CHAPTER 1

INTRODUCTION TO MEEZAN BANK

1.1 WHAT IS BANK?

A bank is a financial institution, which deals with money and credit. It accepts deposits
from individuals, firm and companies at a lower rate of interest and gives at a higher rate
of interest to those who need them. The difference between the terms at which it borrows
and those at which it lends from the source of it profit. A bank, thus, is a profit earning
institution.

1.2 What is Islamic Banking?

Islamic banking is defined as the banking system according to the rules and regulation of
Quran and Sunnah. In Islam Riba is prohibited while conventional banking system is
based on Riba therefore there was always a need of interest free banks. Literally the word
Riba means increase or addition. Technically implies any excess compensation without
due consideration (consideration does not include time value of money). This definition
of Riba is derived the Quran and is unanimously accepted by all Islamic scholars.

The philosophy of Islamic banking takes the lead from Islamic Shariah. According to
Islamic Shariah, Islamic banking cannot deal in transactions involving interest/riba (an
increase stipulated or sought over the principal of a loan or debt). Further, they cannot
deal in the transactions having the element of uncertainty. Moreover, they cannot deal in
any transaction, the subject matter of which is invalid (haram in the eyes of Islam).
Islamic banks focus on generating returns through investment tools which are Shariah
compliant as well. Islamic Shariah links the gain on capital with its performance.
Operating within the ambit of Shariah, the operations of Islamic banking are based on

sharing the risk which may arise through trading and investment activities using contracts
of various Islamic modes of finance.
1- ALBARAKA ISLAMIC BANK.
&
2- AL FAISAL ISLAMIC BANK.

1.3 INTRODUCTION TO MEEZAN BANK LTD

MEEZAN was established as an Islamic Investment Bank in 1997 as AL MEEZAN
INVESTMENT BANK LTD. After the successful completion and great struggle First
Islamic Commercial Banks license was awarded to Al Meezan Investment Bank in year
2002, to start the commercial banking facilities they bought the local operations of Socite
General (French Bank) 03 branches and started the commercial Islamic banking in the
country.
Meezan Bank stands today at a noteworthy point along the evolution of Islamic Banking in
Pakistan. The banking sector is showing a significant paradigm shift away from traditional
means of business and is catering to an increasingly astute and demanding financial
consumer who is also becoming keenly aware of Islamic Banking. Meezan Bank bears the
critical responsibility of leading the way forward in establishing a stable and dynamic
Islamic Banking system replete with dynamic and cutting-edge products and services.
The Bank has made fundamental and significant progress forward, and in doing so has
established a strong and credible management team comprised of experienced
professionals, which have achieved a strong balance sheet with excellent operating
profitability, including a capital adequacy ratio that places the Bank at the top of the
industry, a long-term entity rating of A+, and a short-term entity rating of A1+, the highest
short-term rating.

1.4 SHAREHOLDIN STRUCTER

2

SHAREHOLDING

Rs. In Millions

Noor financial investment Co, Kuwait

3,944

%
49

Pakistan Kuwait Investment

Company (Pvt.) Ltd

2,409

30

Islamic Development Bank Jeddah

749

09

Others

927

12

Paid up capital

8029

100

1.5 SHARIA BAORD

The members of the Shariah Board of Meezan Bank are Internationally-renown scholars,
serving on the boards of many Islamic banks operating in different countries.
The members of the Shariah Board are:

Justice (Retd.) Muhammad Taqi Usmani

Dr. Abdul Sattar Abu Ghuddah

Sheikh Essam M. Ishaq

Dr. Muhammad Imran Ashraf Usmani - Shariah Advisor

1.6 BOARD OF DIRECTORS

H.E. Sheikh Ebrahim Bin Khalifa Al-Khalifa (Chairman)

Abdullateef A. Al-Asfour (Vice Chairman)

Rana Ahmed Humayun

Mohammed Azzaroog Rajab

Ahmed Abdul Rahim Mohamed

Alaa A. Al-Sarawi

Mian Muhammad Younis

Mohammad Abdul Aleem

Irfan Siddiqui (President & CEO)

Ariful Islam

Audit Committee

Mian Muhammad Younis

Ahmed Abdul Rahim Mohamed

Mohammad Abdul Alee

Risk Management Committee

Alaa A. Al-Sarawi

Mian Muhammad Younis

Ariful Islam

Human Resource Committee

Ahmed Abdul Rahim Mohamed

Abdullateef A. Al-Asfour

Irfan Siddiqui

Company Secretary

Tasnimul Haq Farooqui

1.7 MANAGEMENT
Irfan Siddiqui

President & CEO

Ariful Islam

Chief Operating Officer

Arshad Majeed

Operations

Muhammad Shoaib Qureshi

Risk Management

Rizwan Ata

Commercial Banking

Shabbir Hamza Khandwala

Finance

Faizur Rehman

Information Technology

Zubair Haider

Corporate Banking

Irfan Ali Hyder

Human Resource

Muhammad Abdullah Ahmed

Treasury & Financial Institutions

Marketing
Munawar Rizvi

branch expansion and admin

Saleem Wafai

Compliance

Syed Amir Ali

Investment Banking

Tasnimul Haq Farooqui

Legal Affairs

Zia-ul-Hasan

Internal Audit

Ahmed Ali Siddiqui

product development and sharia

compliance

Omer Salimullah

Alternate Distribution Channels

Muhammad Asadullah

Service Quality

Saleem Khan

Nor th Region

Kazi Muhammad Aamir

South-II Region

Aasim Salim

Multan Region

Anwarul Haq

Faisalabad Region

Muhammad Abid

South-I Region

Tariq Mehboob

South-III Region

Abdul Ghaffar Memon

Remedial assets management

Sohail Khan

1.8 ACHIEVEMENTS
CREDIT RATING:

Meezan Bank has reaffirmed its entity ratings at A+ for medium to long-term and A1+
for short-term. This rating was made by JCR-VIS Credit Rating Company, which has also
set Meezan Banks outlook on medium to long-term rating as Stable. The rating is yet
another milestone achievement in the Banks endeavor to be the Bank.
Meezan Banks ratings are based on its shareholding with world-renowned financial
institutions, pioneering role in the industry, strong management initiatives in continuously
introducing various range of Islamic products. The Credit Rating agency has expressed
commendation to Meezan Bank managements ability to deploy funds in core banking
assets, which reflected healthy growth trends last year.

FIRST LADIES BANKING IN PAKISTAN:

The Bank is the first in the country to introduce 'Ladies Banking' a dedicated banking
section only for ladies. This new service provides an exclusive banking area as per the set
Shariah principles for our lady customers in a more comfortable environment.
The dedicated Customer Services Officer in our ladies only banking area will provide
consultancy for a full range of our Halal banking services including, 9am to 5pm Online
Banking, Term Certificates, Current & Saving Accounts, Consumer Financing and 24/7
banking services.
BRANCH NETWORK:

Over 307 branches are working all over the Pakistan.

OTHER ACHIEVEMENTS:
Best Islamic Bank 2005

(Islamic Finance News)

Best provider of Islamic financial services year 2005

Best Islamic bank of the year in 2009

Best Islamic Bank 2012 (CFA) Association of Pakistan

1.9 Vision statement

Establish Islamic banking as banking of first choice to facilitate the implementation of an
equitable economic system, providing a strong foundation for establishing a fair and just
society for mankind.

1.10 Mission statement

To be a premier Islamic bank, offering a one-stop shop for innovative value added
products and services to our customers within the bounds of Shariah, while optimizing
the stakeholders value through an organizational culture based on learning, fairness,
respect for individual enterprise and performance.

1.11 Service Quality Mission

To develop a committed service culture which ensures the consistent delivery of our
products and services within the highest quality service parameters, promoting Islamic
values and ensuring recognition and a quality banking experience to our customers.

CHAPTER 2
DEPARTMENTS AND PRODUCTS
DEPARTMENTS &
THE PRODUCTS OFFERED
AT A BRANCH
There are 5 main departments at a branch of the Bank:
1- Customer Services Department
2- Credit Department
3- Operations Department
4- Trade Finance Department
5- Cash Department

2.1 CUSTOMER SERVICE DEPARTMENT

Account opening and closing is the function of customer services deptt. The banks
customers includes individuals (single or joint), firm (partnership/proprietorship),
Autonomous corporations, Limited companies, Charitable Institutions, associations,
Educational Institutions or local bodies.
Brief Explanation of these accounts is as follows

PRODUCTS OFFERED BY THIS DEPARTMENT:

2.1.1. RIBA FREE RUPEE SAVINGS ACCOUNT

Current account

Saving Account

Meezan Business Plus Account

Karobari Munafa Account

Meezan Bachat Account

8

2.1.2. RIBA FREE FOREIGN CURRENCY ACCOUNTS

Dollar Saving Account

Dollar Current Account

Euro Saving Account

Euro Current Account

Pound Saving Account

Pound Current Account

2.1.1 RIBA FREE-RUPEE SAVING ACCOUNT

As a step towards the mission of providing a one-stop shop for innovative value added
products to our customers, Meezan Bank is pleased to offer RIBA FREE Current
Account, a flexible Rupee based account that is ideal for businesses and individuals
looking for Shariah compliant banking and professionalism under one roof.
The deposits of the customers together with the banks contribution are invested in a pool
that consists of Ijarah and Murabaha financing. The profit earn on this pool is calculated
every month, and if you maintain a minimum average monthly balance of Rs.10, 000/you shall be eligible to receive profits that will be disbursed to you every month. But if
ur balance is less
then 10000 then u get no profit or no penalty is charges to u. there is no fixed profit b/c
every month new rate declared.

Requirements:
Mini deposit::::::::::::::::::::::::::::::::::::: Rs.100/- only

2.1.1.1 Meezan bachat account

Meezan bachat account is a saving account for small savers that offers a higher expected
profit. The minimum investment required for opening an account is Rs. 25000. profit is

calculated with a higher weightage for account balances upto Rs. 1million and a lower
weightage is assigned on a balance over and above Rs. 1 million . there is no restriction
on withdrawals or number of transaction n withdrawals or number of transactions and
there is no deduction of service charges if the balance maintained is low.

2.1.1.2 Meezan business plus account

Meezan business plus is a business account with several unique features that make is very
suitable for use as a business account. On maintaining an average balance of Rs. 100000,
the customer can avail a number of free services including free cheques books, free pay
orders, free VISA Debit card, free account statement, free online banking, free interest
banking , free hold-mail facility, free SMS alerts service, free inter-city clearing, etc.

2.1.1.3 Karobari munafa account

Riba-Free Karobari Munafa Account works under the principles of Mudarabah and is
strictly in conformity with the rules of Islamic Shariah.
On agreeing to become an account holder, the customer enters into a relationship based
on Mudarabah with Meezan Bank. Under this relationship, the Customer is an Investor
(Rab ul Mal), and the Bank is the Manager (Mudarib) of the funds deposited by the
customers.
The bank allocates the funds received from the customers to a deposit pool. These funds
from the pool are utilized to provide financing to customers under Islamic modes that
include, but are not restricted to, Murabaha and Ijarah.

Profit calculated on daily basis and paid monthly

No minimum balance requirement

No restriction on deposit/withdrawals

Free Cheque Books, Pay Orders and Online Banking

Dedicated Account/Relationship

High return for high depositors

10

2.1.2 CURRENT ACCOUNT

Current account is basically used to meet the requirements of business community of
daily transactions. The money kept in current account is in the form of QARZ-E-HASNA
gives the advantage for paying debts by the convenient and safe means of sending
cheques through the post thus avoiding the trouble and loss.

Requirements:
Mini deposit:::::::::::::::::::::::::::::::::::::Rs.100/- only
Other requirements are mentioned in detail in appendix.

3.1.3 RIBA FREE FOREIGN CURRENCY ACCOUNTS

The products offered in main currencies through current and saving accounts. The return
earned on the saving accounts in Mudarba pool is calculated every month and profit ratio
is declared for all investors is declared at the beginning of the month.
If you maintain a minimum average monthly balance of $500 in any FC Saving account,
the balance shall be eligible to receive profits that will be disbursed to you every month.
Requirements:
Mini deposit:::::::::::::::::::::$100 under Mudarabah arrangement.

BASICS OF ACCOUNT OPENING

11

Account opening is the basic and first relationship between bank and customer. In
account opening extreme care has to be exercised in case of completion of account
opening documentation as per Prudential Regulations of State Bank of Pakistan..
Whenever a client comes in the bank in order to open an account the first information that
is given to him/her about the types of accounts, which can be opened, so far this purpose
the client is given detailed information about the accounts and their respective profit
rates.
2.1.4 RIBA FREE TERM DEPOSITS OFFERED BY BANK

Certificate of Islamic Investment

Monthly Mudarabah Certificates

Dollar Mudarabah Certificates

Meezan Amdan Certificates

Meezan Providence Certificate

2.1.4.1 CERTIFICATE OF ISLAMIC INVESTMENT COII

Riba-Free Certificate of Islamic Investment (COII) works under the principles of
Mudarabah and is strictly in conformity with the rules of Islamic Shariah.
On agreeing to become a COII holder, the customer enters into a relationship, based on
Mudarabah, with Meezan Bank. Under this relationship, the Customer is an Investor (Rab
ul Mal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers.
The bank allocates the funds received from the customers to a deposit pool. These funds
are utilized to provide financing to customers under Islamic modes that include, but are
not restricted to, Murabaha and Ijarah.
TENOR :

3 Months

6 Months

1 Year

12

2 Years

3 Years

5 Years

Profit Payment Options

3 Months

on maturity

6 months

on maturity

1 year

monthly or quarterly min investment 200K

2 year

monthly or quarterly min investment 200K

3-5 year

monthly or quarterly min investment 200K

There will be different rate of profit according to the profit payment option and amount
and tenor.
Pre-mature encashment
In case of pre mature encashment the profit rate will be calculated according to the
completed tenor, if extra profit is paid that will be recovered

No pre-mature encashment penalty in MBL

Premium Rate
In Islamic Bank no prior commitment is made with the customer as per Modaraba
rules. However a history sheet is provided to the customer informing him the track
record of the profits given by the bank for a period of one year.

2.1.4.2 Monthly Mudarabah Certificates

Riba Free Monthly Mudarabah Certificates is a flexible investment product which has
been designed to give you a monthly return which is Halal. The minimum investment

13

required is only Rs. 100,000 and you receive profit for each complete month of
investment with the Bank.

How Monthly Mudarabah Certificates works?

Riba-Free Monthly Mudarabah Certificate (MMC) works under the principles of
Mudarabah and is strictly in conformity with the rules of Islamic Shariah.
On agreeing to become a MMC holder, the customer enters into a relationship based on
Mudarabah with Meezan Bank. Under this relationship, the Customer is an Investor (Rab
ul Mal), and the Bank is the Manager (Mudarib) of the funds deposited by the
customers.The bank allocates the funds received from the customers to a deposit pool.
These funds from the pool are utilized to provide financing to customers under Islamic
modes that include, but are not restricted to, Murabaha and Ijarah.
Features:

Minimum requirement of PKR 100K

Profit disbursement on maturity

Tire system for profit payment (as per rates announced )

No payment on premature encashment

Premium Rate
In Islamic Bank no prior commitment is made with the customer as per Mudarabah
rules. However a history sheet is provided to the customer informing him the track
record of the profits given by the bank for a period of one year.

2.1.4.3 Dollar Mudarabah Certificates

14

On agreeing to become a DMC holder, the customer enters into a relationship based on
Mudarabah with Meezan Bank. Under this relationship, the customer is an Investor (Rab
ul Maal), and the Bank is the Manager (Mudarib) of the funds deposited by the
customers.
The Bank allocates the funds received from the customers to a deposit pool. These funds
from the pool are utilized to provide financing to customers under Islamic modes that
include, but are not restricted to, Murabaha and Ijarah.
Requirements:

In USD only

Individuals and Corporate

Minimum investment 10K and above

Tenor:

3Months

6Months

1Year

3Years

Profit payment Options:

3Months

Maturity

6Months

Maturity

1year

6 Monthly or Maturity

3years

6 Monthly or Maturity

Other details n requirements are mentioned in detail & appendix.

Premium Rate

15

In Islamic Bank no prior commitment is made with the customer as per Mudarabah
rules. However a history sheet is provided to the customer informing him the track
record of the profits given by the bank for a period of one year.

2.1.4.4 Meezan Amdan Certificates

The Riba-Free Meezan Aamdan Certificate (MAC) is a long-term deposit certificate with
an exceptionally high monthly profit designed especially for those individuals and
corporations who are in need of regular stream of monthly income. MAC is a monthly
income (mahana aamdani) certificate with a variety of free packaged benefits.
The Riba-Free Meezan Aamdan Certificate (MAC) works under the principles of
Mudarabah and is strictly in conformity with the rules of Islamic Shariah.
On agreeing to become a MAC holder, the customer enters into a relationship based on
Mudarabah with Meezan Bank. Under this relationship, the customer is an Investor (Rab
ul Maal), and the Bank is the Manager (Mudarib) of the funds deposited by the
customers.
The Bank allocates the funds received from the customers to a deposit pool. These funds
from the pool are utilized to provide financing to customers under Islamic modes that
include, but are not restricted to, Murabaha and Ijarah.
Features:

Long Term Product

Tenor 5-1/2 years & 7 years

Profit 9.5% 10.50% (Last month)

For Individuals and Corporate

Minimum deposit PKR 100 K

(50K for old citizens and widows)

Premium Rate :

16

In Islamic Bank no prior commitment is made with the customer as per Mudarabah
rules. However a history sheet is provided to the customer informing him the track
record of the profits given by the bank for a period of one year.

2.1.4.5 MEEZAN PROVIDENCE CERTIFICATE (MPC)

A long-term investment product specially designed to cater to the needs of corporate and
business concerns for purposes of investing their Provident, Pension and Gratuity Funds.

How Meezan Providence Certificate works?

Riba-Free Meezan Providence Certificate (MPC) works under the principles of
Mudarabah and is strictly in conformity with the rules of Islamic Shariah.
On agreeing to become a MPC holder, the customer enters into a relationship based on
Mudarabah with Meezan Bank. Under this relationship, the Customer is an Investor (Rab
ul Mal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers.

Min. deposit 01 Million

TENOR:

5 Years

7 Years

Other options:

Provident and Pension Fund of large corporate

Premature encashment facility available

Premium Rate :
In Islamic Bank no prior commitment is made with the customer as per Modaraba
rules. However a history sheet is provided to the customer informing him the track
record of the profits given by the bank for a period of one year.

2.1.4.6 MEEZAN ISLAMIC INSTITUTION DEPOSIT ACCOUNT

17

The Meezan Islamic Institution Deposit Account (MIIDA) is a unique product, tailored
exclusively for Islamic Financial Institutions (IFIs). With MIIDA, any IFI now has the
opportunity to manage excess liquidity in an immediate and profitable manner, by
maintaining a checking account with Meezan Bank.
All eligible Islamic Banks can enter into a Mudarabah relationship with Meezan Bank.
Under this relationship, the respective Islamic Banks are the Investors (Rab ul Maal), and
Meezan Bank is the Manager (Mudaarib) of the funds deposited by them. Meezan Bank
allocates the funds received from the Islamic Banks to a deposit pool consisting of
financing under Islamic modes that includes, but is not restricted to, Murabaha and Ijarah.
Features:

For Islamic Financial Institutions deposit

To invest their access liquidity

Min. investment PKR 10 M and multiplies there of

Max investment 01 B

2.2 CREDIT / FINANCE DEPARTMENT

Islamic Financing for the following:

Corporate

SME

Personal

PERSONAL FINANCING
DIMINISHING MUSHARAKA (ISLAMIC FINANCING)
With Easy Home you can participate with Meezan Bank in a joint ownership of your
property, where the Bank will provide financing up to 85%. On agreement of a monthly
payment to the Bank of which a component is for the use of the home (rent), and another
for your equity share. The total monthly payment is reallocated regularly by the
partnership to reflect your growing equity and to allocate increasing amounts to your

18

investment. When you have made the full investment, which had been agreed, you
become the sole owner with a free and clear title to the property.
Easy Home
Easy home works under the Diminishing Musharakah where customer participates with
Meezan Bank in joint ownership.
Easy Home finance is available for:
Purchase

3-20 year

Max. Finance 85%

Construction

2-20 year

Max. Finance 70%

Renovation

2-7 year

Max Finance 85%

Replacement

3-20 year
Eligibility

Pakistani National

Age 2565 (till maturity)

Professional Experience

Salaried person:

2 year of consecutive experience in same industry

Min salary 20 k per month

Business

3 years business experience

Min. business income Rs 50K per month

Processing Charges

19

Businessmen Rs 12500

Salaried Person

(Up to Rs 4 M, 2000 Additional for above)

Time Frame 3-4 Weeks

Rs 8500

CAR IJARA
Ijara is a rental agreement under which bank purchase a vehicle and give the same on rent
to customer
Car Ijarah is Pakistans first "Interest Free" car financing based on the Islamic financing
mode of Ijarah (Islamic leasing). This product is ideal for individuals looking for car
financing while avoiding an interest-based transaction.
Scope of Facility

Domestic Vehicle

(Local made)

Commercial Vehicle

(Local Imported)

Used/Imported Vehicle

(1st Transfer only)

Rates offered:
(For New)

(For used)

3 year

14%

15%

4 year

15%

15.50%

5 year

16.50%

18%

1% higher than normal for commercial imported used vehicle

Eligibility:
Pakistani National

20

Salaried individual, self-employed, professional or businessperson

Minimum 3 years of work/business/professional experience

6 month working with present employer

Net income exceeds three times of monthly rental

2.3 DIFFERENT CATOGORIES OF ACCOUNTS AND THE BASIC

REQUIREMENTS:
2.3.1 INDIVIDUAL ACCOUNT

Copy of national identity card

Complete account opening form

Letter of introduction if required

Visiting Card (if the person is employed)

ACCOUNTS OF ILLITERATE [Photo Account]

These accounts can be opened individually or jointly.
Photograph of the customer is required. The SS Card and Account Opening Form should
be enriched with the thumb impressions of both hands. The account operations are
allowed only to be operated by the customer in his personal appearance in the bank. The
cheques presented in Clearing are not allowed.
Requirements:

Photocopy of CNIC of Account Holder.

Proof of income / source of funds

Two/three passport size photographs one is to be pasted on AOF and the other is
on SS Card.

21

2.3.1.2 MINOR ACCOUNT

Bay form and copy of passport minor

National Identity card of Guardian

Signature requirement of guardian

2.3.1.3 NRP (non resident Pakistani)

NICOP/CNICN

Visa/passport copy

Job proof/business proof

2.3.2 JOINT ACCOUNTS

As evident from the name these accounts can be jointly opened by any number of
persons. The minimum number of persons required to open a joint account is two but
there is no maximum limit.
Requirements:

National Identity card of all Applicants

Source / Proof of income

Signature of all Applicants on Account Opening Form and SS Card.

Zakat Affidavit of all Applicants (zakat Exemption in case of Saving Accounts or

Term Deposits).

Operation of account clearly mentioned viz singly or jointly or either or survivor

The options available to operate the account are:

Singly, Jointly, Either or Survivor

Other(s) If the customers wants some special instruction for operations of

Account

2.3.3 CLUB /SOCIETY/ASSOCIATION [Requirements]:

22

Certified copy of resolution

Certified copy of By-Laws

Copies of National Identity cards/Passports of all directors/ Members/ Trustees

Completed account opening form

Specimen Signature Card

2.3.4 TRUST ACCOUNTS

Completed account opening form

Specimen Signature Card

Copy of Registration Certificate

Certified copy of trust deed

Copy of rules/by laws

Copies of National Identity cards of all trustees

2.3.5 CORPORATE ACCOUNTS

2.3.5.1 ACCOUNTS OF SOLE PROPRIETOR (Requirements)

Copy of CNIC

Copy of national tax number certificate

Account opening request and proprietorship letter on firm letterhead

2.3.5.2 ACCOUNT OF PARTNARSHIP (Requirements)

Letter of Authority

Copies of CNICs of all partners

Account opening request on letter head

Attested copy of partnership deed duly signed by all partners

Attested copy of registration certificate with registrar of the firm

23

2.3.5.3 ACCOUNT OF LIMITED COMPANIES (Requirements)

List of Directors of company.

CNIC of all Directors.

Copy of certificate of Incorporation.

Memorandum of Association.

Articles of Association.

Copy of Board Resolution.

Latest Copy of Form-29

Certificate of Commencement of Business (in case of Public Limited Company)

THINGS TO BE CONSIDERED BEFORE OPENING AN ACCOUNT

Verification of the customers CNIC from NADRA Verysis.

The suitability of the prospective customer.

State Banks rules and regulations.

The Banks own policy.

The prospective profitability of the relationship.

24

CHAPTER 3
MURABAHAH, MUSAWAMAH AND
OTHER PRODUCTS

3.1 MURABAHAH FINANCING

Under Islamic terms no cash loan is to be provided to the customers to eliminate the
impact of interest. To serve the customers to get them facilitate in true Islamic spirit the
Islamic banks are providing facility of Murabaha.
In murabah the customer comes to the bank with a request to meet the requirement of
arranging some specific good / commodity to meet his business requirements. The bank
purchases the required commodity for the customer from the market and shows his cost
and profit to the customer and provides the commodity to the customer at a pre-agreed
rate.
Once the price is fixed (including profit) no increase could be made, In murabaha the
Master Murabah Agreement and Declaration by the customer are must to enter into a
murabaha arrangement.

Once the customer receives the goods the risk and cost

immediately transfer to the customer from the bank. Hence it is most important that the
goods must be transferred immediately to customer upon receipt from the market to
safeguard the banks interest.

3.2 LAPTOP EASE

Meezan laptop ease is a laptop financing facility based on the concept of Musawamah
which is a general and regular kind of sale. Through Meezan Laptop Ease, one can
purchase a branded laptop equipped with all the latest features. The salient of this product
is that a laptop can be purchased now and the price can be paid in easy monthly
installments over a period of 3-24 months. Laptop Ease is a Sharia-compliant laptop
finance facility-one that is comprehensive, affordable and completely hassle-free.

25

3.3 OTHER FACILITIES OFFERED

On line Real Time ATM

Free ATM Card

Per Day Limit of PKR 20K

Rs 15 charges for use of other ATM Network

Acceptable at all ATM outlets

Debit card at Orix out lets (PKR 50k/Day)

On line Real Time Facility

Absolutely free from all branches of MBL

Collection of Cheques absolutely free

Available to PKR current, saving & Karobari Munafa acc.

Banking Facility at all MBL Branches for

Mon - Sat

9-5

Friday 9-12-30 & 3-5

Saturday

9-12-30

24/7 Call Center

24/7 call center provides you access to a wide range of Tele-banking
solutions and personalized banking service.
Key Features

Check account balances

Instruct issuance of pay orders and demand drafts

Transfer funds between your own accounts

Order issuance of cheque book

26

Check transaction history of accounts

Receive information on MBL products and services

Issue stop payment instructions

Report loss of your cheque book

Request or change T-PIN

ATM PIN Re issuance

Report loss of ATM/Debit Card or cheque(s)

INTERNET BANKING:
Internet Banking allow to have access to accounts regardless of where they may be in the
world.
Key Features

Balance inquiry

Statement viewing

Statement download

Cheque status

Cheque blocking

Pay order request

Complaint logging and follow-ups

Funds transfers between own accounts at MBL

Change of address request

Cheque book request

Alerts and Notification by E-mail

Low/High balance alert

Credit/Debit transaction alert

Request resolution alert

Complaint resolution alert

27

Future Features

Alerts by SMS/Fax

Utility bill payments

Inter bank funds transfers

Payment to nominated accounts at MBL

Standing orders for repeated payments

28

CHAPTER 4
PROCEDURES AND OPERATIONS
DEPARTMENT
4.1 Procedures for account opening
First of all, after inquiring from the customer what type of account he/she wants to open,
the account opening form is got filled in from the customer and signed off. Along with
the account opening form, the customer also signs Specimen Signatures Card.
After fulfilling all the formalities of account opening, the computer generated account
number is given to the customer that is of special series depending on the type of account.

Letter of thanks:
After opening the account A Letter Of Thanks is send to the customer in order to thank
the customer for opening an account in the Bank. This letter tells all the information
regarding his/her account, which are kept very confidential.

Account opening register:

After an account is opened, an entry is made in the account opening register, which has
the following columns:

Date

Account Number

Name & Address

Telephone Number

Initial Deposit

29

Customer Services/Relation Officer enters the new account opened in computer and the
Specimen signature Cards are also scanned so that whenever a cheque of the respective
account comes for encashment, the signatures can be verified.

Cheque book issuance:

Cheque book is issued after getting CNIC verysis from NADRA, Receipt of Letter of
Thank by the customer at the given address and confirmation / verification of proofs
provided by the customer.
A CBR (Cheque Book Requisition) Slip given to the customer to sign it so that the
customer can get chequebook.
Overall functions performed by Customer Services Department:

ACCOUNT OPENING

ACCOUNT CLOSING

CHEQUE BOOK ISSUANCE

GENERAL CLIENT DEALING

4.2 OPERATIONS DEPARTMENT

Functions performed:
a) Clearing
b) Remittance
4.2.1 Clearing

Inward clearing

Intercity inward clearing

Outward clearing

Intercity outward clearing

30

OBC (outward bills for collection)

IBC (inward bills for collection)

Inward clearing
In the morning, the bank receives its own cheques, which have been presented by the
customers in some other bank to be deposited in their account. NIFT provides the facility
of bringing cheques for inward and also takes the cheques of outward clearing to other
banks.
The cheques received in inward clearing are the cheques drawn on bank and the bank has
to pay for them. For this purpose the bank makes clearing in computer by checking the
balances of the respective customer, if their balances are up to the mark then that cheque
is cleared and the respective customer account is debited with the respective amount. If
the balances are short then that cheque is bounced back to the related bank.

Reasons for returning a cheque

All required stamps of Clearing, Crossing and Endorsement by the collecting

bank are not affixed on the cheques.

Cheque is post dated.

Cheque is mutilated

Insufficient Balance

Effects not cleared, may be presented again

Amounts in words and figures differ.

If any of these reasons exists then that cheque is returned through NIFT and deducts
charges as per Schedule of Charges from customer account as cheque returned charges.
For this purpose an entry is passed on multi entry voucher like:
Customers Account
Cheque returned charges

Dr.
Cr.

31

After this the contents are inserted in the Cheque Return Register showing the following
columns:

Date

Title of account

Account number

Cheque number

Bank and Branch name

Reason of return

Outward clearing:
All the cheques of other banks which are deposited with MBL are presented in outward
clearing. This is called outward clearing because they are presented on the very next day
after depositing a cheque.
In outward clearing, the entry is made like:
CLEARING ACCOUNT

DR

CLEARING SETTLEMENT ACCOUNT

CR

On realization of the Cheque the following entry is passed:

CLEARING SETTLEMENT ACCOUNT . DR
CUSTOMER ACCOUNT

CR

This entry is made when we come to know about the clearing of all cheques, which are
sent to other banks.

4.2.2 SERVICES PROVIDED

I. TRANSFER OF FUNDS Online and Local
32

II.

TELLING ACCOUNT BALANCES

1.Transfer of funds
If a customer holds two accounts in the bank and he/she wants to transfer money from
one account to other account, customer writes a cheque and fills deposit slip in which
he/she writes account number to which amount is to be transferred. After making transfer
entry in the computer, affix transfer stamp on the face of the cheque, crossing on the
upper left and banks endorsement stamp on the backside of the cheque.

I1.Telling accounts balance

Whenever clearing officer receives phone call from the customer inquiring about his/her
account balance after confirming the name, address and other information he tells the
balance through computer.

4.2.3 REMMITENCE
a) Issuance of Pay order and Demand Drafts
b) Transfer of Funds through Online local and foreign

a) Issuance of PAY ORDER and Demand Drafts:

Pay order is an order to pay money but this payment is to be made within city. Pay Order
is drawn and paid by the same branch of a bank. In other words it can be said that the
Drawer and the Payee should be in one city. In case of online banking any Pay order may
be in cashed / paid by any branch of a bank.
In pay order the payment can be made in
A) Transfer
B) Clearing

33

PROCEDURE:
In case of pay order first of all the customer has to fill a pay order application form in
favoring section: name, account number, amount, beneficiary name, address, etc.
The data is entered in already set format of pay order in computer and pay order print out
is taken. An authorized person and manager operations are signed pay order.
The original copy of the pay order is given to the customer and carbon copy is kept with
bank for office record.

b) Demand draft
An order to pay money to the payee who is residing outside the city. In case of Demand
Draft the Drawer and the Payee are different branches. DD can be for a customer who
may or may not have an account in the bank but the other persons account must be
maintained with the bank for which the payer has demanded the DD.

4.2.4 Other functions under operations department

Lockers
Lockers operations shall not be permitted under power of attorney of a
customer. A customer wishing to allow another person or agent may be requested to open
a new locker account under joint names and close the existing account.
In offering this facility branches have to be selective and should provide lockers to the
customers whose identity and integrity is
verified, who should maintain account with the branch and have potential for deposits
and other banking business. It is reiterated
that honesty, creditability and good reputation of the customer is of utmost importance in
the selection of customer for lockers.

34

KEY FEATURES:

Available in selected branches

Available in 3 sizes

For all eligible Account Holders

Key security Deposit

Recovery of Annual Rent in Advance

as per Schedule of Charges

Procedure:

Application on Prescribed Form duly filled

Saving/Current Account with the Bank

02 Passport size Photographs

Charges:

Key Deposit

PKR 3000/

Small

PKR 1000/Year

Medium

PKR 1500/Year

Large

PKR 2000/Year

Locker breaking charges Rs 3000

Cheque Books Handling

Application for New Cheque Book (CBR)

CHARGES

As per Schedule of Charges of the Bank

4.3 CASH DEPARTMENT

35

The cash department is the most important department of the bank. It receives cash from
customers and then deposits it into the accounts of the customers and maintained their
balances.
In cash department following books are maintained.

Scroll book

Paying book

Cash balance book

SBP cash format

Scroll book
When cash is received at the customer it is recorded in the scroll book.

Paying cash book

The cashier makes entry in the paying cashbook when cash is paid.

Cash balance book and SBP cash book format

The consolidated figure of receipt and payment of cash is entered in cash balance book.

Utility bills collection

As per State Bank of Pakistan the Bank is also collects Utility Bills Electricity Bills,
Gas Bills, PTCL Bills and Water charges.
As per Islamic Sharia Boards instruction Islamic banks are not receiving bills having
overdue amounts late payment surcharges as the same are come under the ambit of
interest.
However, corrected bills are not being started to be collected by the Islamic banks.

36

CHAPTER 5
FINANCIAL ANALYSIS
5.1

INTRODUCTION

Financial analysis, though varying according to the particular interests of the analyst,
always involves the use of various financial statements primarily the balance sheet and
income statement. The balance sheet summarizes the assets, liabilities, and owners
equity of a business at a point in time, and thee income statement summarizes revenues
and expenses of the over a particular period of time. A conceptual framework for
financial analysis provides the analyst with an interlocking means for structuring the
financing.
Meezan Bank Limited
Balance Sheet
As at June 30, 2015
Assets
2015
Cash and Balance with SBP and other

2014

central banks

29728764

28582626

Balance with other banks

5501077

355234

lending to financial institutions

90766297

7442732

Investment

114089252

151613933

Advances

175711942

127622868

Operating Fixed Assets

6273239

5594914

Deffered fixed Assets

530564

130939

Other Assets
Total Assets

14804823
437405958

5182385
329724631

Bills payable

5619826

1437639

Borrowing

15465418

50250684

Deposit unit and Account

380421569

1037784947

Liabilities

subordinated loans
liabilities against assets

subject

to

37

finance lease
Defferd tax liabilities

Other liabilities

12021378

53628666

Total

413528191

1158061555

Share Capital

23877767

18500114

Reserves

10027379

28818528

Unappropriated profit

7276191

68715995

Surplus on revaluation of assets

56412120

35243113

Total Liabilities

23877767

18913243

38

5.2 VERTICAL ANALYSIS OF BALANCE SHEET:

Meeazan Bank Limited, Balance Sheet
As at June 30, 2015 (Rupees in Million)
Assets

2015

2015 %

2014

2014%

Cash and Balance with Treasury banks

29729

7%

28583

9%

Balance with other banks

lending to financial institutions
Investment
Islamic financings & Related Assets
Operating Fixed Assets
Deffered Tax Assets
Other Assets
Total Assets
Liabilities
Bills payable
Borrowing
Deposit unit and Account
Defferd tax liabilities
other liabilities

5501
90766
114089
175712
6273
531
14805
437406

1%
21%
26%
40%
1%
4%
100%

3554
7443
151614
127623
5595
131
5182
329725

1%
2%
46%
39%
2%
1%
100%

5620
15465
380422
12021

1%
4%
87%
3%

Total
Net Assets

413528
23878

95%
5%

3615
11375
289811
6011
310812

1%
3%
88%
2%
94%

Share Capital

10027

2%

18919
10027

6%
3%

Reserves
Inappropriate profit

7276

2%

3551

1%

5959

1%

4330

2%

Surplus on revaluation of Investments

616

1005

Total Liabilities
INTERPRETATION:

23878

5%

18913

6%

On vertically analyzing assets side of balance sheet we see that cash balance portion is
slightly high and it should be reduced. Bank should lend more to financial institutions to
generate interest income; other assets should also be reduced and must be utilized in
earning assets. On liabilities side Share capital portion of total liabilities is very low it

39

should be up to the mark and bank should make effort to decrease external funds as
possible. Cash Balance with State bank of Pakistan in 2014 was 9%, while it decreased to
7 percent 2015 due to satisfactory financial position. Balance with other banks was
receded same 1% in 2015 as in 2014. Lending to financial institutions was increased in
2015 to 21% from 2%. In 2014.Investments decreased to 26% in 2015 from previous
year 2014 is 46%.
Islamic financing & related assets increased 1% in 2015 in 2014 it was 39%. Operating
fixed assets decreased 2015 to 1% from 2% in 2014. Other assets increased in 2015 from
1% to 4% than 2014.
Total liabilities were decreased 1% in 2015 to 5% while it was 6% in 2014.

40

5.3 HORIZONTAL ANALYSIS OF BALANCE SHEET:

Meezan Bank Limited
Balance Sheet As at June 30, 2015 (Rupees in Million)
Assets

2015

2014

Cash and Balance with Treasury banks

Balance with other banks
lending to financial institutions
Investment
Islamic financings & Related Assets
Operating Fixed Assets
Deffered Tax Assets
Other Assets
Total Assets
Liabilities
Bills payable
Borrowing
Deposit unit and Account
Defferd tax liabilities
other liabilities
Total
Net Assets

29729
5501
90766
114089
175712
6273
531
14805
437406
2015
5620
15465
380422
-12021
413528
23878

28583
3554
7443
151614
127623
5595
131
5182
329725
2014
3615
11375
289811
6011
310812
18913

Share Capital

10027

10027

Reserves

7276

3551

unappropriate profit

5959

4330

Surplus on revaluation of Investments

616

1005

23878

18913

INTERPRETATION:
As compared to 2014, 20% have been increased in both assets and liabilities in 2015
which is because of more investments and on the liability side also 20% increased
because of increase in Deposits and Share capital. Bank should make effort to improve
this ratio by generating funds internally and making more investments.

41

5.4 PROFIT & LOSS ACCOUNT:

Meezan Bank Limited
Profit and Loss Account.
As at 31 December, 2015
(Rupees in 000)

Particulars

2015

2014

Profit / return earned financing

Return on deposits
Net spread earned
provision against Non performing

28803059
15440250
13362809
545674

23171018
12526169
10644849
127650

Islamic Financing
Reversal
of
provision
diminution

in

the

for (83857)

value

(33070)

of

investment
Provision against of balance sheet 4897

obligations
Reversal of

(1198)

provision

amounts due
Bed debts
Net spread after provision
Other income
Fee , commission
Dividend
Income from dealing
Capital gain on sales
Other income
Total other income
Other expanses
Administrative expanse

against (300)
466504
12896305

93382
10551467

1569327
283633
1626363
1148499
127062
4754884
17651189

1258234
309285
603352
1230159
100420
3501450
14052917

10459934

8286114

42

Other provisions
Other charges
Welfare fund
Total other expanses
Unusual items
Profit before taxation

96288
49433
147000
10752655
6898534
6898534

(2495)
4886
117748
8406253
5646664
5646664

Taxation: Current

2223292

1573730

Prior year

(268836)

Deferred

105156

384994

2328448
4570086
456

1689888
3956776
395

Profit after taxation

Basic and dilute earnings

5.5 RATIO ANAYSIS

1. Current ratio= current Assets /current liability

2015

2014

1.3

0.86

COMMENTS: Current ratio shows that bank has improved its liquidity. There is a slight difference in
both years which can be improved by having a strong control over receivables and
reducing the operating cycle.

2. Net profit ratio = net income/markup earned *100

43

2015

2014

0.56

0.56

COMMENTS: 2: Net profit margin remained sanme for both periods .This ratio can be improved by
lowering the interest expenses and administrative expenses which impacts highly on
the profit margins.

3. Earning asset to total asset= earning asset / Total asset

2015

2014

0.751

0.754

COMMENTS: 3: This ratio shows negative trend. Earning assets of should be increased through
more investments, lending and advances and by not allowing cash to remain idle at
bank.
4.Return on Earning asset= Net Income/ Earning asset
2015

2014

0.634

0.639

COMMENTS: 4: This ratio also shows a slightly negative trend .It can be improved by lowering the

44

interest expenses and administrative expenses which will improve the net income.

4. Interest Margin to Earning asset= Interest Margin / Earning Asset

2015

2014

0.0586

0629

COMMENTS: 5: This ratio shows negative trend. It can be Improved by increasing interest margin
and lowering the interest and administrative expenses.

5. Interest Margin to Earning asset= Interest Margin / Earning Asset

2015
0.0586
COMMENTS: -

2014
.0629

6: This ratio shows that as compared to 2014 ratio of debt to total assets has been
reduced for bank. It can be improved by not making debt financing as possible as they
can.
6. Debt to total assets ratio = total debt/total assets
2015
0.847

2014
0.870

COMMENTS:
7: Favorable trend found in this ratio. Deposits should be increased to generate more
income.
8.Loan to Deposit= Loan / Deposit
2015

2014

45

0.575

.6298

COMMENTS: -8: This ratio suggests that bank has increased internal source of
funds as compared to the outsiders which is a good sing.

CHAPTER 6
CONCLUSION & RECOMMENDATION
OVERALL CONCLUSION
Islamic banking is a very young concept. Yet it has already been implemented as the only
system in two Muslim countries; there are Islamic banks in many Muslim countries and a
few in non-Muslim countries as well. Despite the successful acceptance there are
problems. These problems are mainly in the area of financing.
With only minor changes in their practices, Islamic banks can get rid of all their
cumbersome, burdensome and sometimes doubtful forms of financing and offer a clean
and efficient interest-free banking. All the necessary ingredients are already there.
The modified system will make use of only two forms of financing loans with a service
charge and Mudaraba participatory financing both of which are fully accepted by all
Muslim writers on the subject.
Such a system will offer an effective banking system where Islamic banking is obligatory
and a powerful alternative to conventional banking where both co-exist.
Additionally, such a system will have no problem in obtaining authorization to operate in
non-Muslim countries. Participatory financing is a unique feature of Islamic banking, and
can offer responsible financing to socially and economically relevant development
projects.

46

This is an additional service Islamic banks offer over and above the traditional services
provided by conventional commercial banks.

RECOMMENDATIONS

Expanding their business by establishing new branches in those areas which are
near to the business area.

MBL has the option to increase its customers through efficient marketing system.

The bank must hire the efficient marketing personnel.

MBL must take part in heavy advertisement as the people become aware of the
Islamic banking System.

Bank should provide management training to their employees.

Bank should develop healthy relation to their customers.

MBL should give more compensations and benefits to its employees and other

workers for the improvement in the performance. Because it leads to the

improvement of overall banks performance.

47

References

(Online)Available,http://www.investorwords.com/5107/unappropriated_profit.ht
ml/ Dated 18 Dec 204.

(Online)Available,http://www.accounting-dictionary.com/definition/investmentrevaluation-reserve.html Dated 18 Dec 2014.

MBL(2015), Annual Report,

Sahih Muslim, Karachi, Pakistan, V.2,

Usmani, Imran Ashraf. (2002), Meezan banks guide to Islamic banking, Darul
Ishaat, Karachi, Pakistan.

48