Download - Islamic Banking PPT_1
-
8/3/2019 Islamic Banking PPT_1
1/25
ISLAMIC BANKINGISLAMIC BANKING
ISLAMIC BANKING
Presented By.
Aditya Singh (806)
Dipeeka Thikekar (817)
Govinda Chhangani (820)
Mayur Kotak (834)
Prem Chhatani (846)
-
8/3/2019 Islamic Banking PPT_1
2/25
ISLAMIC BANKINGISLAMIC BANKING
Is this
about Islam
Or
about Banking ?
What has religion got to do withEconomics & Banking ?
-
8/3/2019 Islamic Banking PPT_1
3/25
ISLAMIC BANKINGISLAMIC BANKING
Introduction Islamic Banking refers to a system of banking or banking activity that is
consistent with Islamic law (Sharia) principles.
The first modern theoretical literature on Islamic Banking started in the1940s and the theoretical literature ended in the 1960s.
Modern practical approach towards banking started in the 1960s andwere followed by the establishment of several Islamic Banks in theprivate sector in the 1970s.
During the 1980s, Pakistan, Iran, Sudan, and Malaysia adopted thenew system officially.
-
8/3/2019 Islamic Banking PPT_1
4/25
ISLAMIC BANKINGISLAMIC BANKING
OBJECTIVES The humanitarian goal of achieving the well being of all members of
the human family cannot be attained by concentrating primarily on thematerial constituents of well-being and making maximization of wealthas the main objective of Economics.
It is also necessary to raise the spiritual content of well being andreduce all the symptoms of anomie, like family disintegration, heavyinterest based debt payments, conflict and tensions, crime, alcoholism,drug addiction, and mental illness, all indicating lack of inner happiness and contentment in the life of individuals.
Capitalism as well as Socialism have both failed to lead mankind tosuch an overall well-being. It is therefore, necessary to lay down thecontours of a new system which could help optimize human well-beingas per the divine guidelines of Allah.
Introduction
-
8/3/2019 Islamic Banking PPT_1
5/25
ISLAMIC BANKINGISLAMIC BANKING
Rules Govern Investment Behavior:
The absence of interest-based (riba) transactions;
The avoidance of economic activities involving speculation;
The discouragement of the production of goods and service which
contradict the value pattern ofIslam (haram).
Introduction
-
8/3/2019 Islamic Banking PPT_1
6/25
ISLAMIC BANKINGISLAMIC BANKING
Difference between ConventionalBanking and Islamic Banking
Concept ofInterest
Deals in Money/Asset
Participation in Business Evaluation of Projects.
Introduction
-
8/3/2019 Islamic Banking PPT_1
7/25
ISLAMIC BANKINGISLAMIC BANKINGMarketing Mix
DEPOSITORS/INVESTORS
BANK
PROFIT
FINANCING ANDINVESTMENT
ACTIVITIES
LOSS
30%
70%
100%
INVEST FUNDS
(MUDHARABAH)
Pre-agreed Profit-Sharing Ratio
-
8/3/2019 Islamic Banking PPT_1
8/25
ISLAMIC BANKINGISLAMIC BANKING
Products of Islamic Banking
Mudharabah (Profit Sharing)
Wadiah (Safe Keeping)
Musharakah (JointV
enture) Murabahah (Cost Plus)
Ljarah (Leasing)
Takaful (Insurance)
Marketing Mix
-
8/3/2019 Islamic Banking PPT_1
9/25
ISLAMIC BANKINGISLAMIC BANKING
Supplier
Customer
Bank
3. Customerbuys thegoods asBanks agent.
Cost: $100
1. ExecutionofMurabaha
Agreement.
4. Disbursementof the Facility.Facility Amount:
$100
5. Under the Murabaha Agreement the Bank willimmediately sell the goods at $110 (cost plus a profitmargin) payable on a deferred payment terms.
Sale
Features:
Fixed rate financingonly
Uses:
InventoryFinancingFinancingcommodity purchase
Tenor:
12-18 monthsRisks:
Credit Risk
2. Bankappoints theCustomer as itsagent to buy
the goods.
Murabahah Agreement
-
8/3/2019 Islamic Banking PPT_1
10/25
ISLAMIC BANKINGISLAMIC BANKING
Promotion Parsoli Corporation Ltd. does the marketing ofIslamic Banking by
conducting conferences and seminars in Muslim populated states inIndia.
The conferences are then telecast on CN
BC to create awareness tomass people.
Microfinance institutions shall emerge not only for economicconsiderations but also as part to government strategy to exploit thepotential of micro-financing for poverty alleviation.
Marketing Mix
-
8/3/2019 Islamic Banking PPT_1
11/25
ISLAMIC BANKINGISLAMIC BANKING
Marketing EnvironmentMICRO MACRO
Customers Political
Competitors Economic
Social
Technological
-
8/3/2019 Islamic Banking PPT_1
12/25
ISLAMIC BANKINGISLAMIC BANKING
Market Opportunities
Muslim population in India is about 15 crores
Worldwide Muslim population
Grail Research Need to compete for funds with conventional banks
Stock market
Mutual funds (Equity funds, Sector funds, Index funds, Growth
fund)
-
8/3/2019 Islamic Banking PPT_1
13/25
ISLAMIC BANKINGISLAMIC BANKING
Reasons for Growth of Islamic banking
Is in response to the needs of Muslim community
Acts as a catalyst to fill the gap to mobilise funds for productive
purposes, in particular for Muslim communities
Significant untapped business potential.
Proven to be a viable financial intermediation channel in supporting
economic growth.
-
8/3/2019 Islamic Banking PPT_1
14/25
ISLAMIC BANKINGISLAMIC BANKING
Reasons for Growth of Islamic bankingCont..
Fulfilled the demands of not only the Muslims but non-Muslimpopulation as well.
Unaffected by the sub prime mortgage crisis
Tame the liquidity and inflation problems
Rating of complete investment risks instead of mere credit risks
-
8/3/2019 Islamic Banking PPT_1
15/25
ISLAMIC BANKINGISLAMIC BANKING
International Scenario The size ofIslamic Financial Industry has reached US$ 500 Billionand its growing annually @ 15% per annum.
42 countries have Islamic Banking Institutions
27 Muslim countries including Bahrain, UAE, Saudi Arabia, Malaysia,Brunei and Pakistan
15 non-Muslim countries including USA, UK, Canada, Switzerland,South Africa and Australia
Leading foreign Banks have opened Islamic Banking windows orsubsidiaries such as:
Standard Chartered Bank Citibank
HSBC
ABN AMRO
UBS
-
8/3/2019 Islamic Banking PPT_1
16/25
ISLAMIC BANKINGISLAMIC BANKING
In Feb 1999, Dow Jones introduced the Dow Jones IslamicMarket Index (DJIM) of 600 companies world wide whosebusiness complies with Islamic Shariah laws
At present there are more than 105 Islamic Fundsoperational through out the world with a total fund base ofover USD 3.50 billion
Governments of Bahrain ,Malaysia and now Pakistan haveissued Islamic Bonds (Sukuk) in order to facilitate Islamic
Banks in managing their liquidity. Issuance of these bonds has also paved the way for Shariah
compliant Government borrowings.
Institutions like Accounting and Auditing Organization forIslamic Financial Institutions (AAOIFI) and Islamic FinanceServices Board (IFSB) have been formed.
These institutions are playing a key role in setting up andstandardizing Shariah , Financial and Accounting standardsforIslamic Financial Institutions.
Due to these collective efforts Islamic banking is nowrecognized by IMF, World Bank and Basel Committee.
International Scenario
-
8/3/2019 Islamic Banking PPT_1
17/25
ISLAMIC BANKINGISLAMIC BANKING
In countries like Malaysia, which took the lead in introducing Islamicfinance some thirty years ago, Islamic investments now account for 11% ofthe total banking assets. The Malaysian IB industry is firmly positioned tocapture 20% share by 2010.
According to Standard & Poors, the growth rate ofIB services outpacedthat of conventional banking during the past decade, making it one of the
most dynamic areas in international finance.
The annual growth of Islamic financial institutions (IFI) has been anestimated 10% in the Gulf and almost 15% worldwide over the past 10years, report says. IFIs assets and funds under management areestimated at about $500bn. Islamic banking activities are expected to grow
even more rapidly in the foreseeable future.
International Scenario
-
8/3/2019 Islamic Banking PPT_1
18/25
ISLAMIC BANKINGISLAMIC BANKING
United States: 20-Al Manzil Financial Services
- American Finance House
- Failaka Investments
- HSBC
- Ameen Housing Cooperative
Germany: 3- Bank Sepah
- Commerz Bank
- Deutsche Bank
Switzerland: 6UK: 26 (primarilybranches of Gulf and
global banks)
- HSBC Amanah Finance
- Al Baraka International Ltd
- Takafol UK Ltd- The Halal Mutual
Investment Company
- J Aron & Co Ltd (Goldman
Sachs)
Bahrain: 26- Bahrain Islamic Bank
- Al Baraka
- ABC Islamic Bank
- CitiIslamic Investment Bank
Malaysia: 492 - Pure Islamic Banks (Bank
Islam, Bank Muamalat)Rest - conventional banks
Saudi Arabia: 10- Al Rajhi
- SAMBA
- Saudi Hollandi
- Riyadh Bank
UAE: 9- Dubai Islamic Bank
- Abu Dhabi Islamic Bank
- HSBC Amanah
Qatar: 4- QatarIslamic Bank
- QatarInternational Islamic
Kuwait: 5- Kuwait Finance House
Iran: 8
Egypt: 7-Alwatany Bank of Egypt
- Egyptian Saudi Finance
Indonesia: 4
Sudan: 9
Pakistan: 5India: 3
Bangladesh: 3Turkey: 7- Faisal Finance
Institution
- Ihlas Finance House
Yemen: 5
United States: 20-Al Manzil Financial Services
- American Finance House
- Failaka Investments
- HSBC
- Ameen Housing Cooperative
Germany: 3- Bank Sepah
- Commerz Bank
- Deutsche Bank
Switzerland: 6UK: 26 (primarilybranches of Gulf and
global banks)
- HSBC Amanah Finance
- Al Baraka International Ltd
- Takafol UK Ltd- The Halal Mutual
Investment Company
- J Aron & Co Ltd (Goldman
Sachs)
Bahrain: 26- Bahrain Islamic Bank
- Al Baraka
- ABC Islamic Bank
- CitiIslamic Investment Bank
Malaysia: 492 - Pure Islamic Banks (Bank
Islam, Bank Muamalat)Rest - conventional banks
Saudi Arabia: 10- Al Rajhi
- SAMBA
- Saudi Hollandi
- Riyadh Bank
UAE: 9- Dubai Islamic Bank
- Abu Dhabi Islamic Bank
- HSBC Amanah
Qatar: 4- QatarIslamic Bank
- QatarInternational Islamic
Kuwait: 5- Kuwait Finance House
Iran: 8
Egypt: 7-Alwatany Bank of Egypt
- Egyptian Saudi Finance
Indonesia: 4
Sudan: 9
Pakistan: 5India: 3
Bangladesh: 3Turkey: 7- Faisal Finance
Institution
- Ihlas Finance House
Yemen: 5
-
8/3/2019 Islamic Banking PPT_1
19/25
ISLAMIC BANKINGISLAMIC BANKING
Islamic Banking in India Confined to the co-operative sector.
Operate on small scale missing the economies of scale.
Function underNon Banking Finance Companies Reserve Bank Directives1997 RBI (Amendment) Act 1997-(Eg-Parsoli )
Reveal its potential to build infrastructure for agriculture sector andunorganized sector
Nationalized banks
Corporate sectors
To counter Terrorism
Raghuram Rajan Committee Regulatory issues need to be sorted
-
8/3/2019 Islamic Banking PPT_1
20/25
ISLAMIC BANKINGISLAMIC BANKING
Future Prospects
Islamic banking and financing has gained a foothold both nationally in
Muslim countries and internationally in the financial world.
Islamic banking industry faces issues of a different sort. That is, how to
(1) Consolidate the gains made so far and sustain itself,
(2) Protect against any meltdown and
(3) Grow.
-
8/3/2019 Islamic Banking PPT_1
21/25
ISLAMIC BANKINGISLAMIC BANKINGFuture Prospects
Survival ofIslamic banking depends on the following:
Its Economic Viability, -
Economic viability ofIslamic banking/financing is not an
issue for two reasons:
> Islamic banking is just another way of banking.
> Islamic banking offers a better financial
architecture, on economic grounds.
Its Stability,
> During downswing in an interest-based economy, depositors
existing claims remain a liability of the banking system.
> Islamic banking has advantage that bank obligations
to depositors automatically adjust, both in downswing and
recovery phases,
-
8/3/2019 Islamic Banking PPT_1
22/25
-
8/3/2019 Islamic Banking PPT_1
23/25
ISLAMIC BANKINGISLAMIC BANKINGFuture Prospects
Future Challenges for Islamic Banking
& Finance
Financial Innovation in Critical Areas
Competition
Misuse ofIslamic Banking
-
8/3/2019 Islamic Banking PPT_1
24/25
ISLAMIC BANKINGISLAMIC BANKING
Conclusion
The Islamic Banking is still very new.
Few minor changes is required to work.
A vastly complicated concept.
-
8/3/2019 Islamic Banking PPT_1
25/25
ISLAMIC BANKINGISLAMIC BANKINGQuestion ????Question ????