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MEEZAN BANK & FAYASL BANK PRODUCT


COMPARISON OFFER TO CUSTOMERS

Submitted By: Muhammad Muavia Khan [SP09-MBA-081]

Rahmat ullah [SP09-MBA-114]

Danish [SP09-MBA-027]

Syad Azam Shah [SP09-MBA-135]

Submitted To: Dr. Waheed Akhtar

Subject: Islamic Finance

Submission Date: 13/05/2010

Department of Management Sciences


VS MEEZAN BANK & FAYASL BANK PRODUCT COMPARISON OFFER TO CUSTOMERS

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COMSATs Institute of Information Technology, Lahore, Pakistan.
VS MEEZAN BANK & FAYASL BANK PRODUCT COMPARISON OFFER TO CUSTOMERS

MEEZAN BANK & FAYASL BANK PRODUCT


COMPARISON, OFFER TO CUSTOMERS

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VS MEEZAN BANK & FAYASL BANK PRODUCT COMPARISON OFFER TO CUSTOMERS

ACKNOWLEDGEMENT

We are heartily thankful to our supervisor, Mr. Dr. Waheed Akhtar, whose encouragement,
guidance and support from the initial to the final level enabled me to develop an understanding
of the subject. Lastly, we offer our regards and blessings to all of those who supported us in any
respect during the completion of the project.

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Executive Summary

We have done this research task assigned by our course


coordinator Dr. Waheed Akhter on the topic “Product
comparison of Islamic Bank & Conventional Bank”. We hereby
compared the Meezan Bank’s (Islamic) products offered to
customers with Faysal Bank’s (Conventional) products. We
prepared this assigned work by focusing on the current, saving &
consumer finance products of both entities.

Meezan bank is the leading Islamic bank in Pakistan. It is


the awarded bank of Pakistan in Islamic banking. It is a totally
sharia-based organization. It offers paramount Riba Free
Islamic products to the customers that can draw a customer’s
interest in Islamic operations. Returns (Profits) from Meezan
Bank’s investment pools are distributed among the all depositors
according to the nature (Type) of product. There is no exploitation
of customer; all products are of balanced nature.

Faysal Bank is a conventional bank. It runs its operations


according to materialism as a conventional bank operates. It offer
number of packages to attract customers; moreover it also cop-up
different sectors of the economy like agriculture and corporate
financing. All the products offered by Faysal Bank are of
competitive nature with the product of other conventional banks.
All the offered products are interest based.

It was concluded that there are several differences in


operations of Islamic banking and commercial banking.
Recommendations for both banks are given last. So that they
improve their functions and products according to customers’

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VS MEEZAN BANK & FAYASL BANK PRODUCT COMPARISON OFFER TO CUSTOMERS

need. Moreover, the demands for Islamic products are increasing


with the passage of time.

TABLE OF CONTENTS

Introduction……………………………………………………………….…………….. 07

What is Bank?..................................................................................................................... 07

History of banking in Pakistan:……………………………………….………………… 07

Banking In Pakistan:…………………………………………….………………………. 07

History and Background of Faysal Bank:……………………………………………… 07

History and Background of Meezan Bank:……………………………….……………. 08

Competitive Products Offered by Both Banks:………………………….…………….. 10

Current Account Products:………………………………...…….……………... 11

Saving Account Products:……………………………….…...….………………. 12

Consumer Finance Products:………………………………….………………... 17

Referance:……………………………………………………………………………...… 26

PREAMBLE

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What is Bank?

In Simple words we can say that bank is a pipeline through which money moves into and
out of circulation. Bank accepts deposits and repays cash to its customers on demand. The bank
borrows money at a lesser rate of interest and lends it to the borrower at a higher rate.

History of banking in Pakistan:

At the time of independence, there were 487 offices of scheduled banks in the territories
now constituting Pakistan. Following the announcement of independence plan in June 1947, the
Hindus residing in the territories now comprising Pakistan started transferring their registered
offices in Pakistan, transferred them to India in order to bring a collapse of the new state. By
30th June 1948, the number of offices of scheduled banks in Pakistan declined from 487 to only
195.

Banking In Pakistan:

Pakistan has indeed unique banking history commencing as were from scratch at the time
of Pakistan of this subcontinent. However it soon comes over its extra ordinary banking
problems and by grace of Allah we have a stable banking sector.

History and Background of Faysal Bank:

Faysal Bank started operations in Pakistan in 1987, first as a branch set-up of Faysal
Islamic Bank of Bahrain and then in 1995 as a locally incorporate Pakistani bank under the
present name of Faysal Bank Limited. On January 1, 2002, Al Faysal Investment Bank Limited,
another group entity in Pakistan, merged into Faysal Bank Limited which resulted in a larger,
stronger and much more versatile institution. In fact it has the highest share capital amongst
private banks in Pakistan and is amongst the largest in terms of equity. Faysal Bank Limited is a
full service banking institution offering consumer, corporate and investment banking facilities to
its customers.

Vision
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“Excellence in all that we do.”

Mission Statement:

“Achieve leadership in providing financial services in chosen markets through


innovation.”

History and Background of Meezan Bank:

Meezan bank is a premier Islamic bank and publicly listed company first incorporated on
January 27, 1997. It started operations as an investment bank in August of the same year. In
January, 2002 in an historic initiative, Meezan Bank was granted the nation's first full-fledged
commercial banking license dedicated to Islamic Banking, by the State Bank of Pakistan.

Meezan Bank stands today at a noteworthy point along the evolution of Islamic Banking
in Pakistan. The banking sector is showing a significant paradigm shift away from traditional
means of business and is catering to an increasingly astute and demanding financial consumer
who is also becoming keenly aware of Islamic Banking. Meezan Bank bears the critical
responsibility of leading the way forward in establishing a stable and dynamic Islamic Banking
system replete with dynamic and cutting-edge products and services.

Vision

Establish Islamic banking as banking of first choice to facilitate the implementation of an


equitable economic system, providing a strong foundation for establishing a fair and just society
for mankind.

Mission

To be a premier Islamic bank, offering a one-stop shop for innovative value added
products and services to our customers within the bounds of Shariah, while optimizing the

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stakeholders value through an organizational culture based on learning, fairness, respect for
individual enterprise and performance.

Objectives

To develop a committed service culture which ensures the consistent delivery of our
products and services within the highest quality service parameters, promoting Islamic values
and ensuring recognition and a quality banking experience to our customers.

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Meezan Bank Products Faysal Bank Products


There is a list of products offered by Meezan There is a list of products offered by Faysal
Bank to their customer. Bank to their customer.

Current Account: Current Account:

• Riba Free - Current Account  Faysal Sahulat

Saving Account:

Saving Account:
• Faysal Savings Account
• Riba Free - Rupee Saving Account • FCY Saving Plus
• Riba Free - Dollar Saving Account • Faysal Mahfooz Sarmaya
• Meezan Bachat Account • Faysal Premium
• Meezan Business Plus Account • Faysal Moavin
• Karobari Munafa Account • Faysal Market Link
• Labbaik Saving Aasaan • Rozana Munafa Plus Account

Consumer Financing:
Consumer Financing:
• Faysal Car Finance
• Car Ijarah - Islamic Auto Finance • Faysal Home Finance
• Faysal Personal Finance
• Easy Home – Islamic Housing finance
• Faysal Khushaal Kisan Scheme

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CURRENT ACCOUNT:

In this type of account the client is allowed to deposit or withdraw money as he likes. He
may, thus, deposit or withdraw several times in a day as he likes. Usually the bank
allows this and charges service charges are deducted by the bank from current deposit
account. It gives advantage for paying debts by the convenient and safe means of sending
Cheques through the post thus avoiding the trouble and loss.
Current Account (Riba Free): Faysal Sahulat:

This bank account that is ideal for Faysal Sahulat is a transactional


businesses and individuals looking for Shariah account specially designed for individuals and
compliant banking and ease of access. With a business customers who seek instant access to
minimum amount of only Rs.10,000 this their funds at any FBL branch in Pakistan.
product offers you a range of benefits Account can be opened with an initial deposit
including personalized checking facility, no of Rs. 5,000.
restrictions on the number of transactions,
free Call Centre facilities, free balance
certificates, priority banking and much more.
KeyFeatures of Meezan current A/c KeyFeatures of Faysal Current A/c Products:
Products:
• Free access to account through online
banking at all Faysal Bank branches
• Free access to account through online
countrywide.
banking at all Meezan Bank branches
• Unlimited transaction facilities.
countrywide.
• On maintaining a monthly average
• Unlimited transaction facilities.
balance of Rs. 500,000 or more
• On maintaining a monthly average
following additional facilities are
balance of Rs. 1000,000 or more
provided, free of cost:
following additional facilities are
provided, free of cost:  Cheque Book
 Cheque Book  Pay orders
 Pay orders
 Visa ATM/Debit Card

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 Visa ATM/Debit Card

Outcomes & Recommendation:

Both banks offered the current account product with about same features but the
minimum deposit limits vary. Meezan bank limits is higher than Faysal bank. And the limit for
additional is higher than Faysal bank. Both bank have to set the lowest limits of deposit so that
the persons with low salary and wages can access it.

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SAVING ACCOUNT:

An account used to deposit money at a bank or credit union and earn Interest / Profit on
the account over time. Money can be added or removed from the account by visiting the bank.
Usually you can add or withdraw funds at any time; there is no cost to do so. Banks may require
a minimum to open or maintain the account. This type of account is often the easiest account for
children to open. Because of its simplicity, it is the first account for many people and is used by
all ages.

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Rupee saving Account (Riba Free): Faysal Savings Account:

With a minimum of only PKR 10,000 Faysal Savings is specially designed to


The Rupee Saving Account can be opened cater to the need of those who like to earn on
under Musharakah Agreement. The profit their hard earned savings. This account
earned is calculated every month. And if the provides convenience for the account holders.
client maintains a monthly balance of PKR Account can be opened with an initial deposit
10,000 the client is eligible for the profits that of Rs. 10,000/. Profit is calculated on monthly
will be disbursed every month. minimum balance. Profit is paid on six
monthly bases

Meezan Bachat Account (Riba-Free): Rozana Munafa Plus:

Meezan Bachat Account is a unique Rozana Munafa Plus is a savings account


saving account that provides high monthly in which profit (Interest) is calculated on day
returns with the flexibility to withdraw savings end balance, and is disbursed on a monthly
if needed. Account Holders receive profit even basis. The customer gets benefited because it
if their balance falls below Rs. 25,000/- in any provides customer with the option of a high
month. Profit is credited to their account every value monthly profit (Interest) account.
month and is calculated with reference to the Account opening and minimum balance
minimum balance maintained in the account requirement of Rs. 100,000 for individual
during the preceding month. The Riba-Free customers and Rs. 500,000 for corporate
Meezan Bachat Account works under the customers.
principles of Mudarabah. Maximum balance
limit for getting highest profit rate is Rs.
1,000,000/-

Meezan Business Plus: Faysal Premium:

Meezan Business Plus is a Mudarabah-based Faysal Premium is a savings account


account that allows customers to conduct their specially designed for high value deposits with
banking transactions while availing a wide 15
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KeyFeatures of Meezan Saving A/c Products: KeyFeatures of Faysal Saving A/c Products:

• Halal & High Competitive  Access to account through on-line


returns banking at all Faysal Bank branches
• Profit payment on monthly across Pakistan.
basis open for individuals only.  Profit payment on monthly basis open
• Waiver of application fee for for individuals only.
Car Ijarah & Easy Home for accounts  Free online banking.
with minimum balance of Rs. 500,000  Priority Banking
• Free bank balance certificates  Free facilities: cheque books and pay
• Visa Debit Card. orders
• Free facilities: cheque books
and pay orders
• Saving Account opened under
Musharakah Agreement.

Outcomes & Recommendation:

Both banks are offering the numbers of products in saving account categories because
large number of customers is interested in opening saving account. Because a specific return is
given on the deposit. Meezan bank give the return from their profit and is Halal according to
Shariah Meezan Saving Account opened under Musharakah Agreement while the Faysal bank
give the return from their interest based profit which is totally haram in Shariah point of view.
So, Faysal bank should launch Islamic product because they are operating in Islamic country.

CUSTOMER FINANCE:

The division of retail banking that deals with lending money to consumers. This includes a wide
variety of loans, including credit cards, mortgage loans, and auto loans, and can also be used to
refer to loans taken out at either the prime rate or the sub prime rate.

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Islamic Car Financing: Faysal Car Finance:

Car Ijarah is Pakistan's first Faysal Car Finance is the most flexible product
"Interest Free" car-financing based on designed to meet customer needs. Car
Islamic financing mode of Ijarah or Financing for locally manufactured new and
Islamic leasing. This product is ideal for used cars and imported cars. Car Financing up
interest averse individuals, looking for a car to five years. Down payment only 20% of the
financing that provides the convenience of a car value plus Minimum documentation
well designed product while avoiding an charges. Fast processing. Option to
interest based transaction. Car Ijarah totally prematurely terminate the facility.
Halal auto finance facility that is very
Eligibility:
affordable, with quick processing and minimal
Now you can swiftly, easily and cost
documentation. Car financing that is very
effectively owns a car if you are:
competitively priced, hassle-free, and totally
Halal.
• A Pakistani National holding the New
Computerized Identity Card (NADRA)
As Ijarah is basically is the transfer of • Minimum 20 years of age at the time of
financing.
usufruct of a fixed asset to another person for
• A Businessman or Self-Employed with
an agreed period, at an agreed consideration. a minimum of one year experience in
the same business and profession.
Under car Ijarah agreement the car will be
• A Salaried person with at least two
given to the customer for the period agreed on years employment history.
the time of contract. In car Ijarah the asset
Limitations:
remains in the ownership and risk of bank and
the customers only pay the rentals for use Faysal bank not leases cars to judges, lawyers,
army, and police.
of the asset: just like house rent. The
product has grown all over the country with a Mostly prefer the salaried persons rather than
portfolio of Rs 291 million as of 31st landlord.
December with non-performing contracts. Insurance Company ADAM G and EFU

Features: Insurance 5%
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Lease term 3, 4 and 5 years
 COMSATs
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Features: Features:

 High financing amounts. • Flexible repayment options


 Maximum financing against • Option to partially or fully terminate
property value. the facility.
 Flexibility to make partial • Financing tenor up to 20 years!!!
prepayments. • Fast processing.
 Minimal processing charges. • Minimum processing charges
 Very affordable and competitive • Enhancement option available
monthly payment plan with a regularly • Financing available up to 80% of the
reducing rental amount. market value of the property.

Outcomes & Recommendation:

Both banks are operating in consumer finance products but the mode of financing varies.
Meezan bank is fallowing the Shariah laws while the Faysal bank is fallowing the conventional
banking. In Faysal bank financing is totally interest based while the Meezan bank financing is
totally rental based. Meezan bank is providing just “Car Ijarah Finance” and Easy Home
Finance” while the Faysal Bank offering the Car financing, Home financing, Personal & Agri
Loan facility. Faysal Bank should convert their conventional financing into Islamic financing
because the Islamic financing is the ideal financing technique. In which both parties avoided
from interest as well as transect happily. There is no exploitation of parties/ persons involved in
financing contract. Meezan bank can be got the more market share by offering the personal and
Agri loan with Islamic mode of financing.

Basic Difference between conventional and Islamic banking


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Conventional Banking Islamic Banking


• The functions and operating modes of • The functions and operating modes of
conventional banks are based on fully Islamic banks are based on the
manmade principles. principles of Islamic Shariah.

• The investor is assured of a • In contrast, it promotes risk sharing


predetermined rate of interest. between provider of capital (investor)
and the user of funds (entrepreneur).

• It aims at maximizing profit without • It also aims at maximizing profit but


any restriction. subject to Shariah restrictions.

• It does not deal with Zakat. • In the modern Islamic banking system,
it has become one of the service-
oriented functions of the Islamic banks
to be a Zakat Collection Centre and
they also pay out their Zakat.

• Lending money and getting it back with • Participation in partnership business is


compounding interest is the the fundamental function of the Islamic
fundamental function of the banks. So we have to understand our
conventional banks. customer’s business very well.

• It can charge additional money (penalty • The Islamic banks have no provision to
and compounded interest) in case of charge any extra money from the
defaulters. defaulters. Only small amount of
compensation and these proceeds is
given to charity. Rebates are give for
early settlement at the Bank’s
discretion.

• Very often it results in the bank’s own • It gives due importance to the public
interest becoming prominent. It makes interest. Its ultimate aim is to ensure
no effort to ensure growth with equity. growth with equity.

• For interest-based commercial banks, • For the Islamic banks, it must be based
borrowing from the money market is on a Shariah approved underlying
relatively easier. transaction.

• Since income from the advances is • Since it shares profit and loss, the
fixed, it gives little importance to Islamic banks pay greater attention to
developing expertise in project developing project appraisal and
appraisal and evaluations. evaluations.

• The conventional banks give greater • The Islamic banks, on the other hand,
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emphasis on credit-worthiness of the give greater emphasis on the viability


clients. of the projects.

• The status of a conventional bank, in • The status of Islamic bank in relation to


relation to its clients, is that of creditor its clients is that of partners, investors
and debtors. and trader, buyer and seller.

Conclusion:
After a complete analysis of both banks we conclude that both banks are doing well in
their respective fields. Moreover, Faysal Bank also have Islamic banking unit but still it has to
improve enough to represent Pakistan over the world in Islamic banking.

Meezan bank should also enhance its market share nationally and internationally by
launching awareness programs for society to create better understanding regarding Islamic
banking.

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Reference:

1. Official web sites of Meezan Bank.

i. www.meezanbank.com.pk

ii. www.almeezan.com.pk

2. Official web site of Faysal Bank

i. www.faysalbank.com

3. Others:

i. http://mohdhafez.wordpress.com/

ii. www.wikipedia.com

iii. www.answers.com

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