Final project

Final project

Comparison between Islamic and Conventional Banking

I am doing job in Faysal Bank Barkat Islamic, the reason for selecting this topic is because I want to prove Islamic banking is better than conventional banking and gradually it is promoting in our country, trend is making to invest in Islamic banking, investor are now more clear concepts and satisfied with Islamic banking. I will define Islamic banking and conventional banking. Give the comparison between Islamic and conventional banking. Describe advantages and disadvantage of both Islamic banking and conventional banking. Prove: Why Islamic banking is better than conventional banking?

ACKNOWLEDGEMENT

I would like to express my gratitude to all those who helped me during the whole of my project. I gratefully acknowledge the help of my counselor Fahad Asghar who has offered me valuable suggestions in the academic studies. In the whole of final project, he has spent much time to help me and provided me with inspiring advice. Without his patient instructions, insightful criticisms and expert guidance, the completion of this project would not have been possible. In the end, my gratitude also extends to my family and friends who have been assisting, supporting and caring for me all of my life.

Table of ContentsIntroduction:8Islamic Baking11Beginning of Islamic Banking11Major policies12Products offered In Islamic banking12Mudarabah12Hibah (gift)13Ijarah13Sukuk (Islamic bonds)14Takaful (Islamic insurance)14Conventional Banking14Types of loans granted by commercial banks15Secured loans15Unsecured loan15Bank overdrafts15Corporate bonds16Credit card debt16Credit facilities or lines of credit16Personal loans16Background17Difference between Conventional Banking & Islamic Banking20Objectives21Significance22Data Collection Sources23Primary Sources23Secondary Sources23Data Collection Tools/Instruments24Subjects/Participants24Data Processing & Analysis24Faysal Premium:29Faysal Mahfooz Sarmaya:29FCY Saving Plus:30Introduction of the student38Bibliography40

Executive Summary

The quick advancement in banking industry has led banks to come up with the new solutions for the customers. For valuable services the conventional and Islamic banking are playing the major role in the financial markets. The aim of this study is to propose a mechanism to understand Comparison between Islamic banking and conventional banking. For this, we have selected two banks, Meezan Bank (Islamic) and Faysal bank (Conventional). The major significant comparability is based on products, liabilities and assets. Meezan Bank is the most established and leading Islamic bank in Pakistan. Meezan Bank is the first bank which is totally sharia-based organization. Meezan bank offers Riba free Islamic products which attracts the customers who want to avoid Riba. Customers who invest in Meezan bank gets their share in the form of profit. Meezan Bank dont exploit the customer and all their products are in well balanced nature. Faysal bank is a regular conventional bank. Its operations are based on materialism like other conventional banks. However, it captures different sectors of economy like corporate financing and agriculture. Their products are very competitive nature and interest based. In Pakistan conventional banking is inclined to Islamic banking as people are more interested in Islamic banking these days and give value to their products.

Introduction:

Banks are performing numerous functions to give a variety of products and services for distinctive sections of the economy. Since its creation, Pakistani banking sector part has encountered exceptionally rough environment because of unstable approaches and vulnerability. Private part banks dominated within 1950s and 1960s however they were nationalized in 1974. Nationalized banks demonstrated extremely poor execution because of second rate products/services that came about into the privatization of banking sector in 1992. State Bank of Pakistan has started working for the commencement of Islamic banking practices in 2000 and Meezan Islamic bank was enrolled as first undeniable Islamic bank in 2002. Islamic banks are new contestants in the Pakistani banking industry furthermore oblige a near study to survey the execution of their operations and products/services. Services industry especially managing an account part is developing over the globe during the decade of 1990s.Banks are performing various functions to give a mixed bag of items and administrations for different segments of the economy. Since its creation, Pakistani saving money part has experienced particularly harsh environment on account of temperamental methodologies and defenselessness. Private part banks ruled inside 1950s and 1960s anyway they were nationalized in 1974. Nationalized banks showed amazingly poor execution due to worthless items/benefits that happened into the privatization of saving money part in 1992. State Bank of Pakistan has begun working for the initiation of Islamic saving money rehearses in 2000 and Meezan Islamic bank was selected as first obvious Islamic bank in 2002. Islamic banks are new contenders in the Pakistani saving money industry moreover oblige a close study to overview the execution of their operations and items/administrations. Administrations industry particularly dealing with a record part is creating over the globe amid the decade of 1990s.

The 21st century accompanied mixing of chances and dangers for the managing an account area because of initiation of Islamic banking rehearses in diverse nations the way in other countries such Bangladesh, Malaysia and other Non-Muslim part of the world. It is observed that Islamic banking framework is better than conventional banking framework as it guarantees more steady money related segment (Khan, 1986).

SBP issued detailed criteria in December 2001 for the foundation of undeniable Islamic bank in the private division. Al Meezan Investment Bank got the permit from SBP in January 2002 and began its operations with the name of Meezan Islamic bank as the first Islamic bank from March 20, 2002 (SBP, 2002). Islamic banks have various open doors in Pakistan with a populace of more than 96% Muslims. Islamic banks need to face numerous difficulties because of solid response from conventional banks on the grounds that they were profound established and prevalent among people in general to meet their prerequisites.

The 21st century went hand in hand with blending of chances and dangers for the dealing with a record region in view of start of Islamic managing an account practices in various countries the path in different nations such Bangladesh, Malaysia and other Non-Muslim a piece of the world. It is watched that Islamic saving money structure is superior to customary managing an account system as it promises all the more unfaltering cash related fragment (Khan, 1986).

SBP issued point by point criteria in December 2001 for the establishment of obvious Islamic bank in the private division. Al Meezan Investment Bank got the license from SBP in January 2002 and started its operations with the name of Meezan Islamic bank as the first Islamic bank from March 20, 2002 (SBP, 2002). Islamic banks have different open entryways in Pakistan with a masses of more than 96% Muslims. Islamic banks need to face various troubles in light of robust reaction from ordinary depends on the grounds that they were significant built and common among individuals when all is said in done to meet their essentials.

The expanding number of conventional and Islamic banks made a sound rivalry for the procurement of value services to hold satisfied customers for long term benefits. The banking business encountered an extension because of enhancement and advancement of products/services. Everybody tries to present innovative products and services by wonderful mixing of customary offices and advanced engineering to adapt to one another for more noteworthy number of customers that prompts more gainfulness. Pakistani banking part saw a real change because of key part of private segment having around 80% of banking resources (Economic Survey of Pakistan, 2007-08).

This study looks at how benefit quality influences the customer judgments towards satisfaction of the Islamic banks and also conventional banks in Pakistan This examination is a push to fill this hole in the writing. This study may help the experts, bank supervisors, and academician and approach creators to figure out the example of satisfaction for bank customers in Pakistan. This study is likewise imperative on the grounds that Islamic banking is developing as far as size is concerned at the rate of one hundred fourteen percent every year (SBP, 2006).

The growing number of customary and Islamic banks made a sound contention for the obtainment of worth administrations to hold fulfilled clients for long haul advantages. The managing an account business experienced an augmentation due to improvement and headway of items/administrations. Everyone tries to present inventive items and administrations by eminent blending of standard work places and propelled designing to adjust to each other for more vital number of clients that prompts more profit. Pakistani saving money part saw a genuine change due to key piece of private fragment having around 80% of managing an account assets (Economic Survey of Pakistan, 2007-08).

This study takes a gander at how profit quality impacts the client judgments towards fulfillment of the Islamic banks furthermore traditional banks in Pakistan This examination is a push to fill this opening in the written work. This study may help the masters, bank directors, and academician and methodology inventors to make sense of the case of fulfillment for bank clients in Pakistan. This study is moreover basic because Islamic keeping money is creating the extent that size is concerned at the rate of one hundred fourteen percent consistently (SBP, 2006).Islamic Baking

Islamic banking, a banking or banking activity that is consistent with the principles of sharia and its practical application through the development of Islamic economics. As such, a more correct term for 'Islamic banking' is 'Sharia compliant finance'.Beginning of Islamic BankingAn early market economy and an early form of mercantilism, called Islamic capitalism, was developed between the eighth and twelfth centuries. The monetary economy of the period was based on the widely circulated currency the gold dinar, and it tied together regions that were previously economically independent.Major policies Islamic banking has the same reason as conventional banking: to profit for the banking institute by lending out capital. Be that as it may that is not the sole reason either. Adherence to Islamic law and guaranteeing reasonable play is additionally at the center of Islamic banking. Since Islam disallows basically lending out money at interest, Islamic rules on transactions (known as Fiqh al-Muamalat) have been made to forestall it. In an Islamic mortgage transaction, as opposed to lending the buyer money to buy the thing, a bank may buy the thing itself from the seller, and re-sell it to the buyer at a profit, while permitting the buyer to pay the bank in installments. Notwithstanding, the bank's profit can't be made express and along these lines there are no extra punishments for late payment. So as to ensure itself against default, the bank requests strict collateral. The goods or area is enlisted to the name of the buyer from the beginning of the transaction. This course of action is called Murabahah. Products offered In Islamic bankingMudarabah

"Mudarabah" is an unique sort of partnership where one accomplice offers money to an alternate for investing it in a commercial endeavor. The capital investment ought to regularly originate from both accomplices. both ought to have some skin in the game(timur 2004).

The Mudarabah (Profit Sharing) is a contract, with ONE gathering giving 100 percent of the capital and the other party giving its specific information to contribute the capital and deal with the investment venture. Profits generated are imparted between the gatherings as per a preagreed ratio. On the off chance that there is a misfortune, the first accomplice "rabb-ul-mal" will lose his capital, and the other party "mudarib" will lose the time and exertion put resources into the venture The profit is normally imparted half or 60%-40% for rabb-ul-mal. Hibah (gift)

This is a token given willfully by an indebted person in exchange for a loan. Hibah normally emerges practically speaking when Islamic banks intentionally pay their clients a "gift" on investment account parities, speaking to a share of the profit made by utilizing those investment account adjusts as a part of different exercises.

Ijarah

Ijarah means lease, rent or wage. Generally, the Ijarah idea alludes to selling the profit of utilization or administration at a fixed cost or wage. Under this idea, the Bank makes accessible to the client the utilization of administration of assets/ supplies, for example, plant, office computerization, engine vehicle at a fixed period and cost. Sukuk (Islamic bonds) Sukuk, is the Arabic name for financial testaments that are what might as well be called bonds. In any case, fixed-salary. Those assets which agree with the laws of Islam can be ordered as per their usage and non-usage in the auxiliary markets.

Takaful (Islamic insurance)

Takaful is an option manifestation of cover that a Muslim can profit himself against the risk of misfortune because of mishaps. Takaful is based on the thought that what is dubious as for an individual may stop to be indeterminate as for a substantial number of comparable people. Insurance by consolidating the risks of numerous individuals empowers every person further bolstering appreciate the good fortune gave by the law of vast numbers.

Conventional Banking In the United States the term "commercial bank" was often used to recognize it from an investment bank because of contrasts in bank regulation. A commercial bank is a kind of bank that gives services, for example, tolerating deposits, making business loans, and offering fundamental investment products. Commercial bank can likewise refer to a bank or a division of a bank that basically manages deposits and loans from corporations or expansive businesses, instead of individual parts of people in general (retail banking). In the United States the expression "business bank" was frequently used to remember it from a speculation bank in view of differentiations in bank regulation. A business bank is a sort of bank that gives administrations, for instance, enduring stores, making business credits, and offering principal speculation items. Business bank can moreover allude to a bank or a division of a bank that fundamentally oversees stores and advances from companies or extensive organizations, rather than individual parts of individuals as a rule (retail banking).Types of loans granted by commercial banks

Secured loans

A secured loan is a loan in which the borrower pledges some advantage (e.g., an auto or property) as collateral for the loan, which then turns into a secured debt owed to the creditor who gives the loan. Unsecured loan

Unsecured loans are monetary loans that are not secured against the borrower's assets (no collateral is included). There are little business unsecured loans, for example, credit cards and credit lines to extensive corporate credit lines. These may be accessible from financial institutions under various pretenses or marketing bundles.

Bank overdrafts

A bank overdraft is a breaking point on getting on a bank current record. With an overdraft the measure of obtaining may shift every day. A bank loan is a fixed sum for a fixed term with consistent fixed repayments. The interest on a loan has a tendency to be lower than an overdraft Corporate bonds A corporate security is a security issued by an enterprise. It is a security that a company issues to bring cash sufficiently up with a particular final objective to develop its business. The term is regularly associated with longer-term obligation instruments, for the most part with a development date falling in any occasion a year after their issue date.Credit card debt

Credit card debt is a case of unsecured buyer debt, got to through credit cards. Debt results when a client of a credit card organization purchases a thing or administration through the card framework.

Credit facilities or lines of credit An arrangement between a monetary foundations, for the most part a bank, and a client that makes a most prominent advance adjust that the bank will permit the borrower to keep up. The borrower can draw down in question of credit at whatever point, the length of he or she doesn't surpass the most amazing set in the comprehension.Personal loans

A personal loan is an unsecured loan, importance the borrower does not set up any collateral or security to ensure the repayment of the loan. Thus, personal loans have a tendency to convey high interest rates. In the event that a borrower owns a home, a lower interest rate option is a home equity loan.

Background Islamic banking practices came about into a striking increment in the supply of credits. It is observed that legislature intercession assumed an imperative part to oversee supports other than other monetary variables in the economy (Makiyan, 2003). Levesque and Mcdougall (1996) explored the impact of key determinants of service quality on customer satisfaction in money related establishments. They discovered a considerable effect of service issues on customer satisfaction and their intensions to switch. It is recommended that service quality is a fundamental determinant of customer satisfaction (Yavas et al., 1997). Islamic banks working in diverse parts of the world evaluated their execution in reference to service quality and customers' reactions. An experimental study was led to gauge customer awareness and satisfaction by utilizing an example of 206 respondents towards Islamic banking in Jordan. It is watched that customers have awareness about products of Islamic bank yet communicated a feeling of dissatisfaction towards a percentage of the services (Naseer, Jamal and Al-Khatib, 1999).Islamic banks working in differing parts of the world assessed their execution in reference to administration quality and clients' responses. A test study was directed to gage client mindfulness and fulfillment by using a sample of 206 respondents towards Islamic keeping money in Jordan. It is viewed that clients have mindfulness about results of Islamic bank yet conveyed an inclination of disappointment towards a rate of the administrations (Naseer, Jamal and Al-Khatib, 1999).

Bahia and Nantel (2000) created an option scale for estimation of service quality in retail banking. They created BSQ and contrasted and SERVQUAL. They found that BSQ measurements are more dependable than SERVQUAL measurements. In an alternate study SERVQUAL is contrasted and Technical/Functional quality of services in private banks. Results demonstrated that Technical/Functional quality model is better (Lassar et.al, 2000). A study of 801 customers demonstrated that customers' view of service quality contrasts as far as demographic qualities (sex, ethnicity, training and salary) of the respondents (Urban and Pratt, 2000). Jamal (2004) watched that customers have fluctuated encounters of satisfaction and dissatisfaction for usage of organization toward oneself advances. Money related segment is getting to be more cognizant about the execution assessment with respect to quality of products/services as indicated by customers' desires. In an alternate study, discoveries uncover a positive relationship between money related execution and customer service quality scores (Duncan and Elliott, 2004). Curry and Penman (2004) reported that service quality is certain for separation to contend in the banking part. They recommended that the right service could hold the customers for long haul advantages. Thus, Banks ought to keep up the level of services by legitimate distribution of assets to meet customer prerequisites. Discoveries showed that financial institutions require sensible systems to assess the general satisfaction of their customers. Be that as it may, understanding of changing needs and desires of customers is a fundamental essential for the budgetary area (Joseph et al. 2005). Bahia and Nantel (2000) made a choice scale for estimation of administration quality in retail saving money. They made BSQ and differentiated and SERVQUAL. They found that BSQ estimations are more tried and true than SERVQUAL estimations. In an interchange study SERVQUAL is differentiated and Technical/Functional nature of administrations in private banks. Results showed that Technical/Functional quality model is better (Lassar et.al, 2000). An investigation of 801 clients showed that clients' perspective of administration quality differentiations the extent that demographic qualities (sex, ethnicity, preparing and compensation) of the respondents (Urban and Pratt, 2000).

Jamal (2004) viewed that clients have varied experiences of fulfillment and disappointment for utilization of association to oneself advances. Cash related section is becoming more mindful about the execution appraisal regarding nature of items/administrations as showed by clients' cravings. In a substitute study, revelations reveal a positive relationship between cash related execution and client administration quality scores (Duncan and Elliott, 2004).

Curry and Penman (2004) reported that administration quality is sure for division to battle in the keeping money part. They prescribed that the right administration could hold the clients for whole deal points of interest. Accordingly, Banks should keep up the level of administrations by honest to goodness dispersion of resources for meet client essentials. Revelations demonstrated that budgetary foundations require sensible frameworks to evaluate the general fulfillment of their clients. Nevertheless, understanding of changing needs and yearnings of clients is a major vital for the budgetary range (Joseph et al. 2005).Difference between Conventional Banking & Islamic Banking

CONVENTIONALBANKING ISLAMICBANKING

In conventional banking money lending activities conducted containing Riba (Interest).

In Islamic banking partnership built on profit & loss sharing.

Conventional banking run their business on charging interest.

Islamic banking charge no interest/Riba. They charge halal profit.

Conventional banking do not differentiate to the business type.

Islamic banking do not finance in haram businesses.

Conventional banking not involves in real economic and socially permissible business.

Islamic banking involves in real economic and socially permissible business.

Conventional banking take money as commodity and charge interest on it.Islamic banking conduct financial activities on real asset backed products (trade, lease, partnership etc.) and do not use money as commodity.

Conventional banking mainly the risk is bear by the customer.

Islamic banking take on risk of the transaction according to Shariah Principles.

Objectives

To find and investigate the products of conventional banking. To find and investigate the products of Islamic banking. To compare the products/services of both systems. To find major differences between products of both systems. To get know how of policies and procedures of conventional banking To get know how of policies and procedures of Islamic banking. To compare and find the difference between policies and procedures of both banking system. To compare operations of both banking systems. Future and potential growth of both systems. To present easy to understand differences. To give common man sufficient information about functioning of both banking system for choosing the either of two.

Significance

In this project comparison gives the knowledge to the customers, investors, banks and other parties about the difference in Islamic and conventional banking. Customers, investors, banks and other parties will get clear, deep and sufficient knowledge about different products of Islamic and conventional banking. On behalf of this knowledge customers, investors, banks and other parties will be able to choose their products according to their needs, demands and importance of the document.

In future customers, investors, banks and other parties are more vigilant in choosing Islamic and Conventional banking. Islamic and conventional banks will have to be more product conscious because of the all stakeholders sufficient and effective knowledge about the products. Both Islamic and Conventional Banks will have to give user friendly ways of banking, customer satisfaction will have to be on their top preferences and interest/profit rates competition will be increase. Because I am a Muslim person and I follow the sayings of Islam. Islam says Riba (Interest) is haram and also never invest in haram products. I thought banking is totally haram because they give interest on savings and also do investment in haram products. But when I do comparison between Islamic and conventional banking, I found Islamic banking is interest free banking and its investments are purely in halal products.

Now I am satisfied with Islamic banking. The way they are doing banking is under Islamic rules and regulations. Sharia Compliance is also there to monitor Islamic baking. So now I have comprehensive knowledge about Islamic baking and Conventional banking products, policies, procedures, features and their differences. Now I am able to take decision on behalf of this knowledge and can also give suggestions to others. Data Collection Sources Primary Sources Interviews QuestionnaireSecondary Sources Journal Articles(Published papers) Google scholar

Data Collection Tools/InstrumentsStructured Interviews has been taken from two banks (Islamic and Conventional Bank)Structures interviews has been conducted by the Branch Managers (BMs) and Operational Managers (OMs).

Subjects/Participants

Faysal Bank Limited for Conventional Banking Meezan Bank for Islamic Banking Five branches of each Bank which will cover the most geographical area of Lahore. Branch Manager (BM) & Operation Manager (OM) of each Branch are target audience. 30 minutes at least taken of each Manager It was completely Structured Interviews Data Processing & Analysis After the data will be collected by the target population, the data will be analyzed based on the responses of each manager. In this case, comparison will be conducted not only of their products and services but with the operations of these banks (Faysal bank and Meezan bank ltd.)

Introduction to the selected banks (Meezan and Faysal Bank) Products and services offered by the selected conventional bank (Faysal bank) Products and services offered by the selected Islamic bank (Meezan bank) Difference in products and services of selected conventional and Islamic banks (Meezan and Faysal Bank) Policies and procedures of selected conventional bank (Faysal Bank) Policies and procedures of selected Islamic bank ( Meezan Bank) Differences in policies and procedures of selected conventional and Islamic banks (Meezan and Faysal Bank)

ANALYSIS:

Background of Faysal Bank LimitedFaysal Bank Limited started its operations in Pakistan since 1987, first as an opening set-up of Faysal Islamic in Bahrain and thereafter in 1995 as a commonly unite Pakistani bank under the present name of Faysal Bank Limited. On January 1, 2002, Al Faysal Investment Bank Limited, a substitute social occasion substance in Pakistan, united into Faysal Bank Limited which achieved a greater, stronger and significantly more versatile association. Surely it has the most foremost offer capital among private banks in Pakistan and is among the greatest the extent that esteem. Faysal Bank Limited is a full organization banking foundation offering client, corporate and wander banking business locales to its customers.Background of Meezan Bank LimitedMeezan bank is a largest Islamic bank and unreservedly recorded association at first melded on January 27, 1997. It started operations as a theory bank in August of that year. In January, 2002 in a noteworthy action, Meezan Bank was permitted the nation's first obvious business banking grant focused on Islamic Banking, by the State Bank of Pakistan.

Meezan Bank stands today at a basic point along the headway of Islamic Banking in Pakistan. The banking part is exhibiting a tremendous perfect model change a long way from standard strategy for business and is reveling an obviously competent and asking for cash related purchaser who is in like manner becoming doubtlessly aware of Islamic Banking. Meezan Bank bears the segregating commitment of driving the course forward in making an unfaltering and component Islamic Banking system stacked with dynamic and forefront things and organizations.

COMPARISON OF LIABILITY PRODUCTS

CURRENT ACCOUNT:Current account is the type of account in which the customer can deposit or withdraw money from his account at any time. The Clients can deposit or withdraw money several times in a day. Bank deduct service charges on current account. Many advantages are provided by current account for paying debt by the opportune and save the time of sending cheques by post. Avoid different types of losses and problems.

Mezzan BankFaysal Bank

Current Account (Riba Free):This bank product is best for those customer who demand Shariah complaint banking and ease of access. This account can be opened just only Rs. 1000. This product offers you many type of benefits like this product offers you to access your account personally through online banking, no restriction are on numbers of transaction, call centre facility is free, free statements of balance, priority banking and gives much more than your expectations.Faysal Sahulat:Faysal Sahulat is an account which is maintained for individuals or business customer who use their account on regular basis in Pakistan at all branches of FBL. The account is opened with minimum amount of 5,000.

Main Characteristics Of Faysal Bank Current Account:Main Characteristics Of Faysal Bank Current Account:

Account is access through online banking at all branches of Meezan bank. No restrictions on transactions. No need to maintain average balance of 1000,000 or more. This account provide free of cost additional facilities like free cheque book, pay orders, visa ATM/debit card, no deduction on low balance maintenance. Account is access through online banking at all branches of FBL. No restrictions on transactions. No need to maintain average balance of 500,000 or more. Its provide free of cost additional facilities like free cheque book, pay orders, visa ATM/debit card, demand draft, duplicate statement of account free online access.

Outcomes and Recommendation:Both banks offered almost same facilities but have some difference on account opening amount and maintenance amount. Meezan open account in less amount than Faysal bank. Meezan bank free of cost additional facilities but in Faysal you have to maintain minimum monthly balance. If you want to get free additional facilities in Meezan bank no charges will be deducted on low balance maintenance but in Faysal bank charges will be deducted on low balances maintenance.

SAVING ACCOUNT:This account is used to save money or earn profits (interest) on the account over time. Money is deposited and withdraw through any branch of bank at any time. Bank cannot deduct any charges. Bank may demand only minimum amount to open this account or maintain this account. Many people More preferably use or open this account to save money or get high return/ profits (interest) at interest way.Meezan bankFaysal bank

Rupee Savings Account (Riba Free): Under Musharakah agreement account can be opened with only Rs.10,000. The profit is calculated every month according to the interest rate at the time of calculation. If the customer has balance of Rs.10,000 in his account then the customer is eligible for the interest (profits) which is distributed every month.

Meezan Bachat Account (Riba-Free): High monthly returns with the flexibility to withdraw at any time, is provided by Meezan Bachat Account which is unique saving account. Meezan bank in this bachat Account gives profits to account holders even accountholders in any month their balance drops below Rs. 25,000. Every month profits are credited to their account. Profits are calculated according to preceding month minimum balance maintain by account holder. This Bachat Account is working under principles of Mudarabah. Maximum balance limit for getting highest profit rate is Rs. 1,000,000/-Meezan Business Plus: Mudarabah-based account has a other type Meezan Business Plus which offers customers banking transaction. extensive kind of free services are availed by Customer They provides best convenience and flexibility which are given by Islamic banking. To open an account minimum deposit requirement is Rs. 100,000/- No restriction on withdrawals. Individuals (Sole Proprietorships) Partnerships, Limited Companies can open Meezan Business Plus Account.

Dollar saving Account (Riba Free): Initial deposit required for opening dollar saving account is $100 in Meezan bank under Mudarabah Arrangement. Strictly in conformity with principles of Islamic Shariah. At the beginning of the month profit ratio is declared for all investors. On monthly basis return earned on Mudarabah Pool is calculated.

Karobari Munafa Account(Riba Free): Another type of high profit savings account is Karobari Munafa. Karobari Munafa Account for large Corporate or GoP (Govt. Of Pakistan) controlled entities. High profits on surplus cash balances are earned by customers. No restrictions on transaction Another benefit is that this account Offer variety of packages. Calculations of profits are on a Daily Product Basis. Minimum balance requirement for account opening is Rs. 1,000,000. Deposits and withdrawals are not restricted.Labbaik Saving Aasaan: Labbaik Saving Aasaan is design for small saver who wish to save their money (incomes) for their children, their life partners, or for their parents etc. Provide special benefit to Mudarabah based Deposit account. This account is a plan to save money for Umrah & Hajj from six month to twenty years This account provides bigger incentive on savings or deposits in account for Umrah /Hajj purpose

The Karobari Munafa Account: Working under principles of Mudarabah. Follow rules of Islamic Shariah. Profit are also calculated according to Islamic Shariah No restrictions on transactions but must have to adherence Islamic Shariah. Shariah Advisor and the Shariah Supervisory Board examined Karobari Munafa Account and take decisions about it.Faysal Savings Account: Faysal savings account facilitates hard earned savings peoples who want to earn profits. This very beneficial account for account holders. Initial deposit for this account is Rs. 10,000/. Calculations of profits is on minimum balance. Semiannually profits are distributed to account holders.

Rozana Munafa Plus:

Faysal bank offers another savings account which is Rozana Munafa Plus. In this account calculated of profit (Interest) is done at day of end balance, profits are distributed on monthly basis. Benefited are provided to customer like high rate monthly profit (Interest) on account balance. Minimum balance for account opening is Rs. 100,000 for individual customers and for corporate customers Rs. 500,000 is required.

Faysal Premium: High amount deposits with attractive profit rates is offered by Faysal Premium savings account. Account is designed as it opened with first deposit of Rs. 5000,000/-. Calculations of Profit is on daily balance basis. Distribution of Profit are on monthly basis. Customers can access to Faysal premium at all Faysal Bank branches and also Pakistan through online banking.

Faysal Mahfooz Sarmaya: Faysal bank Mahfooz Sarmaya foreign currency account is designed to provide convenience to customers who want to deal in foreign currency. This account attract customer through features. In these major foreign currencies accounts are opened: US Dollars Pound Sterling Euro. This Account opened with Minimum balance of 1000 units of the currency.

Faysal Moavin Savings Account: Designed for genuine individual savers. Faysal Moavin saving account offers flexibility in account as similar to current account. Initial deposit required for account opening is Rs. 20,000. Number of transactions are not restricted. On daily balance basis profits are calculated. Profits are disbursed on monthly basis. Incentive are given to account holders to save more on Tiered profit structure. We can say profit will increases if deposit amount increases.FCY Saving Plus: A new foreign currency savings account offered by Faysal bank which is named as FCY saving plus account. Attract customers with profit rates. Profit are calculated on a monthly basis. This account deals with these foreign currencies which are mention below: US Dollars Pound Sterling Euro Balance required by FCY Saving Plus is 500 units of the currency at the beginning when account is opened. Profit is calculated on monthly average balance. Profit is disbursed on monthly basis. No charges are deducted by FCY for cash depositing. Additional benefits as mention below are provided if customer maintains monthly average balance which is equal to USD 50k or if above then USD 50k. 90% of FCY can be Borrowing in PKR For consumer financing special rates are offered.

Main Characteristics Of Meezan Bank Saving Account:Main Characteristics Of Faysal Bank Saving Account:

Visa Debit Card. High and halal economical returns. Profit are distributed on monthly basis. Bank balance statements are free Many facilities are free like cheque books and pay orders. Opening account with Musharakah agreement compliance Minimum required balance for Car Ijarah and Easy home is Rs. 500,000. Through online banking account can be access at all Faysal Bank branches across Pakistan. Profit are distributed on monthly basis. Online banking facility is free. Many facilities are free like cheque books and pay orders In this Priority is provided to Banking.

Outcomes and Recommendation:In saving account, numbers of products are offered by Meezan and Faysal bank just because of the developing interest of customers towards opening saving account. Bank gives return in form of profits or interest on specific rates. Faysal bank disbursed profits in form of interest that is against the rules of Islam (haram in Shariah). In Meezan bank returns are in term of profits which are halal with respect to Shariah. Faysal banks should have to introduce new products according to Islamic rules regulations.CUSTOMER FINANCE:Retail banking deals with consumers who want to lend money to fulfil their financial needs. Customer financing offers loans as mention below: Credit cards Mortgage loans Auto loans Loans taken by prime rate or the sub prime rate.Meezan BankFaysal Bank

Islamic Car Financing: Car Ijarah is first Islamic product which is interest free. This product is established according to Islamic financing mode or considering Islamic leasing. This product is best for whose individuals who want to buy a car through car financing on minimum interest rate or interest free. This product is specially design to prevent transaction who are based on interest charges. Car Ijarah is halal because it is interest free. It facility is easily affordable. In Ijarah basically fixed assets is transfer to another person under some agreed consideration. In car Ijarah agreement, for a specific period of time car is taken by the customer. Ownership of asset hold by bank so bank has no risk. Only Rental amount is paid by the customer. Car Ijarah is developing day by day in Overall Country. It becomes famous in customer.

Characteristics: Free of cost Can get any new local car No expenses of insurance payment Monthly rent is low No amount of advance is paid Time period is 3 to 5 years 20% of asset must be deposit as security

Easy home financing: Easy home financing is according to Shariah compliant home financing. This product is affordable and provide excellent and quick service to their customers. Meezan bank fulfil the needs of their customers by considering Shariah which indicate that it is Islamic housing finance. Easy home based on diminishing muskarakah mode The customer can buy house, renovate this old house or can replace current mortgage Packages: Easy buyer Easy renovate Easy replacement Easy builder

Meezan personal finance:For non-salaried and salaried person Meezan bank is not dealing with personal finance at current period.

Meezan Agri-Finance:

No facility is provided to agriculture sectors at current time.

Faysal Car Financing: Faysal car finance product is made to meet the need of customer by providing them facility. Faysal bank finance for local car, imported cars, secondhand (used car). Car financing duration is 5 years. 20% of car is only down payment. Customer also have to pay documentation charges. Customer has option to dismiss the car financing. Quick service.

Eligibility:Customer can owns a car easily and affordable prices if customer have: National identity card of Pakistan hold by customer. Those are eligible for car financing whose age is above 19 year. Minimum experience of 1 ear in professional field (business man or self-employed). Minimum 2 year employed history of salary person.

Limitation: Facility is not for judgeas, lawyers, police, army. Facility not for landlord.Term and Conditions : Insurance company ADAM G and EFU Insurance of car 5% Lease term 3,4 and 5 years Internal rate of return 18.5% 20% of car Down payment Symbols and lines are use in software Less than 33% should debt burden. Faysal housing finance: Faysal housing finance facilitate their customer much more than customer expectations. Facilitate customer to move in an easy way and manner Customer can manufacture his on house or can buy house ready mate, or can renovate his old house, current expensive mortgage finance balance can be transfer, through Faysal house financing. Customer should have resident of Pakistan and should hold national; identity card. Eligibility: 25 to 60 year age of salaried person 65 year age if businessman Minimum professional and business years required by the house financing is 3 years. 3 year experience required if continuous employment 1 year for existing employers. If monthly income is Rs. 30,000 or more than Rs. 30,000 then eligible.

Faysal Personal Finance: Unsecured because no security is pledged. Customer has opportunity to withdraw only 6 cheque range of withdraw money is from Rs. 100,000 to Rs. 5,00,00 Designed for salaried and business person. Recovery of loan is not easy. 1.5 million is the target of this department which they have to meet. If they meet that target bank give bonus to their employees. Personal loan is divided in to two types: Secured loan Unsecured loanUnsecured loan: Unsecure loan Range 1 lack to 5 lack High mark upSecured loan: Secure High mark up Rang is above 5 lacks

Faysal Khushaal Kisan Scheme: Designed especially for agriculture sector. Located in different areas of overall country to facilitate the farmer This product helps to improve yield and procedures of farming. Cheap and affordable rates. Payback period for loan is generally between one to five years.Faysal bank divided Agriculture loan in two types: Production loan and developing loan.Developing loan: For long term purpose. Loan for development of land For example: Farm Power, Farm Machinery and Equipment, Farm Transport, Farm Irrigation, Land Improvement, Godowns, Silos and Cold Storage, Seed Processing Units.Faysal Developing loan are also of two types: Form loan Non-form loansForm loans:This loan is just for forms like tractor or machines use in fields. Non Form Loans:This product is for dairy, poultry forms, fishing, for buying animals and for shading.Product Loan: Used for input used in fields like for seeds, fertilizers, water expenses, cost of diesel, labor, storage, nurseries, vegetable farming, transportation and other working capital requirements of crop farming, orchards, floriculture etc.Two types of product loan: Form loan Non-Form loanForm Loan:Facilitate in providing input used as seed, fertilizer, water expenses in fields.Non-Form Loan:This product facilitate customers to take loan for feeds of animals like oil cakes, green food etc. Charged Interest by KIBER 18.5%, 14.5% 4% charged by FBL. For all banks KIBER interest rates remain same. 4% markup changed by Faysal bank requirement Down payment for dairy and poultry form is 20%, for tube well is 10% only. For fertilizers, pesticides, seeds no down payment.

Main Characteristics Of Faysal Bank Customer Finance:

Main Characteristics Of Faysal Bank Customer Finance:

High mount of loan can be taken Affordable reducing rental amount Property play a role of security Customer has facility to make partial prepayments Processing charges are low

Customer has facility to make partial prepayments. Customer can terminate partially or fully Time period of loan is between 1 to 20 years. Forward towards Improvement. Property play a role of security. 80% loan is offered against market value of property Fast processing

Outcomes and Recommendation:The customer financing product is offered by the both banks but their modes of financing varies with term and conditions. Faysal bank is conventional bank but Meezan is working according the Shariah laws. Meezan bank financing is based on rental amount but Faysal bank charge interest on loan. Car Ijarah finance and easy home finance is offered by Meezan bank while the Car financing, Home financing, Personal & Agri Loan facility is offered by Faysal bank. Conventional financing is converted in Islamic banking by Faysal bank. Both banks providing best services. But Meezan bank has more market shares then Faysal bank.COMPARISON OF ASSETS BETWEEN MEEZAN BANK & FAYSAL BANK:

CONCLUSION

After a complete and detail examination of both banks we have to accept that both the banks are performing well in their individual fields. But conventional is referred to as the interest bearing bank and earns profit based on those interest, however the Islamic banking is interest free, earns profit based on the deposits and investments in different areas. In Pakistan conventional banking is inclined to Islamic banking as people are more interested in Islamic banking these days and give value to their products. I also mention that Faysal bank is doing business in Islamic banking but it needs to improve their Islamic banking unit to represent his country in Islamic world.However, Meezan bank needs to enhance its market share nationally and internationally by giving awareness programs to the society for creating better understandings related to Islamic banking. It might be fascinating to repeat the study based on distinctive banks in Pakistan.

RECOMMENDATIONS1. Islamic banking should give profit to the customers above the interest paid by the conventional banking system retain the customers.2. Islamic banking cost more than conventional whether in terms of transactions, products, etc. Islamic banking system should work on providing less cost to the customers.3. Conventional banks must give stress on their operations such as in Faysal Bank, customers were not very happy with the operations management of the system.4. Product awareness must be given to the people in Islamic banking5. Product flexibility must also be provided to the individual customers.6. Conventional banking should focus on the procedures in Pakistan, they need to improve them as per policies followed in the western world.7. New innovative techniques should be applied in both banking systems.8. Investment plans must be specific and for the good of their customers.

LIMITATIONS1. The study is limited to only two different banks in Pakistan.2. The study is conducted in geographical area of Lahore.3. The study is comprised of limited sample.

Introduction of the student Graduation. Faysal Bank Barkat Islamic Branch Services Officer Experience (2 Years)

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