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Islamic Banking: How we can move on to next

phase?
by A.J. Karimi,
Head HMB IB Products`

Novemebr 02, 2010

Islamic Banking:
How we can move on to next phase?

Abdul Jabbar Karimi

Head- HMB IB Products, Research &Training

HMB-Islamic Banking Division

Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

Possible Outcomes..
To know that who are stakeholders of this growing
child understanding the basic science of Islamic
Banking/Finance in order to enable the participants to
appreciate the need of the subject and look into it to
make the industry as mainstream banking sector
To understand the minimum responsibilities and
consequently the roles being Muslim have to be played
to move on..to next phase
The future....of Islamic Finance is in our hands at
most..
Mostly in your hands. the customer.
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

TABLE OF CONTENTS

1.What I mean by next phase?

2.How to move on?
1. Theory:

position
2. Practice:

ones perception and

taking
what needs to be done?

3.Do we really want to move to next

phase?
4.I am optimistic for the Isl. Banking
Future
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

TABLE OF CONTENTS

Let us look a glance on Islamic

Banking Current Scenario

Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

The Presence of Islamic Finance:

About 1100 institutes offering Islamic Products around the
world

Germany: 3
United States: 20
- Al Manzil Financial Services
- American Finance House
- Failaka Investments
- HSBC
- Ameen Housing Cooperative

- Bank Sepah
- Commerz Bank
- Deutsche Bank

Switzerland: 6

UAE: 9
- Dubai Islamic Bank
- Abu Dhabi Islamic Bank
Bahrain: 26
- HSBC Amanah Kuwait: 5
- Bahrain Islamic Bank
- Kuwait Finance
- Al Baraka
House
Qatar: 4
- ABC Islamic Bank
- CitiIslamic Investment Bank - Qatar Islamic Bank
- Qatar International Islamic

UK: 26 (primarily branches of

Iran: 8 Pakistan: 5
Gulf and glo
bal banks)
India: 3
- HSBC Amanah Finance
Bangladesh: 3
- Al Baraka International Ltd
Turkey: 7
- Takafol UK Ltd
- Faisal Finance
- The Halal Mutual Investment
Sudan: 9
Institution
Malaysia: 49
Company
- Ihlas Finance
2 - Pure Islamic Banks
-J Aron & Co Ltd (Goldman
House 10
Saudi Arabia:
Egypt:
7
(Bank Islam, Bank
Sachs)
- Al Rajhi
Alwatany
Bank
of
Egypt
Muamalat)
-Britain Islamic Bank
- Egyptian Saudi Finance - SAMBA
Rest - conventional banks
- Saudi Hollandi
Indonesia: 4
- Riyadh Bank
Yemen: 5

Planning to go for Islamic

Banking

Note: Figure indicates number of Islamic FIs in the country. Only some of the key FIs are shown for each
country
Islamic Banking: How we can move on to next phase?
Novemebr 02, 2010
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by A.J. Karimi, Head HMB IB Products`

Global Scenario

1100 institutions are offering Islamic Financial Products/Services

Growth Rate @ 28% since 2006

According to The Bankers 2009 survey, the volume of the

Shariah Compliant Assets of the top 500 Islamic Financial
Institutions grew by 28.6% rising to US$822bn from $639 in
2008 at a time when the top 1000 World Banks assets slumped to
6.8% from 21.6% from the previous year.

The Shariah Compliant Assets are projected to grow to US$1.60

trillion by 2012.

Sukuk (Islamic Bond) Issuance expected to hit US$200 Billion by

2010

Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

Global Scenario.
The United Kingdom has emerged as a leading centre for offering
Islamic Financial Services (IFS) as at present there are 22 banks in
UK offering Islamic Financial Services, out of which 05 are fully
Shariah Compliant (4 wholesale & 1 retail bank).

Lloyds TSB Bank PLC (LYG ), Britain's fourth-largest, recently

introduced Islamic mortgage products to cater to Britain's 2.5
million Muslims.

France by indicating the adjustments in its legal and fiscal

framework aims to the development of Islamic Finance to cater the
faith-based clientele in the country in addition to gain attention of
Middle Eastern Investors holding abundant liquidity. (report by
Standard & Poor, 2009)

German state became the first European government body to issue

an Islamic bond last year -- a $121 million.
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

Global Scenario.

The opportunities to tap the surplus funds of oil rich Muslim nations
is strong as many non Muslim countries are trying to tap it
including, Japan, UK, Singapore, France, Hong Kong US,
Germany, Australia, Thailand, etc.

These institutions are playing a key role in setting up and

standardizing Shariah , Financial and Accounting standards for
Islamic Financial Institutions.
Major business schools such as Oxford, Harvard, Rice and Durham

has started post graduate programs in Islamic Finance

Harvard University has developed a major database by the name of

Harvard Islamic Financial Information Program HIFIP) for Islamic

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Banking.
Islamic Banking: How we can move on to next phase?
by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

Islamic Banking In Pakistan: An Overview

The Islamic banking market in Pakistan continued to expand during
the last year as well and the assets growth has registered 59% p.a.
growth since 2005 as stated by Deputy Governor SBP.
Assets = about PKR 411 bn + (Industry Share constitute 6.10%)
Deposits = about PKR 330bn + (Industry Share constitute 6.40%)
Financing and Investment = about PKR 230 bn +(Industry Share
constitute 4.30%)
Projected growth for the next 5 years of Islamic Banking is 15%
to 20% per annum.
The Islamic Banking Market share would reach 12% by 2012 as per
strategy plan of SBP
In 2008 the assets of Islamic Banking increased by 34% as
compared to the assets of overall industry by 8.8%. (SBP Bulletin)
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

A FEW SAYINGS BY KEY PLAYERS FOR ISLAMIC

BANKING

"There is a segment within the current market that

would switch to Islamic if the quality and benefits
offered were as good as conventional financial
products," says Ray Ferguson, CEO of Standard
Chartered Bank UAE in Dubai.

A conservative approach to risk and a close link

between the financial sector and real assets has
helped shield the sector from the worst of the credit
crisis, said. Brian Caplen, An editor of a
London-based magazine

"Islamic banking isn't just for conservative or radical

Muslims. It's mainstream business now, "That's why
every bank wants a bigger piece of it."
says Ross Mohamad Din, director of HSBC
Amanah
Malaysia
Islamic Banking: How
we can move on to next phase?

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by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

TABLE OF CONTENTS

1.What I mean by

next phase?

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

Next Phase shall be starting..

o
Islamic banking must be able to become domestic
player with an international quality in services and
performance, i.e. first best choice that caters equally the
here (Dunya) on the same competitive conventional
banking lines
o

Positioning Islamic Banking as a beyond banking ,i.e.

more than just a bank..

20% + Country Business /(deposits+ Assets) to be done

through Islamic Banking

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

TABLE OF CONTENTS

2. How to move on?

Theory:
ones perception and
position taking
Practice:
what needs to be done?
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

How to move on? Theory:

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB
Products`

Novemebr 02, 2010

How
to move on?

Theory:

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

How to move on? Theory:

O you who believe, Fear Allah and give up what remains of your
demand for Interest, if you are indeed a believer. If you do not, then you
are warned of the declaration of war from Allah and His Messenger; But
if you turn back you shall have your principal: Deal not unjustly and you
shall not be dealt with unjustly.
Al Baqarah 278 - 279 (Fourth Revelation)
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

How to move on? Theory:

1. From Hazrat Abu Hurayrah (RA), The Prophet, peace be on
him, said:

"Riba has seventy segments, the least serious

being equivalent to a man committing adultery
with his own mother.
(Ref: Ibn-e-Majah)
The Prophet may
peace be on him, cursed the receiver and the
payer of interest, the one who records it and the
witnesses to the transaction and said; They are
all alike (in guilt). Ref: (Muslim, Tirmidhi and Musnad

2. From Hazrat Jabir Ibn-e-Abdullah (RA):

Ahmed)
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

How to move on? Theory:

What is Islamic Banking?

Islamic Banking is interest free Asset

Backed banking governed by the
principles of Islamic Shariah
The ends of the both banking systems are same but only

the means to achieve these ends are different as one

system is God given in contrast to its rival system which
is ma made.

(Karimi, Abdul Jabbar- Islamic Banking :A necessary system, published in

the Finance & Business Review, The News, 18th Jun 2001)

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

How to move on? Practice (Practical Steps):

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

How to move on? Practice (Practical Steps):

Regulations/Policies
guidelines

Legal
Framework

Central
Bank

Governmen
t
Public opinion/Religious
Rulings

Consumer
s

Madrasas/
Religious
Scholars

Demand for Products &

Services

External
Intern
al

Islamic
Banking
Institution

Shariah
supervision

Vision &
Leadership

Management
Capita
l

Sponsors
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Productivi
ty

Shariah
Adviser/
Shariah
Board

Staf

Novemebr 02, 2010

Next Phase?:The minimum steps to go into

next phase
1.
Perception Change: To build understanding in Islamic
banking as Beyond Banking various forumsmore
efficient socialization and educational program for public interest .(all)

2.
3.

Businesses to take it in their TOP priorities list (Customer)

Feasible Regulatory Environment , addressing the IB challenges
(Liquidity, Legal, Taxation, + ) on priority basis ..(Govt. /SBP)

4.
5.

Big banks to play role/think seriously ..(Govt. /SBP)

Positioning, Differentiation and Branding, positioning the IB as
the most attractive one in country and abroad (IIFS) + Shariah +Customer

6.

IB to be accessible for all kinds of people and all

segments /PLS Based Products on assets side (IIFS
+Customer)

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7.

Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

HR Service quality: Professional +Religious touch (Staff)

Next Phase?...
And.
8. Unanimity of views of Religious
Scholars (RS).for
o
the products and services offered by
Islamic Banking,
o
the prohibition of Banking Interest
Shariah Doctor
o
the differences, if any, in terms Shariah
interpretation should remain within the
circles of scholars.
9.
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CUSTOMERS total commitment for Islamic banking as

Islamic Banking: How we can move on to next phase?
by A.J. Karimi, Head HMB IB Products`

the only choice to bank with.. Haq-ul-Yaqeen

Novemebr 02, 2010

Unanimity of views
An example.
The Question about
MURABAHA

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

Murabaha .
The basic purpose of Murabahah Sale has been described in Fiqh
books in these words:


" the main purpose of (Murabahah) sale is to protect the innocent
general consumer lacking expertise in the various items of trade
from the wiles and stratagems of sharp traders.
Usually there are three parties to a Murabahah transaction where
the bank is involved:
1. The one who promise to buy (Customer)
2. The Bank
3. The vendor (supplier to the Bank)

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

3.
Do we really want to move to next
phase?
The Trillion Dollar
Cake

End 2008

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Amount in Billion of USD

Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

And the long way

1 Year To Go

LIVE
y
d
a
e
r
Al

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

I am optimistic for the

Islamic Banking Future

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

I m optimistic for IB .
Karimi says,
I am optimistic regarding the future
/tomorrow of Islamic Banking that it is going
to be the mainstream banking chosen as choice
by almost all iff
We successfully provided the products that
cater the needs of the customers on equal
grounds ...
tomorrow is of Islamic Banking..
Why??
An illustration.with comparison..
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

Is our vision to create a Market

Segment?

The tale of Telecom.

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

Telecom RevolutionYear
2000
Source:
Pakistan Telecommunication Authority
No of connections and
market share

In the Year 2000, after 8 years

mobile phone operators share was only 9%
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

Telecom RevolutionYear
2007
No of connections and
market share

Now mobile phone operators share of

the industry is 89%!!!
Source:
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Pakistan Telecommunication Authority

Novemebr 02, 2010

Telecom RevolutionYear
2007

Mobile Phone
Industry
55 Mn Connections

Fixed Line
Industry
5 Mn Lines

The market segment has become

larger than the basic industry itself
Source:
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Pakistan Telecommunication Authority

Novemebr 02, 2010

What is the inspiration

Basic functionality with

out the wire

Financial solutions with

out Riba

Vision is to create an industry itself

and not a segment

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Islamic Banking: How we can move on to next phase?

Karimi, Head HMB IB Products`

by A.J.
Novemebr 02, 2010

Source:
Oasis International research 2006

What does this Market Want?

Research:
I will only bank
with an Islamic
Bank

The winning formula

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Islamic Banking: How we can move on to next phase?

A.J. Karimi, Head HMB IB Products`

I will Not bank

with an Islamic
Bank

All things equal I

Will prefer an
Islamic Product

by

Novemebr 02, 2010

What does this Market Want?

An Example

IBB

Launched in
an area
already
Highest incremental
having
growth in the entire
Conv.banking
banking industry
branches All things equal
I will prefer an Islamic product
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

The road ahead

Whom to go Shariah Doctor?

..Pleasure of Allah
SWT is only possible
when well adhere the
minimum Shariah
boundaries. Having
business within
prescribes lines by
Quran + Sunnah

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

Concluding Point

The Main Motivating Factor and Driver of

Islamic Banking ..

ROI (h+h)
In anticipation of ROI (H+H), i.e. the investment that brings return for

here and herein after in an effort to abide by the prohibition of Riba, a

surprisingly increasing number of Muslim deposit holders all across the
world, have non-interest bearing accounts and they refrain from
Interest Based Banking.

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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010

Thanks
FOR FURTHER INFORMATION:
Abdul Jabbar Karimi
Head-HMB Islamic Banking Products
HBZ Plaza (Hirani Centre)
Islamic Banking Division
Cell: +92 300 824 5995
D/L: +9221 32639665
D/L: +9221 32644406
Email: ajk313@gmail.com
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Islamic Banking: How we can move on to next phase?

by A.J. Karimi, Head HMB IB Products`

Novemebr 02, 2010