Principles of Islamic Economics & Finance

Assignment #

Q.1 Today's Problems and Challenges in Pakistan's Islamic Financial System:

1. Risk Management: Islamic financial instruments mean that Islamic banks face not only the traditional risk
of consumer debt but also other risks associated with metals. For example the danger of the Islamic financial
market and damaging claims for ownership.
2. Accounting: Accounting represents the greatest challenge for Islamic finance. Some of the objectives for
accounting purposes are as follows: a) Revenue is not available when accumulated but when it is generated.
b) When depositors provide joint ventures to banks, the bank's employees, etc.
3. Income flow: In this Islamic financial challenge this is necessary for orphan pensioners who are orphans
and other similar groups in society based on planned wage schemes.
4. Legal Framework: Islamic banks operate in most Islamic countries without proper legal coverage. One
issue that will continue to work in the foreseeable future is that Islamic banks operate on a standard
interest-based framework.
5. Establishment of Real Market Links: Funding and marketing strategies for disposal of sales made on
behalf of financial institutions under Islamic funds. The same considerations apply to other Islamic financial
institutions, for example, for rental arrangements with suppliers and marketing agencies.
6. Reduced Financial Costs: Financial costs can be reduced by providing an adequate amount of financial
institutions when transactions are paid for. This can be done as a follow-up to financial contracts. They can
be registered with the judicial authorities before using them.
7. Public Awareness: In fact with the availability of more funding mechanisms than the current ones they
will need to be more efficient and effective but face a common acceptance problem. Islamic banking can be
the following: a) public education, b) Islamic banking ideas, c) Islamic financial conduct.
8. Credit Debt through Credit Renewal: Debt is usually made by fulfilling customer obligations. The default
for payment either in place of a specific or primary installment. Islamic banks operate and above all live with
different groups of applicants.
9. Divisive and attractive: The situation is dangerous in Muslim countries where tax revenue is constantly
levied on government expenditure for mixed purposes. The problem of rising public debt has made matters
worse.
10. Regulation and Regulation of Islamic Financial Institutions: The regulation and regulation of Islamic
banks will be required to ensure that they remain financial institutions. That role should go beyond just
filling in the gaps. Allowing Muslim banks to do more than that would be to sow seed.
Problems and Challenges in the International Islamic Financial System:
1. Differences in Islamic cultures and societies in a different country that creates interpretations of sharia
principles are inconsistent between Islamic schools.
2. The role and progress of Islamic banking where it has shown that growing awareness of Islamic banks
seeks to provide free banking services with interest through various windows in India and Ethiopia.
3. Islamic banking can go a long way in stabilizing the economy. However, without the support of a large
bank as a last resort, further development can be difficult.
4. In order to sell Islamic banking products and services, Islamic banks need to be more involved.
Promotional efforts should be made to provide Islamic services products and services to customers.
5. Muslims have used Islamic financial products since the time of the Prophet Muhammad (PBUH), the first
study of Islamic finance did not appear until a century ago. Thereafter several Muslim and non-Muslim
researchers investigated the growth and development of the Islamic bank.
6. New customers with no previous business or contact with Islamic funds. Previous studies have found a
lack of awareness and understanding among consumers. Evidence shows that Islamic banks are failing in
their challenge of diversification from conventional banks.
7. Challenges facing Islamic banks in the UK led to a series of talks with four London-based institutions and
reported that the UK government still had to accept and support the Islamic banking industry at any rate.
8. British Muslims remain ignorant of sharia offerings and do not fully understand the true essence of
Islamic banking stating what they believe to be the two main reasons for such a lack of knowledge and
inclusion.
9. If this is true then it will not only reduce the long-term performance of Islamic banks and other banks but
will also affect the growth of developing countries in the absence of banks to support these activities.
10. Most Islamic banks are privately owned and operate an interest-based banking system. It is unlikely that
Islamic banking tools set up by these banks could be challenged. But when the question is about using the
system a lot of questions may arise.
Q2. Companies in Pakistan Stock Exchange are using Islamic Financing in Pakistan:
1. FECTO cement limited:
Islamic Finance = 502000
Total capital= 4,833,806
Formula for Islamic Financing = Islamic Financing/Total Capital * 100
= 4292891/4833806*100
= 88.80%
2. Ali Asghar Textile Mills Limited:
Islamic financing = 58508315
Total equity = 682474489
Formula for Islamic Financing = Islamic Financing/Total Capital * 100
= 58508315/682474489*100
= 8.58%
3. Kohat Textile Mills Ltd.
Islamic financing = 2081126
Total equity = 2897706
Formula for Islamic Financing = Islamic Financing/Total Capital * 100
= 2081126/2897706*100
= 71.81%
4. Ghani Automobile Industries Limited:
Islamic financing = 31,814,934
Total equity = 233,391,665
Formula for Islamic Financing = Islamic Financing/Total Capital * 100
= 31,814,934/233,391,665*100
=13.63%
5. BLESSED TEXTILES LIMITED:
Islamic financing = 2,013,891,529
Total equity = 10,762,029,080
Formula for Islamic Financing = Islamic Financing/Total Capital * 100
= 2,013,891,529/10,762,029,080*100
=18.71%