stucture of islamic bank

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June 7, 2010 [HALAL ISLAMIC BANK ]

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Final Project (ISLAMIC BANKING)

Submitted To:

SIR. DR UZAIR AL BAZI

Submitted By;

KASHIF UR REHMAN 08117034USMAN BADER 08117049

SAJJAD AHMED 08117023 MABROOR 08117011

DANISH 08117045

HAROON 08117037

MBA B&F (Section A)

GIFT University Gujranwala




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Table of Contents

S.NO PARTICULAR PAGE

1 Acknowledgement 3

2 Dedication 4

3 Islamic Banking 5

5 Halal Islamic Bank 7

6 Mission 7

7 Vision 7

8 Value 7

9 Purpose 7

10 Management structure 8

11 Modes of financing 9

12 Modes of lending 12

13 Operation and services 13

14 Personal funding 14

15 Product and services 15

16 Cooperative Islamic Banking 25

17 Industrial Banking 26

18 Impact on country economy 27




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Acknowledgement

First of all, we all are very thankful to ALLAH ALMIGHTY, without who·s help

we are nothing. It was because of only ALLAH·s help we were able to do this

task without the help of our great ALLAH our efforts could never be fruitful. It

was ALLAH·s help and prayers of our parents that we are able to complete this

project.

Than we are also very thankful to respected and honorable Dr. Uzair-Al-Bazi

who explores this opportunity for us and than he was always be there to help

and guide us in our working of this project. It was his motivational attitude

that we have completed this project enthusiastically.




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DEDICATION

We dedicate our final project of Islamic Banking to

Our Teacher Mr. Uzair Al-Bazi




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Islamic Banking

As we are Muslims and Islam is the religion selected for us by our Creator the most power full

and we will be soon in front of our Creator to justify what we did and how strictly we havefallowed rules and regulations of Islam. So we have to fallow rules and regulations that Islam tell

us about how to live in this world. Islam guides us in every field of life and provides the mostsuitable methods of living a balanced life with equality and justice with all society around us. In

the light of Allah¶s commands, it is obligatory on us to try to find and adopt the right bankingsystem, one that follows the principles set by the Creator. Those who learn to differentiate

between what has been allowed and what has been forbidden will be the ones with a clear conscience when they assemble in front of the Creator on the Day of Judgment.

Allah has clearly ordained the prohibition of Riba (interest) in the Glorious Quran, in the Versesas [2:278-279] translate into:

Verse 278.

O ye who believe! Fear Allah, and give up what remains of your demand for usury, if ye are

Indeed believers.

Verse 279.

If ye do not, take notice of war from Allah and His Messenger: but if ye repent, ye shall have

your capital sums; Neither will you deal with others unjustly, nor shall you be dealt withunjustly.

Beware! False interpretations of these verses has led many individuals to assume that the prohibition only relates to situations where the creditor is likely to charge exploitatively high

rates of interest. It is wrong to see the above translation as proof that the (sole) objective served by the prohibition of Riba is the avoidance of injustice (in the sense of exploitation of the poor

debtor by the rich creditor). In Islam, there is no room for Riba, marginal or otherwise. Ribagives birth to an economic system that is unjust; one that favors the rich at the expense of the

poor. Rather than reward for effort and entrepreneurship with profit, the Riba based economicsystem rewards capitalists. Islamic Finance attempts to create a fair economic system. It works

on the principle of profit and loss sharing. Riba (Interest) is strictly prohibited in all its forms andkinds.




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HALAL BANK

HALAL Islamic Bank (Pvt.) Ltd is incorporated in the city of Pakistan so it has to be registered

by the virtue of Banking Company Ordinance 1962. The law defines the bank and banking

company in sub section B & C of section 5 as:

³Banking Company means the company which transacts the business of banking in Pakistan and

Banking means accepting for the purpose of investment deposits of general public.´

As our organization will be performing above stated activities and would not be involve in any

trading or manufacturing as stated in law so it is registered as banking corporation by virtue of

Banking Company Ordinance 1962.

The other reason of calling this organization a BANK is banking is the derivation of financing

processes so this organization would be performing Islamic modes of financing so it will be

called a BANK.

The name of our Islamic bank is Halal-islamic Bank. All the facilities provided by us will be

truly base on the Islamic law. After visiting many conventional and Islamic banks, we found

many errors related to riba and customers were just satisfy by availing those facilities without

knowing the depth of the facility nature. We have discussed all the facilities in detail by showing

first the views of conventional and Islamic banking and then our views which have tried our

level best to be according to Islamic law.HALAL Islamic Bank (Pvt.) Ltd is a true Islamic bank

operating in Gujranawala incorporated as corporation with authorized working capital of rupees

50,000,000 and issued, subscribed and paid-up capital of rupees 2,000,000 each director

contributing with rupees 500,0000 each and 30,000,000 collected by issuance of common shares

and each share will be 10 Rs, each offer to general public with the support of national Islamic

banks and largest manufacturers and groups. However the minimum capital requirement (MCR)

for banks which are registered under Banking Company Ordinance 1962, as a banking company

is different in respect with Halal Islamic Bank (Pvt.) Ltd. The bank is incorporated by the virtue

of sub section B & C of section 5 of Banking Company ordinance 1962 which describes:

³Banking Company means the company which transacts the business of banking in Pakistan and

Banking means accepting for the purpose of investment deposits of general public.´

A key feature of Halal Islamic banking is that unlike conventional banks which deal primarily in

money and financial securities, HALAL Islamic financing is related to an asset that is a feature

of the transaction, and quite often the principal feature itself. From this springs an important




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distinguishing feature of Islam wherein Islamic financing is always based on illiquid assets that

have intrinsic value.

Mission Statement

´We provide financing solutions, at city level in accordance with Shariah

principlesµ

Vision Statement

´HIB aims to be first priority and pioneer bank in the Islamic financial domainµ

Our value

Commitment to provide extra high quality services and build strong and

permanent relations with the customers

Welfare of employees and provide incentives to great performances

Cooperation and Team work

Purposes

The main strategic purposes of HALAL Islamic Bank:

Offering Islamic banking activities in compliance with Sharia

principles and Carrying out all Islamic financing works .

To participate in economic development process operated in HALAL

through contributing in financing and investment operations

needed for development projects complying with Islamic Sharia

laws.




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Management Structure

Borad of Director

Chef Executive Officer

(CEO)

Chef Operating Officer

Shariah Board Audit Committee

Division Manager

Area Manager

Branch Manager

AccountsManager

OperationManager

MarketingManager

ShariahCompliance

Officer

HRMManager

ITManager

Staff Staff Staff Staff Staff

Internal Auditor Shariah Advisor

CA qualified

professionals




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CUSTOMERBANK

Joint

Ownership

Musharka

HALAL Islamic bank would be financing through.

1) Musharkah

2) Mudharbah

3) Murabahah

4) Ijarah (lease & Hire purchase)

Musharkah:

In this mode of financing the both parties involved in the business provide funds needed for

investment and either both, one or non f them will operate the business and they will share profit

of the business as par the agreement that is mostly based on the ratio of investment made by both

the parties.

Meaning of Musharkah is partnership, is an Islamic mode of finance in which capital is provided

by two or more parties for project development. ³HALAL´ bank can participate in equity along

with the project sponsors. The profits are shared among the parties on the basis of their

participation or on a pre-agreed ratio and the losses are shared on the basis of equity

participation.

According to this mode we provide profit & loss account to our costumers on the basis of

Musharkah. Bank and client bear same rate of losses and generate same rate of profit margin.

Mudharbah:

Mudaraba is a mode of financing in which one party gives finance and other provide services and

then share the profit of the business as par the terms and conditions are settled by the both

parties.

Mudharbah (Profit Sharing) is a contract, with one party providing 100 percent of the capital and

the other party providing its specialist knowledge to invest the capital and manage the investment




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project. Profits generated are shared between the parties according to a pre-agreed ratio. But in a

Mudharbah only the lender of the money has to take losses. HALAL Islamic bank provide three

types of accounts on the basis of Mudharbah.

Murabahah:

A concept found in Islamic finance which is not mode of financing but a source to avoid interest

dealing. It is a contract between a bank and its client, by which the bank purchases goods and

then sells them to the client at a cost that includes a profit margin. The contract requires specific

installment payments or a lump sum amount in future to the bank. This arrangement allows the

bank to avoid charging interest, which is forbidden under some interpretations of Islamic law.

Murabahah process




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Ijarah:

It¶s in simple words as rent charged against right that is given to an other person for the use of

the asset. HIB leased out assets and equipments to clients on the basis of Islamic Law. As thelessor will own the asset and have to bear all the liabilities related to the asset but other than the

operating expenses.

Ijarah is the Islamic of fiqh. Lexically, it means to give something on rent. In the Islamic

jurisprudence, the term µIjarah¶ is used for two different situations. In the first place, it means to

employ services of a person on wages gives to him as a consideration for his hired services. The

employer is called µmusta¶jir¶ while employee is called µajir¶. The second type of Ijarah is related

to the rights of assets and properties, and not the service of human being. µIjarah¶ in this sense

means to transfer the rights of a particular property to another person in exchange for a rent

claimed from him. In this case the term µIjarah¶ is analogous to the English term leasing. Here

the lesser is called µMujir¶ the lessee called µMusta¶jir¶ and the rent payable to the lesser is called

µujrah¶.

There are four directors of this bank who will provide the services at the start of its operations.

The bank is backed by the security of a well known person Shaukat Manzoor cheema(MPA).The

bank will maintain an account with name of Bait-ul-maal account. The purpose of this account is

to help the needy people.

CUSTOMERBANK

Ownershipremains tol

bank




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Islamic Banking Modes of lending.

Following modes of lending will be used under Islamic Banking system:-

1)

Bai' al-inah (sale and buy-back agreement)

Under this system, the financier sells an asset to the customer on a deferred-payment basis, and

then the asset is immediately repurchased by the financier for cash at ownership over the asset in

order to protect against default without explicitly charging interest in the event of late payments

or insolvency. Some scholars believe that this is not compliant with Shariah principles.

2 ) Bai' bithaman ajil (deferred payment sale)

This concept refers to the sale of goods on a deferred payment basis at a price, which includes a

profit margin agreed to by both parties. This is similar to Murabaha, except that the debtor makes

only a single instalment on the maturity date of the loan. By the application of a discount rate, an

Islamic bank can collect the market rate of interest

3) Bai muajjal (credit sale)

Literally bai muajjal 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 the purchase price and allows the buyer to pay the price of the commodity at a

future date in a lump sum or in instalments. 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.

4 ) Mudarabah (profit sharing)

Mudarabah is an arrangement or agreement between the bank, or a capital provider, and an

entrepreneur, whereby the entrepreneur can mobilize the funds of the former for its business

activity. The entrepreneur provides expertise, labour and management. Profits made are shared

between the bank and the entrepreneur according to predetermined ratio. In case of loss, the bank

loses the capital, while the entrepreneur loses his provision of labour. It is this financial risk,




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according to the Shariah, that justifies the bank's claim to part of the profit. The profit-sharing

continues until the loan is repaid. The bank is compensated for the time value of its money in the

form of a floating rate that is pegged to the debtor's profits

Operations and Services

The operations of HALAL bank are divided into two major categories:

Personal funding

Product and service

Personal funding

It will consist of Investors of all types who have the excess money than their needs

and would like to earn profits by investing their money. The bank can invest their money

Financing Real Estate Purchase

Financing Cars Purchase

Financing the Purchase of Furniture, Home and Office Supplies:

Product and service

This group would include all kind of needy people who have less money than their

need and would like to fulfill their needs.

HALAL bank will provide following services for its first group from its above stated two major

groups:

HALAL Current A/c

HALAL Saving A/c

HALAL fixed deposit A/c

HALAL Mutual Funds A/c

Lockers

HALAL Bussiness partnership A/c

HALAL Gharailo Needs




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The only account which will serve the needs and wants of both above stated group is as follow;

HALAL Bait-ul-Maal A/c

Personal funding

1) Financing Real Estate Purchase

The bank shall purchase the property/house that the client chooses and finances up to 75% of the

value of the property/house. The client pays a minimum of 25% of the value of the wanted

property, and the amount plus the bank¶s profit are paid off during a period up to a maximum of

120 months, with the property held in mortgage for the bank until the full amount is paid off. The

bank and the client agree in due time on the defined profit of the bank, and financing is carried

out according to the policy of the bank.

2) Financing Cars Purchase

The bank shall purchase new and/or used cars financing up to 70% of the value of the car, while

the client pays a minimum of 30% of the value of the car. The amount plus the bank¶s profit are

paid off during a period up to a maximum of 60 months. This financing is made after the car is

mortgaged for the bank and fully-insured against all risks until the whole amount is paid off. The

bank and the client shall agree on the defined profit made by the bank and the financing is

carried out according to the policy of the bank.

3) Financing the Purchase of Furniture, Home and Off ice Supplies:

The bank shall purchase furniture, and home and office supplies reaching 100% of the value of

furniture/appliances. Paying off can be for a maximum period of 36 months, guaranteed by

transferring the client¶s salary (who applied for the purchase) and/or demanding a warrantor if

needed. In due time, the bank and the client shall agree on the defined profit made by the bank

and the financing is carried out according to the policy of the bank.




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Product and service

1) HALAL Current A/c:

Now your current account is your wallet. With HALAL Current Account, you can have complete

peace of mind that your funds are safe and utilized in Halal Businesses only. The funds would be

used in described business only of which liquidity ratio would be higher so that bank always

maintains its liquidity. HALAL Current Account is ideal for customers who have frequent

transaction needs and require unlimited access to their account to meet their personal or business

expenses. Requirements to open a HALAL Current A/c are stated below:

A minimum balance of Rs. 1,000/- only to open the account

Joint Account facility up to four joint account holders

Inter Bank Funds transfer facility

Round the clock phone Banking through personalized service from

Customer Relationship Officers

Free Account statement facility

Safe deposit lockers

HALAL Current A/c is based on the Islamic principle of Qarz (loan) whereby you are the lender

and the Bank is the borrower. These funds are invested in described HALAL business ventures

only. The funds are payable to you on demand as and when required with neither any addition

nor penalty.




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Difference with conventional and other Islamic banks:

Conventional bank

Current A/c

Islamic banks Current

A/c

HALAL Current A/c

The money of

depositors is invested

in interest based funds

to earn interest.

However the money is

invested in the

business venture in

accordance with

Shariyah rule but still

there is an iron wall

between the depositor

and bank.

The funds will be

invested in HALAL

business venture of

which the depositors

will be well aware.

2) HALAL Saving A/c:

HALAL Saving A/c is the perfect account for savings purposes as well as

to earn attractive profit in accordance with Shariyah rules. The profits are

distributed monthly according to the contribution in fund. It gives u flexibility

of making as many transactions on your account as you want.

HALAL Saving A/c is ideal for customers who need to draw money for monthly

expenses but would also like to earn on your hard earned savings.

Requirements to open a HALAL Saving A/c are stated below:

Monthly profit/loss payment

Profit announcement at the end of every month A minimum balance of Rs. 5,000/- only to open

Joint Account facility up to four joint account holders

Round the clock phone Banking through personalized service from

Customer Relationship Officers




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Free Account Statement facility

Safe deposit lockers


Conventional bank

Savings A/c

Islamic banks Savings

A/c

HALAL Saving A/c

The money of

depositors is invested

in interest based funds

to earn interest and

depositors are paid

interest according to

their investments no

matter bank earn

interest or lost its

investment.

However the money is

invested in the

business venture in

accordance with

Shariyah rule but still

there is an iron wall

between the depositor

and bank. Rab-ul-

maal is not told where

the investment is being

invested.

The funds will be

invested in HALAL and

JAIZ business venture

of which the depositors

will be well aware as

well as profit will be

share on outcome

basis according to

predetermined profit

sharing ratio.

3) HALAL Fixed deposit A/c:

This deposit is known as time deposit or fixed deposit account because the money deposited in

this account can't be withdrawn before the date of maturity. This type of bank account requires

the customers to deposit a certain sum of money for a fixed time period. However, some banks

allow customers to withdraw money before maturity, by charging a penalty. The rate of interest

paid on time deposits is usually higher than the other types of Deposit accounts. The interest paidon this account depends on the maturity period, i.e. longer the maturity period; the higher is the

rate of interest paid. When the time is over it can be withdrawn or it can be rolled over for

another term. So, longer the time duration of account, the better the yield on the money. Fixed

deposit account is a safe investment and it is therefore a very good option for conservative, low-

risk investors.




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Conventional bank

fixed deposit A/c

Islamic banks fixed

deposit A/c

HALAL fixed deposit

A/c

The nature of this

account is long-term

with specified time

duration of 1 to 5

years and minimum

balance of Rs. 100000

. The interest rate is

10% to 11%.

Islamic banking is also

providing this account

for 5 years along with

the interest rate of

11.5%. On basis of

profit The minimum

balance is Rs.100,000.

We will provide this

account for five years

with minimum balance

of Rs.100,000. The

interest rate will be

12% on the basis of

profit earned by the

original amount.

4) HALAL Mutual Funds A/c:

HALAL Mutual Funds A/c are just perfect for those who have a little bit

saving at the end of each month and would like to save this saving for future

needs. It is a new service is introduced in Pakistan at banks level.

Requirements to open HALAL Mutual Funds A/c are as follow:

Initial deposit of Rs 1000/=

Tenure of accounts 0.5, 1, 1.5 years

Specific group selection

Mechanism Behind HALAL Mutual Funds A/c:

The idea to offer this account is taken from the COMITEE SYSTEM heldand managed by one person in a small town. People having small investment

after every month will open this account in HALAL bank for different tenure

and different groups depending on their future need. The bank will act as the

trustee till the last payment of this fund and will charge a little fee for its

documentation expenses. The order of payments will be decided through draw




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under supervision of all the directors however one can transfer the payments to

other with mutual understanding as per the case.


Conventional bank Islamic banks HALAL Mutual Funds

A/c

No Conventional

banks provide this

service.

No Islamic banks

provide this service.

Its new service

introduce in Pakistan

at banks level.

5) HALAL L ockers:

Lockers service will be provided to those who would like to secure their

precious item. The bank will charge a nominal fee for its service provided.

Mechanism Behind Locker:

The bank will act as trustee. There will be two keys from which one will

be given to client and other will remain in custody of manger. In absence of one

key the locker will be locked and cannot be operated.


Conventional bank Islamic banks HALAL Lockers

All banks provide thisservice.

All banks provide thisservice.

HALAL bank provides

this service by offering

its clients lower

charges.




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HALAL Business Partnership A/c:

HALAL business partnership account is just the right way for

entrepreneurs who would like to start their successful business ventures but

due to non-availability of required capital they can not so they are unable to

contribute in country economy. HALAL bank provides those entrepreneurs the

opportunity to start the business by providing the capital in accordance with

Shariyah rules.

Requirements for the HALAL business partnership A/c:

Project Feasibility

Number of partners

Performance Test

Credibility Test

Mechanism Behind HALAL Business Partnership A/c:

HALAL business partnership account depends on the terminology of islmic

mode of financing, called Musharakah. In Musharakah, a joint enterprise is

formed for conducting some business in which all partners share the profit

according to a mutually agreed pre-determined ratio, whereas, the loss is

shared in the ratio of capital investment. From Shariyah perspective,

Musharakah is one of the preferred modes of financing

The scope of Musharakah is broad. Musharakah can be applied to fulfill project

financing needs as well as working capital financing needs. Since Musharakah

transactions are based on pure profit and loss sharing arrangement, therefore,

the risks associated with such transactions are greater as compared to other

financing modes.




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Conventional bank Islamic banks HALAL bank

Conventional banks

give loan charging

higher interest rate, as

it·s the main source of

their earnings

ultimately contributing

to increase inflation

All banks provide this

service but there are a

few technical

problems:

1) Banks decide the

profit sharing ratio of

each partner

2) It is almost

impossible to keep

track of each partner·s

share in the fund as

there are all sleeping

partners.

HALAL bank will be

operating at city level

so:

1) It will be possible to

keep record of each

partner

2) The profit sharing

ratio will be decided at

the start of contract by

multilateral basis.

2) HALAL Personal Needs:

HALAL bank provides the opportunity to fulfill your Ghrailo needs

without having full price of product at spot. This service is just the right

solution for salaried people who have their fixed monthly incomes but just

would like to fulfill their Ghrailo needs. The Ghrailo Needs umbrella covers the

product such as;

Personal computers

TV·s

Split Air conditioners Laptops

Deep Freezers

Microwave ovens e.t.c.




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RANAA Personal Needs financing is based on the concept of Ijarah wa

Iqtinaa. It is in accordance with Shariyah rules alternative to

conventional leasing where Bank acts as a Lessor and you act as a

Lessee. The Bank requires you to pay a monthly rent for the use of the

Mabee·a. In this while, the ownership of the Mabee·a remains with the

Bank, only the rights of use is transferred to you. At the end of the Ijarah

Agreement, you will be given a choice whether to return the Mabee·a to

the Bank and receive back the security deposit paid by you at the

beginning or to purchase it at a price as low as the security deposit.


Conventional bank Leasing:

Conventional banks charge interest for using their money which is

ultimately used in buying that product. It is the same like borrowing

from bank and buying the asset at your own. To have a brief insight in

conventional leasing let·s take an example.

A bank leased out an asset with followings terms:

Down payment = Rs. 19000/=

Four Lease Rentals = Rs. 25000/=

Interest Rate = 9%

Market value of asset = Rs. 100,000/=

Date Rental Interest Principal Balance

100,000

01-01-10 19,000 19,000 81,000

01-01-10 25,000 7,290 17,710 63,290

01-01-11 25,000 5,696 19,304 43,986

01-01-12 25,000 3,959 21,041 22,945

01-01-13 25,000 2,055 22,945 NIL

119,000 19,000 100,000




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Islamic Banking Ijara wa Iqtana:

According to all Islamic banks, they are providing Ijara wa Iqtana

services in accordance with Shariyah rules but still there is a fault in

their system. In case where client (lessee) is unable to pay the rent for

some genuine reason then these banks hire services of Special Purpose

Vehicles to sell the asset at bid or reschedule the rental payments which

are not permissible.

HALAL Bank Ijara wa Iqtana:

HALAL Bank Ijara wa Iqtana is true Islamic mode of financing. To

have brief insight on HALAL Bank Ijara wa Iqtana lets carry on the above

stated example.

Spot Market Value of asset Rs. 100,000/=

Client contribution at beginning contract Rs. 20,000/=

Bank contribution at beginning contract Rs. 80,000/=

Rent per year Rs. 10,000/=

Saman of a unit which can be purchased annually Rs. 20,000/=

Total number of units Four

Contract Date 01-01-2010

Date Rent plus

payment to

purchase a unit

Share of

Bank in

rent

Share of

client in

rent

Ownership

transferred

to client

01-01-10 20%

31-12-10 10,000+20,000 8,000 2,000 40%

31-12-11 10,000+20,000 6,000 4,000 60%

31-12-12 10,000+20,000 4,000 6,000 80%

31-12-13 10,000+20,000 2,000 8,000 100%

40,000+80,000* 20,000**




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Conventional bank Islamic banks HALAL Bait-ul-maal

A/c

No bank provide thissort of charity A/c

No bank provide thissort of charity A/c

HALAL bank provides

this service for the

betterment of society.

Corporative Islamic Banking:

A cooperative is an autonomous association of persons united voluntarily to meet their common

economic, social and cultural needs and aspirations through a jointly owned and democratically

controlled enterprise.

Islamic Cooperative Finance is based on Islamic ethics: justice, fairness, sharing, benevolence,

cooperation.

This is a new concept in the banking sector. The key concept in the Islamic Cooperative Banking

is under the mode of Takaful which means "guaranteeing each other" or "joint guarantee" to pay

compensation to each other.

Takaful is founded on the cooperative principle and on the principle of separation between the

funds and operations of shareholders, thus passing the ownership of the Takaful (Insurance) fund

and operations to the policyholders




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Industrial Banking System

There is one type of Accounts to run the industrial banking system in Hlala bank.

Running Finance

HALAL Islamic Banking

Basically the Halal Islamic bank works on this counterparty.

Working capital Finance Solution for short term financing requirements The wide range

of Shariah complaint solutions for our customers is Murabaha, designed to meet working

capital requirements. For example, if you need finance for purchasing raw materials for

your industry or are trading in goods then you could use Murabaha to meet your financial

needs.

Murabahah:

One of the most common modes of finance employed by Islamic Banks, Murabaha is

based on the exact requirements of each customer. It can be defined as a sales transaction

where Noor- ul- Islamic Bank purchases the commodity and sells it after adding an

agreed profit. Thus, it is not a loan given on interest - it is the sale of a commodity on a

deferred price.

Hence Murabaha involves the purchase of a commodity by Noor - ul- Islamic Bank on

behalf of a customer and the subsequent resale to the customer on cost-plus-profit basis.

The cost and profit margin to the bank is expressly disclosed to the customer.

Working of Running Finance (Murabahah)

Simply put, rather than advancing money to the customer, HALAL Islamic Bank buys

the commodity from a third party and sells it to the customer at an agreed price, which

includes an element of profit.




Impact on country Economy

HALAL bank·s financing solutions will definitely have positive Impact on

society·s economy ultimately leading toward betterment of country·s economy

in followings several ways:

Elimination of Riba

Reduction in Inflation

By providing employment

By providing basic needs for poor part of society

As HALAL bank will be investing in range of different business ventures, it will

provide more employment opportunities for society member. The bait-ul-maal

account will help needy people by contributing in reduction of robbery and

theft.

On the other hand as bank will be providing interest free financing facility to

entrepreneur, it will reduce the cost of production, ultimately leading toward

reduction in inflation.

stucture of islamic bank

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