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COMMERCIAL AND ISLAMIC BANKING
Presenting by: The Spectaculars
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What is Bank ?A Business that keeps and lends money and provides other financial services, Such as wealth.
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"A Bank is a place where they lend an umbrella in fair weather and ask for it back when it begins to rain"
-Robert Frost
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THROWBACK
As history follows it wasn`t name as bank in that time.
One view is that it is derived from an Italian word ‘banque’ which means a ‘bench’.
The other point of view is that it has originated from the German word ‘banc’ which means a ‘joint stock firm’.
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WHAT IS COMMECIAL BANK?
Commercial bank accepts deposits from individuals, firms and companies at a lower rate of interest and gives it at higher rate of interest to those who need them.
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Primary Functions
Accepting Deposits Accept various types of deposits from public
I. Current accountII. Saving accountIII. Fixed/term deposit account
Advancing of Loans Provide loans and advances of various forms
I. Cash CreditII. Demand LoansIII. Short-term Loans
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Secondary Functions
Special financial servicesI. Currency exchangeII. Letters of creditIII. Money transfer
Agency functionsI. Collection of ChecksII. Collection of DividendsIII. Purchase or sale of SecuritiesIV. Execution of standing instructionsV. Acting as trustee or executors
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ISLAMIC BANK
lets invest in our beliefs, enjoy a full range of Shariah Compliant solutions
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ISLAMIC BANKING
Based on the principles of Islamic law Prohibition of the collection and
payment of interest by lenders and investors Shariah covers every aspect of our life it provides principles how to live at individual level in the society legal and economic system
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FINANCIAL TERMS
Contract (Aqad)Contract on Loan (Bai' al 'inah)Profit Sharing (Mudharabah)Safekeeping (Wadiah) Joint Venture (Musharakah)Cost Plus (Murabahah) Leasing (Ijara)
Islam forbids lending out money at Interest, Islamic rules on transactions known as Fiqh al-Muamalat
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Fiqh al-Muamalat
Aqad contracts business and marriage
partiesBai' al 'inah
sale and buy-back at a different priceMudharabah
One gives money to another for investing
Wadiah safekeeping, custody, deposit and trust
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Musharakah profit/loss sharing
Murabahah a profit on the sale of goods
Ijarah providing services and goods
temporarily for a wage
Fiqh al-Muamalat
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ISLAMIC VS COMMERCIAL BANKING
Islamic bank Commercial bank All the functions and
operating modes of are based on the principles of Islamic Shariah
It shares risk between the investor and the entrepreneur
Maximising profit but subject to Sharia'h restrictions
The functions and operating modes are based on fully manmade principles
The investor and lender is guaranteed of a predetermined rate of interest or returns
Maximising profit without any restrictions
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Fundamental function is to participate in partnership business
It must be based on a Shariah approved underlying transaction
fundamental function is to lend money and get it back with compound interest
Interest-based commercial banks don’t care about the activities being performed with their financing
Islamic bank Commercial bank
ISLAMIC VS COMMERCIAL BANKING
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Central Bank
A central bank is a monopolized and often nationalized institution given privileged control over the production and distribution of money and credit
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CENTRAL BANK
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Governed by the government and work for the economic development
Controls and regulates the entire banking system
Acts as a state owned institution.
Act as a banker to the Government.
Profit motive banks, held by government and private sectors as well
Operates under the direct control and supervision of the central bank
Acts as a state or private owned institution.
Acts as agents of the central bank.
Central bank Other bank
Central Vs Other Banks
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Does not deal directly with the public. It issue guidelines to commercial banks
Deals directly with the Public. It serves the financial requirement of the public
Issues currency and control the supply of money in the Market
Does not Issue currency, but only adds to the approval of the central bank
Central bank Other bank
Central Vs Other Banks
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Conclusion
Hope this picture explains a lot to you
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