Description
This is about Islamic Banking Primer.
Islamic Banking Presented By: Group 1
Agenda
• Facts • Islamic banking • Activities of Islamic banking
– Financing Activities
• Difference between conventional and Islamic Banking • Islamic banking in India
Some Facts
• First Islamic Bank established in Egypt in 1972 • More than 250 Islamic Financial Institutions in 27 Muslim countries and 16 Non Muslim countries • Islamic Banking global estimates US$400Bn+ • Projected growth 15% Per Annum
What is Islamic Banking?
• Banking practices consistent with Islamic law • Islamic law prohibits
– Riba – Exploitation – Investment in unlawful activities such as betting
• Offers services to both muslims and non-muslims
Activities
• Deposits
– Saving Accounts
• Financing
– – – – – – Murabaha Ijaraha Musharakah Mudarabah Salam Istisna
• Services
Financing Activities
Murabaha
• Sale of mutually agreed profit
Transfer of title to customer with collateral provided
Transfer of title to bank
Vendor
Islamic Bank
Customer
Payment of marked-up price (P + X), payable at deferred payment basis
Payment of price purchase (P)
Ijaraha
Transfer of title to bank
Assets leased to customer – title pass to customer at the end of lease term
Vendor
Islamic Bank
Customer
Payment of price purchase
Ijaraha Installments, Rents
Musharakah
Partner (Customer)
30% Ownership
Islamic Bank
70% Ownership
Musharakah
• Customer buys out bank’s share over a period of time
• Share profits according to agreed proportions • Losses on their capital contribution
Mudarabah
Client (Investor of Capital) Islamic Bank (Payment of capital) Investing/Trading Activities (Earning of Profits)
Islamic Bank (Periodic proportionate return)
Client (Distributer of earned profits)
Salam
Delivery of asset at future date Delivery of asset at future date
Commodity Owner
Islamic Bank
Customer
Advance Payment of purchase price (P)
Advance Payment of purchase price (P + X)
Istisna
Delivery of asset at future date Delivery of asset at future date
Manufacturer
Islamic Bank
Customer
Payment of purchase price on delivery
Progress payment of purchase price
Conventional vs. Islamic
Conventional Banking
• No moral or ethical dimension • Deposit insurance is available and mandatory based on some threshold • Risk management techniques are highly developed and advanced
Islamic Banking
• Strong moral and ethical activities • No deposit insurance
• Risk management techniques are being developed, they are still in infancy
Conventional vs. Islamic
Conventional Banking
• Lending is done purely based on financial gains
Islamic Banking
• Lending is partially based on financial gains, but is mainly done for the purpose of lending • Access to money market is limited and generally not available • Overnight loans is not common and is being developed
• Structured, formal and organised money market available • Availability of overnight loans for liquidity purpose
World Islamic Banks
• Bank Melli Iran – largest bank • Iranian banks – 40% of total assets of world’s top 100 banks • Present in 51 countries including the United States • Islamic banks are also present widely in Pakistan, Malaysia, UAE, Saudi Arabia, Kuwait • Islamic banking is expected to grow at around 10-15% each year
Islamic Banking in India
• India has approximately 150 million Muslim population • Penetration in India is low – Regulatory block • Amendment needed in Banking Regulation Act of India, 1949 • Primary reason is the socio-religious nature of the Indian political scene
Islamic Banking & Financial Crisis
• Video
doc_842151586.ppt
This is about Islamic Banking Primer.
Islamic Banking Presented By: Group 1
Agenda
• Facts • Islamic banking • Activities of Islamic banking
– Financing Activities
• Difference between conventional and Islamic Banking • Islamic banking in India
Some Facts
• First Islamic Bank established in Egypt in 1972 • More than 250 Islamic Financial Institutions in 27 Muslim countries and 16 Non Muslim countries • Islamic Banking global estimates US$400Bn+ • Projected growth 15% Per Annum
What is Islamic Banking?
• Banking practices consistent with Islamic law • Islamic law prohibits
– Riba – Exploitation – Investment in unlawful activities such as betting
• Offers services to both muslims and non-muslims
Activities
• Deposits
– Saving Accounts
• Financing
– – – – – – Murabaha Ijaraha Musharakah Mudarabah Salam Istisna
• Services
Financing Activities
Murabaha
• Sale of mutually agreed profit
Transfer of title to customer with collateral provided
Transfer of title to bank
Vendor
Islamic Bank
Customer
Payment of marked-up price (P + X), payable at deferred payment basis
Payment of price purchase (P)
Ijaraha
Transfer of title to bank
Assets leased to customer – title pass to customer at the end of lease term
Vendor
Islamic Bank
Customer
Payment of price purchase
Ijaraha Installments, Rents
Musharakah
Partner (Customer)
30% Ownership
Islamic Bank
70% Ownership
Musharakah
• Customer buys out bank’s share over a period of time
• Share profits according to agreed proportions • Losses on their capital contribution
Mudarabah
Client (Investor of Capital) Islamic Bank (Payment of capital) Investing/Trading Activities (Earning of Profits)
Islamic Bank (Periodic proportionate return)
Client (Distributer of earned profits)
Salam
Delivery of asset at future date Delivery of asset at future date
Commodity Owner
Islamic Bank
Customer
Advance Payment of purchase price (P)
Advance Payment of purchase price (P + X)
Istisna
Delivery of asset at future date Delivery of asset at future date
Manufacturer
Islamic Bank
Customer
Payment of purchase price on delivery
Progress payment of purchase price
Conventional vs. Islamic
Conventional Banking
• No moral or ethical dimension • Deposit insurance is available and mandatory based on some threshold • Risk management techniques are highly developed and advanced
Islamic Banking
• Strong moral and ethical activities • No deposit insurance
• Risk management techniques are being developed, they are still in infancy
Conventional vs. Islamic
Conventional Banking
• Lending is done purely based on financial gains
Islamic Banking
• Lending is partially based on financial gains, but is mainly done for the purpose of lending • Access to money market is limited and generally not available • Overnight loans is not common and is being developed
• Structured, formal and organised money market available • Availability of overnight loans for liquidity purpose
World Islamic Banks
• Bank Melli Iran – largest bank • Iranian banks – 40% of total assets of world’s top 100 banks • Present in 51 countries including the United States • Islamic banks are also present widely in Pakistan, Malaysia, UAE, Saudi Arabia, Kuwait • Islamic banking is expected to grow at around 10-15% each year
Islamic Banking in India
• India has approximately 150 million Muslim population • Penetration in India is low – Regulatory block • Amendment needed in Banking Regulation Act of India, 1949 • Primary reason is the socio-religious nature of the Indian political scene
Islamic Banking & Financial Crisis
• Video
doc_842151586.ppt