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Money andBanking
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The Karachi Stock
Exchange
Empowering TheCompanies of Tomorrow
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Group Members ;
Syed Owais Ali (SP07-BB-0135)M. Moez Siddiqui (SP07-BB-0106)
M. Laraib (SP07-BB-0082)
Pawan Kumar (SP07-BB-0128)
Shahbaz Nawaz (Sp07-BB-0150)
Bhawani Shankar (SP07-BB-0039)
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What is Islamic Banking?
Islamic banking has been defined as banking inconsonance with the ethos and value system ofIslam and governed, in addition to the conventionalgood governance and risk management rules, bythe principles laid down by Islamic Shariah.
Interest free banking is a narrow concept denoting anumber of banking instruments or operations,which avoid interest.
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History
Steps for Islamization of banking and financialsystem of Pakistan were started in 1977-78.
Pakistan was among the three countries in theworld that had been trying to implement interest
free banking at comprehensive/national level.The Islamization measures included the elimination
of interest from the operations of specializedfinancial institutions including HBFC, ICP and NIT
in July 1979 and that of the commercial banksduring January 1981 to June 1985.
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The legal framework of Pakistan's financial andcorporate system was amended on June 26, 1980to permit issuance of a Shariah compliantinstrument of corporate financing namedParticipation Term Certificate (PTC).
Separate Interest-free counters started operating inall the nationalized commercial banks on January1, 1981 to mobilize deposits on profit and loss
sharing basis.
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Major modes ofIslamic Banking and
Finance
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MURABAHALiterally it means a sale on mutually agreed profit.
Technically, it is a contract of sale in which the sellerdeclares his cost and profit.
IJARAHIjarah is a contract of a known and proposed usufruct
against a specified and lawful return or consideration forthe service or return for the benefit proposed to be taken,or for the effort or work proposed to be expended.
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IJARAH-WAL-IQTINA A CONTRACT UNDER WHICH AN ISLAMIC BANK PROVIDES
EQUIPMENT, BUILDING OR OTHER ASSETS TO THECLIENT AGAINST AN AGREED RENTAL TOGETHER WITH AUNILATERAL UNDERTAKING BY THE BANK OR THE CLIENT
THAT AT THE END OF THE LEASE PERIOD, THEOWNERSHIP IN THE ASSET WOULD BE TRANSFERRED TO
THE LESSEE.
MUSAWAMAH
MUSAWAMAH IS A GENERAL AND REGULAR KIND OF SALE INWHICH PRICE OF THE COMMODITY TO BE TRADED ISBARGAINED BETWEEN SELLER AND THE BUYER WITHOUTANY REFERENCE TO THE PRICE PAID OR COST INCURREDBY THE FORMER.
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ISTISNA A
IT IS A CONTRACTUAL AGREEMENT FOR MANUFACTURINGGOODS AND COMMODITIES, ALLOWING CASH PAYMENTIN ADVANCE AND FUTURE DELIVERY OR A FUTURE
PAYMENT AND FUTURE DELIVERY.BAI MUAJJAL
LITERALLY IT MEANS A CREDIT SALE. TECHNICALLY, IT IS AFINANCING TECHNIQUE ADOPTED BY ISLAMIC BANKS
THAT TAKES THE FORM OF MURABAHA MUAJJAL.
MUDARABAH
A FORM OF PARTNERSHIP WHERE ONE PARTY PROVIDES THEFUNDS WHILE THE OTHER PROVIDES EXPERTISE ANDMANAGEMENT. THE LATTER IS REFERRED TO AS THE
MUDARIB
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MUSHARAKAH
MUSHARAKAH MEANS A RELATIONSHIP ESTABLISHED UNDERA CONTRACT BY THE MUTUAL CONSENT OF THE PARTIESFOR SHARING OF PROFITS AND LOSSES IN THE JOINT
BUSINESS.BAI SALAM
SALAM MEANS A CONTRACT IN WHICH ADVANCE PAYMENT ISMADE FOR GOODS TO BE DELIVERED LATER ON. THESELLER UNDERTAKES TO SUPPLY SOME SPECIFIC GOODS
TO THE BUYER AT A FUTURE DATE IN EXCHANGE OF ANADVANCE PRICE FULLY PAID AT THE TIME OF CONTRACT.
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Dubai Islamic Bank
The Worlds First Islamic Bank
The largest Islamic Bank in UAEAmongst the top 4 Banks in
the country
Government ownership 34%
Part of the Big Five IslamicBanks in the world
Globally recognized Leaderand Innovator in Islamic Banking
Strong Domestic FranchiseNearly 600,000 retail customers
49 branches / nearly
300 ATMs, CDM
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DIBs principal business is focused on its
five core units
Largest business unit within DIBFull range of products and services
Customer segments: Mass affluent, Wealth management, SME
One of the largest Retail customer base in UAE
Market leaders: Deposits products and Auto finance
Retail &
Business
Banking
Real Estate,Contracting
Finance, DirectEquities
Investment
Banking
Corporate
Banking
Treasury
Millennium Capital and Millennium Finance subsidiaries incorporated in DubaiInternational Financial Centre
Investment banking activities such as project finance, loan syndication, capitalmarkets, asset management and structured finance as well as Corporate AdvisoryServices
Global leaders in Sukuk issuance: #1 in the Bloomberg league table in 2006 Leading provider of Real Estate Finance services in the UAE with significant role in
supporting real estate developments
Financing to contractors in the oil, gas, power and water sectors
Short term equity investments in established companies and business start-ups
across MENA region Large & Middle Market
Bankers to top corporate houses in GCC
Financing for Trade and Manufacturing and Infrastructure
Cash Management capabilities
Foreign exchange services
Asset-liability management
Islamic derivatives
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Dubai Islamic Bank Strategic Agenda
To be
amongstthe Top
33Banksin UAE
Growth drivers to beRetail, Corporate Banking &
Investment Banking
Leveraging on the successin Dubai to capitalize on
opportunities in other Emirates
Evolving froma pure banking entity
to a more comprehensiveFinancial Services Group
Diversifying DIBs revenue streamsthrough penetration and presencein new markets in the MENA region
Continually innovate using thelatest technology and product expert
leading to ease and convenience
Focus on Value Growth:cross selling,
new Islamic productsembed cost awareness
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Portfolio Diversification, Business
Overview
Diversified portfolio both with respect to economic sectors and customersegments
Key economic sectors include government / public sector and real estate
Among the most significant Arrangers of financing for Dubai Government
Segmental Revenue; % of Total Revenue (2007)Sectorial Exposure of Financial Assets (2007)
Real Estat
26%
Financial
Institution
38%
Retail
10%
Manuf / Service
19%
Govt
7%
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Mega Deals
US$ 3.52 Bn Sukuk issue for Nakheel(Dubai World)
US$ 3.5 Bn Sukuk issue for PCFC(Govt of Dubai)
US$ 2 Billion Sukuk for Dubai CivilAviation for expansion project of DubaiInternational Airport
US$ 600m Government of MalaysiaSukuk
US$ 600m Pakistan Sovereign Sukuk
US$ 550m Sukuk for Emirates Airlines
US$ 530m Lead Arranger for Qatar Gas
II
Awards & Accolades (2005-07)
Best Bank in UAE, 2006: The Banker
Best Islamic Bank in ME, 2006:
Euromoney Best Debt house UAE, 2005: Euromoney
Best Sukuk House, 2005: Euromoney
Award for Finance (2005): ShaikhMohammed Bin Rashid Business Award
Quality Recognition Award, 2005: JPMorgan Chase
Banking Achievement Award for theMiddle East, by Emerging MarketsPublication during the IMF Conference in
New York, Oct07
An Integral, Recognized player in the IslamicFinance sector
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Products and Services
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Ready Market:
A conventional stock market also known as the regular market,where buyers and sellers come together to trade shares.
Settlement of trade occurs 2 days after the trade.
Cash Settled Futures:
A standardized contract, to buy or sell a certain underlying
instrument at a certain date in the future, at specified price. Allsettlement occurs purely on cash basis. Depending on thecontract, settlement occurs 30, 60 & 90 days after the contract ispurchased.
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Stock Index Futures:
Stock Index Futures are traded in a number of contracts. Eachcontract is to buy or sell a fixed value of the index. Stock IndexFutures Contract occurs 90 days after the contract ispurchased.
Deliverable Futures:
Forward contracts to buy or sell a certain underlyinginstrument with actual delivery of the underlying instrument
occurring. Settlement occurs 30 days after the contract ispurchased.
- CFS (discontinued)- COT (discontinued)
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Company Services
Customized services and state-of-the-art technologyinfrastructure, have given us an edge over other exchanges inthe region.
Fully automated trading, clearing and settlement system.
Internet routed trading facility. Gateway trading (Order Management System).
Investors and fund managers can also access informationthrough Display Only Terminal
Internet trading facilities available.
Order-driven system . Brokers connectivity to KSE through VPN (to ensure security of
data).
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Data Services:
TV channels also display KSE ticker through live feeds from KSEsystem.
Investors provided customized data packages for trading andassessment of their portfolio on a real time basis.
Data feed provided to major international redistributors(Reuters, Bloomberg) on real time basis.
KSE website offers data of market on real time basis, includinglisted company profiles, snap shot of financials, press releasesand summary of market activities on real time basis.
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Over the last three decades Islamic banking and finance has
developed into a full-fledged system and discipline
reportedly growing at the rate of 15 percent per annum.
Today, Islamic financial institutions, in one form or the other, are
working in about 75 countries of the world.
In Malaysia, Bahrain, Pakistan and a few other countries of the
Gulf, Islamic banks and financial institutions are working as a
system parallel with the conventional system.
Islamic Banking Global Scenario
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In Britain, the Financial Services Authority has issued Islamic
banking license to the Islamic Bank of Britain, which has
been sponsored by Gulf and UK investors.
The United States of America has appointed Dr. Mahmoud El
Gamal, an eminent economist/expert on Islamic banking to
advise the US Treasury and Government departments on
Islamic finance in June 2004.
Both US and Britain have over two dozens of Islamic financial
institutions each for providing Riba free financing facilities to
their Muslim communities.