CONTENTS
Title Page No.
Introduction to Bank Islami ………. 08
Vision ………. 09
Mission ………. 09
Core Values ………. 09
Board of Directors ………. 10
Capital Structure ………. 10
Shariah Board ………. 10
Product & Services ………. 11
- Deposit Products ………. 12
- Islami Bachat Account
- Islami Dollar Bachat
- Islami Bachat Account
Account
- Islami Amadni Certificate
- Islami Mahana Certificate
- Corporate Banking ………. 17
- Medium & Long Term
- Medium & Long Term
Financing
- Ijarah Leasing
- Consumer Banking ………. 21
- Auto Ijarah
- Muskun Home Financing
- Auto Ijarah
Services ………. 27
Reference ………. 28
Pakistan's economy in 2007 performed well despite of all the expected and unexpected political and economic upheavals. On the political front, they had expected some uncertainty and had mentioned it in their last year's review as well. The magnitude and its corresponding impact on the economy were however under estimated. Coupled with it, external factors such as oil prices and resulting current account deficit and inflation some what halted what was turning out to be a good economic story. However, there were positive signs as well. The growth rate remained above 6%, Foreign Portfolio Investment largely remained intact, Remittances increased and Foreign Direct Investment continued to pour in. This shows both local and foreign investors are better aware of risk and opportunities in Pakistan and economics not events is dictating decision making, signs of a maturing market.
In this backdrop, Islamic banking industry did extremely well. The growth rates continued to remain impressive. In the first nine months of the year, deposits increased by 49.4% to Rs.124 billion, Assets 51% to Rs.178 billion, branches 38% to 207 and share in the industry to 3.80% from 2.90%. This 31% growth rate in comparison with 13.40% of the over all banking industry should put rest doubts about future of Islamic banking industry in Pakistan. As a matter of fact, there is a consensus within Islamic Banking industry that the market share will rise to 12% by 2012 i.e. the incremental growth rate on average will be around 20% per annum in next five years.
BankIslami is ideally poised within the Industry to reap the fruits of opportunity.
They continued their strategy of creating a large national network. BankIslami opened 26 branches (+260%) in 21 cities taking our network to 36 in 23 cities across the nation. This is probably the fastest expansion recorded by any bank. As most of the branches were opened in the last two months, the increase in business was mainly generated by the old network. Deposits increased to Rs.9.93 billion (+ 559%), Advances to Rs.3.96 billion (+413%), Investments to Rs.3.86 billion (+784%), staff strength rose to 563 (+238%) while average employees per branch dropped to 16 from 24 (-50%) compared from last year. Number of accounts increased to about 20,000 (+ 626%). The Bank also successfully extended its service offering into Consumer and Investment Banking.
In Consumer Banking, it was one of the few banks which correctly predicted the trends in the industry. Their strategy is to have 10% to 15% of the portfolio in Consumer business while keeping the default rate less than 2%. It successfully launched Housing Finance Product, Muskun, during the year with good results. Auto Ijarah, car financing business further consolidated. At year end, the Consumer portfolio stood at about 15% of the portfolio with infection at less than 0.5%. Importantly, the business was profitable. This strategy is likely to continue this year with offerings in selected segments. Debit card was also introduced during the year. Bank will be launching Visa debit card this year. Yet another mile stone would be the introduction of card less ATM facility using Biometric Technology.
A key achievement of the year was setting up of an Investment Banking department which has come up very well. BankIslami's strategy is to be a player of significance in the mid-tier segment with some presence in the large transactions. During the year bank lead managed and successfully closed Sukuk transactions worth Rs.15.3 billion. Notable among them were: Sui Southern Gas Company Limited, Shahmurad Sugar Mills Limited, Eden Housing Limited, Pak Elektron Limited, New Allied Electronics Industries (Private) Limited, Amtex Limited and Fatima Sugar Mills Limited. The deal pipeline is extremely healthy. BankIslami has recently been mandated to lead manage the largest Sukuk offering so far by a government agency. Bank expects to increase earnings form their Investment banking business by almost 300% in 2008.
Corporate and SME are the main revenue generators. In Corporate, bank does not have a significant presence as yet. Recession in textile, the largest industrial segment, phasing out of Export Re-finance and reluctance to work at fine rates were the main reason for that. It also explains negligible presence in the Trade Finance Business. Corporate is getting a lot of attention this year as bank has a network to cater to their needs across the country. Their target is to increase the Corporate Book by 900% this year without any adverse impact on the quality which is infection free. SME, on the other hand has been very active. They have planned to deepen their business penetration in SME's with almost a similar increase as projected in Corporate Business. At the end of year bank has made provisioning of about Rs.13m in SME using subjective criteria. This was done more out of prudence. Bank does not expect these provisioning to result into a loss.
BankIslami has taken a lot of pride in its investment in technology. Notable milestones achieved this year were: Purchase of state-of-art and the only Sharia'h compliant core banking system, iMal. This system has recently been ranked as the best Islamic Banking Software by International Bank Sales, London. Bank expects iMal to add significantly to business efficiency and Sharia'h compliance. Other achievements were: Implementation of first smart card based think clients, Deployment of Global Bunch Note Acceptor ATM and Deployment of Anti-Money Laundering Software, XM3. All these milestones were achieved first time by any institution in Pakistan. As well, BankIslami became the first Islamic Bank to have offered Inter Bank Fund Transfer Facility (IBFT).
Some of the other initiatives taken and completed were: Implementation of e-statements facility and development of an in-house biometric kiosk. Main challenge this year is to successfully complete deployment of iMal software by end third quarter.
On the Human Resources front, bank continued with its strategy of being employer of choice for those who have conviction for Islamic Banking. Their recruitment process is transparent, unbiased and geared to hire people who have high moral and ethical values. Bank routinely conduct written tests at hiring stage together with psychometric testing. The measure of success of recruitment process was their ability to hire almost 100% local staff in areas such as Tando AllahYar, Muslim Bagh, Qila Saifullah, Chaman, Larkana, Nawabshah, Pishin and Mirpurkhas to name a few. Training and Development is yet another forte of bank. They have a formal training and development center in the Head Office. All employees in BankIslami are required to attend and pass an Islamic banking course through a formal examination with passing marks as high as 90% for certain disciplines. Soft skills get due attention as well. Their three year graduate training program has come up well. Most of manpower requirement would be met internally next year.
In line with their strategy of setting up 'Principal Businesses' for Wealth Management offering, they acquired JS Finance Limited, which has since been re-named BankIslami Modaraba Investments Limited. It is their intention to set up a number of specific purpose Modarabas to be managed by this company. The existing Modaraba, Modaraba Al-Mali is in the process of being re-structured which will be completed by end third quarter this year. This particular Modaraba will primarily focus on energy business. Similar other initiatives are in pipe line.
No progress was made in their desire to offer Wealth Management in 2007. Delay in certain regulatory approvals, their pre-occupation with expansion of network and implementation of the software are some of the reasons. However, they are committed to deploy the infrastructure this year for offering from next year.
In the Media, we kept ourselves present. A program was sponsored in Ramazan to promote Islamic Banking on CNBC. A study is also under progress to re-brand the Branches. Decision is expected by end of first quarter.
BankIslami distinguishes itself from its peers that it offers not only authentic Sharia'h compliant Islamic banking, but also ensures Islamic practices are truly reflected in their business dealings and work place. Azaan is made through public address system and almost all work places are provided with formal prayer areas. There is a dress code for both men and women to promote modesty. All their advertisements carry simple and plain statements emphasizing on humility and humbleness. Customer dealings are kept transparent. Un-solicited sales calls are discouraged, especially after business hours. All promotional material, including visiting cards are available in Urdu to ensure there are no language barriers. Islamic Banking, is much more than structuring of business contracts.
They have received 30 branch licenses in addition to 32 sub-branches from State Bank of Pakistan. This will take their network to 98 by close of the year. Their focus this year will remain on creating a national network to be player of significance in Pakistan's financial services industry. Specifically, they expect almost 100% growth in balance sheet.
On the capital front, we abandoned the idea of raising the capital to Rs.6 billion due to political uncertainty in the country. They will re-visit this option once situation some what settles down. Alternatively, a rights issue shall be made in the third quarter to raise the capital to Rs. 5 billion.
INTRODUCTION TO BANKISLAMI
BankIslami Pakistan Limited is a dedicated Islamic commercial bank operational in Pakistan since April 7th, 2006. The Bank offers a full range of Shariah compliant commercial banking products and services. The Bank's growing nationwide network consists of 36 branches.
BankIslami is sponsored by three financially sound and reputable groups which are: The DCD Group, Dubai Bank and Jahangir Siddiqui & Company Limited.
THE DCD GROUP is a UK based group which has played a pioneering role in setting up of institutions such as the Islamic Bank of Britain and European Islamic Investment Bank aside from partnering with Dallah Al-Baraka Bank in South Africa.
DUBAI BANK is an Islamic bank in the UAE, owned by Dubai Holdings, the investment arm of Government of Dubai and Emaar Properties, which is the largest real estate company in terms of capitalization in the region.
JAHANGIR SIDDIQUI & CO. LTD is the largest and most diversified financial services group in Pakistan with a track record of innovation and success. It has the distinction of sponsoring the first and largest asset management company, ABAMCO Limited and the first Islamic Fund in Pakistan.
The Shariah Board of BankIslami consists of three renowned and distinguished Shariah scholars namely Justice (Retd) Muhammad Taqi Usmani, Prof Dr Fazlur Rahman and Mufti Irshad Ahmad Aijaz. Mufti Irshad Ahmad is also the Shariah Adviser of the bank who works full-time with the management and guides them in issues pertaining to the Shariah.
The business philosophy of BankIslami focuses on providing Shariah compliant products at par with better service and technology standards viz-a-viz conventional banks. In pursuit of these traditions BankIslami is the first commercial bank in Pakistan as well as in the region to deploy Biometric ATMs for its customers to ensure better security and service. Also, BankIslami is the first bank in Pakistan to start Internet banking for all its customer from the day it started operations.
Currently our Shariah Compliant products menu includes Working Capital Finance, Medium and Long Term Finance, Ijarah (Islamic Leasing), Islamic Export Refinance, Structured Finance, Letter of Credit (Sight and Usance), Letter of Guarantees, Forward Cover, Bill Purchases, Islami Current Account, Islami Bachat Account, Islami Mahana Munafa Account, Islami Amdani Certificate, Auto Ijarah, Muskun (Home) Financing e.t.c.
BankIslami envisages being the first Islamic Financial institution in Pakistan to focus on Wealth Management as its core area of business. BankIslami aspires to be recognized as the leading authentic Islamic bank and hopes to set standards which will take the industry to greater heights.
VISION:
The Vision of BankIslami is to be recognized as the leading authentic Islamic Bank.
MISSION:
The Mission of BankIslami is to create value for our stakeholders by offering Authentic, Shariah Compliant and technologically advanced product and services. We differentiate ourselves through (i) authenticity (ii) innovation (iii) understanding our client's needs (iv) commitment to excellence, and (v) fast, efficient and seamless delivery of solution. As a growing institution, the foundation for our performance lies on our human capital and BankIslami remains committed to becoming an employer of choice, attracting, nurturing and developing talent in a transparent and performance driven culture.
CORE VALUES:
BankIslami is strongly committed towards its core values of:
- Product authenticity
- Customer focus
- Meritocracy
- Integrity
- Team work
- Humility
- Innovation
BOARD OF DIRECTORS
The Directors of the Bank are:
Chief Justice (R) Mahboob Ahmed Chairman
Mr. Ahmed M Elshall Director
Mr. Ahmed Goolam Mahomed Randeree Director
Mr.Ali Raza Siddiqui Director
Mr.Hasan A Bilgrami CEO/Director
Mr. Mohamed Al Nahdi Director
Mr.Shabir Ahmed Randeree Director
CAPITAL STRUCTURE OF BANKISLAMI
The Shareholding Rs.(millions) %
The Founding Sponsors
DCD Group 600 18.75
Dubai Bank PJSC 600 8.75
Jahangir Siddiqui & Co. Ltd. 600 8.75
Total 1,800 56.25
General Public 1,400 43.75
Grand Total 3,200 100
The initial public offering of BankIslami took place in March 2006. BankIslami shares were formally listed on the Karachi Stock Excange on April 17, 2006.
On August 23, 2007, the Board of Directors of the Bank decided to raise the paid up capital of the Bank to Rs.4.2 billion through a right issue of 31.25% at par i.e Rs.10 each to existing shareholders.
SHARIAH BOARD
Justice (R) Muhammad Taqi Usmani
- Chairman of Shariah Supervisory Board of the Bank
Professor Dr Fazlur Rahman
- Member of Shariah Supervisory Board of the Bank
Mufti Irshad Ahmad Aijaz
- Appointed as the full time Shariah Advisor to the Bank
PRODUCTS & SERVICES
BankIslami Pakistan Limited offers a full range of Shariah compliant commercial banking products and services such as current accounts, saving accounts, term deposits, auto ijarah, home financing, murabaha financing, trade financing, biometric ATM facility, internet banking service, locker facility, phone banking etc.
It aims to be the first Islamic Financial institution in Pakistan to focus on Wealth Management as the core area of business. The Bank intends to offer Shariah compliant integrated financial planning services, proprietary & third party products and host of other new retail banking products and services in future.
Products and services are provided at bankislami:
DEPOSIT PRODUCTS
- Islami Current Account
- Islami Bachat Account
- Islami Dollar Bachat Account
- Islami Amadni Certificate
- Islami Mahana Munafa Account
CORPORATE BANKING
- Working Capital Finance
- Medium & Long Term finance
- Leasing /Ijarah
- Islamic Export Refinance
INVESTMENT BANKING
- Advisory
- Private Placement
- Sukuk Arrangement
- Syndication
- Underwriting
- Trusteeship
- Structured Finance
- Listing on Capital Markets
- Project Financing
- Mergers & Acquistions
TRADE FINANCING
- Letter of Credit (Sight & Usance)
- Letter of Guarantee
- Forward Cover
- Bill Purchase
CONSUMER BANKING
- Auto Ijarah
- MUSKUN Home Financing
WEALTH MANAGEMENT SERVICES
(SOON TO BE LAUNCHED)
- Integrated financial planning solutions
- Proprietary products
- Third party products
DEPOSIT PRODUCTS
ISLAMI BACHAT ACCOUNT:
What makes Islami Bachat Account Shariah Compliant?
All funds raised by BankIslami are invested in businesses which are in compliance with Shariah. Importantly, they are invested in the manner which is prescribed by Shariah. All profits are pooled and distributed according to the pre-agreed ratio between BankIslami and the depositors. Transactions are reviewed by our Shariah Adviser to ensure compliance with Shariah.
The pre-agreed profit sharing ratio is announced at the start of each month and can be obtained from the branch, website or phone banker. Based on this profit sharing ratio, the Islami Bachat Account holder would be distributed the share in profit for the month at the beginning of the next month.
What is the relationship between an Islami Bachat Account holder
and BankIslami?
Deposit products of BankIslami are structured under the Mudarabah concept. An Islami Bachat Account holder provides funds as 'Rabb-ulmaal' and BankIslami invest these funds as 'Mudarib' i.e the fund manager. Based on this relationship, the depositors and BankIslami become beneficiaries of the profit earned. When the joint investment pool earns profit, it is distributed in the pre-agreed ratio of depositors and BankIslami. In case of the unlikely event of loss, the depositors on the pro-rata basis bears the loss whereas the Bank goes un-rewarded for all its efforts and bears all the costs incurred for doing the business.
Key Features:
- A minimum balance of Rs. 100/- only.
- Choice of currency, i.e PKR, USD, GBP, EUR and JPY.
- Monthly profit/loss payment on daily product basis.
- No restriction on number of transactions.
- Free 1 Card, BankIslami's ATM & Debit card.
- Access to the entire online branch network of BankIslami.
- Free Internet banking service having free funds transfer and mini account statement facility.
- Personalized service from Customer Relationship Officers.
- Full Service Banking during extended hours.
- Free account statement and duplicate statement facility.
- Hold mail and stop payment facility.
- Rent free lockers subject to availability and minimum balance requirements.
- Differential and specific pool allocation possible for large deposit holders.
How to open an Islami Bachat Account?
- Complete the Account Opening Form in accordance with the instructions
- provided.
- Provide a copy of Computerized National Identity Card if you are an
- individual customer.
- Provide a copy of Passport if you are a foreign national.
- Business account requirements may vary depending on the nature of
- business.
- Provide introduction from existing banker or BankIslami account
- holder.
- Deposit only Rs. 100/- in cash and become an Islami Bachat Account
- holder.
- In next 3 working days receive your cheque book, 1 Card and Internet
- banking access.
Islami Dollar Bachat Account holder is suitable for individuals and businesses who are eager to save in US Dollar. This saving scheme is for both residents and non-residents who need to either save in US dollar or remit money from or to abroad for personal or business transactions.
What makes Islami Dollar Bachat Account Shariah Compliant?
All Islami Dollar Bachat Account deposits received by Bankislami are invested in Shariah approved by the US Dollar based investment either onshore or offshore and in providing US Dollar financing to customers. The income from these investments are pooled and distributed according to the pre-declared weights between BankIslami and the depositors. All investment are reviewed by our shariah Adviser to ensure strict compliance with Shariah rules. Investments are done only in Islamic modes.
What is the relationship between an Islami Dollar Bachat Account and BankIslami
An Islami Dollar Bachat Account is a remurative account based on the Mudarabah concept where the depositors is the Rabb-ul-maal and bankislami is the mudarib or fund manager. Shariah compliant investments are made by bankislami which generates hala income which is distributed among depositors based on prescribed weights for the bankislami Dollar Bachat Account.
The profit weights are announced at the start of each month and can be obtained from the branch, website or phone banker. Based on this profit sharing ratio, the Islami Dollar Bachat Account holder would be distributed the share in profit foe the month at the beginning of the next month
Key Features:
- A minimum investment amount of USD 1,000/- only
- Monthly profit payment on daily product basis
- Withdrawl of cash in excess of USD 10,000/- is subject to prior notice to the bank
- Most suitable for transfer of remittance from abroad
- No zakat or withholding tax applicable
- Free internet banking service
- Access to online branch network of Bankislami
- Personalized service from customer relationship officers
- Full service Banking during extended hours
- Free account statement and duplicate facility
- Hold mail and stop payment facility
How to open an islami dollar bachat account?
- Complete the Account opening form in accordance with the instructions provided
- Provide copy of computerized nationality identity card if you are an individual customer or Pakistan origin certificate/passport as the case may be
- Business account requirements may vary depending on the nature of business
- Provide introduction from existing banker or bankislami account holder
- Deposit only USD 1,000/- in cash or through USD clearing cheque or valid instructions of remittances from abroad and become an Islami Dollar Bachat Account holder
- In next 3 working days receive your cheque book and internet banking access
What makes Islami Amadni Certificate Shariah Compliant?
All funds raised by BankIslami are invested in businesses which are in compliance with Shariah. Importantly, they are invested in the manner which is prescribed by Shariah. All profits are pooled and distributed according to the pre agreed ratio between BankIslami and the Certificate holders. Transactions are reviewed by our Shariah Adviser to ensure compliance with Shariah.
The pre-agreed profit sharing ratio is announced at the start of each month and can be obtained from the branch, website or phone banker. Based on this profit sharing ratio, the Islami Amadni Certificate holder would be made payment of the share in profit for the term on the maturity date.
What is the relationship between an Islami Amadni Certificate holder
and BankIslami?
Islami Amadni Certificate, like the deposit products of BankIslami is structured under the Mudarabah concept. An Islami Amadni Certificate holder provides funds as 'Rabb-ul-maal' and BankIslami invest these funds as 'Mudarib' i.e the fund manager. Based on this relationship, the Islami Amadni Certificate holder and BankIslami become beneficiaries of the profit earned. When the joint investment pool earns profit, it is distributed in the pre-agreed ratio of pool members and BankIslami. In case of the unlikely event of loss, the Islami Amadni Certificate holder on the pro-rata basis bears the loss whereas the Bank goes un-rewarded for all its efforts and bears all the costs incurred for doing the business.
Key Features
- Investment can be done for 1, 3, 6, 7, 12, 24, 36, 48 or 60 months.
- Minimum amount of investment is Rs. 10,000/- only.
- Payment of profit/loss and amount of investment on the maturity date.
- Quarterly profit payment for investment of 12 months and above.
- Facility of premature encashment available. In such a case, the corresponding period rate would apply, unless stated otherwise.
- Free facility of transfer of profit and invested funds in nominated Islami Current or Islami Bachat Account.
- Access to the entire online branch network of BankIslami.
- Full Service Banking during extended hours.
- Personalized service from Customer Relationship Officers.
- Hold mail facility.
- Rent free lockers subject to availability and amount of investment.
- Differential and specific pool allocation possible for Certificate holders investing large amount.
How to invest in Islami Amadni Certificate?
- Complete the Account Opening Form in accordance with the instructions provided.
- Provide a copy of Computerized National Identity Card if you are an individual customer.
- Provide a copy of Passport if you are a foreign national.
- Business account requirements may vary depending on the nature of business.
- Provide introduction from existing banker or BankIslami account holder.
- Deposit only Rs. 10,000/- in cash and become an Islami Amadni Certificate holder.
- Provide instructions to transfer profit and invested funds in nominated Islami Current or Islami Bachat Account.
What makes Islami Mahana Munafa Account Shariah Compliant?
All funds raised by BankIslami are invested in businesses which are in compliance with Shariah. Importantly, they are invested in the manner which is prescribed by Shariah. All profits are pooled and distributed according to the pre-agreed ratio between BankIslami and the depositors. Transactions are reviewed by our Shariah Adviser to ensure compliance with Shariah.
The pre-agreed profit sharing ratio is announced at the start of each month and can be obtained from the branch, website or phone banker. Based on this profit sharing ratio, the Islami Mahana Munafa Account holder would be made payment of the share in profit on monthly basis until the maturity date.
What is the relationship between an Islami Muhana Munafa Account
holder and BankIslami?
Deposit products of BankIslami are structured under the Mudarabah concept. An Islami Mahana Munafa Account holder provides funds as 'Rabb-ul-maal' and BankIslami invest these funds as 'Mudarib' i.e the fund manager. Based on this relationship, the depositors and BankIslami become beneficiaries of the profit earned. When the joint investment pool earns profit, it is distributed in the pre-agreed ratio of depositors and BankIslami. In case of the unlikely event of loss, the depositors on the pro-rata basis bears the loss whereas the Bank goes un-rewarded for all its efforts and bears all the costs incurred for doing the business.
Key Features
- Tenure of investment is 5 years.
- Minimum amount of investment is Rs. 10,000/- only.
- Profit/loss payment on monthly basis until the maturity date.
- Payment of amount of investment on the maturity date.
- Facility of premature encashment available. In such a case, the corresponding period rate would apply, unless stated otherwise.
- Free facility of transfer of profit and invested funds in nominated Islami Current or Islami Bachat Account.
- Access to the entire online branch network of BankIslami.
- Full Service Banking during extended hours.
- Personalized service from Customer Relationship Officers.
- Free account statement and duplicate statement facility.
- Hold mail facility.
- Rent free lockers subject to availability and invested amount.
- Differential and specific pool allocation possible for large deposit
- holders.
How to open an Islami Mahana Munafa Account?
- Complete the Account Opening Form in accordance with the instructions provided.
- Provide a copy of Computerized National Identity Card if you are an individual customer.
- Provide a copy of Passport if you are a foreign national.
- Business account requirements may vary depending on the nature of business.
- Provide introduction from existing banker or BankIslami account holder.
- Deposit only Rs. 10,000/- in cash and become an Islami Mahana Munafa Account holder.
- Provide instructions to transfer profit and invested funds in nominated Islami Current or Islami Bachat Account.
CORPORAT BANKING
MEDIUM AND LONG TERM FINANCING:
Murabahah-The Path to transparent trading:
Bankislami take a lot of pride in our authenticity and transparency. Of course it is your right to know how it works and what it is when we call ourselves an Islamic Bank with stringent Shariah criteria.
What is Murabahah?
Murabahah is a form of financing which is effected on the basis of sale. Bankislami, instead of giving a loan, purchase commodity required by the customer and sells it to him at a profit after discussing its cost. Cost may not be declared in an ordinary sale
SHARIAH GUIDELINES
Bankislami ensures compliance of conditions prescribed by shariah for completion of Murabahah Sale Transaction. The islami Fiqh or law clearly lays down rulings for that. Important ones are:
- SPECIFIC ANF IDENTIFIABLE
Murabahah is only allowed for specific, identifiable and quantifiable goods and commodities. In a Murabahah transaction, bankislami ensures that goods sold under Murabahah are specifically known and identified to the buyer
- OWNERSHIP AND POSSESSION OF GOODS
The basic principle of islam is, what is not owned can not be sold. It is ensured that goods which are being sold are in the ownership of the bank at the time of sale. Ownership may be physical or constructive. Constructive possession means, holding title of ownership and not physical possession. Bank being a seller is responsible for goods or commodity, which include all the rights and responsibilities. Bankislami ensures compliance of rules by making direct payment to the supplier and physical verification of the goods sold.
3. CONFIRMATION OF PRICE
Murabahah is sale of a commodity for a deferred price, which includes an agreed profit plus the cost. Therefore, the price must be agreed at the time of sale. This price can not be changed once the sale is completed
HOW BANKISLAMI ENSURES COMPLIANCE OF SHARIAH REGULATIONS
As a matter of policy, bankislami will make payment to supplier wherever it is possible. Bankislami has also made arrangements to physically verify the goods purchased by the customer in his capacity as agent.
IJARAH/ LEASING
What is ijarah ?
Ijarah is an Islamic alternate for leasing. Accounting to shariah, all those assets that are not consumed while they are being used, can be given on ijarah, for example a house, a car or equipment. In other words, shariah allows ijarah of fixed assets with certain conditions. Bankislami uses ijarah for providing car, equipment, property or any other fixed assets on rent to a customer against agreed payment. The rentals are calculated in such a way that the bank is able to recover its cost and profit. The client may either purchase the asset at a nominal value or return the assets to the bank at the end of the agreed period.
During the period of ijarah, the ownership of the asset remains with the bank and consequently it bears all the risks. If the assets are damaged due to any event beyond the control of lessee, whether due to an earthquake or ay natural disaster or loss due to theft, the loss would be borne by the Bank. However, customers bears responsibility for negligence if it occurred due to that.
Steps In Ijarah
- Customer approaches bankislami for ijarah financing. Bankislami purchases the assets from the market after signing promise to lease agreement with the customer. This to ensure customer take-up of asset from the bank.
- Bankislami purchases the item, acquires title of ownership and makes payment to the vendor.
- Bankislami Ijarah(leases) the asset to the customer against rentals.
- After receiving all the rentals under ijarah agreement for the agreed period. Baqnkislami offers to sell the asset to the customer. If the customer accepts the offer, bankislami transfer the asset to the customer under a sepearte sles agreement at an agreed price.
AUTO-IJARAH
Bankislami Pakistan's auto ijarah is simply a rental agreement under which the vehicle shall be given to you on the rent for a period, agreed at the time of the contract. Bankislami Pakistan purchases the vehicles and rents it out to the customer for a minimum period of 3 years and upon completion of the ijarah period the customer gets ownership of the vehicle against his initial security deposit.
Key Features Of Auto-Ijarah
- No up-front pre-approval application fee
- Ease of acquiring any new or used locally manufactured and imported vehicles
- No up front insurance payment
- No advance rental
- Renatls to start upon delivery of the vehicle
- Minimum security deposit as low as 15 %
COMPARING CONVENTIONAL LEASE AND IAJRAH
CONVENTIONAL FINANCE LEASE
IJARAH FINANCE
Commencement
Lease commences the day price is paid by
the lessor, whether the lessee has taken delivery of the asset or not.
At Bankislami according to Shariah, rent is charged after the customer has taken
delivery of the asset, not from the day the
price has been paid
Expenses consequential to ownership
Expenses incurred in the process of the purchase of the asset such as registration charges, import expenses like freight and customs duty etc are patd by the lessee. Insurance is also done by the lessee
As Bankislami is the owner of the asset therefore it is liable to pay all expenses incurred in the process of its purchase and
its import. Insurance or Takaful is also
borne by the bank. However, expenses and charges are part of rentals
Liability of the parties in case of loss to
the asset
Non-islamic 'Financial lease' does not differentiate between wear and tear or
losses caused by negligence of the lessee. Lessee is liable for costs incurred due to natural disaster or theft.
The Customer is only responsible for
misuse or negligence or normal wear and
tear but not for events beyond his control.
In ijarah, each situation is treated sepeartely.
Penalty on late payment of rent
Penalty charges exist on late payment.
These are taken as income
The lessee may be asked to undertake that
if he fails to pay rent on due date, he will
pay certain amount to charity through Bankislami. The charity is utilized by bankislami as per the guidelines given by
the Shariah supervisory board.
CONSUMER BANKING
Auto Ijarah
Auto Ijarah is a car financing product of BankIslami based on Islamic financing mode of Ijarah or Islamic leasing.
Q1. What is the eligibility criteria for Auto Ijarah ?
A. Eligibility criteria for Auto Ijarah are as under :-
FOR SALARIED PERSONS
Minimum 3 years of working experience in current field or organization.
Applicants salary must be thrice to the rentals of vehicle interested in.
FOR BUSINESS PERSONS
Minimum 3 years of experience of owning that business.
Applicants income must be thrice to the rentals of vehicle interested in.
Q2. Which documents are required to fulfill the BankIslami criteria ?
A. Documents required are as under :-
- Copy of CNIC
- 1 recent photograph
- Bank Statement of last six months
- Salary Slip / Certificate (for Salaried persons), Proprietorship Letter/Partnership Deed/Memorandum and Articles of Association (for Business persons)
Q3.What would be initial down payment or security deposit for both new and old cars?
A. Security deposit for new cars is 15% minimum and customer can pay upto 50% of the total cost and 20% minimum and maximum 50% for old cars. (The minimum criteria vary as per car model)
Q4. What are the minimum and maximum tenures being offered by BankIslami?
A. Bankislami offers 3, 4 and 5 years tenure for new cars and vary for old cars subject to model but not more than 5 years.
Q5. What are the profit rates on new and old cars?
A. BankIslami profit rates are 16.5% on new cars, 17.5% on old cars and 17% on commercial vehicles.
Q6. What are the processing fees on new and old cars?
A. Processing fees is Rs.3,000/per car upto Rs. 1 million and Rs. 3,500/per car exceeding Rs.1 million.
Q7. How and which company covers the Insurance amount of the vehicle?
A. Pak Kuwait Takaful Company covers the comprehensive Takaful of the vehicle which is 3.7% of vehicle cost. Insurance amount is paid by BankIslami in full at the time of booking and same is added in monthly rentals.
Q8. How much will be charged if premature payment option is taken by Customer?
A. 5% of the principle outstanding will be charged on premature payment of the vehicle.
Q9. Which models being offered by Bank for Auto Ijarah ?
A. All models which are locally manufactured and also Imported models which are not older than 5 years.
Q10. What would be the minimum and maximum amount for leased asset ?
A. The minimum limit is Rs. 200,000/- and no upper limit for leased asset.
Q11. Will monthly rental be started on execution of agreement ?
A. Monthly rentals starts once car is delivered to the customer.
Q12. In case of immediate delivery of vehicle how much more have to be paid?
A. BankIslami will deliver the vehicle as per the pricing schedule provided by the automobile manufacturing company. Any additional amount to secure immediate delivery would be paid by the customer on its own.
Q13. Does Auto Ijarah contract contains any hidden charges ?
- The Auto Ijarah contract provides details of all charges taken in monthly rentals. Other than defined in Auto Ijarah contract, there are no hidden or extra charges additionally taken by BankIslami.
CONVENTIONAL LEASE
AUTO IJARAH
Lease commences the very day on
which the price is paid by the
Bank, whether the Customer has taken
the delivery or not.
At BankIslami, rentals start after
the delivery of asset, not from the day
the price has been paid by BankIslami.
Expenses incurred in the process
of purchase of asset are paid by
the Customer.
BankIslami is the owner of the
asset therefore it is liable to pay all expenses incurred in the process
of its purchase.
Lease does not differentiate between
wear & tear or losses caused by
the negligence of Customer and
Customer is liable for cost incurred due
to natural disasters.
The Customer is responsible only
for misuse and negligence, but not
for events beyond control. In Auto
Ijarah each situation is treated
separately.
Penalty charges are taken from
Customer on late payment. They are
taken as income by the Bank.
The Customer fails to pay rental on
due date, a certain amount will be
taken from the Customer and
given to charity by BankIslami.
In a lease agreement it has been
noticed that unrestricted power has
been given to Bank to terminate the
lease unilaterally whenever it wishes.
If the Customer breaks any term of
the agreement, BankIslami has a
right to terminate Auto Ijarah
unilaterally. However, if there is
no contravention at Customer's end
Auto Ijarah cannot be terminated
without mutual consent.
MUSKUN HOME FINANCING:
Muskun is an Islamic home financing product of BankIslami. It is a shariah compliant product based on the concept of Diminishing Musharakah. The BankIslami and the customer jointly take ownership of a real estate property through a partnership and then BIPL on installement basis transfers the complete ownership to the customer.
Q1. What are the basic components of Muskun-Islami Home Financing ?
A. Muskun is basically a kind of partnership in which the partners join together with different contributions for the ownership of a real estate property (House, apartment etc.) in accordance with the principles of Shari'ah, its basic components are :-
Joint ownership of the BankIslami and Customer in the real estate property,
Customer as a lessee uses the share of the BankIslami and gives rent for that portion to the BankIslami,
Purchase of the share of the BankIslami by the customer on monthly basis.
Taking ownership in the real estate property through a partnership and then transferring complete ownership to the Customer instead of simply lending money for home financing is the major factor that makes our product Shariah compliant.
Q2. What are the minimum and maximum financing limit for Muskun-Islami Home Financing ?
A. Financing limit is minimum PKR. 200,000 and maximum PKR 50 (m) for both Salaried and Business persons. Whereas, Bank Investment Ration (BIR) for Salaried persons is maximum 80% of the cost of property and for Business perosn maximum 70% of the cost of the property.
Q3. What is the minimum and maximum tenure being offered by BankIslami ?
A. Tenure from 2 – 20 years is being offered by BankIslami (considering the age factors of Applicant & Co-applicant).
Q4. How much time does BankIslami take to approve the case?
A. Minimum 20-25 working days are required for processing depending upon the availability of complete documents.
Q5. What are the processing charges for Muskun-Islami Home Financing ?
A. The processing charges for Muskun-Islami Home Financing ranges from PKR. 11,500 to PKR 25,100 depending upon the status and scale of the finance amount.
Q6. What is the age criteria required for Muskun-Islami Home Financing ?
A. Minimum age required for a primary applicant is 25 – 65 years.
21 – 70 years for Co-applicant.
25 – 60 years for Non Resident Pakistanis.
Q7. What documents needed for Muskun-Islami Home Financing ?
A. The Minimum Eligibility Criterion and Documents needed for Muskun-Islami Home Financing as under :-
- Genral Requirements :
- Copy of CNIC (Applicant and Co-applicant).
- 2 passport size photographs (Applicant and Co-applicant).
- Completely filled Application form with Applicant's Profile Report.
- Copies of Last utility bills.
For Salaried Persons- Permanent Job with a minimum 2 years experience in same industry / field
- Minimum Salary should be Rs. 15,000/month
- Employment certificate issued by employer
- Last three Salary Slips
- Bank Statement of last 12 months.
- Detail of other financing along with its repayment.
For Business Persons- Ownership and existence of the business / same line business must must not be less than last three years.
- Minimum Income Should be Rs. 35,000/month.
- Income tax return for last three years , Proprietorship Letter/Partnership deed/ Memorandum and Articles of Association
- Company Bank Statement of last 12 months
- Detail of other financing along with its repayment
For Non Resident Pakistanis
- We offer NRPs only of Salaried segment to purchase/construct/renovate/balance transfer facility of a house/Property only in Pakistan.
- There must be a Co-applicant residing in Pakistan ( As an Authorised Person on behalf of NRP).
- Minimum Salary should be PKR.80,000 /month after conversion in Pak Rupee.
- Last three Salary Slip.
- Passport copy
- NICOP copy,
- VISA/residential status proof
- Tax deduction details.
- Employment Certificate and Contract Copy.
- Bank Letter and Banks Statment of last 1 year.
- 2 passport-sized colored Photographs of Applicant / Co-Applicant
- All the abovementioned documents relating to NRP should be duly attested by Pakistani Consulate.
Q8. What condition would apply in case of Co-applicant case ?
A. Co-applicant must be member of the immediate family i.e Spouse, Parents & Childrens only and only 50% of co-applicant's income may be aggregated for repayent burden ratio calculation (other than the income of spouse).
Q9. Which area considered "positive" for Muskun-Islami Home Financing ?
A. No Negative Area has been marked by BankIslami for Muskun-Islami Home Financing. However, few areas are considered as High Risk Area (HRA) where Bank Investment Ratio (BIR) will be 60% maximum of the cost of the property.
Q10. What is the profit rate for Muskun-Islami Home Financing ?
A. The Profit rate for Muskun-Islami Home Financing is 14% for Resident Pakistanis & Non Resident Pakistanis. However, Profit-rate is 15% for those who wants to avail financing in HRA.
Q11 What is charged if pre-mature payment (early payment or termination) of Muskun-Islami Home Financing is done?
- Customer has to pay the initial 12 installments as per schedule provided. 5% of the remaining balance would be charged if premature payment occurs before first 12 installments are paid. No charge will be imposed on premature payment which includes partial or full payment of installments after the first 12 installments have been paid by the Customer.
SERVICES
- Biometric ATM services
- Internet Banking
- Nationwide Online Banking
- Round the clock self service Phone Banking
- 24/7 Call Center at 111-ISLAMI (475-264)
- Lockers
- Inter-bank Fund Transfer (IBFT) facility
- E-Statement Facility
- Utility Bill Payment Facility
