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ESSENTIALS OF ISLAMIC FINANCE

PROJECT REPORT
COMPARISON BETWEEN MEEZAN BANK & BANK ISLAMI

Submitted to, Sir Shakeel Awan

Submitted by, Eisha Amjad(13556) Abdullah Awais(12063) Konmpal Shabbir(12258) Hamid Arshad(12156)

5/2/2011
www.iqraisb.edu.pk Sir Shakeel Awan

ESSENTIALS OF ISLAMIC FINANCE

We have to do work for fate that have possession of way and give financial system to our community that is base on top of true Islamic ideas of fairness of adulthood and communal fairness.

MR MOHAMMAD ALEE JANNAH CREATOR OF THE ISLAMIC REPUBLIC OF PAKISTAN Opening ceremonial function of the SBP on first July 1948

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CHAPTER 1 INTRODUCTION

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1.1)

Introduction:

The Islamic banking today has become most popular Financial system in the world. It appeared on the world as energetic player over three decades ago. Islamic Bank today exists in all the parts of the world and is looked upon as a realistic substitute system which has so much to suggest. It was firstly developed to accomplish the needs of Muslims, but now it is universally acceptable. Islam is a religion that undoubtedly prohibits the interest, so the basic principle of Islamic banking is the prohibition of Riba in our daily transactions. At first side, efforts are to cover the entire financial systems according to Islamic (Shariah). At the second side, full fledged Islamic banks are allowed to run there operations in similar and conservative banks that based on interest.

1.1.1) Islamic Banking Defined: Its a type of banking which are totally reliable on the (Shariah). Banking is passed out in satisfying with the Shariah, known as fiqh muaamalaat (dealings based on Islamic principals). It is clearly defined that the banking is with the viewpoint and value arrangement of Islam. It doesnt allows the giving and taking of riba and promote larger degree of evenhandedness & justice for everyone that carry out of banking system. Without Riba banking is a slender idea that denotes number of instrument or operation, which evade interest from Islamic-banking system not only restricts transactions in which interest is involved, which are strictly not permitted in Islam, but it moreover restricts the immoral practices, and thus aggressively participates to achieve the goals, mission and all the objectives which is a part of an Islamic Economic system. Rules and regulations of shariah come up to from two primary sources namely the Holy book Quran and the Sunnah and other secondary and truthful sources of Islamic law. All the operations of Islamic banking are in a number of contracts under fiqh muamalat. The broadly used concepts in Islamic banking include profit sharing that is known as Mudaraba, safekeeping known as Wadiah, joint venture known as Musharika, cost plus as Murabaha and leasing as Ijarah.

1.1.2) Why Islamic Banking? Islam is a absolute regulations of life that provides direction about each and every aspect of life. The chief objectives of Islamic financial System are as under. y Equivalent division of wealth y Societal fairness These objectives are never able to achieve in Interest based financial systems. Allahs instructions have made compulsory on us to attempt and discover the right banking system. One who gets to be familiar with the divergence between what is allowed and what is not allowed
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will be the one with a very clear sense of right and wrong when he/she will appear in front of Allah Almighty. Allah has very undoubtedly intended the prohibition of interest in His splendid book.

In Islam, there is no room for interest. It gives origin to an unfair economy; one that nepotism the wealthy and exploits the poor. The plunder for attempt and entrepreneurship is not profit, rather the interest based financial system plunder capitalists. Banking that is based on Islamic point of view is an important and it is also valuable because it eliminates the barriers among those individuals who spend and save & carried them nearer to the genuine market. The financing of those banks are controlled by functional services and goods that avoid doing from financing ethically unpleasant services e.g pornography and casinos and also intoxicating drinks or that whether the supplies and services are lawful in the country. Every matchless and most important characteristic of Islamic Banking is assimilation of fair and moral values with its banking operations. The moral and proper considerations of Islam cant be without being seen and their ethical and moral activities must be reliable with moral and right principles followed by those rules and regulations which are based on islam.

1.1.3) Historical point of view of Islamic Banking: The beginning of Islamic economics starts at the time of Prophet (SAW). The examples of Quran set by Holy Prophet (SAW) provides undeviating behavioral channel to over millions of Muslims worldwide. The Prophet Muhammad (SAW) was a dealer for Khadija. The Prophetic example was a picture of fair business. Ensuring the clarity in transactions, abstaining from usury and total truthfulness and give a title of Al-Amin the honorable personality in Arab. In Muslim community, the banking actions refer the time of Prophet Muhammad (SAW). On the other hand, in anticipation of 40 years ago, Islamic Banking was not extremely wellknown. The initial example of Islamic banking came into existence in 1963 in Egypt. The ground-breaking hard work by Ahmad al Najjaar that gives origin to this bank, (non-interest based philosophy of Shariah) whose key principle was profit distribution. There were total Nine different banks in the country at the last year 1976. Those institutions didnt paid or charged Riba but their working were generally controlled to do business where those banks invested openly or as associates of depositors. So these institutions work more functionally then the other conventional banks. In Egypt Nazir social bank was the first ever commercial bank in 1971, despite the fact that this contract has no references to Islamic shariah. This bank was clearly according to the rules of Shariah and in 1974 islamic organization made this bank and the Islamic organization is called (IDB) in Jedah Saudi Arabia. Gradually during the 1970s more than a few Islamic banks came into being, including the Faysal bank of Sudan in 1977 and the Bahrain bank in 1979 and also the Dubai Islamic Bank in 1975. Others banks from Asia includes the (PAB) Philippine Amanat bank, that is established under president order. Pakistan also established a banking setup which do their operation according to
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the Shariah but Pakistan is unlucky in this matter because this system did not stay alive for a long time. The factual stage of development of Islamic banking really happened in the 1980s. Previous initiative that tends towards the banking in which Riba is not involved, but the materialization of this type of system starts in 1980s. On the other hand, avoidance of riba is still the fundamental clause of Islamic banking , and the principals for example possession of rights and the regulations ofrisk of distribution also supported. OIC declared Islamic insurance as Shariah acquiescent. The new face of financing according to Islamic rules covers all the banking activities includes the place where assets formulate or is available for sale and purchase. The major change is done when an auditing and accounting firm gets a hold to take care the activities of Islamic banking all over the world. After some time in 2002 other organizations also gets right to take cares expansion of standards for example Islamic Financial Services Board present in Malaysia In view of the fact that this type of banking is thinning out everywhere in the world at a extraordinary speed from fundamental abstraction to become a commanding force in the world. Now the world is recognizing in Pakistan the meaning of Islamic banking that is addressed by the founder of great Pakistan.

1.1.4) Banking that is based on Islamic rules: In the later 70s Islamic banking coincides with the internationally revival. Pakistan is the country which tries to implement Islamic banking at a big level. This happens when president gave order on 29th September, 1977. This group includes bankers and panelists, who want to eliminate interest from the society. This statement indicates that the Islamic banking will be implemented in Pakistan. Islamic country Pakistan after twenty years gap now resolute and move in the direction of riba that is not present in economy without damaging the economy. The official announcement made by Governor of the state bank in the uppermost Court of Pakistan that reflects the future strategy. SBP issue the criteria detail in late Dec 2001 just because of establishing Islamic banks in all sectors of pakistan. Recently recognized banks must list in the Pakistan Stock Exchange that provides lowest/minimum amount of 50 % of the total shares that will be open for the local public. Only fifteen percent of the total assets must be taken individually by the supportive directors. Islamic Banks requires to keep a lowest capital amount that have ratio of 8 percent that depends on jeopardy Assets. Meeezan receives the title of becoming a first full fledged Islamic from State Bank of Pakistan in Jan 2002. Late 2003 Meezan bank ltd has a little set-up of approximately 10 different branches with the 130 million US $ total deposit. In Jan 2003 the SBP issues all the detailed directions setting-up to subsidiary and become only Islamic Bank by the offered profitable institution. Therefore 6 existed commercial Banks that includes 1 overseas bank were allowed to open a separate branch that is based on Islamic rules and regulations. Since June 2004 eight branches of 4 Banks had already started their all working. Islamic Banks were allowed to sustain legislative liquidity requirments and special cash

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reserves deposited in all accounts with the State bank to utmost degree 40percent of SLR and SCR for the other Banks just because of keeping away the transactions in which riba is involved. Some advancement is observed in the capital market which is considered relevant to Islamization. A large number of Companies issues the (TFC) Term Finance Certificates to elevate the capital that based on Musharikh. So the investor believe that the possibility of loss in proportion to their main amount in the case of operate loss in-curred by the organization. In Sep 2002 SECP also permitted the companies deals in Mudaraba to glide Musharika base TFCs.
Another momentous increase for the period of 2003 was the grant to set-up the SME Mudarba. 20 Mudaraba companies participated and undertook the (SME) business in the small towns and all remote areas. It motivates in resolving the major problems of the individual Mudaraba Companies which dont have wide networks of the branches to achieve the potential clients.

1.1.5) Industry Progress and Market Share: Despite prevailing fragile economic conditions in the country, the industry of Islamic Banking has sustained growth momentum. The economy further disrupt because of the recent Floods in the country. The assets deposts and the financing continue the growth powerfully during the quarter results increase in the total asset to 424 billion Rs from 411 billion Rs. In investments and financing side there is comparatively very less development analytic and hurdles that were in the way of (IBIs) to explore to the fresh investment and financing avenue that arrange the increasing deposit side.

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Background and Development; Vision, Mission Statements and Core Values

1.2)

Back Ground and Development:

Meezan Bank Limited is earliest & biggest bank based on Islamic rules of Pakistan and lone top mounting Banks in Banking segment for the past few years of the country. Listed companies that
have the largest set-up of branches everywhere in the country and the wide variety of services and products. Meezan bank is helds responsible to lead a forward way in established an Islamic banking system stuffed that have the energetic and critical border of services and products. It s a publicly listed company that has the biggest network of branches and collection of products. Meeezan bank bears important responsibility of being primary to establish a even and exciting Banking System full of powerful & advanced services and products. Meeezan bank combines both investment and commercial Bankers scholars must develop new, possible and aggressive principles which fulfill the necessities of today s multifaceted financial world within the limitations of Shariah and with the help of this it develop an amazing research and growth impending. It s main objective is to perform the customers needs with ease and handiness and create an environment and traditions which is dedicated towards the services which meet their own needs MBL was came into being on 1997 and starts their

working with the title of an investment bank. Jan 2002 a momentous idea force Sbp to accept meeezan bank as a best Islamic institution in Pakistan.
Meezan integrated on Jan 27 1997 and starts their working in August as investment bank, in the similar time. By Jan 20002, a historical step, State Bank decided MBL as the first fully fledged commercial Bank of the country and get a certificate as most committed bank runs their operatio9ns on Islamic rules. This Bank firmly follows the principle lay down according to Islamic Shariah. The Shariah administrative board is comprise of globally well-known Islamic scholar which frequently review the bank s behavior.

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Justice Mohammad Taqee Usmani Chairman of (Pakistan) Dr Abdul Sattaar Ghudda (Saudia-Arab) Shikh Essam Ishaq (Bahraim.) Dr Muhammad Emran Usmaani
This bank is renowned as the best rising Banks in the history of the country s Banking segment, because it offers a international services to its customers. The branch system grows from 4 to 201 in no time and the regular development in deposits had been 55 percent for the period of its operations. A trustworthy management team is established which comprises experienced professionals; it has also achieve a tough balance sheet with outstanding profits and strapping ratios, which seats the Bank at the peak of the industry.

Award Winning Bank: Meeezan Bank gets award of being Best Islamic bank present in Pakistan for the time of year 2010 by Islamic economics info of RED wealth in a ceremony that is held in Kuala Lumpur, Malaysia.
It is the largest part that is esteemed & renowned awards of international Islamic capital markets. The Award brings a highly successful year of MBL with a branch system of 223 total established branchis in almost 64 major cities transversely in Pakistan. This Bank confirmed hearty business enlargement in middle of 2010, concluding the year that has deposit number of 131 billions Import & Export of 143 billion and a 61 percent growth in Net revenue over the preceding year.

Vision:
The Vision was to formulate Islamic banking as first selection to help implement an evenhanded financial system, only as a strong basis of rising as fair-haired and humanity for humans.

Mission: To become leader by offer a one click shop for new VAS & all the product to its all customers, surrounded by limitations set by shariah as optimized stakeholder worth through clerical traditions base on knowledge, fairness, esteem for individual activity and concert.

A Service Mission of Meezan Bank: Build up a faithful examine society that ensure that the solid deliverance of the services and products having the top quality parameter, encouragement of principles based on Islamic rules and ensure acknowledgment of a high superiority Banking know-how of its customer.

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1.3) Back Ground and Development: Late 2003, the excellent thought of establishing Bank Islami by the Mr Muhammad Jahangir Siddiqui. On March 16, 2004 Mr Hassan Ahmed Bilgrami selected as consultant to formulate the thought. He presented the idea of Bank Islami to gave sponsor 2004 March 24. On 26th May 2004 A detailed business sketch was submit to the SBP and afterwards at a time of 26th Sep 2005 when Dubai Bank connected with those who sponsor and become the first who have shares of Bank Islami by making an investment of 18 percent of the whole Capital.

The vision of the Bank was to spotlight mainly the administration as the main area of the business according to Shariah grievance put up for sale products Third party products, and incorporated fiscal scheduling. The SBP confirmed Bank Islami as a complete planned Bank from 17th March 2006. Bank Islami starts its activities on 7th April 2006 when they opened first ever branch in Karachi. In the end of year 2006, the Bank had opened 10 new branches, 1 branch (Quetta) and 9 branches at Karachi. Bank forcefully structuring a system on a national level and at the end of 2007, its branches starts growing to 36 in numbers in all 24 cities. After 2007 at 2008, the bank opens recently 66 new setups nationally which extended the system to more than 102 branches in all 49 major cites. This step gives motivation Bank Islami of having biggest growing system in Pakistan and also gives the widest system by any Islamic Banking system in Pakistan.

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Vision: To be the best known as the top genuine Islamic Bank

Mission: The bank Islami is to construct worth for our stakeholder by offering an genuine, Shariah acquiescent & scientifically highly developed services & product. We distinguish through: y y y y y Genuineness. Novelty. Understands our customers wants. Guarantee to excellency Quick, competent & faultless deliverance of solution. Rising institution, the base for performance and Bank Islami remain dedicated to becoming appropriate employer of choices, attractions, development and develops crystal clear talent and performance driven traditions.

Core/base Values: Bank Islami shows the 100% commitments to its basic values: 1. 2. 3. 4. 5. 6. Product genuineness. Focus on customers. Honesty. Working in a team. Modesty. Modernism.

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CHAPTER 2: Products & Services Offered

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2.1) Prroducts & Services offer by Meezan bank:  Deposit Accounts: 1. Rupee Current Account: A rupee based current account providing convenience of not putting money in a riba based account and making use of it whenever required, without any of the limitations on the withdraws. The bank also provides its customers with professional conveniences. This account is based on the contract of Qard, in this contract; the bank is liable to pay back the amount to the customers whenever needed. In the mean time, the bank uses these funds for investment and other activities. This gives the customer a complete stable state of mind in which the money that they deposit is safe and is not being used in any investment or activities that is against Shariah. Meezan Current Account can be opened by Sole-Proprietorships, Individuals, Partnerships and Limited Companies. Keys: y The Minimum investment required is Rs 1000/- to open an account. y Free of restrictions on the number of transactions. y If the clients balance is low, there is no deduction from the amount.

2. Rupee Saving Account: A fundamental account for every individuals needs. This account pays monthly returns along with a large number of benefits. It is purely Riba free. Keys: y y y y y y

Account opening requires the Minimum investment of Rs. 10,000/Profit is being calculated on daily product basis, and is paid on monthly basis. Free of limitation on the withdraws and amount of dealings (transaction) The account holders are provided Cheque books free of cost. The account holders are given a VISA Debit card which is accepted globally. The online facility is nationwide and totally free of cost.

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y
y y

The internet banking service is also free. A duplicate account statement is issued.

3. Meezan Bachat Account: An Exclusive account that provides the customers with the elasticity of withdrawing the savings whenever needed. It pays high rate of returns with the same ease and service quality of the standards saving accounts. Salaried, Self-employed, Housewives and Retired individuals can open up the Meezan Bachat Account. Keys: y Account opening requires Rs 25,000/y If one requires a higher weightage of profit, the maximum balance required in the account is Rs 1,000,000/y The balance maintained during a month is the basis of the profit calculation. y They payment of the profit is transferred to the Meezan Bank account on monthly basis. y The application fee for Car Ijarah and Easy Home Financing for accounts requires a minimum balance of Rs 500,000.

4. Labbaik Saving Aasaan: An account for the individuals if they are the savers and are willing to save for their spouse, children or parents etc. it is a Mudarabah based account and it provides special benefits for Umrah & Hajj. Keys: y It is available for all those individuals, who can open a single or joint account with any of their family members. y Labbaik Saving Plan is available for six 6 months to twenty 20 years y It is a Pak Rupee account. y Monthly deposit will be contributed by the customers as it is mentioned in the deposit schedule plan. y The account holders will not be facilitated with the Cheque books or the VISA Debit cards. y The customers can deposit additional amounts in order to complete the scheduled amount and are able to make the journey earlier then the initially planned. y After achievement of the desired deposit amount, customers will have a right to travel with Meezan Bank or exchange his funds to go with an alternate company or make use of the funds for alternate purposes y No pre-mature withdrawal schedule is allowed.

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5. Meezan Business Plus : A Mudaraba-based account that allows to conduct the banking transactions and also consuming a large number of free services. It provides the ideal mix of handiness and flexibility that one wishes to have in Islamic banking. The account can be opened by Individuals and businesses including Sole Proprietorships, Partnerships and Limited Companies

6. Dollar Saving Account : Another Mudarabah based account that can be opened by individuals, sloe prorieterships, partnerships and limited companies. It is an account that is opened by using US Dollars and is an excellent tool for the individuals and as well as corporate clients. This account helps in fulfilling the needs of the business and for the venture diversification. It also protects from the exchange rate fluctuations.

7. Karobari Munafa Account : A high profit savings account specifically customized for large Corporate. It pays off higher returns and comes with a variety of benefis. It works under the Mudarabah principle in which the customer acts as an investor and the bank is the Manager of the amount deposited. The funds that are pooled are invested under Islamic modes of financing Keys: y y y y y

Minimum investment required to open an account is Rs. 10,00,000/Profit calculated on daily basis and paid on monthly basis. Free of restrictions on withdrawals or the number of transactions. Cheque books and pay orders are provided free of charge. The relationship manager is dedicated.

 SPECIAL BANKING : 8. Online Banking : The online facility makes it easy to withdraw and deposit cash and also helps in making pay orders, even if the account is based in different city. It allows all the clients to access their accounts and conduct transactions from any of the Meezan bank branch nationwide. The services that offered are the instant crediting of the account. The cash can be withdrawal in no time up to 5 million rupees, client can access its money from anywhere in the country. Funds can be easily transferred between the clients Meezan bank accounts. Clearing cheques can be deposited and

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can be drawn within the same city very easily; it also helps in issuing the pay orders from any of the branch.

9. 8am to 8pm Banking : The customers can access the branch from 8 am to 8 pm. This is the very first bank that has introduced 8 to 8 banking. This service has created a complete new dimension to the banking service and has planned to give ease to its customers. Customers are allowed to make a visit to the branch before going to work or on their way home from the office. The bank offers the full range of its services from 8 to 5 pm and from 5 pm to 8 pm, customers are able to utilize several common banking facilities which meet most og the daily requirements. This service focuses on the mission, that is to focus on customers ease and service quality. Services provided from 5PM to 8PM at 8 to 8 Branches y y y y y Cash is accepted. Cheques are collected and cleared. Transfer instructions are also accepted. Acceptance of Cheque Book, Pay Order and Demand Draft requests Accepting ATM, telephone banking and Internet banking requests

 8AM to 8PM banking services are presently being offered at selected branches  Karachi y y y y Bahadurabad Branch Clifton Branch Gulshan Chowrangi Branch Gulshan-e-Iqbal Branch

 Islamabad y y F-7 Jinnah Super Branch F-10 Markaz Branch

10. Ladies Banking : Meezan bank introduces a new service Ladies Banking, this service is devoted in fulfilling the requirements of ladies. It provides an elite banking area as set by the principles of Shariah, in a very relaxed environment. Services provided at the Ladies Banking Section include:

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y y y y y Car Ijarah and Easy Home Current & Savings Accounts, Foreign Currency Accounts, Term Deposits 24/7 Banking Services: ATM/Debit Card, Call Center, Internet Banking Ladies banking service is a part of Meezan Banks mission to focus on customer convenience and service quality and make Islamic Banking the banking of First Choice. This service is presently being offered at our Barkat-e-Hyderi branch in Karachi.

11. Meezan Home Remittance : Meezan Bank's payment services are simple and dependable. They are available at the doorsteps through a wide and efficient network of parallel banks worldwide. Advantages of Meezan Home Remittance: y Quick payments in major currencies like USD,EUR,JPY SGD and AUD y The funds can be easily transferred within the branch network, free of charge. y The branch network is extensive covering all the major cities of Pakistan. y VISA Debit cards are issued that allows using the money at more than 40 million outlets and 160 countries nationwide. y The internet banking facility is free of charge. 12. ELECTRONIC BANKING : Electronic banking has made it feasible to access money anytime, anywhere. VISA Debit card is main sources from which the client can access his/her account wherever they are, and wherever they see the VISA symbol. The money is automatically deducted from their balance, free of interest, no bills to be paid and no late fees are taken. y Using the card is quicker than making a trip to the bank. And is far more suitable than standing in a que at a cash counter and it is a lot safe then carrying the cash. y The clients use their own money at more than 40 million outlets and 160 countries worldwide. This can be used to buy both, big and small items. It is easy and convenient alternate to carry cash. The client can call the helpline 24 hours a day for any queries. y All the shopping transactions are signature based.

 Meezan VISA Debit -A prefect travel companion: y y y y Meezan Visa debit card can be used whenever going to abroad; for all the purchases and to withdraw cash at ATMs, just as one does at home wherever they see the Visa symbol. No hassle of buying foreign currency or travelers cheques in advance whenever traveling abroad. It is convenient. No need to carry huge amount of cash, it is safe. Accepted globally, the clients can pay for hotels, sight seeing, shopping and dinning out.

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13. Internet Banking : Internet banking provides global access to the account 24 hours a day. And it is a lot smarter service. The facilities enjoyed by the internet banking are; the balance inquiry of multiple accounts. Account statements can be viewed easily. Requests to make Cheque books and pay orders can be made. The status of complaints can be checked. The alerts can be activated related to account activities.

14. ATM Network: Meezan Banks ATMs are located at all branches and also offsite locations. The need to carry cash is finished, the customer simply goes to the ATM and withdraws the cash anywhere, anytime. Other facilities that ATMs help the clients are, the funds can be easily transferred between the accounts in the same branch. y The amount of cash that can be withdrawn is subject to the amount of funds present in the account. y The cash can be withdraw from any other banks ATM which is the member of MNET. And this applies to same accounts which are linked to the ATM card. y If anyone is using a non Meezan ATM, the limit of cash withdrawal is applicable to the client y Charges of PKR 15 per transaction will be applied when 1Link or MNET ATMs are used for cash withdrawal.

15. SMS Alerts: SMS Alerts have made the life much easier and convenient. There is no need to call or make a visit to the branch to inquire about the daily transactions. once, he/she signs up for the Meezan SMS Alert service, an instant SMS alert from Meezan Bank on their mobile phone will be received whenever any of the following transactions occur on their Current or Savings account(s). This service informs about the amount that is deducted from the current or saving account. It also informs about any addition made to the account. If the Cheque has been dishonored, SMS alert also informs the client. This service is applied on all current and saving accounts. And this service is currently only for the clients residing in Pakistan.

16. 24/7 Call Center : With the Call Centre facility, no need to take time out to visit the branch for the everyday banking needs. By simply dialing 111-331-331 (dial 00-92-21-111-331-331 from outside Pakistan) one can get access to a wide range of Tele-banking solutions including answers to questions on Islamic Banking. Interactive Voice Response system will help in guiding and assisting all the transactions.
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Account balance can be checked, instructions to issue payorders can be made, funds can be transferred between own account, orders to issue Cheque books can be made easily, transaction history can be checked with ease. Instruction to stop a payment can be made, complaint can be made is there is any loss of Cheque book. Comments and suggestions can be registered. T pin can also be easily requested or changed. The loss of VISA Card can be reported and a Request for new Internet Banking Username / Password can be made through this service. 17. Consumer Finance: Car Ijarah also features Used Vehicles and for new vehicles. Meezan bank provides the lease of new cars and also if the sole provider of leasing second hand cars, locally and imported vehicles. Keys: The monthly rental to be paid is low, and is to be paid after delivery, not in advance. It is the fastest means of processing and delivery. The facility of tracking is also available. The security deposit is very low as 10%. All new, used, local, imported vehicles are financed.

18. Easy Home : A comprehensive, very reasonable and totally stress free home financing facility based on Shariah. It allows owning a house and also keeps away from interest based financing. The financing amounts are high, and adequate against the property value. It is a quick process. The charges are minimum. And the clients have the flexibility to make partial payments. The instalments are affordable and the amounts are regularly reducing. It is absolutely hasslefree, there is no burden or excessive paper work. It is Halal and easy. The eligibility is also easy. Non resident Pakistanis can also enjoy this service. Qualified Chartered Accountants and Corporate CFOs can avail discounted rates and flexible repayment option with no prepayment charges on early payment either partially or full.

19. Certificate of Islamic Investment: Savings for the period of 3 to 5 months can be invested and a Halal profit can be earned at different periods using certificate of Islamic Investment. It is a Mudarabah based deposit. It is an ideal investment for individuals, partnerships and Limited companies. Investment is done for 3 months to 5 years. The payment for profit is optional, that is quarterly, monthly or at maturity. The amount that is required for investment in Rs 50,000/- for quarterly or on maturity payment. The payment on monthly basis requires the minimum investment of Rs 200,000.

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20. Meezan Amdan Certificate: An ideal certificate for those people who need a regular flow on monthly income. It is a Mudarabah based long term deposit under which the customer is the investor and the bank is the manager. Minimum investment required is Rs. 100,000/ and the Minimum investment for widows and senior citizens is Rs. 50,000/-. The Investment can be made for 5 1/2 years and 7 years. The Profit payment is made to the clients Meezan account on monthly basis. Pre-mature withdrawal can also be made as per approved schedule. This service provides free first Cheque book for customers who open an account for MAC issuance.

21. Monthly Mudarabah Certificate: It is designed to pay monthly returns, working on the principle of Mudarabah under which the customer acts as an investor and the bank is the manager of the funds deposited by the customer. The banks use the funds received from the clients to a pool. And then these funds are used to provide finance to customers under the Shariah based Islamic modes. The Minimum Investment required is Rs. 100,000/- and Investment period is one month with reinvestment option available on a continuous basis. The Monthly profit payment will be made to your Meezan Bank account.

22. Dollar Mudarabah Certificate: A deposit product through which US Dollars can be invested with Meezan Bank for periods ranging from 3 months to 3 years and earn six-monthly or at maturity profit payments on the investment. lowest amount required for Investment is USD 10,000/-

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2.2) Products & Services Offered by Bank Islami: 1) 2) 3) 4) Consumer Banking Retail Banking Corporate Banking Value Added Services

CONSUMER BANKING:1. MUSKUN Home financing:Bank Islami can make ones dream come true by their service Muskun Home Financing. This service gives 4 basic facilities; y The purchase of a new house, the person just let the Bank know that which house or apartment he is willing to buy, the bank will simply help him/her with the financing. y If a person has a wish to build his own house, the only thing the bank needs is the design and specification the client want. And then the Bank will help him in the construction using the Istisna, as the mode of finance y Any renovation, or modification of a house, if needed, and the person cannot afford it, the bank also offers the facility of home renovation. y Home replacement facility is offered by Bank Islami, this service helps the client to switch their conventional mortgage loans to Shariah complaint means of financing. y Diminishing Musharakah and Ijarah are the basis of this Financing facility. The client and the bank, both enjoy the possession of the assets. The share of the bank is leased to the client on the basis of Ijarah, and the leased part is further divided into different parts, the client then buys the parts in different periods from the bank, by the end of the period the client will be the only owner of the asset. He buys the banks part by paying rents/ installments and as the installments decrease, the banks ownership also decreases. Advantages: The main benefits that one enjoys from this facility is, it is an immediate process, the bank finances up to 60% of the value of the asset, the asset leased can be fro up to 20 years. Another benefit is, no additional amount is charged after the period of one year. It has elastic and affordable installments. This facility is free of negative area.

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2. New Vehicle Islami Auto Ijarah : Auto finance facility is a complete Sharia based and is also based on the concept of Ijarah. Bank acts a Lessor and the client perform the activities of Lessee. The client is compulsory to pay monthly rent for the use of the vehicle, while all the rights remain with the bank; the client only enjoys the usufruct of the car. This facility is for new car, and the time period is of 3 to 5 years. The security that has to be deposited is of 30% to 50% till the time of 5 years. This restricted minimum cost of the vehicle should be Rs 250,000.

2- RETAIL BANKING: i. Islami Current Account: The client can enjoy a complete stable state of mind with the help of Islami current account. They have the assurity are being used in Halal activities just. It is a perfect facility for the people who have their regular transactions and also want to have unlimited access to the account their individual and business transactions. With the help of this facility, the cutomers can have access to the entire network of Bank Islami across 49 cities of Pakistan. They can have a secure connection with all the intercity branches as well. The features that Islami Current account has, the lowest amount required to open an account is 1000 Rs, up to 4 people can open a joint account. The clients have the access to the entire network of branches. The online intercity transactions are free of cost. The ATM & Debit cards are also free of cost. The clients also enjoy the complete access to all ATMs throughout Pakistan. Funds can be transferred through the ATM facility. The bank also gives the facility of making payment different commodities such as grocery, oil, and different purchases. The internet banking service is also free of cost. The banking facility is available round the clock through the phone line, 111-475-264. the clients can get the account statements without any cost. Deposit lockers are also available which are safe.

2. Islami Foreign Currency Account:The foreign currency account is best choice for the individuals or the businessman who are willing to expand their venture in different currencies. They are assured safety from the exchange rate fluctuations. They can access foreign currencies without any hassles, faced during the currency conversion, when a person has to travel abroad or has to make any payments in foreign currencies to meet education, leisure or business needs. The key features of this facility is that the accounts are available is US Dollars, Euro and GBP. The minimum balance required to open the account is USD 100/-. 4 people are able to open a joint account and the account statement facility is also free of cost.

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3. Islami Bachat Account: One enjoys a number of benefits if he/she has a bachat account in Islami Bank. The practice of savings is much convenient and safe. High profits are earned on the savings and one can make as many transactions as he/she wants. It is an excellent option for the clients who have to withdraw money on monthly basis, but are also willing to earn on their savings.

Employees can get Halal and flexible profits, if the corporate employers open their salary accounts with the bank. The features offered by the bank are, the profit is given at the last of every month. Lowest amount balance necessary for the opening of account is 5000/-. The joint account facility is for 4 people. Easy access to the entire online network of 102 branches, withdrawals are free of charge. The bank applies no restrictions on the transactions that are intercity. The bank also gives 1 ATM &Debit card absolutely free. The client can enjoy an access to all the ATMs throughout Pakistan. The internet banking facility is also free of charge, and the banking service is there for 24 hours, through helpline. And if the lockers are available, the clients have the facility of safe deposit lockers also.

4. Islami Dollar Bachat Account:An ideal facility for individuals and businesses who are keen to save in US Dollars, this service can be enjoyed by the residents of Pakistan and also the non residents, who either need to save in US Dollar, or are willing to send money from abroad This account is based on the principle of Mudarabah, following the complete Shariah rules. The profit and loss, from the investment is shared between the client and the bank. Free Internet Banking service, Safe Deposit Lockers facility is available; it is 100% interest free, the minimum balance of USD. 100/- in cash or through USD clearing cheque required for the account opening, No Zakat or Withholding tax is deducted, the joint account facility for 4. Free of restrictions on intercity dealings, the clients have Access to the entire online branch network 102 Branches in 49 Cities, the banking service round the clock, Free Account statement facility also prevails. The customer relationship officer gives a tailored service.

5 Islami Amadni Certificate: The client can get the best in both the worlds with the help of Islami Amadni certificate. If the individual gets salary, or he/she is a businessman and has some funds to spare, this certificate is ideal for them. They can get higher returns on higher investment, in a complete Shariah based manner. These certificates have the features which make it prominent among the different services offered by the bank, it is available in Pak rupees, the time period for the Investment can be 1 to 60 months. The minimum cost should be Rs 10,000/- The round the clock banking is present through the helpline.

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3- CORPORATE BANKING: The economic needs of the clients are within the reach of the Banks highly qualified professionals, who are fully devoted to understand the needs and provide the clients an effective service. The bank offers the following products and services to help achieve the business objectives: a. Account Services The clients can maintain their Current Accounts with zero account maintenance fees, the Choice of currency-PKR, EURO, USD, GBP & JPY relies to the client, and the funds can be transferred with lowest transaction fees, the Access to foreign exchange services is quick and timely. The client has an Access to the entire online branch network 102 Branches in 49 Cities, the service can be enjoyed Unlimited within city and intercity online transactions, the deposits and withdrawal are free at all Bank Islami branches b. Trade Services BankIslami offers a wide range of export and import services planned to give a hand to the clients in building their strengths, so that their company can seize new business opportunities around the world. Bank gives the Guarantee, wide range of Services for Exporters; the bank gives the services for the collection of Export Bills. The pre-shipment and post-shipment costs are financed by the bank on the basis of Islamic modes. It also gives Services for Importers. c. Working Capital Finance the clients short term financing needs This is for the bank knows that the constant access to the cost and flexible means of financing is required for the business. This service helps to meet everyday funding needs. The bank offers medium and long term financing facilities for the infrastructure development, and industrial projects in all sectors. d. Musharakah Finance A combined scheme is formed for conducting business in which the profit is shared by all the associates according to mutually settled ratios, whereas the loss is shared in the ratio of capital investment.

e. Mudarabah Finance: It is a kind of businedd where one associate gives money to another for the purpose of investment in commercial projects. The one who invests is called Rabb-ul-Maal and the one who bears the responsibility of the running of business is called Mudarib. The profits earned are shared according to a mutually agreed pre-determined ratio, whereas, loss is borne by Rabbul-Maal unless the loss is due to negligence of Mudarib

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4-VALUE ADDED SERVICES:1. Online Banking: Having a wide network of 102 branches in 49 cities, the bank offers the online banking services. This means that the branches are associated with one another so that the access to their account can be easy and the clients are able to make transactions. This service has a number of key benefits, like cash can be deposited for immediate credit to a remote branch. The cheque can be encashed from any online branch; the funds can be transferred immediately to any online branch. The balance can be enquired from any online branch.

2. Inter Bank Fund Transfer: With this facility, the client can easily transfer funds in their accounts via ATM. The funds transfer can be hassle free; there is no need to wait for the cheque clearance or going to the branch to deposit the cash or cheque. It is convenient, easy to use, the transfer is immediate, the facility is available 7*24, and it is one of the secure facilities. It eliminates the use of cheques. 3. Internet Banking: The clients are now able to access their account info and view their transaction details done previously from their home or office computer/laptop via internet 24 hours a day, 7 days a week. The account can be accessed in mini/full statement; funds can be transferred from one bank islami account to another. Transaction history can be easily accessed. The transactions can be inquired by the cheque No, or the transaction date or amount. The complaints can also be registered. An activity log to track the transactional activities performed on internet banking. These are the benefits one can enjoy through the internet banking facility. 4. ATM/Debit Card: ONE CARD is obedient to Islamic shariah ATM/Debit card, its a complete substitute for cash. Now everyone has the lack of restrictions to access their Bank Accounts 24 hours a day to make instant and cashless payment at huge number of shops, outlets and restaurants. Youre ATM Card: One can withdraw cash 2,500 Rs from ATMs nationwide connected to the M-Net and 1-Link switches. Youre Debit Card: Clients are able to make purchases of grocery, fuel, dine out at over 3600 retail outlets that are linked to Orix Network country wide. 5. 24/7 Phone Banking: No break and no holidays, the bank is available 24 hours a day for its clients, any information required related to products and services, or a client needs to lodge a complaint or a feedback is to be given, the client is just required to dial 111-475-264 and he/she is connected to the bank.

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CHAPTER 3: Analysis of Financial Statements

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3.1) FINANCIAL STATEMENTS OF MEEZAN BANK

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3.2) FINANCIAL STATEMENTS OF BANK ISLAMI

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3.3- Analysis of Financial Statements of Meezan Bank and Bank Islami:

ASSETS LIABILITIES NET ASSESTS SURPLUS ON INVESTMENT TOTAL INCOME PROFIT AFTER TAX EARNING PER SHARE

MEEEZAN BANK 2009 2010 124,169,096 154,752,425 114,984,637 143,672,434 9,184,459 11,079,991 9,184,459 1,485,394 1,025,351 1.62 11,079,991 1,895,532 1,649,588 2.36

BANK ISLAMI 2009 2010 34,271,792 40,108,440 4,725,314 4,727,120 4,725,314 4,727,120 37,860 150,150 150,150 0.284 38,101 17,695 17,695 0.034

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CHAPTER 4: SWOT Analysis

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4.1. SWOT Analysis of Meezan Bank:

 Strength: y Meeezan is the first ever private bank that runs their operations according to Islamic rules. y It is the first Islamic bank who have more than 180 branches in all big cities of Pakistan. y According to SBP its a most rapidly growing banking sector. y All the members of supervisory committee of meeezan bank are well reputed and big renowned scholars that serve many Islamic banks. y It is a most enthusiastic and qualified staff. y Supervisory Board contains all the well reputed and renowned scholars. y Strong operational environment. y Well-built shareholding  y y y y y y y y Weaknesse: As compared to competitors meeezan bank deduct high charges for most of their services. The main weakness of meezan bank is that they have lack of advertisement. Documentation is very extensive so it is not very friendly for customers perspective. Centralized processing is very slow. The main weekness is that they still didnt target their market so they have very week marketing strategies. Services provided by the meezan bank are less than its competitors. They are not providing credit card facility so its a main weekness. Policies are under limitations of shariah.

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 Opportunitie: y To maximize their profit they must target house financing sectors.. y As we know that the Islamic banking is growing very strongly so they must grow their operations. y They must explore new area in everywhere in the world and also within the boundries of the country so they will expand the business. y They must introduce new promotions that help them to grab the middle level customers to maximize their profit. y They must do business with the Islamic institutions that runs their business on Islamic principles. y They must increase their setup of branches in all over Pakistan.

 Threat: y The main threat for them is the entry of new competitors in the market so they must build their strong reputation. y If SBP announced high intrest rate then they will suffer from this announcement. y In case of Islamic banking SBP does not declared any policies that are enforceable by law. y Maulana Taqi leave the advisory board of meezan bank so it is major problem for them. y All the governmental policies is especially for conventional banks not for the Islamic banks. y Iff attitude of the government is change for Islamic banks their will be a big problem for them.

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4.2. SWOT Analysis of bank Islami:

 y y y y y

Strength: They are providing a large number of services to their customers. A very strong cash-flow in the market. Management is very strong so they are managing very strongly. Their financial performance is very strong. According to State Bank Of Pakistan they grow at a high pace.

 y y y y y y

Weaknesse: The main weakness is that they have lack of advertisement and promotion. They have weak online information system. Their setups in the country are not very strong means their branches is very less. Consumer fiscal retail is also very weak. They are very week in building relationships with the society. Their online banking is also very poor.

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 Opportunitie: y To maximize their profit they must target house financing sectors.. y As we know that the Islamic banking is growing very strongly so they must grow their operations. y They must explore new area in everywhere in the world and also within the boundries of the country so they will expand the business. y They must introduce new promotions that help them to grab the middle level customers to maximize their profit. y They must do business with the Islamic institutions that runs their business on Islamic principles. y They must increase their setup of branches in all over Pakistan. y They must improve their online banking facility.

 Threat: y Competition increase y Online banking as we know very weak by this bank so they have a security threat in that area. y International competition with overseas banks. y Uncertainty in economy of Pakistan is always a threat for every bank

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Chapter 5: Conclusion & Recommendations

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5.1) Conclusion: As we know that there are a large number of Islamic banks present in different countires all over the world and very fewer in Non Muslim countries. In spite of, that it is successfully accepted and also implemented that there are still some problems. And mostly the problems belongs to the finance fields. If the Islamic banks bring only slight changes in all their operations, they will be free from their awkward & uncertain types of financing and they can present a very easy, clean & a very effective interest free banking. As it is a very young concept and ingredient were there, if Islamic banks modifies and utilized only two types of investment the loans with a service charge and Mudarabah, these two are accepted by all the Muslim scholars globally. By offering such modes, the banking system will be effective and will also be a powerful alternate to commercial banking, the world in which both the systems exist. Additionally, by applying a proper Shariah based Islamic system; the systems will have no problem in getting authorized to start functioning in Non Muslim countries. Islamic banking has a good reputation among people because it is growing very strongly from the past few years. The employee earnings is high which requires to be slash downward as number of well trained employees are being loosed due to the poor policies. Their approach and development of their product line, Islamic Banks are powerfully placed to meet up these hurdles and challenges. On the whole banks are doing well but there are some problems present that I have to recommend some suggestions that may help the banks to progress.

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5.2-Recommendations: Discussion and suggestions Customers have a never ending list of the wants. That is food, clothing, housing and machinery. Entrepreneurs are the only sources which develop means to fulfill these wants. By advertising their products and services, they raise people expectations and they become the customer of the entrepreneur. If the wants are being satisfied according to their expectations, they continue their full-fledge support to the business and hence the enterprise grows. Banks are also a business that fulfills the needs of people that are connected with money, capital and the transferring of funds. As they exist for centuries and they are prospering continually, it means that their methods are good and are also fulfilling customers wants and expectations. Commercial banking system as it functions today is accepted globally except the Islamic countries, as its methods are against Islamic Shariah. The reservation is on the fact that the bank operates on the basis of interest which is completely prohibited in ISLAM. Commercial banks have completely ignored the interest related concerns on the account of Muslims. And Muslims turned to another entrepreneur, which is the Islamic Banker. On the basis of this report, we hereby recommend some suggestions, if these suggestions are fulfilled; the Islamic Banking sector can flourish. Performance Appraisal: As the employees are main basis of an organization, their needs should be the first thing to be catered. The management should evaluate the performance of the employyes and increments and promotions should be recommended on merit basis. Customer relationship: If a person wants to expand his business, he should know the customers and his needs. By their attitude, the relationship with the customers can be improved. And by knowing that what the customer wants, fulfilling those wants in a Shariah based manner, Islamic Banks can flourish. Marketing strategies: Employees should be given proper training for marketing, and proper plans should be built for the promotion of their products and services so that the sale is increased and also the profit of the banks. With the experts guidance, the employees should be trained with the basic concept of marketing and the target market should be properly identified.

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