BBA-4th-SS

MONEY BANKING
AND FINANCE

ISLAMIC BANKING VS CONVENTIONAL

BANKING.

Submitted To:
Sir. Khuram Amin

Submitted By:
Yawar Abbas:

129

Usama Farooq:

136

Qaiser Khalil:

138

Hamza Naeem:

150

UNIVERSITY OF SARGODHA.

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INTRODUCTION

AlBaraka Islamic Bank (AIB) is a member of Albaraka Banking Group

(ABG) which is a Bahraini Joint Stock Company listed on Bahrain and
Dubai stock exchanges and one of the well-known leading international
Islamic banks.
Albaraka Banking Group is the biggest Islamic banking group listed on
the Bahrain Stock

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The authorized capital of ABG is US$1.5 billion, while the total equity
amounts to about US$ 1.59 billion. With assets of US$11.2 billion, the
Group has a wide geographical presence in the form of subsidiary
banking Units in 12 countries, which in turn provide their services
through more than 250 branches. These banking Units are Jordan
Islamic Bank/ Jordan,

History:
Al-Baraka Islamic Bank (AIB) has the honor of being the pioneer of Islamic
banking in Pakistan and has been operating in the country as branches of AlBaraka Islamic Bank Bahrain since 1991.
Over the years, the bank has successfully developed and maintained its
identity as one of the leading providers of a host of banking products and
services in strict compliance with Shariah principles. Currently operating
with 20 branches in 11 major cities of the country,
AIB offers a wide array of Islamic financing products such as Murabaha, Ijara,
Musharaka and Islamic Export Refinance,

Al - Barakas Commitment to Islamic Banking:

Al-Baraka Islamic Bank and Al-Baraka Banking Group are fully

committed to develop and promote an integrated Islamic Financial
System. Compliance with the rules and principles of Islamic Shariah is
the core of the banking and financial activities and its philosophy. All its
banking activities are very closely regulated by a Board of Shariah
Advisors based at the Head Office in Bahrain and a Shariah Advisor
based in Pakistan, to ensure strict compliance with the highest
standards of Islamic Banking principles.

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Islamic Modes Followed By AIB:

Mudarba
Musharka
Murabaha
Murabaha LC
Takaful
Ijarah
Istisna'

Mudarabah:
"Mudarabah" is a special kind of partnership where one partner gives money
to another for investing it in a commercial enterprise. The investment comes
from the first partner who is called "rabb-ul-mal", while the management and
work is an exclusive responsibility of the other, who is called "mudarib".

Investment

In Mudarabah, Rab-ul-maal provides the investment and Mudarib the

management therefore the Rab-ul-maal should hand over the agreed
investment to Mudarib and leaves everything to Mudarib with no interference
from his side but he has the authority to:
a) Oversee the Mudarib's activities and
b) Work with Mudarib if the Mudarib consents.

Distribution of Profit & Loss

It is necessary for the validity of Mudarabah that the parties agree, right at
the beginning, on a definite proportion of the actual profit to which each one
of them is entitled. The Shariah has prescribed no particular proportion;
rather it has been left to their mutual consent. They can share the profit in
equal proportions and they can also allocate different proportions for Rab-ulMaal and Mudarib. However in extreme case where the parties have not
predetermined the ratio of profit, the profit will be calculated at 50:50.

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The Mudarib & Rab-ul-Maal cannot allocate a lump sum amount of profit for
any party nor can they determine the share of any party at a specific rate
tied up with the capital. For example, if the capital is Rs.100,000/-, they
cannot agree on a condition that Rs.10,000 out of the profit shall be the
share of the Mudarib nor can they say that 20% of the capital shall be given
to Rab-ul-Maal. However they can agree that 40% of the actual profit shall go
to the Mudarib and 60% to the Rab-ul-Maal or vice versa.
It is also allowed that different proportions are agreed in different situations.
For example, the Rab-ul-Maal can say to Mudarib "If you trade in wheat, you
will get 50% of the profit and if you trade in flour, you will have 33% of the
profit". Similarly, he can say "If you do the business in your town, you will be
entitled to 30% of the profit and if you do it in another town, your share will
be 50% of the profit".

Musharakah:
Musharakah plays a vital role in financing business operations based on
Islamic principles, which prohibit making a profit on interest from loans. For
example, suppose that an individual (A) wants to begin a business but has
limited funds. Individual (B) has excess funds and wishes to be the financier
in musharakah with A. The two people would come to an agreement to the
terms and begin a business in which both share a portion of the profits and
losses. This negates the need for A to receive a loan from B.

SECURITY IN MUSHARAKAH:
In case of Musharakah agreement taking place between bank and client, the
bank may ask the client to furnish a security to ensure that the capital is
invested as per agreed term and conditions. note that security cannot be
used to set off against any losses.

Murabaha:
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Murabaha is an Islamic form of asset financing and has a fixed term

and a predetermined profit. In a Murabaha the bank buys a specific
asset that the customer wants, and after having owned it and becomes
its property, it sells to the customer at the buying price plus a profit at
a rate agreed at the time of entering into the contract. Murabaha helps
enterprises and commercial customers by serving their project and
business needs.

Murabaha LC:
The customer submits an application to the bank to open a letter of
credit for the purchase or import of goods, indicating that it wants to
buy the goods from the bank upon arrival on a Murabaha basis.
The bank will open a letter of credit accordingly, and the price will be
paid by the bank in its capacity as the buyer of the goods.
Upon the arrival of the goods, the bank sells them to the customer on a
Murabaha basis at an agreed price which includes the cost of goods, a
profit and service fees.

Istisna'a:
Istisna is an Islamic form of financing used to finance construction and
industrial projects, such as the construction of buildings and so on. The
unique feature of Istisna'a is that it allows the selling of an asset which
does not exist at time of the contract. The payment can be in
immediate cash or may be in the form of deferred payments.

IJARAH
"Ijarah" is a term of Islamic fiqh. Lexically, it means to give something on rent. In the Islamic
jurisprudence, the term 'Ijarah' is used for two different situations. In the first place, it means to
employ the services of a person on wages given to him as a consideration for his hired services.
The employer is called 'musta'jir' while the employee is called 'ajir.

WHAT WE OFFER:
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AIB offers financing based on trade i.e. sales and purchases. Money
is not lend based on an agreed return for money which is prohibited as
Islam encourages Trade and prohibits lending. AIB Hhases goods
required by the customer and sells the same at an agreed profit, on
the cost price under Murabahah transaction. The value based on price
is settled within an agreed time period, either in installments or
lumsum.

FINICIAL ANALAYSICS

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PRODUCTS OF ABL
ACCOUNTS :
CURRENT ACCOUNT:

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Allied bank offers current account facility

for individuals as well as for

institutions and commercial customers .

No return\ profits shall be payable on current accounts.
Free services for depositors maintaining minimum

balance

of

Rs. 0.1

(M) in previous month.

Free online transactions

Free issuance of payment orders

Free issuance of demand drafts

Free issuance of deposit at call receipts

PLS SAVING DEPOSITS:

Allied

bank offers PLS savings accounts facility to its customers with the

following features
Attractive return up to 5.00% per annum
No Service charges on active account
Complementary ATM cards

FOREIG CURRENCY DEPOSITS:

Allied Bank has offer facilities for opening current saving and term deposit
accounts. These accounts can be opened in us dollars, Pound Sterling, Euro, and
Japanese Yen at designated branches.

ALLIED PROFIT PLUS-TERM DEPOSITS

The scheme offers an attractive return on various tenors tailored to the individuals
needs of our customers. Profits is payable on maturity

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SLABS

12

MONTH

MONTH

MONTHS

MONTHS

S
Rs0.5(M) to less than RS

6.50%

7.00%

7.50%

8.00%

6.75%

7.25%

7.75%

8.25%

7%

7.5%

8%

8.5%

7.5%

8.00%

8.5%

9%

8.0%

8.5%

9.00%

9.5%

5 (M)
Rs5(M) to less than Rs
10(M)
Rs10(M) to less than Rs
15(M)
Rs15(M) to less than
Rs20(M)
Rs 20(M)&above

Allied Monthly Income Scheme:

Allied Monthly Income Scheme is a unique product with attractive returns. It
provides an opportunity for regular monthly income. The period of deposit
under this scheme is 3 years

Minimum Amount

R 100,000 ( with increments of Rs 10,000)

Profit

Payable on monthly basis

Projected
rates

profit

Rs 850 per month on a deposit of Rs 100,000 @ 10.20% p.a

Eligibility

All individuals & institutions other than Financial Institution

Period

3 years

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LENDING PRODUCTS
SEASONAL FINANCE:
seasonal finance facility is allowed against pledge of produce of cash crops
harvested in that particular crop season. The delivery of pledge stocks/goods is
made against appropriate cash payment

AGRICULTURAL FINANCE:
bank under agricultural financing scheme envisaged by the state bank of Pakistan
extends short, medium and long term, farm and non-farm credits. the firm credit are
e3xtended for production (inputs) and development purposes.
Non-firm credits are allowed for livestock (goats, sheep and cattle) ,poultry, factory
including social forestry and fisheries .

IMPORT EXPORT BUSINESS/TRADE FINANCE:

Allied Bank provides highly efficient trade finance services for imports/exports
business for our clients/customers through large number of authorized branches
where trained and motivated staff is available to handle the business on behalf of
customer.

RUNNING FINANCE:
it is a short term loan allowed by the bank for a period of one year. The mark up is
recovered on the products of daily outstanding balance. The running finance is
suitable for meeting day to day financial needs of the business.

Profit and Loss Saving Account

The main objective of this account is to encourage and mobilized savings of
the people .
Rules for PLS are as follow.
The account can be opened with a minimum balance of Rs.100
The account can be opened in the name of individuals; minors (to be
operated by guardian) limited companies, firm, educational institutions etc.

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The account holder can withdraw cash from PLS account only eight times in a
calendar month and for total amount should not exceed Rs. 15000.

FINANCIAL ANALAYSIS
Financial Reports
STATEMENT OF FINANCIAL POSITION
ASSETS

2015

2014

2013

Cash and balances with treasury and other banks

60,789

42,128

45,775

Lending to financial institutions

3,628

2,030

12,461

Investments- Gross

546,855

428,791 364,966

Advances Gross

340,769

306,014 285,376

Operating Fixed assets

28,850

27,250

22,084

Other assets

32,716

36,055

23,496

Total assets Gross

1,013,607 842,269 754,158

Provisions against non-performing Loans, advances

(19,164)

(19,811) (18,375)

Provisions against diminution in value of investments

(2,778)

(807)

Total assets net of provision

991,665

842,269 734,196

LIABILITIES

2015

Bills payable

4,942
137,96

Inter bank borrowings

4,832

2013
4,879

66,096 32,952

734,59 667,87 608,41

Customer deposits & other accounts

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2014

(1,587)

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Sub-ordinated loans

2,994

4,242

Other liabilities

24,911 19,579 17,513

902,40 761,37 667,99

Total Liabilities

NET ASSETS / LIABILITIES

89,256 80,890 66,198

PRESENTED BY

2015

2014

2013

Share capital

11,451 11,451 10,410

Share premium

Reserves

15,102 13,549 12,438

Un appropriated profit

41,415 37,053 30,855

Equity Tier I

67,968 62,053 53,703

Surplus on revaluation of assets

21,288 18,837 12,495

Total Equity

80,890 66,198

PROFITABILITY

2015

Markup / Rerurn / Interest earned

2014

2013

72,116 67,001 54,222

(35,97 (38,81 (32,55

Markup / Return / Interest expensed

7)

5)

2)

Net Markup / Interest income

36,139 28,186 21,670

Fee, Commission, Brokerage and Exchange income

4,409

3,758

3,711

Capital gain & Dividend income

4,360

7,850

4,645

Other income

986

1,128

1,247

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Non interest income

9,755

12,736 9,603

Gross income

45,894 40,922 31,273

(18,60 (17,39 (15,80

Operating expenses

3)

0)

4)

Profit before provisions

27,291 23,532 15,469

Donations

(139)

Provisions- (charge) / reversal

(1,649) (1,254) (628)

Profit before taxation

25,503 22,202 14,761

(10,38

Taxation

3)

Profit after taxation

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(76)

(80)

(7,187) (118)

15,120 15,015 14,643

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