited 2

plete its journey on April 25, 2009 in a very special

convention at K arachi . The road show w il l also dis-

tr ibute memorial shields to 300 prominent IslamicBankers and 200 corporate clients of Islamic Bank-

ing and Takaful to acknowledge of their services to

th e cause of Islam ic bank in g and fi nance.

A not her special aspect of th is road show is that ov er

20 programmes in this process have been organised

at dif feren t Pr ess clu bs and M edia cent res, so th at

special feature of Islamic banking and Takaful are

brought to the journalists community for the f irst

t ime at their doorstep which wi l l u l t imately pro-

mote general awareness on the subject in a more

convenient way.

Addressing at a reception hosted by the HyderabadChamber of Commerce and Industry president Shafiq

A hm ed Qur eshi , M r Chaw la said th at th e country s

economy could improve only i f the interest based

banki ng w as aboli shed.

He said that there is stagnation in economy due to

interest rate and people dont have job opportunities.

H e poin ted out th at cost of borrow in g and cost of pr o-

duction are increasing. He said that it was all due to

poor pace of supplies and not due to increase in de-

mand. There is no change in demand but certainlythere is stagnation in supply, he said. He stated that

governments policy of deficit f inancing had led to

probl ems of consum ers.

Unless our economy gets rid of interest-based sys-

tem, its healt h w il l not im prove. The markup system

had destroy ed our econom y and it never promoted it ,

he said. Besides cost of borrowing, shortage of energy

and in creasin g tarif fs of electr ici ty , gas and w ater also

caused probl ems for econom y. H e said th at t hese w ere

essential for our economy and slow pace of their sup-ply had led to in surm ountable problems.

ht tp: / /ww w .daw n.com/w ps/wcm/connect /daw n-content - l ibrary/

dawn /th e-new spaper/l ocal/h yderabad-fpcci-ch ief-opp oses-

interestbased-banking

A pril 19, 2009

**Provisional data


25/27


25

AzadKashmir

Balochis-tan

FederalCapital FAA NWFP Punjab Sind

1 3 3 15 8

1 8 2 1 5 29 24 1 6 8

1 2 1 12 7

1 2 5 20 14

1 3 7 12 55 49

3 13 17 1 26 137 110

1 1 2 9 5

1 1 2 2 1 3 3 29 12

1

1 3

1 1 1 5 3

1 2 1

1 1 1 1 2

1 1 3 3 3

1 10 3 2

1 2

1 3 1

7 7 24 59 37

3 3

1 1

1 1 4 14 13

1 3 5 7 26 32

4 23 29 1 57 223 179

BankIslami Pakistan Limited 1 2 3 2 9 14

Askari Bank Limited 1 1

GrandTotal

30

7015

23

42

127

307

18

648

1

4

11

4

6

11

16

3

5

133

2

32

6

2

33

75

515

(A s of M arch, 2009)

**Provisional data

Islamic Banking Department's Publications (These publications are also available in SBP Library)

S. No Publications Web Address

1 SBP Governors Speeches on Islamic Finance http://www.sbp.org.pk/ibd/speeches.htm

2 Strategic Plan for Islamic Banking Industry http://www.sbp.org.pk/departments/pdf/StrategicPlanPDF/Strategy%20Paper-Final.pdf

3 Frequently Asked Questions (FAQs) http://www.sbp.org.pk/departments/ibd/FAQs.pdf

4 Risk Manageme

bulletin oct dec 2008

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