Al- Sadiq (A.

S) Institute of Islamic Banking, Finance & Takaful

By: Jawaid Iqbal

Rajab 8, 1429 Saturday July 12, 2008
 Classification of businesses by activity

 Manufacturing Business

 Merchandising Business

 Service Business
Classification of businesses by formation

 Sole Proprietorship

 Partnership

 Company (Private/Public)
 Bottom Line / Equation

Assets = Liabilities + Capital

The name bank derives from the Italian word
banco "desk/bench“.

In Italy, Florentines bankers, used to make

their transactions above a desk covered by a
green tablecloth.
(Source: http://en.wikipedia.org/wiki/Bank)
Definition
A banker or bank is a financial institution
whose primary activity is to act as a payment
agent for customers, and to borrow and lend
money.
Bank as a payment agent
Banks act as payment agents by conducting
checking or current accounts for customers,
paying cheques drawn by customers on the
bank, and collecting cheques deposited to
customers„ accounts. Banks also enable
customer payments via other payment
methods such as telegraphic transfer, and
ATM.
Bank as a borrower
Banks borrow money by accepting funds
deposited on current and savings accounts,
accepting term deposits and by issuing debt
securities such as bonds i.e. TFC‟s.
Bank as a lender
Banks lend money by making advances to
customers on current account, by making
installment loans, and by investing in
marketable debt securities and other forms of
lending.
Other Functions
 Provide safe custody – Lockers
 Issue letter of credits, guarantees
 Issue demand drafts and pay orders
 Provide foreign exchange
 Provide reports on the creditworthiness of
customers
New Concepts
 Telephone Banking
 Mobile Banking
 Internet Banking
 Branchless Banking
Rank Entity Score
1 Bank Of America Corporation 135,271 ($m)
2 Citigroup Inc 119,783 ($m)
3 JP Morgan Chase & Co. 115,790 ($m)
4 HSBC 114,928 ($m)
5 Mitsubishi UFJ Financial Group 81,940 ($m)
6 Royal Bank Of Scotland Group 78,730 ($m)
7 ING Groep NV 78,088 ($m)
8 Crédit Agricole 77,462 ($m)
9 Wachovia Corporation 69,716 ($m)
10 BNP Paribas 67,378 ($m)
Source: Euromoney Magazine
 Conventional
money
Bank Client

money + money (interest)

 Islamic

Bank Goods & Client

Services

money
• What is Islamic Banking?

• What prompted Islamic Banking?

• Islamic Finance Perspectives

 “Islamic Banking is interest free Asset
Backed banking governed by the
principles of Islamic Shariah”

 Islamic Banking distinguishes from

Conventional Banking in four basic principles:
1. Interest Free Transactions.
2. Risk Sharing
3. Asset & Service Backing
4. Contractual Certainty( Gharar free
contracts)
• Interest free banking? 

• Profit and loss 

sharing?


• Ethical banking?
• Emergence of Arab nationalism and the
search for identity

• Oil shocks and petrodollars (US$ 145 per

barrel)

• Privatization and the individual‟s right to

choose
 More than 350 Islamic Banks/FI‟s in 50
countries

 current market size US$ 700 billion

 Estimated annual growth rate – 20% , total

assets exceeding US$ 1 trillion by 2016.