National Bank of
History:
NBP was established under the National Bank of Pakistan Ordinance 1949 in
Special Role: NBP occupies a unique position in the financial sector of
Ownership: NBP is 100% owned by the Government of Pakistan (GoP).
Branch Network: NBP has an extensive domestic branch network of over 1500 branches located all over
Deposits: NBP holds 24.6% share of time and demand deposits in the country. Local currency deposits comprise 67% of bank's total deposits while foreign currency deposits account for the rest.
Assets: NBP's total assets stood at PKR350 billion on December 1999. This included total earning assets of about PKR268 billion with gross loan portfolio of PKR140 billion. The bank also has an investment portfolio of PKR91 billion, which comprises treasury securities, corporate bonds, shares and other securities.
Equity: As of December 1999 NBP had a paid-up capital of PKR1.46 billion divided into 146 million shares of 10 rupees each. Total shareholders' equity was PKR10 billion, however, revaluation reserve has increased shareholders' funds to PKR16 billion. NBP has, however, increased its paid up capital from PKR Rs. 1.46 billion to Rs. 3.73 billion through issuance of bonus shares (subject to corporate and shareholder approvals).
NBP ISLAMIC BANKING
NBP Islamic Banking Branches:
I.I. Chundrigar Road
Phone: 021-2466281-2
Fax: 021-2466283
Phone: 042-9210641 Ext: 3007-3008,
042-9213529
Fax: 042-9211247
29 The Mall
Phone: 091-5253961-2
Fax: 091-5253960
Islamic bank mission:
To become a leading player in the growing field of Islamic Finance in
ISLAMIC BANKING VISION
Islamic bank vision:
To set standards of best practices and performance through efficient asset allocation, and offer / develop products based on the true spirit of Islamic finance.
PRODUCTS AND SERVICES AVAILABLE AT ISLAMIC BANKING BRANCH:
Products and services being offered by our Islamic Banking Branch are fully Shariah Compliant and have been certified by NBP’s Shariah Advisor.
NBP Islamic banking deposit schemes:
Deposit Schemes being offered by NBP’s Islamic Banking Branches would include the following:
Ø Current Deposit Scheme
Ø Profit & Loss Sharing (PLS) Deposit Scheme
Current Deposit Scheme:
Ø Ideal for customers looking for security of their funds along with absolute convenience in its use, in the form of Current accounts.
Ø Funds deposited with the bank will be utilized by the bank at its sole discretion in Shariah acceptable avenues.
Ø The Customer will have the flexibility to withdraw a part or the whole of their balances at any time as per their requirement.
Ø This is a non remunerative deposit scheme and thus the customer will not be sharing the profits nor will be sharing losses (if any). However, the Bank may at its absolute discretion give rewards to these Depositors depending upon the operational results of the Bank. Losses will not be passed on to these Depositors.
Other terms, conditions and rules for Current Deposit Accounts to be advised by the Bank at the time of opening of Account.
Profit & Loss Sharing Deposit (PLS) Scheme:
PLS Saving Deposits Scheme (to be accepted in future) will accept deposits on Mudaraba basis, where the depositor will be Rabb-ul-Mal and Bank will be Mudarib. The Bank will invest the deposited funds at its (Bank’s) sole discretion in Shariah acceptable avenues.
The Depositor will have the flexibility to withdraw a part or the whole of their balances at any time as per their requirement.
The Bank will give profit to the Depositors twice in a year in January and July, on the basis of agreed ratio of actual profits to be announced by the Bank from time to time.
In the event of financial loss, the PLS depositors will bear the loss in proportion of their investment.
The Depositors will not participate in the management of the business of the Bank
Other terms and conditions as well as rules for PLS Deposit Account to be advised by the Bank at the time of opening of Account.
NBP will shortly launch Shariah Complaint PLS Deposit Schemes. For information about their salient features, weightages and expected rates please continue to visit our website.
NBP Islamic banking financial facilities:
Commercial and Corporate customers requiring financing will have the following financing facilities available to them to meet their requirements:
Murabaha:
Murabaha may be defined as a contract between a Buyer and Seller under which the Seller discloses to the Buyer the cost of goods being sold and adds an agreed profit. Price is payable on spot or at a certain future date, in lump sum or in installments (deferred payments).
Murabaha Facility:
Under the MURABAHA FACILITY, the Bank will first purchase the required goods directly or through an Agent. All costs incurred on such purchases will be borne by the Bank.
Subsequently the Bank will sell the goods to the customer on deferred payment basis (30 days to one year) at an agreed price comprising cost of goods purchased and Bank’s profit.
On due date the customer will pay to the Bank the agreed price, in lump sum or as per the agreed installment schedule.
Ijarah (Leasing):
Ijarah means “to give something on rent”. The term “IJARAH’ is analogous to the English term “leasing “.
Firstly the Bank will purchase the Assets as required by the Customer and subsequently the assets will be leased to the Customer on the terms and conditions as agreed with him.
Ijarah Facility will be offered for the following assets:
Vehicles (both Commercial and Private)
Office Equipment
Plant and Machinery
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 :
Ø Letter of Credit Facility
Ø Handling of Remittances
Ø Issuance of Bank Drafts and Pay Orders.
Ø Collection of Export Bills.
Ø Collection of Local Bills.
Ø Government Collections
Ø Utility Bills Collection
Overview of Islamic Banking
Islamic Economics:
Islamic banking is based on the principles of Islamic economics — an economic framework in accordance with Islamic law (Sharia'h).
There are two types of Islamic economics:
Ø Caliphate , the Islamic form of government representing the political unity and leadership of the Muslim world (Islamic political framework)
Ø Assuming the political framework is non-Islamic, therefore, seeking to integrate some prominent Islamic tenets into a secular economic framework
Caliphate is the absolute Islamic rule, thus the economy focuses on distribution of resources in order to meet the basic and luxurious needs of individuals in society, and the state has a clear role in policing, taxation, managing public assets, and ensuring the circulation of wealth. Such a political framework in its true form does not exist in today's world.
Assuming non-Islamic political framework simply proposes two main tenets: no interest can be earned on loans and socially responsible investing. This is the way conventional banking is Islamized—the first step towards an Islamic economic framework.
Modern day Islamic scholars and academics have developed various modes of Sharia'h complaint financing that are designed to work within the prevailing capitalist economic framework. In order to achieve this balance numerous concessions have been afforded to financial institutions that would not apply if a viable interest free economic system existed. The intention behind making these concessions is to encourage the evolution of this type of alternative system.
Islamic Banking:
Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law (Sharia’h) principles and guided by Islamic economics. In particular, Islamic law prohibits usury, the collection and payment of interest, also commonly called riba. Generally, Islamic law also prohibits trading in financial risk (which is seen as a form of gambling). In addition, Islamic law prohibits investing in businesses that are considered unlawful, or haraam.
Islamic finance has been gaining momentum on a global scale for the last 30 years.
Many Islamic Banks have sprung up over the last few years. These changes are occurring both in Muslim and in western countries, and are driven by a global trend amongst Muslims to become more observant of their faith. It might have been the reason why Islamic Banking emerged, however, today Islamic Banking is sought by Muslims and non-Muslims due to the benefits it offers.
Industry size is currently estimated at more than $400 billion, with projected growth of 15% per annum.
Financial institutions around the globe are trying to keep pace with the growing demand for Sharia’h compliant products and services
Islamic Banks in
Name Branches
Meezan bank 62
Islamic Banks in
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| 1 | |
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Modes of Islamic Finance
Murabaha:
Literally it means a sale on mutually agreed profit. Technically, it is a contract of sale in which the seller declares his cost and profit. Islamic banks have adopted this as a mode of financing. As a financing technique, it involves a request by the client to the bank to purchase certain goods for him. The bank does that for a definite profit over the cost, which is stipulated in advance.
Ijarah:
Ijarah is a contract of a known and proposed usufruct against a specified and lawful return or consideration for the service or return for the benefit proposed to be taken, or for the effort or work proposed to be expended. In other words, Ijarah or leasing is the transfer of usufruct for a consideration which is rent in case of hiring of assets or things and wage in case of hiring of persons.
Ijarah-Wal-Iqtina:
A contract under which an Islamic bank provides equipment, building or other assets to the client against an agreed rental together with a unilateral undertaking by the bank or the client that at the end of the lease period, the ownership in the asset would be transferred to the lessee. The undertaking or the promise does not become an integral part of the lease contract to make it conditional. The rentals as well as the purchase price are fixed in such manner that the bank gets back its principal sum along with profit over the period of lease.
Musharakah:
Musharakah means a relationship established under a contract by the mutual consent of the parties for sharing of profits and losses in the joint business. It is an agreement under which the Islamic bank provides funds, which are mixed with the funds of the business enterprise and others. All providers of capital are entitled to participate in management, but not necessarily required to do so. The profit is distributed among the partners in pre-agreed ratios, while the loss is borne by each partner strictly in proportion to respective capital contributions.
Musawamah:
Musawamah is a general and regular kind of sale in which price of the commodity to be traded is bargained between seller and the buyer without any reference to the price paid or cost incurred by the former. Thus, it is different from Murabaha in respect of pricing formula. Unlike Murabaha, seller in Musawamah is not obliged to reveal his cost. Both the parties negotiate on the price. All other conditions relevant to Murabaha are valid for Musawamah as well. Musawamah can be used where the seller is not in a position to ascertain precisely the costs of commodities that he is offering to sell.
Istisna'a:
It is a contractual agreement for manufacturing goods and commodities, allowing cash payment in advance and future delivery or a future payment and future delivery. Istisna'a can be used for providing the facility of financing the manufacture or construction of houses, plants, projects and building of bridges, roads and highways.
Bai Muajjal:
Literally it means a credit sale. Technically, it is a financing technique adopted by Islamic banks that takes the form of Murabaha Muajjal. It is a contract in which the bank earns a profit margin on his purchase price and allows the buyer to pay the price of the commodity at a future date in a lump sum or in installments. It has to expressly mention cost of the commodity and the margin of profit is mutually agreed. The price fixed for the commodity in such a transaction can be the same as the spot price or higher or lower than the spot price.
Mudarabah:
A form of partnership where one party provides the funds while the other provides expertise and management. The latter is referred to as the Mudarib. Any profits accrued are shared between the two parties on a pre-agreed basis, while loss is borne only by the provider of the capital.
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. It is necessary that the quality of the commodity intended to be purchased is fully specified leaving no ambiguity leading to dispute. The objects of this sale are goods and cannot be gold, silver or currencies. Barring this, Bai Salam covers almost everything, which is capable of being definitely described as to quantity, quality and workmanship.
Islamic Banking Issues
Human resource for Sharia'h compliance:
Users of Islamic financial services assign primary importance to Sharia'h compliance of the services they use. It is understandable that Sharia'h noncompliance entails a serious operational risk and can result in withdrawal of funds from and instability of an Islamic bank, irrespective of its initial financial soundness. Sharia'h compliance is hence a serious matter for an Islamic bank, in addition to its compliance with other regulatory requirements.
Unresolved Fiqh Issues:
Lack of standard financial contracts and products can be a cause of ambiguity and a source of dispute and cost. In addition, without a common understanding of certain basic foundations, further development of banking products is hindered.
Legal framework:
An appropriate legal, institutional and tax framework is a basic requirement for establishing sound financial institutions and markets. Islamic jurisprudence offers its own framework for the implementation of commercial and financial contracts and transactions.
Nevertheless, commercial, banking and company laws appropriate for the enforcement of Islamic banking and financial contracts do not exist in many countries.
Excess Liquidity
Islamic banks have over 60 % excess liquid funds which cannot be properly utilized due to non-availability of Sharia'h Compliant products and instruments.
The competitiveness and soundness of financial institutions depend on the availability of efficient financial products. Islamic banks urgently need Sharia'h compliant products to meet a number of pressing needs.
Technology:
Designing technological solutions around a concept requires extensive knowledge of the domain. Conventional banking today is technologically advanced; however, for crafting Islamic financial solutions, considerable time and expertise are required.
Islamic Banking — Possible Solutions
Establishment of Shari'ah Governance Systems:
Ø Settling unresolved Fiqh Issues
Ø A sufficient number of well-trained, competent, high-caliber Islamic finance professionals and management teams with the required expertise
Ø Well-informed individual and corporate consumers, knowledgeable about Islamic banking and takaful
Ø The availability of Sharia'h compliant products (Sharia'h Compliant Stocks, Sukuks, etc.)
Ø Development of a Legal, Regulatory, and Institutional Framework complying with Sharia'h
Ø Advanced technology solutions designed to support Islamic Finance.
Bibliography / Sources
Ø www.google.com
