Islamic Banking-Comprehensive Training

Outline

1. Introduction to Bank & Islamic 7. Liability Products

Banking
8. Short Term Financing
2. Difference between Conventional contracts: (Murabaha,
and Islamic Banks Musawamah, Istisna, Salam, Al
3. Basic Prohibitions in Islamic Bai)
Finance 9. Long-Term Modes of
4. Sources of Shariah financing (DM and Ijarah)
5. Rule of a valid Sale
6. Definition of Riba and its types and
its prohibition in Quran and Hadith
What is a Bank?

• A bank is a financial institution that accepts deposits from customers

and uses those funds to make loans or investments.

• Provides an investment opportunity to entities (households and

businesses) with surplus capital. in terms of returns and tenors &
security.

• Provides an opportunity to Small and Large businesses &

Governments to finance their projects/activities through obtaining
surplus funds.
 Overview of a bank’s main functions

Savers/
Loans Banks Loans Borrowers
Depositors
Conventional
Bank

Repayment of Loans
Withdrawals

Interest Payment Interest Payment

 Overview of a bank’s main functions

Savers/ Qarz / Trade / Rent /

Banks Customers
Depositors Mudarabah Service
Islamic
Bank

Repayment
Withdrawals

Profit Payment Profit Payment

 Operating Environment

 Six (6) full-fledged Islamic Banks are operating in Pakistan

 Eleven (11) Islamic Banking Windows are operating by conventional banks

 Islamic Industry Deposits stand at Rs. 5 trillion or 21.1% (Sept -22) [ 18.6% (Sept -21)]

 Islamic Industry Assets stand at Rs. 6.9 trillion or 20% (Sept -22) [17% (Sept -21)]

 In 2022 to date, GoP Ijarah Sukuk worth ~750 Bn issued (@ rates 8.7%-13.52%)

 Pakistan’s IB has witnessed a CAGR of more than 25% in the last 16 years in PKR terms.
 Difference between Islamic and Conventional Banking

Conventional Banking Islamic Banking

Asset Side
This side of a bank’s transactions refers to the financing facilities that the bank offers to the customers.
1. All transactions are loan based 1. All transactions are asset based
2. Primary Business is earning through lending. 2. Primary function is earning through
(a) Trade (sale and purchase) of assets (b) Rental income
(c) Fee for services (d) Acting as an agent on behalf of its
customers.
3. Late payment penalty and compounded interest can be 3. The bank cannot charge late payment penalty in case of
charged in case of delay in repayment. delay in payments. Only small amount is paid by the
customer as charity, as per signed agreement and these
proceeds are given to charity.
4. In case of late repayment, the penalty becomes part of 4. In case of late payment, the charity collected by bank,
bank’s income. does not become bank’s income.
5. The relation of a conventional bank to the client is a 5. The relation of Islamic bank to the client is a partners,
creditor and debtor. investors and trader, buyer and seller.
 Difference between Islamic and Conventional Banking

Conventional Banking Liabilities Side Islamic Banking

Liability Side
This side of a bank’s transactions refers to the deposit accounts/certificates offered to the customers.
6. The bank guarantees all its deposits. 6. The bank only guarantee deposits for Current Accounts,
(Qarz based). In saving account / certificates (Mudarabah
based), the client shall bear loss in principal amount (if
any).
7. In savings accounts / certificates, the depositor gets a 7. In savings accounts / certificates, the depositor does not
predetermined return. get a predetermined profit. Only the principal amount in
current account (based on Qarz) is guaranteed. While in
partnership based modes of deposit (Mudarabah), principal
and profit are not guaranteed
 Basic Prohibitions in Islamic Finance

• All practices of • Gharar (excessive • Qimar / Maysir

charging, receiving or uncertainty and (gambling) as a
facilitating riba speculation) in contractual payment of
(interest) contracts a premium for possible
future economic
benefit with single

Gha May
party gains

Riba
rar sir
 Sources of Shari’ah
 Primary Sources
• Qur’an
• Hadith / Sunnah (Words, Actions & Implied Acceptance)

 Secondary Sources;
• Ijma’a (Consensus of opinion)
• Qiyas (Analogy)
 Rules of Sales
 A sale is valid if all of the following 4 conditions are fulfilled

1) Contract
 Offer and acceptance for transfer of ownership of the subject matter
 Both seller and buyer must be sane and mature
 The contract must be non-contingent

2) Subject Matter
• Must be existing (Exception of Salam & Istisna’)
• Seller must have title/ownership and possession (actual/physical or constructive)
• Valuable (in the eyes of Shariah)
• Usable
• Specified and Quantified
• Delivery must be certain and non-contingent
 Rules of Sales

3) Price
 Quantified (eg twenty thousand)
 Valuable in the eyes of Shariah

4) Possession
Actual or constructive
 Quick Recap-1
1. The relationship of an Islamic bank and its customer is lender and borrower
(False)
2. Uncertainty in a business transaction is not allowed (False| Excessive
uncertainty is not allowed)
3. In case of delay in payment by customer Islamic Bank can charge lat
payment penalty (False)
4. Conventional banking deals in documents while Islamic Banking deals in
assets (True)
 Definition of Riba

Any type of gain derived from a debt contract is Riba.

 Prohibition of Riba in Quran and Hadith
Quran has clearly declared Riba prohibited in multiple places.
Prohibition of Riba in Quran and Hadith
 Prohibition of Riba in Hadith

• From Jabir : The Prophet (Peace be upon him), may cursed the receiver and the payer of interest,
the one who records it and the two witnesses to the transaction and said: "They are all alike [in
guilt]."
(Muslim, Kitab al-Musaqat; also in Tirmidhi and Musnad Ahmad)
• From 'Abdallah ibn Hanzalah : The Prophet (Peace be upon him), said: "A dirham of riba which
a man receives knowingly is worse than committing adultery thirty-six times“
(Mishkat al-Masabih, Kitab al-Buyu', Bab al-riba)
• From Abu Hurayrah : The Prophet (Peace be upon him), said: “Allah would be justified in not
allowing four persons to enter paradise or to taste its blessings: he who drinks habitually, he who
takes riba, he who usurps an orphan's property without right, and he who is undutiful to his
parents.“
(Mustadrak al-Hakim, Kitab al-Buyu‘)
 Types of Riba

• There are mainly 2 types of Riba, both are forbidden

1. Riba-al- Nasiyah / Riba-al-Quran (any gain in a debt contract,

as discussed in the previous slides) (This is the Riba in modern
financial transactions)

2. Riba-al-fazl: Sale which results in charging of riba through

exchange of same commodity of different quality / different
quantity.
 Quick Recap-2
1. All types of gains / benefits / discounts owing to a debts is RIBA.
(True)
2. The type of Riba found in modern day financial transactions is Riba
al Fazl (False)
3. The Quran has not prohibited Riba al Fazl / Riab ul Quran (False)
 Liability & Asset

What are the Liabilities for a Bank ?

Amounts deposited by current and savings accounts holders

What are the Assets for a Bank?

The financing made by bank to businesses (Corporate / commercial/
SME/ Agri / Consumer)
 The Balance Sheet of a Bank

Financing to
Businesses & Money from
Consumer Finance Shareholders /
Investors

Investments
Retained Earnings /
Profit Borrowings

Assets Equity Liabilities

 Islamic Banking General Working Model

Deposit Side Flow of Funds Asset Side

Saving Deposits

Mudaraba Wakala
Mudarabah &
Musharakah
Istisna
Rab-ul-Maal
Term Deposits - Musawamah
Musharaka
Equity
Diminishing
Current Musharaka
Qard Account
Deposits - Murabaha Ijarah

Salam
 Liability Side of Islamic Banking

Current Accounts
• The basis of deposit mobilization into the current account is ‘Qard’.
• There is no distribution or sharing of profit or loss in this kind of accounts.
• Any profit or loss sustained shall solely be the bank.
• As per Shari’a principles the current accountholders should not be promised any special benefits
and services, except those benefits and services provided to other accountholders, because as per
hadith every loan that entails benefit is Riba.
 Liability Side of Islamic Banking

Savings Accounts
• It is an investment contract in which one party contributes capital while the other party (Mudarib)
makes efforts for generation of profit.
• In Islamic banks, it is a contract in which the capital is provided by the depositor/fund provider
and the bank acts as Mudarib.
• The profit is shared in pre-agreed ratio and loss (if any) unless caused by negligence or violation
of terms of the contract by the Mudarib, is borne by the depositor/investors.
• Is it allowed for Mudarib to invest his/its own funds in Mudaraba pool? (Yes with permission from
rab ul maal)
 Liability Side of Islamic Banking

• The bank calculates the profit of the deposit pool every month
• In reality the bank does not distribute net profit it distributes gross profit.
• This means that the Mudarib does not deduct overheads such as salaries, rent, utility bills etc. from
the Mudaraba’s pool profit.
• All such expenses are borne by the Mudarib from its share of Mudaraba pool.
• Therefore, even though as per the Mudaraba contract the Rab ul Maal bears all the loss, this does
not mean that the Mudarib does not bear any loss.
• Incase there is no profit in a certain month that would mean that all the expense done by the bank
shall be from its own funds and without any return.
 Liability Side of Islamic Banking

• The relationship among depositors is based on Musharaka (Shirkat-ul-Aqd).

• The profit is distributed among the customers on the basis of predetermined weightages,
announced at the beginning of the month, based on their respective category/tiers.

• Loss Sharing: In case of any loss, it will be shared by the members of Investment Pool in ratio of
their investment
 Liability Side of Islamic Banking

• Weightage is the value of depositor’s money in the eye of Bank for the purpose of Profit
Distribution only.
• Weightages are assigned based on:
• Investment tenure • Profit payment option • Amount tiers • Product Features • Market Conditions
• Weightages are used for distributing profits among different types of depositors having different
maturities and values.
• These weightages are available on the website and notice boards of the bank.
• Is it possible to have a tier of any remunerative account with ZERO weightage? (No).
 Liability Product Asset Products
Current Accounts (Qarz based)
Current Account
Super Current Account
Current Plus Account
Asaan Current Account Fund Based Financing
RDA Account  Murabaha
Ladies Current Account  Istisna
 Al-Bai
Saving Accounts (Mudarabah based)  Salam
Savings Account  Currency Salam
Junior Savers Account  Working Capital Musharakah
Non-Resident PKR Saving Account  IERS (AlBai/Istisna/Salam/Murabaha/WCM)
PLS Financial Institution Account  Diminishing Musharakah ‘DM’
PLS Plus Account  DM (IFFSAP/ILTFF/ITERF/IFFRE)
PLS Premium Account  Ijarah (IFFSAP/ILTFF/ITERF/IFFRE)
Privilege 55+ Account  Corporate RV Ijarah
RDA Savings Account
Asaan Saving Account Consumer Products
Basic Banking Account  SIRAT House Finance
Ladies Savings Account  Mera Pakistan Mera Ghar
 Insta Car - Consumer
Habib Islamic Investment Certificate (Mudarbah based)

For details, please refer to the Liabilities Product Dairy available

on the portal.
Match the number with correct definition
Name Term
Dayn 1 contract
Aqd 2 Insurance / takaful offered or marketed through banks instead of
through insurance branches or agents
Bay’ mu’ajjal 3 Sale of debt
Sukuk 4 Sell and buy-back to obtain cash
Bancassurance / Bancatakaful 5 deferred payment sale
Usufruct 6 Debt
Bay’ al-dayn 7 Uncertainty
Ijarah 8 Lease contract
Mudarib 9 A financing facility of three years or more
Riba al nasiyah 10 Working partner in Mudarabah
Gharar 11 Any gain in a contract of debt
Musawamah 12 Right to use an asset (eg vehicle etc)
Short Term Financing Facility 13 Capital provider in Mudarabah
Maysir 14 A financing facility for up to one year
Long term financing facility 15 Negotiated sale where seller does not disclose the cost price
Rab ul Maal 16 Certificate of investment
SHORT TERM FINANCING PRODUCTS
 MURABAHA (Cost + Profit)

PURPOSE DEFINITION:

 Murabaha is used to Murabaha is a particular kind of sale where the seller discloses its cost and profit charged thereon.
finance the customer
to meet it’s working
capital need like FEATURES:
purchase of Raw
Material. The price in this sale can be both on spot and deferred. This transaction is concluded with a prior
promise to buy, submitted by a person interested in acquiring goods through the institution.
 It is a set of contracts Components of Murabaha are Seller, Buyer, Merchandise or goods, Price and Sighah [ Offer (Ijab)
completed in steps and and Acceptance (Qubul)].
ultimately fulfills the
financial needs of the
client. The sequence It is a contract wherein the institution, upon request by the customer, purchases an asset from the
of their execution is third party usually a supplier/vendor and sells the same to the customer on a deferred payment basis.
critically important
to make the
transaction Shari'ah
compliant.
 Repayment

The Customer Repays the Murabaha Sales price to the

MURABAHA 7
Bank as per the Schedule on Maturity

The Bank appoints the Customer as its Agent to Purchase

the required Raw Material from the Supplier and issues
Pay Order

2
Pay Order

1
Customer approaches the Bank for Murabaha Financing
for purchase of Raw Material
CUSTOMER 5

The Customer confirms the Delivery of Goods to the

Raw Material Bank and Offers the Bank to Purchase the Raw Material

Pay Order
on Deferred basis

6
Pay Order
Person A wants to purchase The Bank Accepts the Customer’s ‘Offer to Purchase’ and
Raw Material for his The Customer being the Agent of the Bank, purchases Sells the Raw Material to the customer on Deferred basis
3 the Raw Material from Supplier against the issued
Business but doesn’t have
Cash on Hand PayOrder

The Supplier sells the Raw Material to the 2

customer (Agent of the Bank)
4
In case the Bank Purchases the Raw Material directly
from the Supplier
SUPPLIER
 MURABAHA (Cost + Profit)

TYPES OF MURABAHA

1. Local Murabaha
2. Import Murabaha PKR / FE 25
3. Export Murabaha – IERS
4. Credit Murabaha
5. Spot Murabaha
6. Deferred Murabaha
7. Murabaha against Pledge
8. Murabaha against Hypothecation
 AL-BAI (Sale on Bargaining)

PURPOSE DEFINITION:
 Al-Bai is used to
provide finance on The word 'Al Bai' is of Arabic origin, which literally means ‘trading’ and hence commonly known as
ready to ship or ‘Tijarah’ in the Islamic Banking industry of Pakistan. The product has been titled as “Al Bai
finished goods thus Financing Facility”.
covering all working
capital and overhead The product is based on the concept of “Musawamah” which is an Arabic word and means “Sale on
requirements. Bargaining”. Musawamah is a sale on agreed price without referring to the cost price on which the
seller has purchased and profit charged thereon.

 Al-Bai can also be FEATURES:

used when a customer
has ready Goods but All other conditions relevant to Murabaha are valid for Musawamah as well. Musawamah can be an
wants to liquidate the ideal mode where the seller is not in a position to ascertain precisely the cost of commodity(ies) that
Goods by selling on he is offering to sell or not willing to provide / disclose the cost and or profit.
them SPOT.
 AL-BAI
The Customer pays the Sales price to the Bank. If the Sale proceeds are more
than the minimum Sale price, the difference amount is given to customer as
Incentive
6 The Bank enters into an Al-Bai Agreement with the Customer and
purchases the existing Goods of the Customer on a discounted
price on spot payment.

The 3rd Party Pays the Sale Proceeds to the 2

Customer

7
1

CUSTOMER Customer approaches the Bank for Al-Bai Transaction

3
5
The Bank appoints the Customer as its Agent via Agency Agreement to sell
the Purchased Good to a 3rd Party Buyer in the Market.
4

The Customer Sells the Goods

in the Market to a 3rd Party
Buyer

3rd Party Buyer

 AL-BAI (Sale on Bargaining)

DOCUMENTS IN AL BAI

1. Al Bai Agreement (Sale Agreement)

2. General Description of Assets/ Goods
3. Written Offer for the sale of Goods by Customer
4. Goods Receiving Note by Bank
5. Al Bai Agency Agreement
6. Authorization to Sell the Goods by Bank
7. Confirmation of Sale of Goods by Customer
8. List of Credible Buyers from Customer
9. Al Bai Agents Corporate Guarantee from customer
10.Demand Promissory Note
 AL-BAI (Sale on Bargaining)

INTERNAL AUDIT ISSUES

1. Offer & Acceptance carried out after inspection with considerable delay
2. Units of inventory to be taken in to consideration rather than value
3. Evidences not properly attached

EXTERNAL AUDIT ISSUES

4. Confirmation of Sale of Goods (Schedule 2) missing

5. Date missing on authorization to sell, delivery letter, written offer
6. Witness signature missing
7. Agency Date reference missing on GRN, Notice to sell etc.
8. Sale Price Wrongly mentioned (only cost price mentioned)
9. Inspection of goods lot before offer to sell by the customer
10.Wrong Date on GRN
11. Manual Profit calculation
12.100% inspection was not carried out
 ISTISNA (Order to Manufacture)

PURPOSE OF ISTISNA DEFINITION:

 Istisna can be used to An Istisna contract refers to an agreement to purchase from a customer a non existing asset, which
finance a Customer’s is to be manufactured or built according to the buyer’s specifications and is to be delivered on a
overhead expenses specified future date at a predetermined purchase price.
such as rent, salaries
etc. FEATURES:

 It is best suitable It is necessary for the validity of Istisna that the price is fixed with the consent of the parties and the
where the customer is necessary specification of the required items is fully settled between them. The Istisna price can
involved in either be paid full in advance, or in installments or at the time of delivery of goods (i.e. maturity of
manufacturing of the agreement).
heterogeneous goods
of Manufacturing The source of the subject matter should be specified.
sector
Istisna can be used for providing financing facility in transactions where the client can provide the
goods of heterogeneous nature to the bank on a future specified date. Istisna can be easily utilized to
facilitate payment of wages, overheads etc
 ISTISNA
The Customer pays the Istisna Sales price to
the Bank. If the Sale proceeds are more than
the minimum Istisna Sale price, the difference
amount is given to customer as Incentive 7 The Bank enters into an Istisna Agreement with
the Customer, Orders to manufacture specific
Heterogeneous Goods either against 100%
advance or partial payment.
The 3rd Party Pays 2
the Sale Proceeds
to the Customer
7
1
CUSTOMER Customer approaches the Bank for Istisna Transaction

The Bank appoints the Customer

3 4 as its Agent via Agency
6 Agreement to sell the
The Customer manufactures the Goods as per the manufactured goods on behalf of
specific description and Delivers the same to the Bank the Bank to a 3rd Party Buyer in
5 the Market

The Customer
Sells the Goods in
the Market to a 3rd
Party Buyer

3rd Party Buyer

 ISTISNA (Order to Manufacture)

INTERNAL AUDIT ISSUES

1. 100% Inspection not being carried out

2. Inspection format not being used

EXTERNAL AUDIT ISSUES

3. Takaful Cost not borne by Bank

4. Ultimate Buyer Invoice missing
5. Receipt of goods dated wrongly
6. 100% inspection was not carried out
7. Written receipt for the confirmation of Sale price missing in file
8. Payment evidence missing
9. Invoice is of earlier date of customer request
 SALAM
The Customer pays the Salam Sales price to
the Bank. If the Sale proceeds are more than
the minimum Salam Sale price, the difference
amount is given to customer as Incentive 7 The Bank enters into a Salam Agreement with the
Customer, Orders to deliver Homogeneous Goods
against 100% advance Payment

The 3rd Party Pays 2

the Sale Proceeds
to the Customer
7
1
CUSTOMER Customer approaches the Bank for a Salam Transaction

The Bank appoints the Customer

3 4 as its Agent via Agency
6 Agreement to sell the goods on
The Customer Delivers Goods to the Bank behalf of the Bank to a 3rd Party
Buyer in the Market
5

The Customer
Sells the Goods in
the Market to a 3rd
Party Buyer

3rd Party Buyer

 SALAM (Advance Payment)

PURPOSE OF SALAM DEFINITION:

 Salam can be used to It is a sale transaction where the seller undertakes to supply some specific goods to the buyer at a
finance a Customer’s future date against a price fully paid in advance.
overhead expenses
such as rent, salaries FEATURES:
etc.
Salam can be effected only for those commodities that can be exactly specified in quantity and
 It is best suitable quality. Salam is allowed for those commodities, the units of which are homogeneous in
where the customer is characteristic. For example, Salam of wheat is allowed but animal and precious stones cannot be
involved in production subject matter of Salam.
of homogeneous
goods (Mostly The source of the subject matter should not be specified. Therefore we cannot stipulate in a Salam
Agricultural Sector) contract that the commodity will be of a particular field or farm. It is necessary that the commodity
(subject matter of Salam Contract) is commonly available.

In Salam transaction, delivery of goods to buyer is mandatory.

 SALAM (Advance Payment)

DOCUMENTS IN SALAM

1. Salam Agreement
2. Written Offer for sale of Goods by Customer
3. Notice of Delivery by Customer
4. Goods Receiving Note by Bank
5. Salam Agency Agreement
6. Receipt of Goods by Customer
7. Instructions to Sell by Bank
8. Written confirmation for receipt of sale Price by Bank
9. Salam Agents Corporate Guarantee from customer
10. List of Credible Buyers from Customer
11. Demand Promissory Note
 WORKING CAPITAL MUSHARAKAH
(Equity Participation / Partnership)
PURPOSE OF DEFINITION:
WORKING CAPITAL
MUSHARAKAH SIRAT Working Capital Musharakah is a revolving facility based on Shirkat-ul-Aqd and the
Profit Sharing Ratio is mutually agreed between the Bank and the customer. The loss is shared
 WCM is used where as per their investment ratio.
the Customer wants to
cater its Working FEATURES:
Capital needs and is
an effective alternative Under this facility, Bank invests in the primary and operating activities of the customer acting as its
to conventional partner. This facility enables the customer to draw and repay funds against a Musharakah limit
Running Finance offered by the Bank.
Facility. The facility is provided to the client after analysis of the Financial Statement of the customer and the
decision is made on the Average Inventory and Average Trade receivable in the Balance Sheet.

ELIGIBILITY CRITERIA:
Trading / Manufacturing Business
Past 03 Years Audited Financials
PKR 800 Million Equity
 WORKING CAPITAL
MUSHARAKAH (WCM)
On Annual basis the Bank will evaluate the actual
Gross Income of the Customer and adjust the profit
recovered
4

The Bank opens a Facility account and disburses the

sanctioned amount.
2

1
CUSTOMER Customer approaches the Bank for WCM Transaction

3
The Customer on Monthly / Quarterly or Half Yearly
basis pays the Bank the provisional profit amount
LONG TERM FINANCING PRODUCTS
 IJARAH (Islamic Lease)

PURPOSE OF IJARAH DEFINITION:

Ijarah is an alternate to Ijarah refers to transferring the usufruct of an asset but not its ownership. Under Islamic banking, the
Conventional Leasing bank transfers the usufruct to another person for an agreed period at an agreed consideration. The
asset under Ijarah should be valuable, non-perishable, non-consumable, identified and quantified.
Ijarah can be used for machinery and Car etc.

FEATURES:

It is used to express the sale (bay’) of a known benefit in return for its known equivalent.

The Asset should be valuable and identified and should have some usufruct against which the Lessor
pays rent.

Anything which cannot be used without consuming cannot be leased out. e.g.. Money, Wheat etc
 Rent

The Customer pays the Monthly Rental to the

IJARAH 5
Bank

The Bank on a Separate Sale Agreement sells the

Vehicle to the Customer against the Security Deposit or
Hiba at maturity
6
The Bank issues Pay Order in the
1 name of the Car Manufacturer
Customer approaches the Bank for Ijarah of
Vehicle 2
CUSTOMER 7

4
3 Pay Order
The Bank enters into an Ijarah agreement for use
The Car
of Asset (Usufruct) with the Customer against
Manufacturer
Monthly Rentals
delivers the Vehicle
to the Bank
Car Manufacturer
DIMINISHING MUSHARAKAH

1
Customer approaches the Bank for Purchase of an Asset (House)
on Shirkat-ul-Milk basis (Joint Ownership in an Asset)

CUSTOMER 7

Joint Asset

20% Owner 80% Owner

2
The Bank and Customer both enter into a Diminishing
Musharakah Agreement and Jointly purchase an Asset

Units Rent + Unit Price

The Customer Pays the Bank monthly rentals against the use of Bank’s share of Asset. The Customer gradually
purchases the Unit shares of Bank until the Customer becomes the sole owner of the Asset

The Bank sells the Units to the Customer on a Separate Sale Agreement
 Product Matching

Current Accounts
Conventional Product Name Islamic Product Name Shariah Mode
Current Account SIRAT Current Account
Current Account – Non Resident SIRAT Current Account – Non Resident
FCY Current Account SIRAT Current Account
FCY Current Account – Non Resident SIRAT FCY Current Account – Non Resident
Super Current Account -Individual SIRAT Silver Current Account (only Individual customers)
Qard
Super Current Account -Corporate SIRAT Super Current Account (only corporate customers)
Silver Current Account SIRAT Silver Current Account (only Individual customers)
Super Current Account SIRAT Super Current Account (only corporate customers)
Asaan Current Account SIRAT Asaan Current Account
Basic Banking Account SIRAT Basic Banking Account
 Product Matching

Saving Accounts
Conventional Product Name Islamic Product Name Shariah Mode
PLS Saving Account SIRAT PLS Saving Account
Habib Metro FCY Saving Plus Res SIRAT PLS Saving Account
PLS Saving Account – Non Resident SIRAT PLS Saving Account – Non Resident
PLS Saving – FCY SIRAT PLS Saving Account
PLS Saving – FCY – Non Resident SIRAT PLS Saving Account – Non Resident
Savings Plus Account SIRAT Savings Plus Account
Mudarabah
Multiplier Account SIRAT PLS Premium Account
Privileged 55+ SIRAT Privileged 55+ Account
Junior Savers (PKR & FCY) SIRAT Junior Savers Account (PKR & FCY)
Asaan Savings Account SIRAT Asaan Savings Account
FCY Savings Plus SIRAT FCY Savings Plus
FCY Savings Plus – Non Resident SIRAT FCY Savings Plus – Non Resident
 Product Matching

TIME DEPOSIT
Conventional Product Name Islamic Product Name Shariah Mode
Short Notice Term Deposit (SNTD) PKR Habib Islamic Investment Certificates (HIIC)
Fixed Deposit Account (PKR & FCY) Habib Islamic Investment Certificates (HIIC)
Bharpoor Munafa Account (PKR) Habib Islamic Investment Certificates (HIIC)
Mudarabah
Mahana Deposit (PKR) Habib Islamic Investment Certificates (HIIC)
Izafa Certificates (PKR) Habib Islamic Investment Certificates (HIIC)
Premium Deposit (PKR) Habib Islamic Investment Certificates (HIIC)
LOCKER ACCOUNT
Locker Deposit Account SIRAT Locker Deposit Account Mudarabah
SALARY ACCOUNTS
SIRAT HabibMetro@work Gold Current
Salary Flex Account (Green)
Account
SIRAT HabibMetro@work Gold Current
Salary Flex Account (Gold) Qard
Account
SIRAT HabibMetro@work Platinum Current
Salary Flex Account (Platinum)
Account
 Islamic Banking-Thumb Rules

 Shariah Compliant Contracts

 No Interest Income
 No Late Penalties*
 No Prohibited Items

*The concept of charity should be understood by the stakeholders to

avoid any confusion.
 Misconception

“Interest rate can be used as a Bench Mark?”

Using Interest Rate benchmark for determining the profit in halal

transactions does not render the transaction as invalid or haram.

The nature and process of transactions determines the validity and

permissibility of the transaction as per the Shariah principles.
 Misconception

“Islamic banking looks the same as conventional banking”

The validity of a transaction does not only depend on the end result but rather the steps
followed in reaching the end.

A McDonald’s burger in USA and Pakistan looks the same and has the same taste and
smell but the former is haram and the latter is halal due to its compliance of Islamic
guidelines of slaughtering animals.

Same is also true for Islamic and Conventional banking. Former is halal being based on
Islamic principles while latter being based on interest is haram.
 Misconception

Similarly, if a person is feeling hungry, he may steal a piece of bread and eat or alternatively
buy a piece of bread to eat. The apparent end result would be same but one is permissible in
Shariah and the other is not allowed.

The same is also true for Islamic and conventional banking. Therefore, it can be concluded
that it is the underlying transaction that makes something “Halal” (allowed) or “Haram”
(prohibited) and not the result itself.

Apparently, Islamic banks may look similar to conventional banks, however the
contracts and product structures used by Islamic banks are different from that of the
conventional bank.

In the verse 2:275 of the Holy Quran, Allah the Almighty has responded to the
apparent similarity between trade and interest by resolutely informing that he has
permitted trade and prohibited Riba (though they may look similar to someone).
 Misconception

“Can an Islamic Bank guarantee a fixed rate to its depositor?”

Islamic Banking Saving Account Deposit/Term Deposit is based on Mudarabah,

in which the profit rate is based on the actual income earned for the period.
Therefore Islamic Banks can not guarantee any rate prior to earning of the income
of the said period that’s why Islamic banks usually quote expected rates based
upon the historical performance and forecast.
 Misconception

“Interest rate can be used as a Bench Mark?”

Using Interest Rate benchmark for determining the profit in
halal transactions does not render the transaction as invalid
or haram.

The nature and process of transactions determines the

validity and permissibility of the transaction as per the
Shariah principles.
Shariah Board Members
 Control

How it is ensured that all the Islamic banking operations are executed as per the
Shariah principles

Certain & additional controls are present in Islamic Banks such as :

1. Shariah Board with one of its member as Resident Shariah Board Member
2. Shariah Compliance Department
3. Internal Shariah Audit
4. External Shariah audit
5. Inspections of Islamic Banking Department, State Bank of Pakistan
 Important Links

• Islamic Banking Department, State Bank of Pakistan- Circulars / Notifications

http://www.sbp.org.pk/ibd/index.htm
• IBD SBP Shariah Governance Framework
www.sbp/org.pk/ibd/2018/c1
• FAQs/Knowledge Centre
http://www.sbp.org.pk/IB/FAQ.asp
• Instructions for Profit & Loss Distribution and Pool Management for Islamic Banking
Institutions
• http://www.sbp.org.pk/ibd/2012/C3.htm
• Circulars on Training
www.sbp/org.pk/ibd/2018/c2 and http://www.sbp.org.pk/ibd/2020/CL1.htm
• Instructions and guidelines for Shariah compliance
www.sbp/org.pk/ibd/2008/c4
• IBD SBP Implemented Shariah Standards
http://www.sbp.org.pk/ibd/2010/C1.htm http://www.sbp.org.pk/ibd/2013/index.htm
http://www.sbp.org.pk/ibd/2019/index.htm http://www.sbp.org.pk/ibd/2020/index.htm
• Accounting & Auditing Organization of Islamic Financial Institutions (AAOIFI)
http://aaoifi.com/shariaa-standards/?lang=en
• https://www.habibmetro.com/sirat/
Thank you