History and Introduction
In 1949 National Bank of Pakistan (NBP) was established under the National Bank of Pakistan East Pakistan . Offices in Karachi and Lahore followed.now national bank of pakistan
- 1950 NBP established a branch in Jeddah, Saudi Arabia.
- 1955 By this time NBP had branches in London and Calcutta.
- 1957 NBP established a branch in Baghdad, Iraq.
- 1962 NBP established a branch in Dar-es-Salaam, Tanganyika.
- 1964 The Iraqi government nationalized NBP's
- 1965 The Indian government seizsd the
- 1967 The Tanzanian government nationalized the Dar-Es-Salaam branch.
- 1971 NBP acquired Bank of China's two branches, one in Karachi and one at Chittagong. At separation of East Pakistan NBP lost its branches there. NBP merged with Eastern Mercantile Bank and with Eastern Bank Corporation.
- 1974 The government of
- 1977 NBP opened an offshore brain Cairo.
- 1994 NBP amalgamated Mehran Bank (est. 1991).
- 1997 NBP's branch in Ashgabat, Turkmenistan commenced operations.
- 2000 NBP opened a representative office in Almaty, Kazakhstan.
- 2001 State Bank of Pakistan and Bank of England agree to allow only 2 Pakistani banks to operate in the
- 2002 Pakistan International Bank renamed itself United National Bank Limited (UNB). The ownership structure of the UNB remained as before. The only change to the shareholding structure is that UBL had recently been privatised in
- 2003 NBP received permission to open a branch in Afghanistan.
- 2005 NBP closed its offshore branch in
Vision Statement
“To be recognised as a leader and a brand synonymous with trust, highest standards of service quality,international best practices and social responsibility.”
NBP will aspire to the values that make NBP truly the Nation's Bank by:
• Institutionalising a merit and performance culture.
• Creating a distinctive brand identity by providing the highest standards of services.
• Adobting the best international nanagement practices.
• Mazimizing stakeholder’s value.
• Dischargeing our responsibility as a good corporate citizen of Pakistan
Core Values
· Highest standard of integrity
· Institutionalizing team work
· Performance culture
· Excellence in service
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NBP Branch Network
Domestic Branches
Overseas Branches
ATM Finder
FUNCTIONS OF NBP AS A REPRESENTATIVE OF STATE BANK OF PAKISTAN
v Collection of cheques and bill of exchange for its customers.
v Collecting interests due, dividend pensions and other sums due to customers.
v Transferring of money from place to place.
v Acting an executors, trustees for the customers. Paying insurance premium, rent or other obligations of the customers
v Providing safe custody and jewelry documents or securities.
v Undertaking foreign exchange business.;
v Issuing of travelers cheqeus and letter of credit to give credit facilities for travel.
v Purchasing shares for the customers.
v Accepting bills of exchange of behalf of customers.
v Furnishing trade information and tendering advice to customers.
v Formulating operation policy guidelines for the banks.
v Laying down performance c4riteria for banks and taking steps for ensuring their observance./
v Evaluating the performance of the banks in the context of operational guidelines issued to the banks.
v Determining the areas of coordination of the banks.
v Formulating schemes under section of the act.
v Making recommendations to the federal government for the appointment of the president and members of the executive board.
v Overseeing foreign operations of banks to ensure that these are being conducted in the best interest of the bank.
v Analyzing and appraising financial statement including balance sheets and profit and loss accounts of banks and appointment of auditors of the bank.
v Conducting such surveys, inquiries and appraisals as may be necessary for the purpose of this act.
Financial Position
What is Islamic banking?
Islam is not simply one of the greatest monotheistic religions, signifying submission to the will of Allah, but as system of life in entirety. It prescribes a complete code of conduct for every day human life in all its spheres and manifestations. It does not confine itself to a spiritual relationship between man and Allah or describes the Almighty only with a transcendental reference but also regulates, in right proportions, an interactive relationship between man and man, and between man and society with moral, political and economic genesis. As a result, it is a religion lived in every day life and no Muslim is in any doubt as to exactly how he should carry on the events of his day.
On the other hand, capitalism has not been able to narrow down the gap between the “haves and “have-nots”. Material affluence, wherever it exists, is marked by a conspicuous absence of a broad based sharing of fortunes and thus real happiness to a large number of people is seriously missing. Likewise, socialism advocating collective ownership of the means of production and control of distribution has failed to provide the necessary motivation for collective development and personal self-actualisation, and thus retarded the process and rate of economic growth.
Similarly, communism, stressing ownership of property and control of production, distribution and supply by the whole of classless society, could not get along with the human potential, dynamism and aspirations, and fell too short to bring about economic satisfaction or progress, in individual and collective life.
Kotz (1978) says that the conventional banks and few families who control them have “access to other peoples’ capital”. He points out that “the wealthiest and most powerful capitalists operate through banks” and that these banks are also the major stockholders in and creditors of the largest non-financial corporations. Mishan (1971:205) observes “… it would be irrational for the lender to be willing to lend as much to the impecunious as to the richer members of the society, or to lend the same amounts on the same terms to each”.
Galbraith (1975:297) rightly points out that “those who least need to borrow and those who are most favoured are in the planning system. Those who most rely on borrowed funds, or least favoured are in the market system”. Schmidt (1974) while expressing his views about the economic problems of that time said that “The world economy has entered into a phase of extraordinary instability and its future course is absolutely uncertain”. The Holy Qur’an says that “Mischief has appeared in the land and the sea, on account of men’s own doing.” (30:41). What the Holy Qur’an declared 1400 years ago, is equally true even today.
Looking at the inadequacies of the prevailing economic system, in promoting real economic well-being of the masses, Muslims all over the world stared to re-discover the wisdom and balance of Islamic economic system. This led to a renaissance, during the last few decades of economic thought and system as enunciated by Islam. The upsurge gained momentum.
1. INTRODUCTION
A 10-year master plan has been made to promote Islamic banking globally and increase its size to make it an agent for the change so as to save people from the curse of inflation, which is an integral part of capitalism.
Vol. 3, No. 1, (Spring 2007)
Islamic Banking: Present and Future Challenges
With the discovery of oil and resultant ballooning up of the national income of many Middle Eastern countries. In the process, attention was focused on Islamic Economic System, Islamic banking and elimination of interest (riba) in conformity with the injunctions contained in the Holy Qur’an and sayings of the Holy Prophet (Peace be upon him). The revival of Islamic Economic System has now become a point of central attention in Islamic world, which covers about one-sixth of the land surface of the global. The Muslim population by the year 2050 A.D. is expected to be over 2.6 billion or over 26% of the projected world population of 10 billion. Thus one out of every four people by the middle of 21st century would be Muslim, aspiring to lead an economic life as envisaged in Islam. Under the Islamic tenets, interest is prohibited in all forms and
manifestations. This prohibition is strict, absolute and unambiguous. The Holy Qu’ran has clearly warned that those who do not forego interest which has already accrued and do not desist from taking it any further, then they are at war path with Allah and his Prophet (2:278-279).
2. WHAT IS RIBA?
The word "Riba" means excess, increase or addition, which correctly interpreted according to Shariah terminology, implies any excess compensation without due consideration (consideration does not include time value of money). This definition of Riba is derived from the Quran and is unanimously accepted by all the Islamic scholars. There are two types of Riba, identified to date by these scholars namely 'Riba An Nasiyah' and 'Riba Al Fadl'. 'Riba An-Nasiyah' is defined as excess, which resultsfrom predetermined interest (sood) which a lender receives over and above the principle (Ras ul Maal). 'Riba Al Fadl' is defined as the excess compensation without any consideration resulting from a sale of goods. The Islamic system order based on a set of principles constituting the concept and philosophy as enunciated explicitly in the Quran. This philosophy provides what can be understood as the Islamic system of social justice. Plato and Aristotle had also opposed the concept of interest in the era of before Christ. Interest was also prohibited in the preliminary teachings of Jews and Christians, and is also prohibited in the First Testament of the Holy Bible. Modern economists have also opposed the interest. The famous English economics expert Lord Keynes, who is globally recognized as an expert of modern economics, has first time expressed his views on the point that unless the interest is abolished in some un-vexatious way, unemployment could not be eradicated from the world, rather, he insisted that the world would not bear the long-run idleness which is connected with the capitalism. Lord Keynes writes in a book that the rate of interest will have to be diminished in order to eradicate unemployment. Lord Keynes said that for a developed economy, interest rate should be zero. It means according to Lord Keynes there should be no interest in a model economy. The interest is an instrument of exploitation for a common
person and nations, and for this purpose the detailed study under the title “The protocols of the learned elders of Zions,” can be perused. While defining the relationship between interest and unemployment, Lord Keynes writes in his above-quoted book that “The Onus of interest badly affects capacity of capital and the vulnerability adversely affects the constructively, which give rise to unemployment. In the 20th century, Karl Marx, who introduced the surplus theory in his book “Das Capta”, and Mao Zedung, and other socialist scholars and economists had also dissented with interest termed as “Organ of fiscal exploitation”. Lord Keynes has extremely opposed the prevailing system of “batai” on cultivation of agricultural land he has defined “batai” to be the earliest and preliminary shape of interest. 03 Journal of Management and Social Sciences
Noor Ahmed Memon
It is a matter of great concern that the earliest shape of “batai” has no place in Islamic Shariat is prevailing in our country, despite of so-called agricultural reforms no body tends to abolish the “batai” system. In Islam, interest is vehemently opposed. According to Shariah Appellate Bench (SAB) of the Supreme Court of Pakistan, Riba is involved in
such cases as under: i) All prevailing forms of interest, either in banking or private transactions, fall within the definition of Riba. ii) Any interest stipulated in government borrowings acquired from domestic or foreign sources is Riba and clearly is prohibited by the Holy Qur’an. iii) The present financial system, based on interest, is against the injunctions of Islam as laid down in the Holy Qur’an and Sunnah. In order to bring it in conformity with the Shariah it has to be subjected to radical changes.
Riba Al-Nasia includes all kinds of interest irrespective of the fact whether the interest is, or is not added to principal sum after fixed periods and whether the sum lent is for production or consumption purposes.
Islam accepts basic concomitants of market economy like the right of innate
ownership, freedom of enterprise and competitive environment of business and industry. The Holy Prophet (Peace be upon him) is reported to have allowed competitive price mechanism to balance the demand and supply of goods for dispensation of economic justice, ultimate best benefit of society and efficient allocation of resources. The limitations only take care of some moral, religious and cultural perceptions as well as to suit the aspirations that emphasize the significant role of the state in inculcation of the desired norms. These limitations are necessary for fulfilment of overall objectives of Islamic Shariah..
3. HISTORY
Islamic Banking in Pakistan
The SBP initially took drastic steps towards the development (and implementation) of financial instruments based on Islamic principles. Later the whole process came to a standstill. No effort had been made towards the elimination of interest from inter bank transactions; inter-government transactions and foreign currency accounts.
dedicated Islamic windows. Now, six Islamic Banks and 13 conventional banks with a total network of 200 branches offer Islamic Banking products and services. In addition, non-bank financial institutions such as Islamic Mutual Funds, Takaful Companies, Mudaraba Companies, House Building Finance Corporation etc. are also the active Vol. 3, No. 1, (Spring 2007) 04
Islamic Banking: Present and Future Challenges participants. Efforts are also been made for the development of Islamic Sukuk (bond) market. Islamic Banking is targeting to capture 10 per cent of the total financial sector in the years to come. Interest-free liquidity management is the major concern for Islamic Banks. The State Bank of Pakistan (SBP) requires Islamic banks and conventional banks to maintain the same Cash Reserve Requirement (CRR) of five per cent and Statutory Liquidity Requirement (SLR) of eight per cent.
Islamic Banks can hold their required reserve in special current accounts with SBP or with the National Bank of Pakistan
The growth of Islamic Banking as ‘rapid pace of growth’, but the details showed that neither the pace of growth matched with the growth in conventional banking, nor its share was improving to capture a bigger piece of cake. The total banking assets of the Islamic Banking increased from Rs.118 billion in December 2006 to Rs.136 billion in March 2007. However, its shares in terms of asset percentage of banking industry were just 3.2% while comparing conventional banking assets. The size of the conventional banking is increasing rapidly since the last four years which left the Islamic Banking far behind in the race for banking market. In terms of deposits, Islamic Banking share was 3% of total banking deposits, though the size of deposits increased substantially during the last 15 months. The deposit rose to Rs.83 billion in December 2006 from Rs50 billion in December 2005. It further rose to Rs.93 billion in the first quarter of
2007 till end of March 2007.
Murabaha financing is almost 40% of the total financing by the Islamic Banking institutions till the quarter ending March 2007. Second most widely used mode of finance is Ijarah financing accounting for about 30% of the total financing. Growing interest in diminishing Musharakah is depicted representing 17% of the total financing. This was not encouraging for the growth of the Islamic Banking. However, financial position of the Islamic Banking industry is strong and earning and profitability ratios have improved.
State Bank of Pakistan Pakistan Pakistan
| NBP Islamic Banking |
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| NBP Islamic Banking - DEPOSIT SCHEMES | |||||||||
| Deposit Schemes being offered by NBP’s Islamic Banking Branches would include the following:
Current Deposit Scheme
Profit & Loss Sharing Deposit (PLS) Scheme
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| NBP Islamic Banking - FINANCING FACILITIES | ||
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| NBP Islamic Banking - OTHER SERVICES | |||
In addition to Shariah acceptable standard general banking services, following services are also being offered at the Islamic Banking Branch :
• Letter of Credit Facility
• Handling of Remittances
• Issuance of Bank Drafts and Pay Orders.
• Collection of Export Bills.
• Collection of Local Bills.
• Government Collections
• Utility Bills Collection
