AnToverviewTofTtheTstructuredTproducedToffere

dTbyTIslamicTbanksTinTPakistan.
Abstract:
IslamicTbanksTareTattemptingTtoTcaptureTtheTmostTverityTofTcustomerTtoTfightTwithTconventionalTbanks
TbyTprovidingTaTlargeTnumberTofTproductsTasTanTalternativeTforTinterestTbasedTproducts.TThereTisTclea
rTdistinctionTbetweenTstructuredTproductsTcreatedTbyTIslamicTandTconventionalTbanks.TIslamicTbanksTar
eTofferingTinterestTfreeTproductsTaccordingTtoTShariaTprinciplesTtoTpromoteTbusinessTandTtradeTinTtheT
country.TThisTstudyTpresentTanToverviewTofTstructuredTproductsTofferedTbyTIslamicTbanksTespeciallyTinT
Pakistan.TIslamicTbanksTinTPakistanTprovideTaTvarietyTofTstructuredTproductsTaccordingTtoTtheTprinciples
TofTShariahTtoTcopeTwithTtheTchallengesTofTresentTageTinTPakistan.TTheseTproductsTmayTbeTdividedTas
TintoTprofitTandTlossTsharing,TnonprofitTandTlossTsharing,TShortTterm,TmediumTtermTandTlong-
TtermTproductsTaccordingTtoTtheTspecificTcharacteristics.TThisTstudyTalsoTshowsTaTclearTpictureTregardi
ngTtoTtheTperformanceTofTtheTIslamicTbanksTinTPakistanTsinceT2002.TItTmayTenhanceTtheTunderstandin
gTofTcustomer’sTbankersTandTpolicyTmakers.TThisTstudyTalsoThelpTfullTforTtheTprovisionTofTtheTawaren
essTregardingTtoTtheTstructuredTproductsTofTIslamicTbanksTthatTenablesTtheTcustomersTandTpolicyTmak
ersTinTPakistanTtoTexploreTtheTwaysTtoTrealizeTtheTcoreTbenefitsTofTIslamicTbanking.

Introduction:
PrinciplesTofTIslamicTFinance.
“AllahThasTpermittedTtradeTandThasTforbiddenTRiba”

“AllTtheTconditionsTagreedTuponTbyTtheTMuslimsTareTupheld,TexpectTaTconditionTwhichTallowsTwhatTisTprohibite
dTorTprohibitsTwhatTisTlawfil”T(SunanTAbuTDaweedT1981)T

InT1980-
81TParticipationTTermTCertificateT(PTC)TlaunchedTinterestTfreeTcorporateTfinancing.TTwoTTierTstructureTlaunchedTi
nT1981TwhichTisTintroducedTtheTconceptTofTModaraba.TAfterTthatTmanyTcommercializedTbanksTstartedTofferingTi
nterestTfreeTproductsTbasedTonTprofitT&TlossTsharing.TOrdinanceT1984TBankingTandTFinancialTServicesTamendedT
inT1984-
1985.T1stTJulyT1985TallTcommercialTbanksTinTPakTRupeesTwasTmadeTinterestTfree.TInT2002TfirstTIslamicTbankT(Al-
Meezan)TinTPakistanTgivenTtoTlicensesTtoTofferTallTtheTproductsTaccordingTtoTtheTShariah.TInTPakistanTlikeTother
sTcountryTShariahTComplianceTMechanismTensureTtheTcustomersTcanTtrustTIslamicTFinancialTProducts.TMajorTpilla
rsTofTthisTare,TShariahTboardT(approvesTtheTpolicies,TprovideTguideline)TShariahTAdvisorsT(IslamicTguidelineTtoTba
nkTmakeTcustomerTmindTwhenTdealingTwithTIslamicTservices/Products)TShariahTAuditTSystemT(identifyTtheTincom
pleteTtransactionTflow).

StructuredTProductsTofTIslamicTbanksTinTPakista
n.
[Date] 1
IslamicTbankingTstructuredTproductsTinTPakistan
 ParticipatoryTModes.
 Mudarabha
 Musharakah
 DiminishingTPartnership

SaleTModes.
 Murabahah
 Istisna
 Salam
RantTbasedTMode.
Ijarah
Tawaruq

MURABAHA T(ProfitTbaseTsaleTwhereTtheTsellerTexpresslyTmentionTtheTcostTofTcommodityTandTa
dsTagreedTmarginTofTprofit.TPriceTmustTbeTfixedTonceTitTfixedTafterTthatTcannotTbeTchanged.TInTcaseTofTdeferre
d,TdueTdateTshouldTbeTknownTandTspecific.TInTMurabahaTsubjectTofTsaleTmustTexistTandTitTshouldTbeTinTowner
TshipTofTtheTsallerTatTtheTtimeTofTsale.TBankTpurchaseTitTthroughTagentTpaymentTtoTsupplierTandTissuanceTofTi
nvoicesTbyThim.T

IJARAH(Leasing)TIJARAH-WAL-
IQTINA(AssetTLeasing)TMUSAWAMAH(BargainTSale)TISTISNAA(SaleTOrder)TBAITMUAJJAL(CreditTSale)TMUDARABAH
(TrustTprofitTSharing)TMUSHARAKAH(JointTventureTprofitTsharing)TEquationTofTbankTFailure;

NetToperationalTlossesT>TReservesT+TPLSTDeposits

TEquitionTofTBankingTSystemTFailure:

NetToperationalTlossesT>TReservesT+TPLSTDepositsT+TEquity

BAITSALSMT(CommodityTSale)

TBanksTplayTaTkeyTroleTinTtheTmobilizingTfundsTandTenhanceTtheTinvestmentTforTproductiveTmeans.TBanksTaccep
tTdepositsTformTcustomersTandTadvanceTloansTtoTtheTentrepreneursTtoTenhanceTinvestmentTactivitiesTthatTareTi
nevitableTforTaThealthyTeconomy.TInTthisTwayTIslamicTbanksTopenTnewTavenuesTforTacceptanceTofTdepositsTonTt
heTinterestTfreeTbases(qarz-e-hasanaTetc)T

[Date] 2
IslamicTbankingTstructuredTproductsTinTPakistan
Conclusion
TheTprecedingTdiscussionTmakesTitTclearTthatTIslamicTbankingTisTnotTaTnegligibleTorTmerelyTtemporaryT
development.TIslamicTbanksTareThereTtoTstayTandTthereTareTsignsTthatTtheyTwillTcontinueTtoTgrowTand
Texpand.TEvenTifToneTdoesTnotTsubscribeTtoTtheTIslamicTinjunctionTagainstTtheTinstitutionTofTinterestTo
neTmayTfindTinTIslamicTbankingTsomeTinnovativeTideasTwhichTcouldTaddTmoreTvarietyTtoTtheTexistingTfi
nancialTnetwork.oneTofTtheTmainTsellingTpointsTofTIslamicTbankingTatTleastTinTtheoryTisTthatTunlikeTcon
ventionalTbankingTitTisTconcernedTaboutTtheTviabilityTofTtheTprojectTandTtheTprofitabilityTofTtheToperat
ionTbutTnotTtheTsizeTofTtheTcollateral.TGoodTprojectsTwhichTmightTbeTturnedTdownTbyTconventionalTb
anksTforTlackTofTcollateralTwouldTbeTfinancedTbyTIslamicTbanksTonTaTprofit-
sharingTbasis.itTisTespeciallyTinTthisTsenseTthatTIslamicTbanksTcanTplayTaTcatalyticTroleTinTstimulatingTec
onomicTdevelopment.TInTmanyTdevelopingTcountriesTofTcourseTdevelopmentTbanksTareTsupposedTtoTpe
rformThisTfunction.TIslamicTbanksTareTexpectedTtoTbeTmoreTenterprisingTthanTtheirTtypicalTcounterparts
.TInTapplyThoweverTMuslimTbanksTareTconcentratingTonTshort-
runTtradeTfinanceTwhichTisTtheTleastTrisky.TPartTofTtheTexplanationTisTthatTlong-
termTfinancingTrequireTexpertiseTwhichTisTnotTalwaysTavailable.TAnotherTreasonsTthatTtheTrearTnoTback
upTinstitutionalTstructuresTsuchTasTsecondaryTcapitalTmarketsTforTIslamicTfinancialTinstruments.TItTisTpo
ssibleTalsoTthatTtheTtendencyTtoTconcentrateTonTshort-
TtermTfinancingTreflectsTtheTearlyTyearTsoToperationTitTisTeasierTtoTadministerTlessTriskyTandTtheTretur
nsTareTfaster.TTheTbanksTmayTlearnTtoTpayTmoreTattentionTtoTequityTfinancingTasTtheyTgrowTolderT.itT
isTsometimesTsuggestedTthatTisTIslamicTbanksTareTratherTcomplacent.TTheyTtendTtoTbehaveTasTthoughT
theyThadTaTcaptiveTmarketTinTtheTMuslimTmassesTwhoTwillTcomeTtoTtheTmoreTligiousTgroundsT.thisTco
mplacencyTseemsTmoreTpronounceTdinTcountriesTwithTonlyToneTIslamicTbank.TManyTMuslimsTfindTitTm
oreTconvenientTtoTdealTwithTconventionalTbanksTandThaveTnoTqualmsTaboutTshiftingTtheirTdepositsTbet
weenTIslamicTbanksTandTconventionalTonesTdependingTonTwhichTbankToffersTaTbetterTreturn.TThisTmig
htTsuggestTaTcaseTforTmoreTIslamicTbanksTinTthoseTcountriesTasTitTwouldTforceTtheTbanksTtoTbeTmore
TinnovativeTandTcompetitive.TAnotherTsolutionTwouldTbeTtoTallowTtheTconventionalTbanksTtoTundertake
TequityTfinancingTand/orTtoToperateTIslamicT'counters'Tor'windows'TsubjectTtoTstric
tTcomplianceTwithTtheTshariahTrules.TItTisTperhapsTnotTtoTowildaTpropositionTtoTsuggestTthatTtheTreas
onedTforTspecializedTislamicTfinancialTinstitutionsTsuchTasTmudarabaTbanksTmurabahaTbanksTandTmusha
rakaTbanksTwhichTwouldTcompeteTwithToneTanotherTtoTprovideTtheTbestTpossibleTservices.

[Date] 3
IslamicTbankingTstructuredTproductsTinTPakistan
Treferences.Twww.sbp.org.pk/ibd/handbook-
ibd.pdfhttps://www.imf.org/external/pubs/ft/wp/2015/wp15120.pdfhttps://en.wikipedia.org/wiki/islamic_banking_an
d_financehttps://www.scribd.com/doc/35088051/meezan-bank-banking-
productshttps://www.researchgate.net/publication/264160354_an_overview_of_the_operationsproducts_offered_by_i
slamic_banks_in_pakistanThttps://www.dummies.com/personal-finance/islamic-finance/types-of-islamic-financial-
products/

[Date] 4
IslamicTbankingTstructuredTproductsTinTPakistan