ifp - june 2012

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Pakistans First Islamic Finance Expo andConference 2012

Report by Bisma Hareem and Usman Saleem(EYIFSG)

Islamic Banking has been a rising force in the national, as

well as, international financial system but it remainssomething of a mystery to many conventional bankers and

the masses. Pakistans First Islamic Finance Expo and

Conference was both timely and relevant in educating the

underlying concepts and values of Islamic finance. There is

ISLAMIC FINANCE INDUSTRY NEWSLETTER

ISLAMIC FINANCE PAKISTAN

VOLUME 3 ISSUE 6 JUNE 2012

Ayat of the month:

The believers, male and female,

are friends to each other. They

bid virtue and forbid vice and

establish Salah and pay Zakah

and obey Allah and HisMessenger. Those are the ones

whom Allah will bless with mercy.

Surely, Allah is Powerful, Wise.

(Sura Tauba: verse 72)

Inside this issue

Pak i s tan s

First Islamic

F i n a n c e

E x p o a n d

Conference

w a s

organized by

t h e P u b l i c i t y

C h a n n e l

w h i l e t h e

conference

was planned

and directed

by Ernst &

Young Ford

Rhodes SidatHyder. It was

held on 18th

& 1 9 t h o f

May 2012 at

the Karachi

Expo Centre.

Inside Story 1

Editors Message 2

Local andInternational NewsGet a glimpse of what

is happening in the

world of Islamic

finance

7

In the SpotlightFind our read of the

month

10

Ask USBy Mufti Ibrahim Essa

and Mufti Javed

11

Pakistan IslamicBanking IndustryAnalysis

12

Left to right: Mr. Anis Ahmed accompanied by Omar Mustafa

Ansari and Mr. Naeem Qureshi presenting award to Mufti Rafi

Usmani on second day of conference.

Mufti Muneeb ur Rehman accompanied by Mr. Naeem

Qureshi and Mr. Mehmood Tareen visiting stalls.

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Editorial

Page 2 An initiative of IFP forum

Advisory Board

Mufti Irshad Ahmed Aijaz

Mufti Najeeb Khan

Anwar Ahmed Meenai

Mohammad Aslam

Mujeeb Baig

Syed Shahjahan Salahuddin

Faizan Memon

NusratUllah Khan

Muhammad Shahzad

Hussain

Arshad Hussain Zubairi

Ammar Khalid

Rima Farooq

Islamic finance being still at its infancy stage survived well during the global

recession and post the great recession, despite the hindrance and cynicism of

the critics. State Bank of Pakistans states that branch network of Islamic

Banks in Pakistan has grown to 886 branches by the end of December 2011.

Islamic Banking industry has a total asset of Rs. 641 bn and the Deposit base

is of Rs. 521 bn. Islamic banking industry has shown humongous growth rate

of 55% since commencement.

However it still faces many challenges firstly, lack of awareness about Islamic

finance amongst masses. This is as a result of precedent experiences,

customers are skeptical about Islamic finance legitimacy. Generally

customers outlooks are based on misinformation and symbolize lack of

knowledge on Fiqh issues. Changing their opinions has been one of theutmost challenges faced by Islamic financial institutions.

A further challenge faced by Islamic banks in Pakistan is primarily lack of

shorter term investment options. Islamic banks cannot invest in sovereign

debt instruments such as Tbills and investment bonds, thus making short

term liquidity management a key challenge. GOP IjarahSukuk has provided

some breathing space.

Dearth of trained and experienced workforce has an impact on the

expansion of Islamic financial industry. Few universities and training

institutes are offering courses in Islamic finance but they also face the same

problem of scarce professionals to conduct courses. To accommodate market

need business schools, as well as religious schools should join hands to

provide specialized courses along with industry experts, so that we have nextgeneration of Islamic financial experts.

To sustain high future growth steps should be taken to transform the existing

structure of the industry so as to provide improved services within the realm

of Shariah.

Conventional banking took years to reach the height where it stands today,

anticipate the level of maturity from Islamic financial industry at its infancy

stage is asking too much. For the industry to blossom all the stakeholders

should join hands to take steps so as to comprehend the challenges which

industry faces and then put in efforts towards improvement of the industry.

Happy Reading!

Let us know, if you know friends or colleagues who, in your view, may benefit from this newsletter. Send us their email

addresses at [email protected]

Editor-in-Chief

Associate Editors

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no doubt that the knowledge gap is

holding the industry back but this

event brings out very well the need to

educate the market and the consumers.

The event was organized by the

Publicity Channel while the

conference was planned and directedby Ernst & Young Ford Rhodes Sidat

Hyder. It was held on 18th and 19th of

May 2012 at the Karachi Expo Centre.

As its name suggests, it comprised of

two different segments; the conference

and the expo. The primary and

foremost purpose of the conference was

to create awareness and a thorough

understanding of Islamic finance

concepts with particular focus on

Islamic banking. The expo, on the

other hand, comprised of various stalls

setup by major Islamic Banks, Islamic

Universities and Media groups. It was

open for the general public to visit the

stalls and enquire the respective stalls

representatives of their services /

products or any query. Moreover the

banks, Takaful companies and the

universities got the opportunity to

promote their respective organizations

and the products.

The conference started with the

recitation of verses from the Holy

Quran followed by speeches and open

house discussions about the Mutual

funds, Islamic banking, General

Takaful and Fami ly Takaful ,

Page 3

Continued Pakistans First Islamic Finance Expo and Conference 2012

An initiative of IFP forum

Experts present on Meet with the experts session held on 18 May 2012

Inaugural session began with recitation by Mufti Muhammad Ibrahim Essa and Guest of honor speech by Mr. Younus Bashir (President

Karachi Chamber of Commerce and Industries) and Mufti Mohammad Muneeb ur Rehman, Shariah Advisor Burj Bank Limited)

Session 1

Islamic banking

introduction and

criticism

Session 2

Introduction to

Takaful and

Family Takaful

Session 3

Islamic banking

introduction and

criticism

Session 4

Introduction to

Modarabas ands

their product

Session 5

Islamic banking

introduction and

criticism

Session 6

Islamic capital

market and

mutual funds

Mr. Anwar A.

Meenai (Former

Head of Islamic

Banking National

Bank of Pakistan,

Habib Bank

limited and Faysal

Bank Limited)

Mr. Ahmed Ali

Siddiqui (Head of

Product

development and

Shariah

compliance

Meezan bank

limited)

Mufti Ehsan

Waquar Ahmed

(Shariah Advisor

United Bank

Limited)

Mufti Syed Sabir

Hussain (member

Shariah Board

Dawood Family

Takaful limited)

Mufti Irshad

Ahmed Aijaz

(Shariah Advisor

Bank Islami

Pakistan Limited)

Mr. Azeem Pirani

(Regional Head

FWU)

Mr. Muhammad

Faisal Shaikh

(Head product

development Bank

Islami Pakistan

Limited)

Mr. Asif

Amanullah

Darwesh (Vice

President Askari

bank limited

Islamic banking

group)

Mufti Muhammad

Ibrahim Essa

(Shariah advisor

Ernst & Young

Ford Rhodes Sidat

Hyder)

Mr. Shakeel Khan

(General manager

First Paramount

Modaraba)

Mr. Intisar

Muhammad

Usmani (Head of

credit and

marketing First

Habib Modaraba)

Mufti Abdus Sattar

Laghari ( Shariah

advisor National

Bank of Pakistan

and NBFC &

Modaraba

association)

Mr. Mahmood

Shafqat

(Additional

director SBP)

Mr. Mujeeb Baig

(Head of product

development,

MCB Bank

Limited)

Mr. AbdullahNajib Siddiqui

(Deputy Shariah

Advisor Albaraka

Bank Pakistan

Limited)

Mr. Khalid

Waheed

(Chairman

Diyanah Islamic

financial services

(Pvt) Ltd)

Mr. Faisal Wasti

(Head Islamic

investment UBL

managers)

Mr. Faraz

Bandukda (Chief

executive

Fortune Islamic

services)

Guest of honor Mr. Younus Bashir

inaugurating the Pakistans first Islamic

finance expo and Conference 2012.

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Modarabas, Shariah Discussion and

Corporate financing modes in IslamicBanking. The discussions were mainly

headed towards removing the

prevai l ing misconceptions and

promoting awareness.

The panelists discussed that majority of

the general public lack awareness about

the Islamic finance institutions and

there is a great misconception amongst

those who are already aware of their

services. This fact was also reflected

through the questions asked by general

public, as many of the questions were

about the Shariah viability of the

services provided by the institutions.

Wh er e lac k of aw ar en es s an d

misconception among general public

proved to be an obstacle for the Islamic

institutions to expand its share; burden

of documentation and altering the

accounting system to record such

Islamic transactions is seen as a major

hindrance among the corporate users.

This view is also supported by Mufti

Rafi Usmani (Head Darul uloom

Korangi Karachi) and he added that

Our Islamic finance framework has

achieved successfully its first step of

adopting interest free banking however,

the documentation work is seen as an

exhausting task to some people.

Although the documentation work for

entering in an Islamic transaction is

more than 20 times as compared to its

conventional counterpart; the Islamic

banks in particular has provided us aremarkable as s i s tance in the

documentation work, added by Mr.

Shakaib Arif (Chief Operating Officer,

National Foods).

We acknowledge that the time

demands that Islamic finance should be

promoted and for the same reason

State Bank of Pakistan supported the

conference, not in the capacity of a

central bank; as generally central banks

do not support awareness conferencesand seminars, but in the capacity of a

supporter, said by executive of the

State Bank of Pakistan.

One of the panelist responded to a

question by Mr. Omar Mustafa Ansari

(Head of Islamic Financial Services

Group, Ernst & Young Ford Rhodes

Sidat Hyder) about the future growth

aspects of the Islamic finance industry

that, Provided steps are taken to create

a w a r e n e s s a n d r e m o v i n g

misconceptions among the people;

there are no foreseeable breaks in the

growth of the industry and the industry

would grow with the current growth

trend (the industry is currently growing

at a constant 30% per annum for the

last 6-7 years ).

As the industry size is constantly

growing; one should do the basics to

remain in the market and not try

anything adventurous, said by an

executive, while Mr. Hasan A. Bilgrami(CEO, Bank Islami Pakistan Limited)

had a contrasting view and supported

those managers who are adventurous in

nature. Mr. Bilgrami further added that

their bank is planning to expand

tremendously by opening around 100

branches in the upcoming 18 months.

Page 4



Following institutions hadtheir stalls in the expo:

National Bank of

Pakistan

UBL Ameen

Habib Bank Limited

MCB Bank Limited

Burj Bank Limited

Meezan Bank Limited

Pak Kuwait Takaful

JS Investment

Askari Bank Limited

Mudaraba Association

Diyanah Islamic financial

services

Al Meezan investment

management

UBL Fund

FWU

Bank Alfalah Limited

CDC

Unicol

Habib Metropolitan Bank

Oman Investment

Bank of Khyber

Stalls of JS investment, Al Meezan

investment, Askari bank limited and MCB

Islamic division on Pakistans first Islamic

finance expo and conference.

Left to right: Mr. Naeem Qureshi, Mr.

Omar Mustafa Ansari, Mufti Rafi

Usmani, Dr. Prof. Anis Ahmad, Mr.

Zulfiqar Ali Khokhar, Mr. Mohammad

Ayub and Mr. Mehmood Tareen at the

conference on 19 May 2012.

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Dr. Anis Ahmad (Vice Chancellor,

Riphah International University) gave a

concluding and comprehensive idea of

what strategy should all the Islamic

financial institutions adopt by sayingthat The strategic planning of the

institution should be structured

towards coming forward and

supporting awareness among the people

instead of competing with each other.

Organizing such an imperative event on

Islamic finance has triggered the

evolution of Is lamic f inance.

Furthermore, it would definitely

strengthen and support Quaids

concept of economic system basedupon Islamic principles.

Finally the two day event concluded

with the Shariah discussion session,

chaired by Dr. Muhammad Zubair

Usmani (Shariah advisor, MCB

limited) while the panelists included

Mufti Mohammad Najeeb Khan

(Shariah advisor Habib Metro Bank),

Mufti Yahya Asim (Shariah advisor

Habib Bank Limited) and Mr. Munir

Ahmed (Joint Director, SBP-IslamicBanking Department).

Page 5



Mufti Rafi Usmani visiting Burj Banks

stall on the second day of Expo.

Islamic Finance Conference on 19 May 2012

Inaugural session began with speech from the chief guest Mufti Rafi Usmani (Head Darululoom korangi Karachi) later Dr.

Anis Ahmad (Vice Chancellar - Riphah International University) and Mr. Zulfiqar Ali Khokhar (Additional director - Islamicbanking department SBP)

Session 1 Session 2 Session 3 Session 4

Session chaired by: Dr. Anis

Ahmad (Vice Chancellar at

Riphah International

University)

Mr. Hasan A. Bilgrami

(CEO at Bank Islami

Pakistan Limited)

Mr. Muhammad Raza (Head marketing Meezan

Bank Limited)

Mr. Pervez Said (Former

director Islamic banking

department at SBP and

former President at Burj

Bank Limited)

Mr. Mujeeb Baig

Mufti Muhammad Hassan

Kaleem (Member Shariah

board at Pak Kuwait Takaful)

Mr. Imtiaz Bhatti (MD and

CEO at Pak Kuwait Takaful)

Mufti Sabir Hussain (Shariah

coordinator at Burj Bank

Limited)

Mr. Basheer A. Chaudary

(Chairman, NBFI &

Modaraba association)

Mr. Muhamamd Shoaib

Ibrahim (CEO at First Habib

Modaraba)

Mufti Muhamamd Ibrahim

Essa

Mufti Abdul Sattar Laghari

Mr. Ebrahim Qassim (CEO at

Premier group)

Mr. Wasif Khalid (executive

director at Ghulam faruque

group)

Mr. Shakaib Arif (COO at

National foods)

Senator Mr. Abdul Haseeb

Khan (President at Brook

pharmaceutical Pakistan

limited)

Moderated by: Omar

Mustafa Ansari (Head ofIslamic financial services

group at Ernst & Young

Ford Rhodes Sidat Hyder)

Moderated by : Faizan Ahmed

Memon (Deputy GeneralManager at Habib Bank Ltd.)

Moderated by : Mr. Zulfiqar

Ali (CEO at Modaraba AlMali)

Moderated by: Omar Mustafa

Ansari (Head of Islamicfinancial services group at

Ernst & Young Ford Rhodes

Sidat Hyder)

Special session on Islamic capital market and mutual fund as conducted by Mr. Muhamamd Shoaib (CEO at Al Meezan

funds)

I s l a m i c F i n a n c e

P a k i s t a n ( I F P )

newsletter

IFP also had the stall on both the days

of expo displaying various issues of

IFP for the guests, as well as, the

general public.

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Page 6



Left to right: Mufti Rafi Usmani presenting chief guest speech on second

day of expo.

Left to right: Mr. Omar Mustafa Ansari presenting award to Mr.

Muhammad Faisal Shaikh.

Guest of honor Mr. Yousuf Bashir visiting

Meezan bank stall.

Left to right: Mr. Mujeeb Baig, Mr. Omar Mustafa Ansari, Mr.Muhammad Raza, Mr. Hasan A. Bilgrami, Dr. Anis Ahmad and Mr

Mr. Yousuf Bashir giving guest of honorspeech on 18 May 2012.

Dr. Anis Ahmad Presenting award to MrPrevez Said.

Pak-Kuwait Takaful and Diyanah Islamicfinancial services stalls.

Meezan bank stall at the Pakistans first

Islamic finance conference and expo.

Left to right: Mr. Sultan Chawalla presenting

award to senator Mr. Abdul Haseeb Khan.

Mr. Sultan Chawala presenting award to Mr. Omar Mustafa Ansari.

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Disclaimer:

The news included here is on the basis of information obtained from local and international print and electronic mediasources. IFP team does not accept any responsibility about their bona-fide.

IFAAS (Islamic Finance Advisory and Assurance Services) the international

Islamic finance consultancy, announced the imminent launch of its exclu-

sive report entitled, 'Islamic Finance in Morocco - sizing the retail market',analysing the consumer retail market for Islamic financial products and

services in Morocco. The report is the first of its kind for the country and is

due to be launched in June.

'Islamic Finance in Morocco - sizing the retail market', sets out the market

opportunities for financial institutions with interest in the Moroccan mar-

ket. The report measures the potential market size for Islamic retail bank-

ing, finance and Islamic insurance "Takaful" and assesses how it will com-

pete with mainstream, conventional finance.

Libya approves Islamicbanking law

AAOIFI unveils 7Shariah standards

Islamic finance tostrengthen economic andf i n a n c i a l l i n k a g e sbetween Asia and theMiddle East

O I T E c o n f e r e n c e sannounces Oman Islamicbanking and financeconference to be held in

June

Investors hold $1.5t in

Shariah compliant assets

IFAAS announces the launch of the first independentstudy of Morocco's emerging retail Islamic financesector

World Bank - Al Barakalaunches Islamic finance

initiatives

The Accounting and Auditing Or-

ganisation for Islamic Financial

Institutions announced new seven

Shariah standards in Dubai.

The new standards include; Finan-

cial Rights and its Management, the

Regulations of Liquidity Manage-

ment, Bankruptcy, Capital and

Investment Protection, Agency inInvestment, Calculation of the

Profit Transactions and Options of

Trust.

Held under the official support of

the Monetary Authority of Singa-pore, the 3rd Annual World Is-

lamic Banking Conference: Asia

Summit (WIBC Asia 2012), which

was held on the 5th and 6th of

June 2012 in Grand Hyatt Singa-

pore. It set the stage for high-level

discussions that focused on

strengthening international connec-

tivity and capturing cross-border

opportunities enabling further

growth of the Islamic finance indus-

try in Asia.

Oman International Trade and

Exhibition (OITC) Conferences

organized the Oman Islamic Bank-

ing and Finance Conference from

5th-6th June, 2012 at the Grand

Hyatt, Muscat under the theme

Building a Growth for Islamic

Banking and Finance in Oman

through improved regulation, inno-

vation, standardization and best

practices.

Investors globally hold more than

$1.5 trillion in Sharia-compliant

assets which include equities that

are in line with Islamic principles,

Sukuk and Islamic funds, according

to a senior official at the Central

Bank of Bahrain.

The World Bank and Bahrain-

based Al Baraka Banking Group

have joined hands to launch joint

programmes under a new Islamic

Finance Initiatives. These initia-

tives are aimed at fostering the sus-

tainable development of the Islamic

economics and finance, through

the design and delivery of activities

in identifying and disseminating

sound practices in the Islamic fi-

nancial services industry, including

sound practices relating to the regu-

latory and supervisory environment

corporate governance and business

practices.

Libya has approved an Islamic

banking law that will introduce

Shariah compliant banking in the

North African country, a member

of the ruling National Transitional

Council (NTC) said on Thursday.

Libya has been working to amend

its banking laws to attract foreigninvestment and stimulate its private

sector following last year's war that

ousted Muammar Gaddafi, the

central bank governor has said.

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Disclaimer:


Takaful Emarat has joined forces with Saudi Arabia's Riyadh Capital to

launch a new Shariah compliant, capital -protected global equity investment

fund. The fund is designed to be a long term saving venture with a high

degree of capital protection. It is a global fund and is linked to the

performance of selected Shariah compliant stocks, chosen for their high cash

Bahrain-based Gulf International Bank (GIB) has successfully established a

MYR 3.5 billion Sukuk Al-Wakalah Medium-Term Note (MTN) programme

in Malaysia. The Islamic MTN programme is based on the Shariah principle

of Wakalah.

CIMB Investment Bank Berhad and Standard Chartered Saadiq Berhad are

the joint lead arrangers, while GIB Capital LLC, GIBs investment banking

arm, is the international coordinator of the Sukuk programme.

ITFC signs a US$400mi l l ion f rameworka g r e e m e n t f o rcooperation with Egypt

Bank Muscat to opennew branches for Islamicbanking

Abu Dhabi Islamic bank( A D I B ) L o n d o ninaugurated

Noor Islamic Bank (NIB)launches two uniquestructured investmentproducts

Takaful Emarat launch new investment fund

GIB unveils MYR 3.5b Sukuk Al Wakala programme

ITFC and SAMIRSign US$180 millionagreement

The International Islamic Trade

Finance Corporation (ITFC), a

member of the Islamic Develop-

ment Bank Group (IDB), has

signed a framework agreement for

cooperation with the Governmentof the Arab Republic of Egypt. This

agreement aims to finance the

Egyptian General Petroleum Cor-

poration (EGPC) and the General

Authority of Supply Commodities

(GASC) with an amount of US$

400 million annually for three

years. The allocated amount will be

used to finance the import of petro-

leum and petroleum products, in

addition to the import of strategic

commodities namely wheat andfoodstuffs.

It has been reported that Bank

Muscat, Omans biggest financial

institution, is planning to open

seven dedicated branches for offer-

ing Islamic banking services

through window operations, the

banks chief executive told Times ofOman.

BankMuscat has allocated RO150

million (approximately $400 mil-

lion) of capital to finance its Islamic

banking window operations,

Meethaq, subject to the necessary

regulatory approvals.

The International Islamic Trade

Finance Corporation (ITFC), the

international financing arm of the

Islamic Development Bank (IDB)

Group, has signed a US$180 mil-

l ion syndicated s t ructured

Murabaha framework agreementwith Moroccos Societe Anonyme

Marocaine de lIndustrie du Raffi-

nage (SAMIR) for import of crude

oil and petroleum products.

NIB, a leading Islamic bank in the

United Arab Emirates, haslaunched two unique structured

wealth management investment

products, which offers clients an

exposure to a diverse range of asset

classes while minimising their risk

through one structured deposit.

The new products, allow clients to

invest in Precious Metals, Curren-

cies, Equities, Energy and Agricul-

tural Commodities, with 100 per

cent capital protection.

ADIB, a top-tier IFI, announced

the expansion of its global footprint

by starting its operations in London

at the prestigious One Hyde Park at

Knightsbridge. It becomes the first

UAE-based IFI to receive a banking

operations licence from the UK

Financial Services Authority and to

offer full range of services to highnet worth individuals.

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Disclaimer:


Lecture held on Islamicbanking at RiphahUniversity

E x p e r t s h i g h l i g h tpotentials of Islamic fundsindustry in Pakistan

Islamic, Asian banks agreeto funding for Pakistan

wind power

Lecture focuses on futuredirections and research

agenda for Islamic finance

Top Islamic banker vows

to increase interest-freebanking share to 15%

News analysis: code ofcorporate governance 2012

M o v e s a n d

Promotions

Faizan Ahmed Memon Promoted

as Deputy General Manager at

Habib Bank Ltd.

Mufti Syed Zahid Siraj - Promoted

as Resident Vice president at Burj

Bank Ltd.

Malaysian Scholar Dr. Syed Othman

Alhabshi on Thursday delivered lec-

ture on Islamic banking and finance

at Riphah International University.

Renowned scholar and an expert in

Islamic finance, Datuk Dr Syed Oth-

man Alhabshi, Chief Academic Offi-

cer of International Centre of Educa-

tion in Islamic Finance (INCEIF),

Malaysia, visited Riphah Interna-

tional University and delivered a

lecture on Islamic Banking and Fi-

nance for Dynamic Blend of Shariah

and Professional Expertise.

Islamic funds industry in Pakistan is

growing with other aspects of Islamic

finance. Some of these funds are the

leading funds in Asian markets as

well, which is a matter of honor for

Pakistan and can be taken as the

source of further development in this

sector, highlighted the speakers at the

International Conference on Islamic

funds and investments.

The Islamic Development Bank

(IDB) and the Asian Development

Bank agreed to a $133 million financ-

ing plan to develop two wind projects

in Pakistan as the nation seeks new

renewable sources to overcome power

shortages.

Pakistans Fauji Foundation, set up as

a charitable trust for former service-

men, and the nations Tapal Group

are backing the projects totaling 100

megawatts, according to a statement

on the IDB website.

The Islamic banking current share of

8% should grow to over 15% by

2016 in the country through penetra-

tion in all potential sectors with inno-

vative Sharia based products and

services.

Islamic finance is a serious alternative

that academia is still ignoring, said

Dr. Muhammad Fahim Khan, at a

seminar at IIIT on May 28. He deliv-

ered a lecture entitled Islamic Fi-

nance: Future Directions and Agenda

for Research.

Dr. Khan focused on the inherent

problems of Islamic finance, its cur-

rent challenges and future directions.

He started off with outlining the po-litical circumstances of the 1970s that

gave rise to IFIs such as the events in

Afghanistan, the retreat of Russia,

the Islamic revolution in Iran, the

Islamization policy of the military

government of Pakistan (under Zia

Ul Haq), and Sudans commitment

to Sharia.The lecture was attended by

a large number of participants from

various segments of the Islamic fi-

nance industry.

Federal Minister for Finance Dr. Ab-

dul Hafeez Shaikh launched the

Code of Corporate Governance,

2012. It sets a minimum benchmark

in terms of governance standards,brings consistency in the corporate

practices and promotes transparency

through enhanced disclosure require-

ments. It will result in availability of

enhanced information to markets'

participants and hence will provide

better protection of the rights of all

investors, particularly minority share-

holders.

It requires at least one independent

director while preference is for 1/3rdof the total members of the board to

be independent directors. Criteria for

assessment of independence have

also been substantially expanded.

Detail review of the same will be in-

cluded in our next issue.

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This book provides complete insight

to the field of Islamic law of contract

from formation to discharge of

contract. Different spheres whichhave been focused in this book

includes contract of agency, hire

contract, contract of insurance and

banking contracts.

The book initially discusses the

detail about the advent of Islam and

then moves on to provide a more

Very little work has been done in

the field of Islamic law of contract.

Islamic Law of Contract by Dr.

Liaquat Ali Khan Niazi is on of themost renowned book on the subject.

This book is a comprehensive work

on the topic and is a great

contribution in the realm of Islamic

studies as this was on of the initial

books on this subject.

This book highlights the discussion

about the law of contract in the

Holy Quran, Hadith and recognized

standard books of Fiqh. Dr. Liaquat

emphasized on the fact that Islamic

law of contract is based on morality

and honesty in every field of

commercial activity.

He wrote in his book that Islamic

law of contract has undergone a

change in historical process. He

explained that there was a time

when written contracts were valid

but by the change of time parole

agreements were treated as valid.

comprehensive definition of

contract by all the renowned writers

and consequently focuses on the

Islamic law of contract, features ofIslamic law of contract and

codification of Islamic laws on

modern pattern.

Later the book emphasize on the law

of contract in detail, describing in a

comprehensive manner all the

elements of a contract. Aspects of

formation of a contract and

termination of offer. Dr. Liaquat

provides a great insight about the

different classification of Islamic

contracts and latter explained in his

book contracts which are void by

Shariah, contract of sale, kinds of

sale and remedies in case of breach

of contract.

Page 10An initiative of IFP forum

Book in the Spotlight

Islamic Law of Contract

By Dr. Liaquat Ali Khan Niazi

Reviewed by

Bisma Hareem

Published by: Research cell

Dayal Singh Trust Library,

Lahore

About the Author

Dr. Liaquat Ali Khan Niazi was an APUG / DMG (EX CSP) officer he was basically an executive officer having

an expertise and knack to handle administrative problems. He by qualification was MA Arabic, LLB, Bar-at-law

Lincolns Inn London and Ph.D (FIQH) Islamic law of torts. He was a luminary in the academic sphere who

combined a rare blend of executive and literary pursuits. He joined civil cervices and has served as Deputy

Secretary in various departments in Punjab Secretariat and was also posted as Deputy commissioner Chakwal.

This book is him second research work after the book Islamic Law of Torts.

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Ask UsBy Mufti Ibrahim Essa and Mufti Javed Ahmed

Question:

Is it permissible for Islamic banks to

take commission for performing

credit study or offering, renewal or

extension of credit facility? What are

the limits and injunctions of Shariah

in this regard?

Answer:

Islamic banks are permitted to take

commission for the credit study. It is

prepared internally or through an

external party, so as to know thecredit worthiness of the client and his

ability to honor his commitment

within the period agreed upon.

Entitlement of the Islamic bank to

such commission is due to fact that

the client has benefited from the

study regardless of whether the study

has led to acceptance or rejection of

his request. The study shall become

the property of the client who has the

right to take it.

As for the commission for offering

credit facilities is concerned, it is

impermissible to take commission

for offering credit facilities, because

the mere indication of willingness to

enter into a lending and borrowing /

sale purchase transaction do not

justify any remuneration.

Likewise it is not permitted to charge

any commission just for the sake of

renewal or extension of credit

facility.

Question:

What is the view of respectable

Shariah scholars about a scenario in

Istisna and Parallel Istisna where

the actual cost of Istisna incurred by

Islamic bank is less than the

estimated cost or receives any

discount from the subsequent party

in Istisnaa contract, is it obligatory to

Islamic bank to pass this concessionto the ultimate purchaser?

Answer:

If the actual costs incurred by the

Islamic bank to bring the subject

matter of Istisnaa to completion are

considerably less than the projected

costs or the Islamic bank secures a

discount from the party whom it

contracted on a parallel Istisnaa basis

to acquire the subject matter in order

to fulfill its contractual obligation, theIslamic bank is not obliged to give a

discount to ultimate purchaser and

the latter is not entitled to the

amount or part thereof the Islamic

bank has gained over projected costs.

The same rule applies conversely

when the actual costs of production

are considerably greater than the

estimated costs.

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Page 12

The Progress of Islamic Banking IndustryPart 1-Islamic Banking Institutes

{{

Compiled by EY IFSG


Overall industry growth

Every twelve months, Pakistans Islamic banking institutions (IBIs) demonstrates an

incredible growth. In FY 2011 IBIs flourished yet again marking an estimate growth of 36 %.

As a matter of fact, it is one of the fastest growing industries of Pakistan and expectations are

that it will grow at a similar higher pace in the future years to come.

IBIs are escalating its banking network which, by the end of 2011, increased from 751 to 886

branches thus achieving 94% of the approved expansion plan. Full-fledged Islamic banks

(IBs) hold 66% share of overall branch network whereas conventional banks having Islamic

banking windows (IBDs) occupy 34% share. The major contribution in this success came

from Meezan Bank Limited (MEBL) comprising of 31% of the IBIs branch network.

Profit of IBIs crossed Rs. 10 billion mark for the first time; IBs with profit of Rs..5.7 billion

had 59% share of the industrys profitability while, IBDs with profit of Rs. 4.7 billion had41% share. Total assets and deposits of the Islamic banking industry achieved a growth of

34% in FY 2011, while the financing and investments managed a 40% growth.

Analysis of profitability of full-fledged Islamic Banks (IBs)

Considering the performance of the full-fledged Islamic banks, Meezan Bank evidently leads

and exceeds by far registering a net profit of Rs. 3.39 billion as compared to last years net

profit of Rs. 1.65 billion, representing a 105% growth. Following after Meezan Bank was

Bank Islami and Al-Baraka, each with a net profit of Rs. 410 million. Bank Islami showed an

extraordinary rise in its profit by 770% from Rs. 47 million in FY 2010 to Rs. 410 million in

FY 2011. On the other hand, Al-Baraka Bank did not fall behind, swiftly converting its loss

of Rs. 1.04 billion in the previous year to a profit of Rs. 410 million this year.

In FY 2011,

I B I ,

f l o u r i s h e d

y e t a g a i n

marking an

e s t i m a t e

growth o f

3 6 % .

P r o f i t o f

IBIs crossed

R s . 1 0

billion mark

for the first

t i me; I B I s

with profit

of Rs. 5-7

billion had

59% sh are

o f t h e

industry s

profitability

while IBDs

with profit

of Rs. 4.7

billion had

41% share.

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Dubai Islamic grew its profit at the

highest rate in the industry which was

mainly due to reduction in provisions

against non-performing financing.

Lastly, Burj Bank is recuperating fast

following the huge expansion expense,

decreasing its loss from Rs. 536 million

in FY 2010 to a loss of Rs. 288 million

thereby reducing its loss by 46% during

the year. Hence at this rate of

improvement, one can expect Burj

Bank to pull itself out from the loss

and guide itself towards healthy profits

in the prospective years.

Analysis of total assets anddeposits of IBIs

Total assets and deposits of the Islamic

banking industry achieved a growth of

34% in FY 2011, while the financing

and investments managed a 40%

growth. Meezan banks total asset

crossed Rs. 200 billion in FY 2011

increasing by 30% from last year. Total

assets of Meezan bank showed a boost

due to increase in investment of

Meezan bank which reached Rs. 98

billion. Bank Islamis total assets grew

at the similar rate as Meezan bank and

reached Rs. 58 billion. Financing and

investment portfolio of Bank Islami

reached Rs. 21 billion and Rs. 20

billion respectively indicating a growth

of 53% and 21% from the previous

year.

Dubai Islamic and Al-Baraka managed

to regain a growth of 21% and 19%

respectively from the last financial year.

Burj bank as a whole managed to

increase its total assets substantially to

Rs. 28 billion representing 58%

growth.

Meezan bank has the highest

deposit base in the industry which

in FY 2011 crossed 170 billion

representing a growth of 30%

when compared with FY 2010.

Bank Islamis deposit for the FY

2011 was of 50.5 billion increasing

by 32%. Al-Barakas deposit

increased by 25% in FY 2011 and

Dubai Islamics increased by 23%.

Burj bank showed a massive

increase in the deposit based

which grew by 61% and reached

Rs. 20 billion.

Page 13

Continued The Progress of Islamic Banking Industry


Total assets and deposits of

the Islamic banking industry

achieved a growth of 34% in

FY 2011, while the financing

and investments managed a

40% growth.

-

50,000

100,000

150,000

200,000

250,000

Meezan

Bank

Bank Islami Dubai

Islamic Bank

Burj Bank Al Baraka

Total asset and deposit in 2011 of IBs

2011

2011

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Financial summary of the Islamic banks for the year 2011


Statement of Financial Position Figure in Rs.000

Sr.

No Description Meezan Bank

Dubai Islamic

Bank Burj Bank

Al-Baraka

Bank Bank Islami

1. Balances with other banks 2,348,076 1,116,928 2,215,636 7,577,186 549,277

2. Investments 98,488,574 12,937,179 9,982,793 26,179,416 21,067,082

3. Financings 59,155,585 23,340,602 10,509,340 27,610,708 20,110,401

4. Total assets 200,550,394 48,196,449 27,644,829 72,544,879 58,821,314

5. Due to financial institutions 9,235,960 1,898,500 447,300 1,736,120 800,000

6. Deposits and other accounts 170,030,431 38,491,607 20,341,241 61,559,026 50,568,785

7. Total liabilities 186,764,043 41,962,400 21,840,251 66,020,396 53,508,676

8. Net assets 13,786,351 6,234,049 5,804,578 6,524,483 5,312,638

Statement of Comprehensive Income

9. Profit on financings 18,032,152 4,632,785 2,375,585 6,699,178 5,502,154

10. Return on deposits 8,665,622 2,395,995 1,423,171 5,001,222 2,883,355

11. Provisions 1,389,155 10,075 251,580 (227,176 ) 21,423

12. Net spread after provisions 7,977,375 2,226,715 700,834 1,925,132 2,597,376

13. Total other Income 2,504,755 457,136 188,537 482,058 226,709

14. Administrative and other expenses 6,125,830 2,367,722 1,236,279 1,926,488 2,215,498

15. Profit / (Loss) before taxation 4,356,300 316,129 (346,908) 480,702 608,587

16. Profit / (Loss) after taxation 3,391,543 190,486 (288,488) 410,370 409,556

Disclaimer:The data presented in this summary is extracted from the published audited financial statements of the respective banks for the

year ended 31 December 2011. The newsletters management does not take any responsibility of authencity of any data

presented here and will not assume any liability due to any loss or damage caused by the usage of the information presentedhere. User discretion advised.

Continued The Progress of Islamic Banking Industry

ifp - june 2012

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