PRESENTATION ISLAMIC PRINCIPLES.pptx commerece

Islamic Principles

1. Interest Free Banking OR Islamic Banking

2. Presented To: Prof. Dr Mian Muhammad Akram Presented By: Muhammad Osama Rafique Roll no MC20-061 MCOM(Hons) Semester 3rd

3. What Would We Discussed Introduction Product of Islamic Banking Islamic Banking Concept and Practices Interest free banking in Pakistan Difference Between Conventional Banking and Islamic Banks Names of Islamic Banking Conclusion

4. Introduction Islamic banking is interest free banking, in which there is no fixed rate of return. Islamic banking is the banking system which is run in accordance with the Islamic laws and the Shari a` board; that guides the institutions. This Shari a` board authorizes the products that whether these are Shari a` compliant or not. Islamic banking is the banking that is guided by Islamic law ( Shari a`) principles and guided by Islamic economics. The interest is prohibited in Islamic ways of banking as it is also obvious from Quran .

5. Riba(Interest) Riba literally means increase, addition, expansion or growth. It is however not every increase or growth, which is prohibited by Islam. In shariah, Riba technically refers to the premium that must be paid without any consideration.

6. Types of Riba According to jurists of Islam Riba have two types. Riba Al-Nasiyah ' Riba An-Nasiyah’ is defined as excess, which results from predetermined interest (sood) which a lender receives over and above the principle. Riba Al Fadl ' Riba Al Fadl’ is defined as the excess compensation without any consideration resulting from a sale of goods.

7. Product of Interest Free Banking Ijarah: This product is mostly used for the purchase of vehicles like cars, delivery vans, etc. the bank purchases the vehicle for the client and the client pays monthly rentals. When the cost of the vehicle plus the profit amount is paid by the client, the ownership is transferred to the client. Mudarabah: This product is used to finance the businesses. The bank provides the finances and the business provides the labor. If any loss is occurred, it is borne by the bank provided if there is no intent of the Mudaraba of the loss Istisna: It is a contractual agreement for manufacturing goods an commodities, allowing cash payment in advance and future delivery or a future payment and future delivery. Istisna can be used for providing the facility of financing the manufacture or construction of houses, plants, projects, and building of bridges, roads, and highways.

8. Product of Interest Free Banking Musharakah: It is a partnership contract between the bank and the client in which both the partners invest their capital in a project in a proportion. They share profit or loss in a way that the loss is shared between the partners in the proportion they invested their capital, but the profit is shared in a predetermined proportion with mutual consensus. This product is generally used In home loans (for construction and renovation purposes). 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. Murabaha : It is a contract to sell the goods with a mark-up profit on the cost of the goods. The client instructs the bank to purchase the goods from a third party. The bank then sells the goods to the client on the price that includes cost plus the profit. This product is also used to finance the business.

9. Interest Free Banking in Pakistan State banks of Pakistan are playing very important role in the development of Interest free banking and make Interest free banking as the first priority in the banking system. Islamic banking is providing a wide variety of the products which are competitive to the conventional banking system. Interest free banking generally shows an increasing trend in the total assets, total deposits, total financing, total investments, total number of branches, profits, earnings per shares, share holder equity and other financial indicators which shows the financial growth and development of the Interest free financial institutions.

10. ISLAMIC BANKING CONCEPTS AND PRACTICES: In this section, we first examine basic Islamic concepts as well as the profit-and-loss sharing (PLS) paradigm in Islamic banking. We then provide a discussion of Islamic banking practices in Pakistan. ISLAMIC BANKING CONCEPTS AND PARADIGM: The PLS paradigm is widely accepted in Islamic legal and economic literature as the bedrock of Islamic financing. Islamic bank financing, which adheres to the PLS principle, is typically structured along the lines of two major types of contracts: Musharakah (joint venture) and Mudarabah (profit-sharing).

11. Comparison Conventional Banking Time value is the basis for charging interest on capital. Conventional Bank use money as a commodity which leads to inflation. The investor is assured of a pre- determined rate of interest. It can charge additional money incase of defaulters. Islamic Banking Profit on trade of goods for charging on providing service is the basis for earning profit. Interest free banks tends to create link with the real sectors of the economics by using trade related activities. In contract it promotes risk sharing between provider of capital (investor) and the user of funds (entrepreneur). The Interest Free banks have no provision to charge any extra money from the defaulters.

12. Names of Islamic Banks Meezan Bank Dubai Islamic Bank Burj Bank Al Barka Bank Islami The Islamic Development Bank

13. Conclusion The existence of Islamic and conventional banks in Pakistan created stiff competition among banks to attract and retain greater number of customers by the provision of quality services. The magnitude of relationship between service quality and customer satisfaction is greater in Islamic banks as compared to conventional banks. The gap between customer’s satisfaction and performance of Islamic banks may be due to the lack of customer orientation. The future of Islamic banking seems brighter than the conventional banking as the results show that the Islamic banking is not suffered from the global financial crisis to the extent conventional banking is suffered. If manager implement all rules properly interest free banking get success.

14. THANK YOU