This assignment is brought to you by and in courtesy of:

Batool Zia (fa18-baf-019) and Ahmad Tariq (fa18-baf-08)

Semi-Final Version
Question: You are required to visit a financial organization website
(Bank/modarba/insurance etc company) and Seek answer to the following
questions
1. Instruments being used by that organization
2. Ratio of debt and equity
3. Instrument of debt and equity being used
4. Islamic instrument being used
5. Future instruments that the organization wants to float in the market
6. How is that organization adding to the economy of Pakistan and what
economic steps should be taken to improve the economy of Pakistan

Subject of organization chosen: Meezan Bank Ltd.

Ans1.

Following are the instruments that are being used by Meezan Bank Ltd.

1- Rupee Current Account: It is a flexible rupee-based account that is ideal for

persons who are looking for shariah compliant banking system and want no
profit.
2- Rupee Saving Account: This account gives benefit in the form of Halal profit
to the account holder. It can be opened with a minimum deposit of Rs.10,000.
3- Karobari Munafa Acount: It is a high profit saving account specifically
tailored for persons or businessmen wanting larger returns. It is also known as
KMA account.
4- Meezan Bachat Account: It provides high monthly returns but with the
flexibility to withdraw savings if needed, it has high expected rate of return.
 5- US dollar saving Account: It is a Riba-Free Dollar savings account that allows
the holder of the account to invest in foreign-currency in a Shariah-compliant
manner.
6- Meezan Business Plus: It is a Mudaraba-based account, catered for
businessmen that are looking to avail wide range of free services and
convenience.
7- Meezan Institution Account: Meezan Islamic Institution Deposit Account
also known as MIIDA is a unique deposit account, tailored exclusively for Islamic
Financial Instruments. With MIIDA, any IFI can manage excess liquidity in a
profitable manner. It starts at a minimum investment of Rs. 10,000,000.
8- Labbaik Saving Account: Meezan Labbaik is a completely Halal and Riba-free
account made to facilitate and enable Hajj and Umrah. Meezan works with travel
agents to make travels as easy as possible. Few of the travel agents that are
currently on Meezan Bank’s panel are Oasis Travels, Universal Express etc.

All current and saving accounts mentioned above can be opened in any category of the
following types of accounts.

 Individual Accounts
 Joint Accounts
 Minor Accounts
 Sole Proprietorship Account
 Partnership Account

Ans2. The ratio of debt and equity of the Meezan Bank ltd is 12.62 according to the
financial ratio analysis.

Ans3.

Since Meezan Bank is a Shariah-compliant organization, the debt and equity

instruments used are different than the conventional banks.

Meezan Bank ltd uses a debt instrument that is similar to the bonds used in other
banks, but instead it is an Islamic certificate. Meezan Bank provides sakuk bonds
depending upon customers’ requirements, shariah-advisory underwriting and
placement is used as a service for privately placed and listed sukuks. Meezan bank also
provides short-term sukuks for the first time in Pakistan’s Islamic banking system. The
Shariah-compliant bank provides assistance in execution of sukuk transactions.

And, the equity instruments used by Meezan Bank are strictly in conformity with all the
rules of Islamic Shariah, following are the instruments as follows:

Certificate of Islamic Investment: It is a Riba-free certificate of investment that is

Shariah-compliant. It has a minimum investment of Rs. 50,000 and offers tenure from
period of 3 months to 5 years. Profit can be made on either monthly basis or quarterly.
This certificate works under the principles of Mudarabah. The minimum rate of return
is 6.78% and the highest being 11.67% at maturity.

Monthly Mudarabah Certificate: It is a flexible rupee-based investment which is

designed to give the holder monthly returns. The minimum investment requirement
starts at only Rs. 100,000 and the holder receives profit after each month. The monthly
return on profit is 6.58%

Meezan Aamdan Certificate: It is a Riba-free Aamdan certificate for long term

deposits, it has exceptionally high monthly profit catered to attract those individuals
who seek regular stream of income. Meezan Aamdan Certificate or MAC is a monthly
income (mahana aamdani) certificate with a variety of free packaged benefits. The
profit rates for 5 years and 7 years are 10.89% and 12.84% respectively.

Meezan Providence Certificate: It is a long-term investment certificate tailored to

meet the needs of corporate and business concerns for purpose of investing their
provident, pension and gratuity funds. It has Halal returns at a high return rate,
minimum investment required to be made is Rs. 1,000,000.

Dollar Mudarabah Certificate: It is a flexible investment product which provides

profit payments at monthly, quarterly and maturity. The only difference this certificate
has with others is that it takes investment in dollars or foreign currency. The minimum
investment amount starts at USD 10,000. It has different profit rates depending upon
the amount invested and tenure of holding the certificate.
Ans4.

Istisna’a: It is a sales transaction where a commodity is transacted before it comes into

existence. A price is fixed with consent of all parties involved. Meezan Bank ltd provides
Istisna’a for the construction of houses etc. Payment is made after construction of
property is finished. It is a contractual based agreement.

Diminishing Musharaka: Meezan Bank allows customer to participate in joint

ownership of an asset through the use of this Islamic instrument. The asset is divided
into a number of units and the customer periodically purchases the units from the bank
over a specified period of time until all units have been purchases. So, through
diminishing musharaka the customers can own assets over a timespan specified.

Ijarah: The concept is similar to leasing which is used in conventional banking. Meezan
Bank uses this instrument for both long-term and medium-term fixed asset financing,
project financing and for retail products such as homes or automobiles. Ijarah in lexical
meaning stands for, “to give something on rent” Meezan Bank allows customers to lease
out assets (generally automobiles) in a shariah-compliant manner. The most popular
use of Ijarah is car leasing, it is Pakistan’s first interest free car financing and it is based
on Islamic financing mode of Ijarah. It works on a rental agreement, under which the
Bank purchases the car and rents it out to the customer for a period of 1 to 7 years,
agreed as per the terms of contract. Upon completion, the vehicle is sold at a token
amount.

Q.5 pending

Ans6.

Meezan bank was established in 2002 and since its incorporation it has been playing an
important role to improve and facilitate the economy of Pakistan. It is Pakistan’s first
and largest dedicated Islamic Bank and one of the fastest growing financial institute. Its
success has been growing substantially over the years. Meezan Bank has been providing
a sound banking system to mobilize the small and scattered savings of the community
and has made them available for user in productive sectors, it has also been collecting
money from the surplus unit for the deficit in an efficient manner.

Meezan Bank has been improving the economy under the control of the State Bank and
now runs 660 ATMS all over the country. Small business-owners can acquire loans from
the bank in a Shariah-compliant manner and invest that amount that eventually helps in
development of the economy. Meezan Bank has provided an array of Islamic Banking
services to its customers in diversified manner. It has made funds available from abroad
through a simple and quick procedure of online banking.

One of the most important function that Meezan Bank is providing is Riba-free form of
banking which was not made available at such a wide scale before, the said bank has
been working to promote the importance of Islamic banking and has been helping
enormously in business startups through interest free loans that eventually helps the
economy. Since Meezan Bank has been providing Islamic banking facilities, it has
boosted the economic activity of the country as more citizens are engaging in business
and buying out capital assets as it has become easy to borrow loans in a Shariah-
compliant manner.

Small businesses need to borrow money to expand or upgrade their capacity and
through a variety of facilities and services, Meezan Bank has made it effortless to borrow
money. There is a diverse class of bank deposit accounts available to suit each customer
need and demand.

Following are the economic steps that should be taken to improve the economy of
Pakistan.

(1) Promotion of Savings: The government should promote the use of banks for
savings. The money should not be left idle because it is better to invest it or
resultantly, it will lose its value over time. If more people are engaged with
banking then they will utilize their savings for unemployment, old age, sickness,
education, marriage or to own real estate. If the people deposit their scarce
savings in the banks, then it will give the institution to invest that money in a
productive way or to lend out loans to businesses that are in need. Commercial
banks such as Meezan has been providing an array of deposits with varying
 combinations of liquidity and rate of returns to cater to the demand and needs of
the customers.
(2) Better Mobilization of Resources: Continuing with the first point, banks act
as an intermediary between the surplus unit and the deficit unit who is looking to
invest money and resources in a way that generates income and profit. And,
through the very use of commercial bank—the task of lending and borrowing
becomes easy. More people should consider investing in banks as it eliminates
the risk factor, and their deposits are used for a good cause that helps promote
the economy. In this regard, Meezan Bank has been arranging the best services to
the customers through their Shariah-compliant banking system. More and more
people are starting to open their accounts because the bank operates on purely
Islamic principles.
(3) Promotion of Trade, Investment: No country can exist in solitude, trade
plays an important role in uplifting the economy. The banks encourage savings
and utilizes it to increase the aggregate rate of investment in the country. Not
only do banks invest savings of the depositors, but they are also themselves create
deposits or credit which serves as money. As the investment rate increases in the
economy, it has a positive effect on the image of the country and trade opens door
for new foreign investment opportunities. Bank facilitates trades through
numerous instruments that promote the economy and helps it grow over time. It
drives competitiveness and innovation.
(4) Provider of Loans: Bank not only enable people to collect their scarce savings,
but they also are provider of loans of all kinds, that resultantly help an economy
to become more productive and efficient. Banks have been providing loans for the
purchase of houses, construction and student loans which has been playing a
crucial role in pushing the GDP and foreign inflows into the country. More and
more people are beginning to take loans (through a Shariah-compliant manner)
and fulfilling their needs and requirements.
(5) Control of Inflation: All banks work under the control of the Central Bank
which is responsible for using tools such as interest rates to adjust the circulation
of money in the economy. Monetary policies are adopted to control the supply of
money to achieve a desired result and to stabilize output, inflation is thus
controlled by policies which are in-turn applied through the use of scheduled
banks. Banks can reduce liquidity in the country that can prevent inflation and
improve economic growth. Such policies are used to influence production,
demand, and employment etc. Thus, through all these ways the economy of
Pakistan can improve.