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Pakistans First Islamic Finance Expo and Conference 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 remains something 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

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 His Messenger. Those are the ones whom Allah will bless with mercy. Surely, Allah is Powerful, Wise. (Sura Tauba: verse 72)

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.

Paki st ans First Islamic Finance Expo and Conference w a s organized by t h e Publicity Channel while the c o n f er e nc e was planned and directed by Ernst & Young Ford Rhodes Sidat Hyder. It was held on 18th & 19th of May 2012 at the Karachi Expo Centre.

Inside this issue

Inside Story Editors Message 1 2

Local and 7 International News Get a glimpse of what is happening in the world of Islamic finance In the Spotlight Find our read of the month Ask US By Mufti Ibrahim Essa and Mufti Javed Pakistan Islamic Banking Industry Analysis 10



Mufti Muneeb ur Rehman accompanied by Mr. Naeem Qureshi and Mr. Mehmood Tareen visiting stalls.

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 the utmost 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 next generation 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!

Advisory Board
Mufti Irshad Ahmed Aijaz Mufti Najeeb Khan Anwar Ahmed Meenai Mohammad Aslam Mujeeb Baig Syed Shahjahan Salahuddin Faizan Memon

NusratUllah Khan

Associate Editors
Muhammad Shahzad Hussain Arshad Hussain Zubairi Ammar Khalid Rima Farooq

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

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An initiative of IFP forum


Pakistans First Islamic Finance Expo and Conference 2012

educate the market and the consumers. The event was organized by the Publicity Channel while the conference was planned and directed by 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 Family Takaful,

Guest of honor Mr. Younus Bashir inaugurating the Pakistans first Islamic finance expo and Conference 2012. no doubt that the knowledge gap is holding the industry back but this event brings out very well the need to

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 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) Session 2 Introduction to Takaful and Family Takaful 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) Session 3 Islamic banking introduction and criticism Mr. Muhammad Faisal Shaikh (Head product development Bank Islami Pakistan Limited) Mr. Asif Amanullah Darwesh (Vice President Askari bank limited Islamic banking group) Session 4 Introduction to Modarabas ands their product Mr. Shakeel Khan (General manager First Paramount Modaraba) Mr. Intisar Muhammad Usmani (Head of credit and marketing First Habib Modaraba) Session 5 Session 6

Islamic banking Islamic capital introduction and market and mutual funds criticism Mr. Mahmood Shafqat (Additional director SBP) Mr. Mujeeb Baig (Head of product development, MCB Bank Limited) Mr. Abdullah Najib 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)

Mufti Abdus Sattar Laghari ( Shariah advisor National Mufti Muhammad Bank of Pakistan Ibrahim Essa and NBFC & (Shariah advisor Modaraba Ernst & Young association) Ford Rhodes Sidat Hyder)

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An initiative of IFP forum


Pakistans First Islamic Finance Expo and Conference 2012

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 a remarkable assistance 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 conferences and 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 awareness and removing 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)

Following institutions had their stalls in the expo: National 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 Bank of

Stalls of JS investment, Al Meezan investment, Askari bank limited and MCB Islamic division on Pakistans first Islamic finance expo and conference. Modarabas, Shariah Discussion and Corporate financing modes in Islamic Banking. The discussions were mainly headed tow ards removin g the prevailing miscon ception s an d 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. Where lack of awareness and misconception among general public proved to be an obstacle for the Islamic institutions to expand its share; burden of documentation and altering the

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.

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.
An initiative of IFP forum

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Pakistans First Islamic Finance Expo and Conference 2012

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 - Islamic banking department SBP) Session 1 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 Moderated by: Omar Mustafa Ansari (Head of Islamic financial services group at Ernst & Young Ford Rhodes Sidat Hyder) Moderated by : Faizan Ahmed Moderated by : Mr. Zulfiqar Memon (Deputy General Ali (CEO at Modaraba Al Manager at Habib Bank Ltd.) Mali) Moderated by: Omar Mustafa Ansari (Head of Islamic financial services group at Ernst & Young Ford Rhodes Sidat Hyder) Session 2 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) Session 3 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 Session 4 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)

Special session on Islamic capital market and mutual fund as conducted by Mr. Muhamamd Shoaib (CEO at Al Meezan funds) 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 saying that The strategic planning of the institution should be structured t o w a r d s c o m i n g f o r w ar d a n d supporting awareness among the people instead of competing with each other. Organizing such an imperative event on Islamic finance has triggered the evoluti on of Isl a mic fin a n ce. Furthermore, it would definitely strengthen and support Quaids concept of economic system based upon Islamic principles.
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Mufti Mohammad Najeeb Khan (Shariah advisor Habib Metro Bank), Mufti Yahya Asim (Shariah advisor Habib Bank Limited) and Mr. Munir Ahmed (Joint Director, SBP-Islamic Banking Department).

Mufti Rafi Usmani visiting Burj Banks stall on the second day of Expo. 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

Islamic Finance Pakistan (IFP) 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.
An initiative of IFP forum


Pakistans First Islamic Finance Expo and Conference 2012

Meezan bank stall at the Pakistans first Islamic finance conference and expo.

Guest of honor Mr. Yousuf Bashir visiting Meezan bank stall.

Left to right: Mr. Sultan Chawalla presenting award to senator Mr. Abdul Haseeb Khan.

Left to right: Mr. Omar Mustafa Ansari presenting award to Mr. Muhammad Faisal Shaikh.

Left to right: Mufti Rafi Usmani presenting chief guest speech on second day of expo.

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

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

Pak-Kuwait Takaful and Diyanah Islamic financial services stalls. Page 6

Dr. Anis Ahmad Presenting award to Mr Prevez Said.

Mr. Yousuf Bashir giving guest of honor speech on 18 May 2012.

An initiative of IFP forum

AAOIFI unveils Shariah standards

The Accounting and Auditing Organisation for Islamic Financial Institutions announced new seven Shariah standards in Dubai. The new standards include; Financial Rights and its Management, the Regulations of Liquidity Management, Bankruptcy, Capital and Investment Protection, Agency in Investment, Calculation of the Profit Transactions and Options of Trust.

organized the Oman Islamic Banking 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, innovation, standardization and best practices.

Investors hold $1.5t in Shariah compliant assets

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.

Finance Initiatives. These initiatives are aimed at fostering the sustainable development of the Islamic economics and finance, through the design and delivery of activities in identifying and disseminating sound practices in the Islamic financial services industry, including sound practices relating to the regulatory and supervisory environment corporate governance and business practices.

Libya approves Islamic banking law

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 foreign investment and stimulate its private sector following last year's war that ousted Muammar Gaddafi, the central bank governor has said.

Islamic finance to strengthen economic and financial linkages between Asia and the Middle East
Held under the official support of the Monetary Authority of Singapore, the 3rd Annual World Islamic Banking Conference: Asia Summit (WIBC Asia 2012), which was held on the 5th and 6th of June 2012 in Grand Hyatt Singapore. It set the stage for high-level discussions that focused on strengthening international connectivity and capturing cross-border opportunities enabling further growth of the Islamic finance industry in Asia.

World Bank - Al Baraka launches Islamic finance initiatives

The World Bank and Bahrainbased Al Baraka Banking Group have joined hands to launch joint programmes under a new Islamic

IFAAS announces the launch of the first independent study of Morocco's emerging retail Islamic finance sector
IFAAS (Islamic Finance Advisory and Assurance Services) the international Islamic finance consultancy, announced the imminent launch of its exclusive 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 market. The report measures the potential market size for Islamic retail banking, finance and Islamic insurance "Takaful" and assesses how it will compete with mainstream, conventional finance.

OITE conferences announces Oman Islamic banking and finance conference to be held in June
Oman International Trade and Exhibition (OITC) Conferences

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

ITFC signs a US$400 million framework agreement for cooperation with Egypt
The International Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank Group (IDB), has signed a framework agreement for cooperation with the Government of the Arab Republic of Egypt. This agreement aims to finance the Egyptian General Petroleum Corporation (EGPC) and the General Authority of Supply Commodities (GASC) with an amount of US$ 400 million annually for three years. The allocated amount will be used to finance the import of petroleum and petroleum products, in addition to the import of strategic commodities namely wheat and foodstuffs.

ITFC and SAMIR Sign US$180 million agreement

The International Islamic Trade Finance Corporation (ITFC), the international financing arm of the Islamic Development Bank (IDB) Group, has signed a US$180 mill i o n s y n d i c a te d s tr u c tu r e d Murabaha framework agreement with Moroccos Societe Anonyme Marocaine de lIndustrie du Raffinage (SAMIR) for import of crude oil and petroleum products.

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, Currencies, Equities, Energy and Agricultural Commodities, with 100 per cent capital protection.

Abu Dhabi Islamic bank (ADIB) London inaugurated

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 high net worth individuals.

Noor Islamic Bank (NIB) launches two unique structured investment products
NIB, a leading Islamic bank in the United Arab Emirates, has launched two unique structured

Bank Muscat to open new branches for Islamic banking

It has been reported that Bank Muscat, Omans biggest financial institution, is planning to open seven dedicated branches for offering Islamic banking services through window operations, the banks chief executive told Times of Oman. BankMuscat has allocated RO150 million (approximately $400 million) of capital to finance its Islamic banking window operations, Meethaq, subject to the necessary regulatory approvals.

Takaful Emarat launch new investment fund

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

GIB unveils MYR 3.5b Sukuk Al Wakala programme

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.

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

Lecture held on Islamic banking at Riphah University

Malaysian Scholar Dr. Syed Othman Alhabshi on Thursday delivered lecture on Islamic banking and finance at Riphah International University. Renowned scholar and an expert in Islamic finance, Datuk Dr Syed Othman Alhabshi, Chief Academic Officer of International Centre of Education in Islamic Finance (INCEIF), Malaysia, visited Riphah International University and delivered a lecture on Islamic Banking and Finance for Dynamic Blend of Shariah and Professional Expertise.

renewable sources to overcome power shortages. Pakistans Fauji Foundation, set up as a charitable trust for former servicemen, and the nations Tapal Group are backing the projects totaling 100 megawatts, according to a statement on the IDB website.

a large number of participants from various segments of the Islamic finance industry.

News analysis: code of corporate governance 2012

Federal Minister for Finance Dr. Abdul 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 requirements. 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 shareholders. It requires at least one independent director while preference is for 1/3rd of 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 included in our next issue.

Top Islamic banker vows to increase interest-free banking share to 15%

The Islamic banking current share of 8% should grow to over 15% by 2016 in the country through penetration in all potential sectors with innovative Sharia based products and services.

Experts highlight potentials of Islamic funds industry in Pakistan

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.

Lecture focuses on future directions and research agenda for Islamic finance
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 delivered a lecture entitled Islamic Finance: Future Directions and Agenda for Research. Dr. Khan focused on the inherent problems of Islamic finance, its current challenges and future directions. He started off with outlining the political 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

Moves Promotions


Islamic, Asian banks agree to funding for Pakistan wind power

The Islamic Development Bank (IDB) and the Asian Development Bank agreed to a $133 million financing plan to develop two wind projects in Pakistan as the nation seeks new

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.

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

Book in the Spotlight

Islamic Law of Contract

By Dr. Liaquat Ali Khan Niazi Reviewed by

Bisma Hareem

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 the most 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.

This book provides complete insight to the field of Islamic law of contract from formation to discharge of contract. Different spheres which have been focused in this book includes contract of agency, hire contract, contract of insurance and banking contracts.

comprehensive definition of contract by all the renowned writers and consequently focuses on the Islamic law of contract, features of Islamic 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. Published by: Research cell Dayal Singh Trust Library, Lahore

The book initially discusses the detail about the advent of Islam and then moves on to provide a more

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.

An initiative of IFP forum

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Ask Us
By Mufti Ibrahim Essa and Mufti Javed Ahmed
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? 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. in Istisnaa contract, is it obligatory to Islamic bank to pass this concession to the ultimate purchaser?

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, the Islamic 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.

Islamic banks are permitted to take commission for the credit study. It is prepared internally or through an external party, so as to know the credit 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

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

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An initiative of IFP forum

The Progress of Islamic Banking Industry

Part 1-Islamic Banking Institutes
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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

In FY 2011, I B I , flourished yet again marking an estimate gr owth o f 3 6 % . Profit of IBIs crossed R s . 1 0 billion mark for the first t i me ; IBIs with profit of Rs. 5-7 billion had 59% share o f t h e i n d u s t r y s profitability while IBDs with profit of Rs. 4.7 billion had 41% share.

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 had 41% 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.

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An initiative of IFP forum


The Progress of Islamic Banking Industry

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 and deposits 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

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 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

Total asset and deposit in 2011 of IBs

250,000 200,000 150,000 100,000

2011 2011

50,000 Meezan Bank Bank Islami Dubai Islamic Bank Burj Bank Al Baraka

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
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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.

which grew by 61% and reached Rs. 20 billion.

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The Progress of Islamic Banking Industry

Financial summary of the Islamic banks for the year 2011

Statement of Financial Position
Sr. No 1. 2. 3. 4. 5. 6. 7. 8.

Figure in Rs.000
Dubai Islamic Al-Baraka Bank Burj Bank Bank 1,116,928 12,937,179 23,340,602 48,196,449 1,898,500 38,491,607 41,962,400 6,234,049 2,215,636 9,982,793 10,509,340 27,644,829 447,300 20,341,241 21,840,251 5,804,578 7,577,186 26,179,416 27,610,708 72,544,879 1,736,120 61,559,026 66,020,396 6,524,483

Description Balances with other banks Investments Financings Total assets Due to financial institutions Deposits and other accounts Total liabilities Net assets

Meezan Bank 2,348,076 98,488,574 59,155,585 200,550,394 9,235,960 170,030,431 186,764,043 13,786,351

Bank Islami 549,277 21,067,082 20,110,401 58,821,314 800,000 50,568,785 53,508,676 5,312,638

Statement of Comprehensive Income

9. Profit on financings 18,032,152 8,665,622 1,389,155 7,977,375 2,504,755 6,125,830 4,356,300 3,391,543 4,632,785 2,395,995 10,075 2,226,715 457,136 2,367,722 316,129 190,486 2,375,585 1,423,171 251,580 700,834 188,537 1,236,279 (346,908) (288,488) 6,699,178 5,001,222 (227,176 ) 1,925,132 482,058 1,926,488 480,702 410,370 5,502,154 2,883,355 21,423 2,597,376 226,709 2,215,498 608,587 409,556

10. Return on deposits 11. Provisions 12. Net spread after provisions 13. Total other Income 14. Administrative and other expenses 15. Profit / (Loss) before taxation 16. Profit / (Loss) after taxation

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 presented here. User discretion advised.
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