National University of Modern languages

Economics Department

MSc. Economics 4th

Islamic Economics and Banking

Analysis of Current Account

(In case of Meezan Bank)

Submitted to: Sir Saqib Malik

By: Arslan Munir

Taha Najam

Zubi Sonia

Mehwish Mushtaq
 Current Account

Current account is a non-profit generating account. In Islamic prospective it is neither

amanah nor wadia because in amanah neither ownership is transferred nor asset can be used

and wadia is used only for those things in which there occurs natural growth. The Islamic

banks are of the view that money lying in the current account comes under wadia but it is not

so because there is no natural growth in money. So we can say that the current account is

simply a loan

Current Practices of Islamic Banks

Holding unproductive low balance accounts is in fact a financial burden not only on

conventional but also on Islamic banks. For example banks have to maintain such accounts

on their books, service ATM cards, provide online and telephone banking facilities etc. while

not getting enough in return. Therefore, charging fees on low-balance accounts or

downgrading them is a reasonable penalty from a pure business angle. Islamic banks in

Middle East, Pakistan, Malaysia and across the globe have adopted similar practices to deal

with this issue. For example, Dubai Islamic Bank, Pakistan, which is considered as one of the

premier Islamic banks in the country requires foreign currency account holders to maintain a

minimum balance of $500 US in order to be eligible for a share in the banks profit. Any

account holder who does not maintain the required balance is deprived from a share in profit

of the bank. On the other hand, Standard Chartered Saadiq- an Islamic banking subsidiary of

Standard Chartered Bank, charges a flat rate of 50 Pakistani Rupees (PKR) on all local and

foreign currency accounts when the balance drops below the minimum required level.
 S. Name of Organization Practice Regarding
No Current Accounts
1 Dubai Islamic Bank No Minimum Balance
Pakistan Required
2. Standard Chartered PKR 50 per month
(Saadiq) Pakistan charged on low balance
accounts
3. Faysal Islamic Bank No Minimum Balance
Pakistan Required
4. Abu Dhabi Islamic 25 AED per month
Bank charged on low balance
accounts
5. Meezan Bank Pakistan No minimum balance

Accounting and Auditing Organization of Islamic Financial Institute (AAOIFI) Sharia

Standards impose the same restrictions on current accounts. AAOIFI makes it binding on the

bank to return a similar amount on demand for the current deposits. Resolutions of the

Islamic Fiqh Academy also resonates a similar message. Resolution number 86/3/95 of the

academy puts it in these words, Current accounts are considered as loan, from Shari,a

perspective, since the bank taking delivery of these deposits is answerable for their safety and

is bound Sharia-wise to returning them on call.

This opinion is held by the Hanafi, Shafii and Hanbaly schools of thoughts. These jurists

consider Qar-e- Hasana as Duyn-lah (demand loan/deposit). Imam Abu Hanifa, in

particular, is of the view that any Qar can be called back by the lender any time. Ibn-Hazm

has the same view on this issue. Sharia also appreciates giving time to debtors in case they

have hard times and lack resources for repayment.

Current account in case of Meezan bank

Meezan Current Account is based on Qard contract where the Bank is liable to pay your

money back on demand. The Bank can use these funds for investment and other purposes.

This account allows you the peace of mind of having your money safely deposited with a

bank with the additional assurance that the Bank is not investing your money in activities that

contravene Shariah principles. Meezan Current Account can be opened by Individuals, Sole-

Proprietorships, Partnerships and Limited Companies

Key Features:

Minimum investment required to open an account is Rs. 1000/-

Free issuance of Cheque Book

Free issuance of Pay Order

Free Online banking service at all Meezan Bank branches

Free Internet Banking facility

No restriction on withdrawals or number of transactions

No deduction on low balance maintained

Service charges:

ATM card charges Rs 350/-per annum for

Subsequent years

SMS alerts services charges Rs 400/ annum

Cash withdrawal at link or MNET member banks ATM Rs 15/- per transaction

Utility Bill Payment Rs 10/-per bill

The above features offered by bank reflect some contradictions from the shariah rules so
these points are critically analyzed in the light of following Quranic verse.

All loans and debts must be settled on an equal basis

(Al-Baqarah 2:279)

1. Current account is simply a loan and a voluntary action therefore an account holder
being a lender can not be forced to maintain a minimum balance in his account.

2. All the liabilities emerging for the repayment of loan must be beard by the borrower
therefore bank is not allowed to cut the ATM charges but if it does so, it becomes
negative Riba which is declared as zulm in shariah.

3. If the amount is drawn from the ATM of some other bank then the account holder
can not be charged for any transaction because these charges should be settled
between the two banks it has nothing to do with the lenders money. He should get
back his full amount without any deduction according to shariah.

4. Bank can not put a condition against the full repayment of principal amount as bank
is obliged to do so.

5. No tax can be imposed on current account because it becomes negative riba .

Conclusion:

The above analysis reflects a number of conflicts between the current account

running by Meezan Islamic bank and a pure shariah compliant current account.

Therefore the bank is required to review its policy rules regarding the current

account to get its product in line with the true Islamic rules.