PROJECT REPORT

ISLAMIC BANKING V/S CONVENTIONAL BANKING

Credit Assignment No.01

By
MUHAMMAD ASGHAR 07-MBA-(i) 2015

Credit Assignment
(Islamic Banking)

Under the supervision of

SIR MEHRAN TUNIO

Presented to

School of Business Administration

SHAHEED BENAZIR BHUTTO UNIVERSITY,

SHAHEED BENAZIRABAD
 CHAPTER NO. 01
INTRODUCTION OF TWO BANKS
INTRODUCTION OF AL-BARAKA BANK
The origin of Islamic banking system can be traced back to the advent of Islam when the
Prophet himself carried out trading operations for his wife. The Mudarbah or Islamic partnerships has
been widely appreciated by the Muslim business community for centuries but the concept of Riba or
interest has gained very little diligence in regular or day-to-day transactions

Al Baraka Bank (Pakistan) Limited (ABPL) is the result of a merger between Al Baraka Islamic Bank
Pakistan (AIBP), the branch operations of Al Baraka Islamic Bank (AIB) Bahrain and Emirates Global
Islamic Bank (Pakistan). The merged entity commenced operations on November 1st, 2010.

The merger, a first in the Islamic Banking sector in Pakistan, positions ABPL to play an important role
in further growing an industry which has witnessed tremendous growth over the last 12 years. This
growth was further catalyzed in November 2016 when Burj Bank Limiteds operations were merged into
ABPL; making the Bank one of the leaders in the Islamic Banking sphere of the country.

With assets in excess of Rs. 120 billion; a workforce of over 2800 professionals and a network of 224
branches in 100 cities and towns across Pakistan, Al Baraka Bank (Pakistan) Limited is devoted in
providing customers with a range of Shariah compliant products to suit their banking needs.

Faced with growing challenges in this rapidly developing market, ABPL strongly relies on its ability to
be an effective and efficient market player through renewed focus on superior customer service,
development of Islamic alternatives to conventional financing facilities, and strict adherence to Shariah
rulings and principles.

Al Baraka Bank (Pakistan) Limited, offers a wide array of Islamic financing products such as Murabaha,
Ijarah, Musharaka and Islamic Export Refinance etc., catering to a diverse cross-section of the economy
including the Corporate, SME and Consumer sectors.
Moreover, various Shariah compliant deposit schemes are also available for customers to invest their
funds in, along with a variety of other ancillary services such as online branch banking, Al Baraka Union
Pay Debit Card, SMS banking, Interbank Funds Transfer, E-Statements, electronic statement of accounts,
safe deposit lockers and utility bill payments.

ABPL is a subsidiary of Al Baraka Banking Group (ABG), a Bahrain Joint Stock Company, listed on
Bahrain and NASDAQ Dubai stock exchanges. It is a leading International Islamic bank with Standard
& Poors at BB+ (long term) / B (short term) respectively and offers Retail, Corporate, Investment
Banking and Treasury Services strictly in accordance with the principles of Islamic Shariah. The
authorized capital of ABG is US$ 2 billion; asset base of US$ 24 billion and total equity of US$ 2.1

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billion. The group has Banking units and representative offices in 15 countries spanning from Europe to
MENA and Asia, with a network exceeding 700 Branches.

It is part of ABPLs commitment, to put the customers values foremost, hence providing them with a
banking solution that is in line with their beliefs.
Our Vision
We believe that society needs a fair and equitable financial system which rewards effort and contributes
to the development of the community.
Mission Statement
To meet the financial needs of communities across the world by conducting business ethically in
accordance with the Shariah, practicing the highest professional standards and sharing the mutual benefits
with the customers, staff and shareholders who participate in our business success.
Core Values

Partnership Our shared beliefs create strong bonds that form the basis of long term relationships
with customers and staff.
Driven We have the energy and perseverance it will take to make an impact in our customers lives
and for the greater good of the society.
Neighbourly We value and respect the communities we serve. Our doors are always open; our
customers always experience a warm-hearted, hospitable welcome and accommodating service.
Peace of Mind Our customers are rest assured that their financial interests are being managed by
us to the highest ethical standards.

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INTRODUCTION OF HABIB BANK

HBL was the first commercial bank to be established in Pakistan in 1947. Over the
years, HBL has grown its branch network and maintained its position as the largest private sector
bank with over 1,600 branches and 1,700 ATMs globally and a customer base exceeding eight
million relationships.

The Government of Pakistan privatized HBL in 2004 through which AKFED acquired 51% of the
Bank's shareholding and the management control. The remaining 41.5% shareholding by the
Government of Pakistan was divested in April 2015. AKFED continues to retain 51%
shareholding in HBL while the remaining shareholding is held by individuals, local and foreign
institutions and funds including CDC Group Plc which holds 5% and International Finance
Corporation which holds 3%.

With a global presence in over 25 countries spanning across four continents, HBL is also the
largest domestic multinational. The Bank is expanding its presence in principal international
markets including the UK, UAE, South and Central Asia, Africa and the Far East.

The key areas of operations encompass product offerings and services in Retail and Consumer
Banking. HBL also has the largest Corporate Banking portfolio in the country with an active
Investment Banking arm. SME and Agriculture lending programs and banking services are
offered in urban and rural centers.

VISION
Enabling people to advance with confidence and success.
MISSION
To make our investor(s) prosper, our staff excel and to create value for our stakeholders.

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 CHAPTER NO. 02
PRODUCTS OF TWO BANKS
PRODUCTS & SERVICES A-BARAKA ISLAMIC BANK

Ijarah Financing (Commercial Vehicles)

Underlying Islamic Mode Ijarah

Type of Product Corporate, SME

Basis for Pricing KIBOR based fixed and variable rates
Minimum Financing Limit As per PRs and subject to bank's internal
assessment for allocation of limit
Maximum Financing Limit As per PRs and subject to bank's internal
assessment for allocation of limit
Minimum Tenors
3 Years
Maximum Tenors 5 Years
Target Customers All customers falling under corporate,
SME sector
Security/Collateral
Required Title of the leased asset on bank's name,
Security deposit and or any other
security as per PRs

Ijarah Financing (office equipment)

Underlying Islamic Mode Ijarah

Type of Product Corporate, SME

Basis for Pricing
Minimum Financing Limit
Maximum Financing Limit
Minimum Tenors
KIBOR based fixed and variable rates
As per PRs and subject to bank's
internal
assessment for allocation of limit
As per PRs and subject to bank's
internal
assessment for allocation of limit
3 Years

Maximum Tenors 5 Years

Target Customers All customers falling under corporate,
SME sector
Security/Collateral
Required Title of the leased asset on bank's name,
Security deposit and or any other

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 Ijarah Financing (Ijarah for Vehicle-Domestic)
Underlying Islamic Mode Ijarah

Type of Product Corporate, SME

Basis for Pricing
Minimum Financing Limit
Maximum Financing Limit
Minimum Tenors
KIBOR based fixed and variable rates
As per PRs and subject to bank's
internal
assessment for allocation of limit
As per PRs and subject to bank's
internal
assessment for allocation of limit
3 Years

Maximum Tenors 5 Years

Target Customers
Security/Collateral Required
All customers falling under corporate,
SME sector
Title of the leased asset on bank's name,
Security deposit and or any other
security as per PRs

Ijarah Financing (Ijarah for Plant & Machinery)

Underlying Islamic Mode Ijarah

Type of Product Corporate, SME

Basis for Pricing
Minimum Financing Limit
Maximum Financing Limit
Minimum Tenors
KIBOR based fixed and variable rates
As per PRs and subject to bank's internal
assessment for allocation of limit
As per PRs and subject to bank's internal
assessment for allocation of limit
3 Years

Maximum Tenors 5 Years

Target Customers All customers falling under corporate,
SME sector
Security/Collateral
Required Title of the leased asset on bank's name,
Security deposit and or any other
security as per PRs

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 Ijarah Financing (Ijarah for vehicle-domestic)
Underlying Islamic Mode Ijarah

Type of Product Corporate, SME

Basis for Pricing
Minimum Financing Limit
Maximum Financing Limit
Minimum Tenors
KIBOR based fixed and variable rates
As per PRs and subject to bank's internal
assessment for allocation of limit
As per PRs and subject to bank's internal
assessment for allocation of limit
3 Years

Maximum Tenors 5 Years

Target Customers All customers falling under corporate,
SME sector
Security/Collateral Required Title of the leased asset on bank's name,
Security deposit and or any other

Murabaha Finance
Underlying Islamic Mode Murabaha

Type of Product Corporate, SME,

Basis for Pricing
Minimum Financing Limit
Maximum Financing Limit
Minimum Tenors
KIBOR based fixed rates for each
transaction.
As per PRs and subject to bank's internal
assessment for allocation of limit
As per PRs and subject to bank's internal
assessment for allocation of limit
90 days

Maximum Tenors 1 Year

Target Customers
Security/Collateral Required
All customers falling under corporate,
SME sector
Cash, Collateral, Pledge, Mortgage or
hypothecation of asset or as per PRs or
bank's requirement.

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 Export Murabaha & Murabaha Finance FE-25
Underlying Islamic Mode Murabaha

Type of Product Corporate, SME

Basis for Pricing
Minimum Financing Limit
Maximum Financing Limit
Minimum Tenors
Current interbank foreign currency rate
for export Murabaha: LIBOR based
current rates for Murabaha Finance
As per PRs and subject to bank's internal
assessment for allocation of limit
As per PRs and subject to bank's internal
assessment for allocation of limit
90 days

Maximum Tenors 180 Year

Import Murabaha & Murabaha Finance FE 25 Import

Underlying Islamic Mode Murabaha

Type of Product Corporate, SME

Basis for Pricing
Minimum Financing Limit
Maximum Financing Limit
Minimum Tenors
Current interbank foreign currency rate
for export Murabaha: LIBOR based
current rates for Murabaha Finance
As per PRs and subject to bank's internal
assessment for allocation of limit
As per PRs and subject to bank's internal
assessment for allocation of limit
90 days

Maximum Tenors 180 Year

Target Customers
Security/Collateral Required
All customers falling under corporate,
SME sector
Cash, Collateral, Pledge, Mortgage or
hypothecation of asset or as per PRs or
bank's requirement.

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 Islamic Export Refinance Scheme
Underlying Islamic Mode
Type of Product
Basis for Pricing
Minimum Financing Limit
Maximum Financing Limit
Minimum Tenors
Murabaha, Istisna, Musawama,
Musharaka
Corporate, SME
As per SBP refinance rate
As per PRs and subject to bank's internal
assessment for allocation of limit
As per PRs and subject to bank's internal
assessment for allocation of limit
As per PRs.

Maximum Tenors 180 Year

Target Customers
Security/Collateral Required
All customers falling under corporate,
SME sector
Cash, Collateral, Pledge, Mortgage or
hypothecation of asset or as per PRs or
bank's requirement.

Housing Musharaka-Consumer
Underlying Islamic Mode Diminishing Musharaka

Type of Product Consumer

Basis for Pricing KIBOR
Minimum Financing Limit Rs. 300,000

Maximum Financing Limit Rs.20 million

Minimum Tenors 3 Years

Maximum Tenors 20 Years

Target Customers
Security/Collateral Required
Customers falling under salaried, self
employed and businessmen categories
properties are mortgaged in bank's favor,
personal Guarantee or any other
collateral.

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 Commercial Construction and Purchase
Underlying Islamic Mode Diminishing Musharaka

Type of Product Corporate, SME

Basis for Pricing
Minimum Financing Limit
Maximum Financing Limit
Minimum Tenors
KIBOR
As per PRs and subject to bank's internal
assessment for allocation of limit
As per PRs and subject to bank's internal
assessment for allocation of limit
No

Maximum Tenors 5 Years

Target Customers
Security/Collateral Required
All customer falling under Corporate
/SME sector.
Properties are mortgaged in banks
favor, personal Guarantee or any other
collateral.

Personal Murabaha-Consumer
Underlying Islamic Mode Murabaha

Type of Product Consumer

Basis for Pricing Market based fixed rate
Minimum Financing Limit Rs. 25,000

Maximum Financing Limit Rs.500,00

Minimum Tenors 6 Months

Maximum Tenors 2 Years

Target Customers
Security/Collateral Required
Customers falling under salaried, self
employed and businessmen categories
for consumer financing.
Murabaha shall be secured by way of
hypothecation of items to the bank

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 Export Musharaka
Underlying Islamic Mode Musharaka

Type of Product Corporate

Basis for Pricing KIBOR plus spread (pre-agreed ratio)
Minimum Financing Limit As per PRs and bank's internal
assessment
Maximum Financing Limit As per PRs and bank's internal
assessment
Minimum Tenors As per PRs and bank's internal
assessment
Maximum Tenors 180 days
Target Customers Corporate, SME

Security/Collateral Required Pledge, Mortgage or Hypothecation of

assets

LIABILITY SIDE PRODUCT

PLS Saving Account-Local

Underlying Islamic Mode Mudaraba
Acceptable Currency PKR
Type of Product Term
Minimum Balance Requirement (if NA
any)
Minimum Tenor 7 days
Maximum Tenor 5 years
Profit Calculation Daily Product Basis
Periodicity of profit calculation Half Yearly
Target Customers Individuals, Organizations, Firms,
Companies, businesses
Service charges Leviable (if any) No

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 PLS Saving Account-Foreign
Underlying Islamic Mode Mudaraba
Acceptable Currency Euro, USD, GBP, Yen.
Type of Product Term
Minimum Balance Requirement (if NA
any)
Minimum Tenor 7 days
Maximum Tenor 2 years.
Profit Calculation Daily Product Basis
Periodicity of profit calculation Half Yearly
Target Customers Organizations, Firms, Individuals,
companies, businesses

Service charges Leviable (if any) No

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