DIFFERENCE BETWEEN ISLAMIC BANKING AND

CONVENTIONAL BANKING

During 6 weeks of internship started from 16th April 2009, at Meezan Bank
Limited, cavalry ground, Lahore cantt , the first thing which I have learned was the basic difference
between Islamic and conventional banks. The first and basic difference between Islamic and
conventional banking is of cash lending. The conventional advances cash loan and than receives
profit on that loan in the form of interest and interest is totally haram in Islam and is declared as an
open war with Allah Almighty and his Prophet (P.B.U.H). While on the other hand Islamic banks don’t
lend money but instead use financing mode. For example Bank buys the assets for its customer and
than give that asset to the customer and receives rent on that asset which is allowed in Islam.
Financing is used for fixed assets only and hence no cash lending in Islamic banking. In conventional
banking all the loss is borne by the borrower whether he earns profit or loss. For example a person
borrows loan from bank and start a business, the bank will charge him the interest on the principle
amount and if a person suffers loss in that business he will have to pay the interest on that loan. So the
lender will receive interest whether the borrower earns or not. That is to say, one person lends out
capital in the form of a debt, and a second person puts in his labor, if there is a loss it has to be borne
by labor, but, profit or loss, interest does accrue to capital in any case. Islam has interdicted this form
of investment.

The another big difference between conventional and Islamic bank is that the conventional banks pays
fix amount of profit on the saving accounts and again fixing the amount of profit in advance is
impermissible in Islam. The customer will get the profit whether the banks gets profit or bears loss. In
Islam it is not allowed because risk of loss should be bear by the both parties. While on the other hand
in Islamic banking like Meezan Bank, the banks put the deposits of customers in the investment of fix
assets and bank acts as a mudarib or manager of the customer’s deposits and if profit comes from that
investment it is shared by the bank and the customer at an agreed ratio and this is totally permissible in
islam.

ACCOUNT OPENING:
Before discussing about the account opening procedure let us look at liability products which meezan
bank offers
1 Running Account
2 Term Deposit Accounts

1 Running Account
These are those types of accounts in which a customer can deposit and withdraw
his money at any time. Running Accounts Include

SAVING ACCOUNT

A unique bank account that offers the opportunity to earn Halal profits, while enjoying a range of
added benefits. It can be opened with a minimum amount of only Rs.10, 000. The profit on this
account is calculated and paid on a monthly basis, and comes with a variety of free benefits, no
restrictions on transactions, priority banking and more.

← Minimum amount required to open account= Rs. 10,000

← Riba Free COII Holders may open accounts without any minimum balance
requirements
Riba Free Rupee Saving Account works under the principles of Mudarabah and is strictly in
conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in
strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory
Board
KEY FEATURES

Apart from first class service and personalized attention that customers get when they bank with
Meezan, it offer the following additional conveniences:

← Instant access to funds at any online branch.

← Free Online Banking services at all Meezan Bank branches nationwide

← No restriction on withdrawals or number of transactions

← Bank balance certificates & duplicate statements of account

← Stop Payment & Hold Mail instructions

← 24/7 Card your ATM & Debit Card in one

← 24/7 Call Center with complete Tele-banking services

← Personal financial consultancy services

← Specialized 8 to 8 Banking at selected branches

CURRENT ACCOUNT
Meezan Bank is pleased to offer Riba-Free Current Account, a flexible Rupee based account that is
ideal for individuals and businesses looking for Shariah compliant banking and professionalism both
under one roof.

The Meezan Bank Current Account, is a comprehensive Halal method of acquiring a secure and easily
maintainable Riba Free bank account.

Bundled with 24/7 and special banking services, the Meezan Bank Current Account is an innovative
value added account which provides customers both ease of utility and unmatched service quality.

Key features of the Riba -Free Current Account

← Free Online Banking services at all Meezan Bank branches nationwide

← Instant access to funds at any online branch

← No restriction on withdrawals or number of transactions

 ← Bank balance certificates & duplicate statements of account

← Stop Payment & Hold Mail instructions

← 24/7 Card your ATM & Debit Card in one

← 24/7 Call Center with complete Tele-banking services

← Personal financial consultancy services

← Specialized 8 to 8 Banking at selected branches

MEEZAN BACHAT ACCOUNT

Meezan Bachat Account is a unique saving account that provides high monthly returns with the
flexibility to withdraw savings if needed. Thus Meezan Bachat Account offers a higher expected rate
of return with the convenience of a savings account.

With a Meezan Bachat Account, you are entitled for a higher the profit with a higher account balance.
You receive profit even if your balance falls below Rs. 25,000/- in any one month. Profit is credited to
your CUSTOMER’S acount every month and is calculated with reference to the minimum balance
maintained in the account during the preceding month.

The Riba-Free Meezan Bachat Account works under the principles of Mudarabah and is strictly in
conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in
strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory
Board.
Key Features

Enjoy a range of valuable features including:

← Highest expected rate of return

← Riba-free profit paid every month

← Minimum balance for account opening is just Rs.25,000/-

← Maximum balance limit for getting highest profit rate is Rs. 1,000,000/-

← Waiver of application fee for Car Ijarah & Easy Home for accounts with minimum
balance of Rs. 500,000

← Free Online Banking services at all Meezan Bank branches nationwide

← Free bank balance certificates.

← 24/7 Card your ATM & Debit Card in one

 ← 24/7 Call Center with complete Tele-banking services

← 24/7 Internet Banking – free and instant access to your account(s) anytime &
anywhere

← Personal financial consultancy services.

← Specialized 8 to 8 Banking at selected branch

KAROBARI MUNAFA ACCOUNT (KMA)

Karobari Munafa is a savings account specifically tailored for large Corporate entities. It allows
customers to earn higher returns on surplus cash balances. It has no preset transaction limits and
comes with a variety of free packaged benefits.

Key Features

← Profit will be calculated on a Daily Product Basis

← Minimum balance requirement for account opening is Rs. 1 Million

← No restriction on deposits and withdrawals

← Free facilities: chequebooks and payorders

← Dedicated account / relationship manager

The Karobari Munafa Account works under the principles of Mudarabah and is strictly in conformity
with the rules of Islamic Shariah. Profit calculation and all banking transactions are in strict adherence
to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory Board

DOLLAR SAVING ACCOUNT

Meezan Bank is pleased to offer Riba-Free Dollar Saving Account, a foreign-currency based
investment opportunity that is set up on the principles of Shariah and as a result is free from the
element of interest.

With a minimum of only $100 you can open a Dollar Saving Account with us under a Mudarabah
arrangement that is strictly in conformity with the principles of Islamic Shariah. The return earned on
the Mudarabah pool is calculated every month and the profit ratio for all investors is declared at the
beginning of the month. If you maintain a minimum average monthly balance of $ 500, you shall be
eligible to receive profits that shall be disbursed to you every month.
Additional Features
Apart from first class service and personalized attention that our customers get when they bank with
us, we offer the following additional conveniences to our customers:

← Personalized cheque books

← No restriction on withdrawals or number of transactions.

← 24/7 Call Center with complete Tele-banking services

← Monthly profit payment

← Taking stop payment instructions

← Taking hold mail instructions

← Issuance of duplicate statement of account

← Personal financial consultancy services

2 TERM DEPOSITS ACCOUNTS

These are those types of accounts in which the deposits from customers are
fixed for the certain period of time and customers get profit on their
investments. These accounts include

CERTIFICATE OF ISLAMIC INVESTMENT ( COII)

The Riba Free Certificate of Islamic Investment Certificate is a Shariah compatible investment
certificate with a minimum investment of Rs. 50,000 and tenures from 3 months to 5 years. Profit on
investment may be earned on the following basis:

← Monthly profit on 1, 2, 3 and 5 years (Minimum Investment Rs. 200,000)

← Quarterly profit on 1, 2, 3 and 5 years

← At maturity profit payment for all tenures

← Withdraw your investment any time during the course of your investment.
(Profit shall be paid only after completion of one month of investment)

Riba-Free Certificate of Islamic Investment (COII) works under the principles of Mudarabah and is
strictly in conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions
are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah
Supervisory Board.
Invest in Certificate of Islamic Investment

Riba-Free COII is available at all branches of Meezan Bank Ltd. We invite you to visit any of our
branches to experience the comfort of our personalized service. To make an investment the bank
requires customers to maintain either a current or a saving account with Meezan Bank. In order to
open an account, fill in the Account Opening Form, bring in the required documents, and get
introduced by an existing banker.
Additional Features

Enjoy a range of valuable features including:

← High and very competitive returns

← Long-term security ensured

← Pre-mature withdrawal options available

← Free Online Banking services at any of our branches

← 24/7 Call Center with complete Tele-banking services

← Specialized 8 to 8 Banking at selected branches

MAHANA AMDAN CERTIFICATE (MAC)

The Riba-Free Meezan Aamdan Certificate (MAC) is a long-term deposit certificate with an
exceptionally high monthly profit designed especially for those individuals and corporations who are
in need of regular stream of monthly income. MAC is a monthly income (mahana aamdani) certificate
with a variety of free packaged benefits.

Working under the principles of Mudarabah, the Meezan Aamdan Certificate and is strictly in
conformity with the rules of Islamic Shariah. Profit calculation and all banking transactions are in
strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah Supervisory
Board.
Key Features

Enjoy a range of valuable features including:

← High and very competitive returns

← Ensured Long-term security

← Minimum investment amount: Rs. 100,000/-

← Special attraction for Widows and Senior citizens with minimum investment of PKR
50,000/-

← Available tenures of 5½ years and 7 years

 ← Profit payment on monthly basis.

← Pre-mature withdrawal options available.

← Free cheque book

← Free ATM withdrawals on investment of Rs.500,000/- and above ( 5 per month)

← Free Online Banking services at all Meezan Bank branches nationwide

← Free Internet banking facility

← 24/7 Call Center with complete Tele-banking services

← Specialized 8 to 8 Banking at selected branches

MONTHLY MUDARBAH CERTIFICATE (MMC)

Riba Free Monthly Mudarabah Certificates is a flexible rupee based investment which has been
designed to give you a monthly return. The minimum investment required is only Rs. 100,000 and you
receive profit for each complete month of investment with the Bank.

Working under the principles of Mudarabah and in strict conformity with the rules of Islamic
Shariah, the Profit calculation of Monthly Mudarabah Certificates and all other banking transactions
are in strict adherence to the Islamic Shariah, monitored by our Shariah Advisor and the Shariah
Supervisory Board.

The weightages used for profit calculation of the Monthly Mudarabah Certificate are in the following
tiers:

← Rs. 100K up to Rs. 4.99 Mn

← Rs. 5.00 Mn up to Rs. 9.99 Mn

← Rs. 10 Mn up to Rs. 49.99 Mn

← Rs. 50 Mn up to Rs. 99.99 Mn

← Rs. 100 Mn up to Rs. 499.99 Mn

← Rs. 500 Mn & above

Additional Features

During your relationship with us, you would be entitled to receive the following additional benefits.

← A 100% halal investment in strict compliance with Shariah

 ← Monthly profit payment to your current or saving account with us

← Pre-mature withdrawal options available

← Bank balance certificates

← Free Online Banking services at all Meezan Bank branches

← 24/7 Call Center with complete Tele-banking services

← Personal financial consultancy services

← Specialized 8 to 8 Banking and Ladies Banking at selected branches

After looking on the different types of accounts which meezan offers now let us
look upon the ACCOUNT OPENING PROCEDURE

Before opening the account following documents are required

Following are the documents required for opening an Account:

Individual Account

1. CNIC / NICOP / POC

2. Any job / Business proof (As applicable)

← Minor

1. Attested copy of Birth Certificate

2. Attested copy of B Form

3. CNIC copy of Guardian

← Limited Company

1. Attested copy of Certificate of Incorporation

2. List of Directors

3. Attested copy of Memorandum & Articles of Association

4. Board Resolution

5. Attested copy of Certificate of Commencement of Business (For Public

Ltd. Co.)

6. Attested copies of CNICs of all Directors / Signatories

 7. Latest copy of certified Form-29 issued by SECP

← Proprietorship

1. CNIC of Proprietor

2. Attested copy of NTN Certificate

3. Account Opening Request & Proprietorship Letter on Firm's Letter Head

← Partnership

1. Registered Partnership Deed (certified copy)

2. Letter of Authority & Mandate

3. Attested copies of CNICs of all Partners

4. Account Opening Request Letter on Firm's Letter Head

After looking upon the essential documents required opening an account let us
throw light on the account opening procedure. First of all the customer provides
the detail on the account opening form that which type of account he or she
wants to open. Whether current or saving, MBA or KMA etc. in next step
customer specify whether he or she want to open account in pak rupee or in
foreign currency. Than customer specify that he wants to open single or joint
account. There is also option of photo account which is for illiterate people.
Customers of photo account provides their photographs which are scanned on SS
card and they should come themselves for any cash withdrawal. After getting all
these details than customer provides his or her personal information. His or her
name, father or husbands name, mother’s name, CNIC number, Old NIC Number
if applicable, correspondence address, permanent address, mobile and land line
numbers. If there is joint account than same details of other applicant is
obtained. In the next step details are acquired regarding the next of kin. It
means that if customer god forbids die or some sort of situation arise that
customer cannot operate the account than in that situation person specified by
the customer in the next of kin will continue all the transaction. Person specified
in the next of kin should be the blood relative of customer that any be father,
mother, wife, or children only. In the next step step customer specify that the
chances or remittances in his account , how many transactions will he perform in
a month and volume of transactions. Than the customer provide specific details
in the atm card and telephone banking form and the customer will sign the
account opening form and SS card form and for future transactions signatures
specified in the ss card will be used. If the signatures of customer differs from
CNIC than a Signature Difference Form will be signed by the customer which will
include both the signatures that are on CNIC and actual signatures which
customers uses. Than the particulars of introducer are entered in the form. It
means which employ brought the customer to bank for account opening.
Employee’s number, address, etc are entered in the account opening form.

After taking all the details on the account opening form and relevant documents
which are essential for account opening and which are mentioned above are
required than the customer is assigned the account number and than the
customer deposits the cash in his account to operationalize his or her account.
Now when the account is opened and whole information is entered in the system
and than LETTER OF THANKS duly signed by the OM or Authority Holder is
send to the correspondence and permanent address of the customer as an
acknowledgement

CHEQUE BOOK ISSUANCE

FIRST TIME ISSUANCE

Now when the accounts gets open the customer needs cheque book for further
transactions. For issuance of cheque book customer should bring the letter of
thank which is send to his permanent and correspondence address. When the
customer brings that letter the officer gets photocopy of that letter and signed
that letter as an acknowledgement. Than the Cheque book is taken from the
stock and its leave numbers are entered in the register and date is also entered
when the Cheque book is issued. After completing all these formalities stamping
is done on the Cheque book. Stamping is done in the following way

Branch code (0216) Account code (036 for saving, 020 for current, 766 for MBA,
435 for KMA,) account number

For example 021603600000001.

For first time issuance Cheque book of 25 leaves is issued. After stamping the
customer signs on the requisition slip, Cheque book issuance register and on the
copy of letter of thank. After signing the officer signs and stamp the requisition
slip provided in the Cheque book and than Cheque book id handed over to the
customer.

Issuance of Cheque book for more than one time

Customer gives the requisition for Cheque book issuance and specifies that
whether he requires Cheque book of 25, 50 or 100 leaves. Than the above
mentioned procedure is repeated for issuance of Cheque book. The basic
difference between the first time issuance and the issuance for second or greater
times is that for first time issuance the customer should bring the letter of thank.
RATE OR CHEQUE BOOK PER LEAF

Cheque book of current account is charged as RS. 1 Per leaf while for Saving
Accounts Cheque book is issued as RS. 3 per leaf

ISSUANCE OF CHEQUE BOOK FOR STAFF MEMBERS

Cheque books are issued to all staff members free of cost

HOW CHEQUE BOOKS STOCKS GETS OUT

When the stock of Cheque books get finish than the new stock is taken from the
vault. 10 Cheque books of 25 leaves and a bundle of 5 Cheque books of 50 and
100 leaves gets out from stock at a time and their leave numbers are recorded
in the stock register and is duly signed by the operations officer and operations
manager.

FILING DIFFERENT DOCUMENTS

During my internship period I learned there are certain documents which should
be filed daily and these includes

LEDGER JOTTING

This document includes details of all the accounts of customers and their
balances. This document is maintained that if the online system gets fail than the
details of customers accounts can be checked manually

TGL REPORT

This document includes opening and closing balance and includes the details like
total deposits, cash in safe. Foreign currency, assets, expenses and income e.t.c

COMPLIANCE REPORT

This document includes all the business transactions greater than 250 k. the
officer mentions the nature of these transactions and is signed by the branch
manager

DAILY STAFF ACCOUNT ACTIVITY

This includes the details of the staff member’s account whether he or she has
performed debit or credit transaction.

BRANCH SETTELMENT REPORT

It can be called as internal branch settlement. When one branch of Meezan gets
clear from the other Meeazn Bank’s branch it will be shown in this report

DAILY SOD & EOD CHECKLIST

THIS includes the details that when the Day Start was executed and at which
time the Day end was executed and at which time the backup data was taken
and backup tape dispatched to an offsite location. This document is duly signed
by the operations officer, OM and BM

SBP CLASSIFICATION REPORT

This is a report which is send to state bank and includes the details of all
accounts, current, savings and foreign currency account

SQC

The main things which I learned about the work of sqc are as

SQC CHECKLISTS
The first task that sqc performs early in the morning is to monitor sqc
checklist. This checklist includes different things like signage is clean
or not, all staff was present at 8:45 or not. Banking hall and teller area
is clean or not. Rate sheet and brochures are displayed or not. Sitting
area is clean or not. Atm machine is working or not. Lighting and air
conditioning is proper or not. Server room is neat and clean. Generator
is properly fuel or not. Janitorial staff is present well in time or not. So,
these were the main things which sqc checks and mentions in the
checklists

FT SHEETS
Another task which sqc performs is to prepare floor time sheets and
assign the duties of staff for floor time. Each staff member performs ft
duty for an hour in which he or she greets the customer, guide them
to proper desk and ensures the branch is in order. 1st and last hour of
floor time is performed by the lead floor manager who should be
present by 8:15

FTM
During my internship period is also performed the floor time duty. In
FTM I performed different tasks like greeting the customers, filling the
deposit slips for the customers who don’t know to fill it properly.
Guiding the customer to the right desk. Noting at least two
transactions and time taken by a each transaction. During FTM I
learned that branch should be clean, reading material is available or
not etc

CLEARING
In clearing I learned that there are two types of clearing

INWARD CLEARING

Inward clearing is that type of clearing in which MBL customers gives

Cheque to others and that other people presents in MBL for clearing
via NIFT

OUTWARD CLEARING

Customers of other banks give Cheque to MBL customers and MBL

customers present that Cheque in MEEZAN. MBL than send that
Cheque to the parent branch which clears that Cheque if balance is in
the account of the person or otherwise dishonors it

METHOD OF CLEARING.

For inward clearing the officer first of all examines that whether the
date mentioned is correct. A Cheque can be valid for 6 months from
the date of issuance. Cheque should be not post dated or presented
before the date. For example date mentioned on the Cheque is 6 June,
2009 and customer is presenting it on 4 June than that Cheque is not
acceptable before 6 June. Than the officer examine that sufficient
balance is lying in the account or not. If required amount of balance is
present than officer examines the signatures of customer specified on
the SS card. In the next step the officer examines that banl stamp in
which Cheque was present or not and also checks the stamp of Credit
Payee Account only.

If all these conditions are fulfilled than the mbl clears that Cheque or
vice versa

For outward clearing the customer deposits that Cheque of another

bank with deposit slip and than that Cheque is presented to the parent
branch. Within city clearing takes 1 one day while clearing from
outside city takes two to three days and when that Cheque gets clear
and comes back specified amount is credited to the customers
account.

CUSTOMER ENTERTAINMENT EXPENSE

Expenses which incurs on the entertainment are approved by the Area
Manager. All the supporting vouchers are photocopied and than on a
prescribed form nature and details of these expenses are mentioned
and supporting vouchers are attached and than they are send to area
office for approval of Area Manager

CONCLUSION
So these were the main assignments which I completed during my
internship with Mezan Bank Limited, cavalry ground, Lahore. In the
end I would like to thanks all the staff members who were kind and
supporting to me and treated me like their colleague and not just an
internee. They give me the practical task to perform and not asked me
to just file the documents and photocopy the documents as most of
other institution does to the internee. So, it was a great experience for
me at MBL.
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