Money and

Banking
The Karachi Stock
Exchange

“Empowering The
Companies of Tomorrow”
Group Members ;

Syed Owais Ali (SP07-BB-0135)

M. Moez Siddiqui (SP07-BB-0106)
M. Laraib (SP07-BB-0082)
Pawan Kumar (SP07-BB-0128)
Shahbaz Nawaz (Sp07-BB-0150)
Bhawani Shankar (SP07-BB-0039)
What is Islamic Banking?

Islamic banking has been defined as banking in

consonance with the ethos and value system of
Islam and governed, in addition to the conventional
good governance and risk management rules, by
the principles laid down by Islamic Shariah.

Interest free banking is a narrow concept denoting a

number of banking instruments or operations,
which avoid interest.
History

Steps for Islamization of banking and financial

system of Pakistan were started in 1977-78.
Pakistan was among the three countries in the
world that had been trying to implement interest
free banking at comprehensive/national level.
The Islamization measures included the elimination
of interest from the operations of specialized
financial institutions including HBFC, ICP and NIT
in July 1979 and that of the commercial banks
during January 1981 to June 1985.
The legal framework of Pakistan's financial and
corporate system was amended on June 26, 1980
to permit issuance of a Shariah compliant
instrument of corporate financing named
Participation Term Certificate (PTC).
Separate Interest-free counters started operating in
all the nationalized commercial banks on January
1, 1981 to mobilize deposits on profit and loss
sharing basis.
 Major modes of
Islamic Banking and
Finance
MURABAHA
Literally it means a sale on mutually agreed profit.
Technically, it is a contract of sale in which the seller
declares his cost and profit.
IJARAH
Ijarah is a contract of a known and proposed usufruct
against a specified and lawful return or consideration for
the service or return for the benefit proposed to be taken,
or for the effort or work proposed to be expended.
IJARAH-WAL-IQTINA′
A CONTRACT UNDER WHICH AN ISLAMIC BANK PROVIDES
EQUIPMENT, BUILDING OR OTHER ASSETS TO THE
CLIENT AGAINST AN AGREED RENTAL TOGETHER WITH A
UNILATERAL UNDERTAKING BY THE BANK OR THE CLIENT
THAT AT THE END OF THE LEASE PERIOD, THE
OWNERSHIP IN THE ASSET WOULD BE TRANSFERRED TO
THE LESSEE.
MUSAWAMAH
MUSAWAMAH IS A GENERAL AND REGULAR KIND OF SALE IN
WHICH PRICE OF THE COMMODITY TO BE TRADED IS
BARGAINED BETWEEN SELLER AND THE BUYER WITHOUT
ANY REFERENCE TO THE PRICE PAID OR COST INCURRED
BY THE FORMER.
ISTISNA′ A
IT IS A CONTRACTUAL AGREEMENT FOR MANUFACTURING
GOODS AND COMMODITIES, ALLOWING CASH PAYMENT
IN ADVANCE AND FUTURE DELIVERY OR A FUTURE
PAYMENT AND FUTURE DELIVERY.
BAI′ MUAJJAL
LITERALLY IT MEANS A CREDIT SALE. TECHNICALLY, IT IS A
FINANCING TECHNIQUE ADOPTED BY ISLAMIC BANKS
THAT TAKES THE FORM OF MURABAHA MUAJJAL.
MUDARABAH
A FORM OF PARTNERSHIP WHERE ONE PARTY PROVIDES THE
FUNDS WHILE THE OTHER PROVIDES EXPERTISE AND
MANAGEMENT. THE LATTER IS REFERRED TO AS THE
MUDARIB
MUSHARAKAH
MUSHARAKAH MEANS A RELATIONSHIP ESTABLISHED UNDER
A CONTRACT BY THE MUTUAL CONSENT OF THE PARTIES
FOR SHARING OF PROFITS AND LOSSES IN THE JOINT
BUSINESS.
BAI′ SALAM
SALAM MEANS A CONTRACT IN WHICH ADVANCE PAYMENT IS
MADE FOR GOODS TO BE DELIVERED LATER ON. THE
SELLER UNDERTAKES TO SUPPLY SOME SPECIFIC GOODS
TO THE BUYER AT A FUTURE DATE IN EXCHANGE OF AN
ADVANCE PRICE FULLY PAID AT THE TIME OF CONTRACT.
Dubai Islamic Bank

Part of the Big Five Islamic

The World’s First Islamic Bank
Banks in the world

The largest Islamic Bank in UAE Globally recognized Leader

Amongst the top 4 Banks in and Innovator in Islamic Banking
the country

Strong Domestic Franchise

Nearly 600,000 retail customers
Government ownership 34%
49 branches / nearly
300 ATMs, CDM
 Largest business unit within DIB
Full range of products and services
Retail &
Customer segments: Mass affluent, Wealth management, SME
Business
Banking One of the largest Retail customer base in UAE
Market leaders: Deposits products and Auto finance

DIB’s principal
•
business is focused on its
Millennium Capital and Millennium Finance subsidiaries incorporated in Dubai

five
Investment
Banking
core
• units
International Financial Centre
Investment banking activities such as project finance, loan syndication, capital
markets, asset management and structured finance as well as Corporate Advisory
Services
• Global leaders in Sukuk issuance: #1 in the Bloomberg league table in 2006
Real Estate, • Leading provider of Real Estate Finance services in the UAE with significant role in
Contracting supporting real estate developments
Finance, Direct • Financing to contractors in the oil, gas, power and water sectors
Equities
• Short term equity investments in established companies and business start-ups
across MENA region
• Large & Middle Market
Corporate • Bankers to top corporate houses in GCC
Banking • Financing for Trade and Manufacturing and Infrastructure
• Cash Management capabilities

• Foreign exchange services

Treasury • Asset-liability management
• Islamic derivatives
Dubai Islamic Bank – Strategic Agenda

Growth drivers to be Leveraging on the success

Retail, Corporate Banking & in Dubai to capitalize on
Investment Banking opportunities in other Emirates

To be
amongst
Focus on Value Growth: the Top Continually innovate using the
cross selling, latest technology and product experti
new Islamic products 3 leading to ease and convenience
embed cost awareness
Banks
in UAE

Evolving from
Diversifying DIB’s revenue streams
a pure banking entity
through penetration and presence
to a more comprehensive
in new markets in the MENA region
Financial Services Group
 Diversified portfolio both with respect to economic sectors and customer
segments
Key economic sectors include government / public sector and real estate
Portfolio
– Among the most Diversification, Business
significant Arrangers of financing for Dubai Government

Overview
Sectorial Exposure of Financial Assets (2007) Segmental Revenue; % of Total Revenue (2007)

Manuf / Services
19% Real Estate
26%

G ovt
7%

Retail
10%

Financial
Institutions
38%
An Integral, Recognized player in the Islamic
Finance sector
Mega Deals
• US$ 3.52 Bn Sukuk issue for Nakheel
(Dubai World)
• US$ 3.5 Bn Sukuk issue for PCFC
(Govt of Dubai)
• US$ 2 Billion Sukuk for Dubai Civil
Aviation for expansion project of Dubai
International Airport
• US$ 600m Government of Malaysia
Sukuk
• US$ 600m Pakistan Sovereign Sukuk
• US$ 550m Sukuk for Emirates Airlines
• US$ 530m Lead Arranger for Qatar Gas
II
Awards & Accolades (2005-’07)
• Best Bank in UAE, 2006: The Banker
• Best Islamic Bank in ME, 2006:
Euromoney
• Best Debt house UAE, 2005: Euromoney
• Best Sukuk House, 2005: Euromoney
• Award for Finance (2005): Shaikh
Mohammed Bin Rashid Business Award
• Quality Recognition Award, 2005: JP
Morgan Chase
• Banking Achievement Award for the
Middle East, by Emerging Markets
Publication during the IMF Conference in
New York, Oct’07
Products and Services
• Ready Market:

A conventional stock market also known as the regular market,

where buyers and sellers come together to trade shares.
Settlement of trade occurs 2 days after the trade.

• Cash Settled Futures:

A standardized contract, to buy or sell a certain underlying

instrument at a certain date in the future, at specified price. All
settlement occurs purely on cash basis. Depending on the
contract, settlement occurs 30, 60 & 90 days after the contract is
purchased.
• Stock Index Futures:

Stock Index Futures are traded in a number of contracts. Each

contract is to buy or sell a fixed value of the index. Stock Index
Futures Contract occurs 90 days after the contract is
purchased.

• Deliverable Futures:

Forward contracts to buy or sell a certain underlying

instrument with actual delivery of the underlying instrument
occurring. Settlement occurs 30 days after the contract is
purchased.
     - CFS (discontinued)
    - COT (discontinued)
Company Services

• Customized services and state-of-the-art technology

infrastructure, have given us an edge over other exchanges in
the region.
• Fully automated trading, clearing and settlement system.
• Internet routed trading facility.
• Gateway trading (Order Management System).
• Investors and fund managers can also access information
through Display Only Terminal
• Internet trading facilities available.
• Order-driven system .
• Brokers connectivity to KSE through VPN (to ensure security of
data).
Data Services:

• TV channels also display KSE ticker through live feeds from KSE
system.
• Investors provided customized data packages for trading and
assessment of their portfolio on a real time basis.
• Data feed provided to major international redistributors
(Reuters, Bloomberg) on real time basis.
• KSE website offers data of market on real time basis, including
listed company profiles, snap shot of financials, press releases
and summary of market activities on real time basis.
 Islamic Banking Global Scenario

Over the last three decades Islamic banking and finance has
developed into a full-fledged system and discipline
reportedly growing at the rate of 15 percent per annum.

Today, Islamic financial institutions, in one form or the other, are

working in about 75 countries of the world.

In Malaysia, Bahrain, Pakistan and a few other countries of the

Gulf, Islamic banks and financial institutions are working as a
system parallel with the conventional system.
In Britain, the Financial Services Authority has issued Islamic
banking license to the Islamic Bank of Britain, which has
been sponsored by Gulf and UK investors.

The United States of America has appointed Dr. Mahmoud El

Gamal, an eminent economist/expert on Islamic banking to
advise the US Treasury and Government departments on
Islamic finance in June 2004.

Both US and Britain have over two dozens of Islamic financial

institutions each for providing Riba free financing facilities to
their Muslim communities.