15

Islamic banking products and thier operational machinism by muhammad asad

Embed Size (px)

DESCRIPTION

 

Citation preview

Page 1: Islamic banking products and thier operational machinism by muhammad asad
Page 2: Islamic banking products and thier operational machinism by muhammad asad

Presentation On Islamic Banking

By Muhammad Asad

MBA, ICMA, DAIBPHead O&S, Bank of Khyber, Pakistan

8th 9th June, 2010Kabul, Afghanistan

Page 3: Islamic banking products and thier operational machinism by muhammad asad

Presentation On Islamic Banking

Contents

1. Definition

2. Comparison of Islamic and Conventional Systems

3. Profit Distribution Mechanism

4. Concept of Weightages

3

Page 4: Islamic banking products and thier operational machinism by muhammad asad

Definition (From General Public Point Of View)

• Islamic Banking is a system where deposits collected on profit & loss sharing basis are invested in profitable Projects using any Shariah based mode and net income/loss is shared between the depositors and the bank.

• It has three parts.• Collection of deposits on PLS basis.• Investing deposits in profitable ventures using

shariah based modes.• Distributing profit or loss among depositors and

the bank.

4

Page 5: Islamic banking products and thier operational machinism by muhammad asad

Definition (From Economists Point Of View) • It is the pooling of cash resources (means) of

the economy and diverting it to projects which have the greatest positive impact on the GNP and distributing the benefits of increased GNP among the segments of the economy.

• It has four parts.– Pooling of cash resources.– Diverting it to projects which have positive impact on

GNP– Distributing GNP benefits among resource providers– Benefiting the Different segments of the economy

through increased GNP.

5

Page 6: Islamic banking products and thier operational machinism by muhammad asad

Comparison of the Islamic and Conventional systems Conventional Banking • Conventional Banks take deposit on interest

basis and lend on the basis of interest. A part of interest is paid to the depositors and the remaining interest is left for the bank as its income. If this residual is more than its expenses, it will have Net Income otherwise it will have Net loss.

Islamic Banking • Islamic Banking accepts deposits on PLS basis

and invest in Shariah based modes. Whatever is the profit, it is shared with depositors. If there is a loss it will also be shared.

6

Page 7: Islamic banking products and thier operational machinism by muhammad asad

Comparison of the Islamic and Conventional systems Conventional Banking

• Equation of Banks FailureAdmn Exp + Interest Exp > Total Income + Reserves• Equation of Banking System FailureAdmn Exp + Interest Exp > Total Income + Reserves + Equity

Islamic Banking (Musharakah Model)• Equation of Banks FailureNet Operational Losses > Reserves + PLS Deposits• Equation of Banking System Failure• Net Operational Losses > Reserves + PLS Deposits + Equity• Net Operational LossesThere is net operational loss if result of following equation is positive.Net Operational Losses = Admn Exp + Losses (Income) from Invest

Islamic Banking (Mudaraba Model)• Equations of Banks Failure• Gross Expense > Income (Loss) E + Income (Loss) C + Management Fee• Equations of System Failure• Net Losses from (Investment E + Invest C) + Management Exp > Management Fee + Equity

7

Page 8: Islamic banking products and thier operational machinism by muhammad asad

Comparison of the Islamic and Conventional systems

Page 9: Islamic banking products and thier operational machinism by muhammad asad

Comparison of the Islamic and Conventional systems

9

Page 10: Islamic banking products and thier operational machinism by muhammad asad

Comparison of the Islamic and Conventional systems

Page 11: Islamic banking products and thier operational machinism by muhammad asad

Profit Distribution Mechanism

11

Page 12: Islamic banking products and thier operational machinism by muhammad asad

Profit Distribution Mechanism

12

Page 13: Islamic banking products and thier operational machinism by muhammad asad

Profit Distribution Mechanism

Page 14: Islamic banking products and thier operational machinism by muhammad asad

Concept of Weightages

• Weightages:

– Decided by the Management under criteria to be applied uniformly

– declared before start of Month.– Criteria set for determining Weightages shall be applied

uniformly.– Bank can reduce Weightages for equity for profit distribution.– In case of loss Weightages shall be ignored.– Can not be changed during a month.– displayed on Notice Board as well as website of Bank.

15

Page 15: Islamic banking products and thier operational machinism by muhammad asad

Thank You

CENTER OF ISLAMIC BANKING & ECNOMICS

Head Office: 192- Ahmad Block, New Garden Town , Lahore, Pakistan 

Ph: +92-42-35913096-8, 35858990, 38407850 Fax: +92 -42-35913056

E-mail : [email protected]: www.alhudacibe.com