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Table of Contents

Table of Contents.................................................................................................................1
INTRODUCTION TO ISLAMIC BANKING....................................................................1
Prohibition of Riba in the Quran and Sunnah......................................................................1
Second stage of prohibition.............................................................................................1
Third stage of prohibition................................................................................................1
Fourth and final stage of prohibition...............................................................................2
Prohibition of Riba in the Sunnah....................................................................................2
ISLAMIC BANKING in Pakistan (a brief history).............................................................2
DIFFERENCE BETWEEN ISLAMIC BANKING & CONVENTIONAL BANKING....4
INTRODUCTION TO ASKARI BANK.............................................................................5
ATM’s Installed in Pakistan................................................................................................7
ASKARI ISLAMIC BANKING..........................................................................................8
MISSION STATEMENT................................................................................................8
VISION............................................................................................................................9
Core Values......................................................................................................................9
OBJECTIVES..................................................................................................................9
Code of Ethics and Conduct..........................................................................................10
CORPORATE INFORMATION...................................................................................10
ASKARI ISLAMIC BANKING SERVICE DIVISION...............................................11
Askari Islamic bank DIVISIONS .................................................................................11
1. International Division............................................................................................12
2. Legal Affairs Division...........................................................................................12
3. Corporate & Investment Banking Group (CIBG)..................................................13
Islamic Banking Services...................................................................................................13
Products and Services....................................................................................................13
IJARAH ...................................................................................................................13
Advantages of Ijarah..................................................................................................14
MUSAWAMAH ...........................................................................................................14
MUDARABAH ............................................................................................................14
MUSHARAKAH...........................................................................................................15
BAISALAM...................................................................................................................15
ISLAMIC BANKING IN PRACTICE..............................................................................15
I. Collection of Deposit..................................................................................................15
II. Financing contracts...................................................................................................16
1. Murabaha (mark-up sale)...........................................................................................16
2. Musharaka (profits and loss sharing system).............................................................16
Types of Musharaka partnerships..................................................................................16
3. Mudharaba.................................................................................................................17
4. Ijara ...........................................................................................................................17
5. Bay'us-Salam (Advance purchase)............................................................................17
INTERN JOB.....................................................................................................................17
LOCATION IN THE DEPARTMENT.........................................................................17
JOB DESCRIPTION.....................................................................................................18
AREAS LEARNT..........................................................................................................18
DEPARTMENTS OF ISLAMIC BANKING SERVICES DIVISION.........................18
SHARIAH ADVISOR ..............................................................................................19
SHARIAH AUDIT METHODOLOGY....................................................................19
OPERATIONAL DEPARTMENT............................................................................19
OPENING OF NEW BRANCHES:..........................................................................20
ASSET SIDE PRODUCTS...........................................................................................20
ASKARI IJARAH BI SAYYARAH.............................................................................20
MAIN FEATURES OF ASKARI IJARAH BI SAYYARAH:.................................21
CASE APPROVAL AND DISBURSEMENT HIERARCHY.................................21
AT BRANCH LEVEL...............................................................................................21
AT HEAD OFFICE...................................................................................................21
ELIGIBILITY CRITERIA FOR ASKARI IJARAH BI SAYYARAH....................22
DOCUMENTS REQUIRED FOR BUSINESS PERSONS......................................22
FOR SALARIED PERSONS....................................................................................22
FOR SELF EMPLOYED PERSONALS...................................................................22
TENURE OF THE CAR IJARAH............................................................................22
SECURITY DEPOSIT..............................................................................................23
ASKARI HOME MUSHARAKAH..............................................................................23
PRODUCT FEATURES............................................................................................23
PRODUCT TYPES....................................................................................................23
1. AHM PURCHASE ...............................................................................................23
2. AHM CONSTRUCT.............................................................................................24
3. AHM IMPROVE...................................................................................................24
4. AHM TRANSFER.................................................................................................24
ELIGIBILITY CRITERIA.........................................................................................24
DOCUMENTS REQUIRED.....................................................................................24
PROCESS OF DIMINISHING MUSHARAKAH....................................................24
TENURE OF THE DIMINISHING MUSHARAKAH.............................................25
SECURITY OF FINANCING...................................................................................25
PERCENT SHARING OF INVESTMENT..............................................................25
3. MURABAHA............................................................................................................25
DIFFERENCE BETWEEN MURABAHA AND SALE......................................26
BASIC RULES FOR MURABAHAH......................................................................26
4. ISTISNA....................................................................................................................27
ISTISNA’ AS A MODE OF FINANCING...............................................................27
5. SALAM......................................................................................................................27
PURPOSE OF USE: .................................................................................................27
LIABILITY SIDE PRODUCTS....................................................................................28
1. Askari Islamic Investment Certificates..................................................................28
2. Askari Khas Islamic Deposit Account..................................................................28
3. Askari Islamic Term Quality Deposit...................................................................28
ACCOUNT OPENING DEPARTMENT......................................................................28
ACCOUNT OPENING..............................................................................................28
ACCOUNT OPENING FORM.................................................................................28
ACCOUNT OPENING PROCEDURE.....................................................................29
TYPES OF ACCOUNTS...........................................................................................29
PROPRIETARY FIRMS ACCOUNTS.....................................................................29
MINOR’S ACCOUNT..............................................................................................30
ILLITERATE PERSONS ACCOUNT......................................................................30
JOINT ACCOUNT....................................................................................................30
PARTNERSHIP FIRM ACCOUNTS.......................................................................30
PRIVATE/PUBLIC LTD COMPANY’S ACCOUNTS...........................................31
CLOSURE OF AN ACCOUNT................................................................................32
CHARITY FUND......................................................................................................32
INVESTMENT ANALYSIS OF ASKARI ISLAMIC BANK.....................................32
SWOT ANALYSIS.......................................................................................................34
STRENGTHS............................................................................................................34
WEAKNESSES.........................................................................................................35
Opportunities..............................................................................................................35
THREATS..................................................................................................................35
COMPETITIVE ANALYSIS........................................................................................35
RECOMMENDATIONS...............................................................................................36
1. Workshops and Counseling...................................................................................36
2. Innovative Products...............................................................................................36
Marketing Plan...........................................................................................................36
Technological Advancements....................................................................................37
Placements of Employees..........................................................................................37
Priority Banking and Business Development Department........................................37
ATM FACILITIES....................................................................................................37
LACK OF TRAINED STAFF...................................................................................37
LACK OF AWARENESS AMONG PEOPLE ABOUT ISLAMIC BANKING......38
COMPLICATED DOCUMENTATIONS.................................................................38
CONCLUSION..................................................................................................................38
REFERENCES..................................................................................................................39
Online References..........................................................................................................39
INTRODUCTION TO ISLAMIC BANKING
Islam is not only a religion in the ordinary sense of the word, but a
complete system of life. While other religious codes provide guidance
only for the relation between man and his Creator, Islam guides man in
his relationship with God, and gives him the norms which govern his
temporal existence, since Islam is concerned with the spiritual,
political, social economic, moral and all other material aspects of the
human being.
Every social system has its own economic system. Islam being a
comprehensive and distinct social system, possesses a corresponding
economic system of its own. Islamic economics is fast developing into
a different and distinct paradigm of economics. Therefore, a number of
Islamic financial institutions have emerged in various Muslim as well as
some non-Muslim countries.

Prohibition of Riba in the Quran and


Sunnah
What is Riba?
It is the addition of premium paid to the lender in return for the waiting
period as a condition for the loan. Riba has the same meaning and
import as interest in accordance with the consensus of all Fuqua
(jurists) and is harem. The following are the steps on Riba prohibition:
First stage of prohibition of Riba
Says God: "That which you give as interest to increase the peoples
wealth increases not with God; but that which you give in charity,
seeking the pleasure of God, multiplies manifold". (Quran, 30:39)

Second stage of prohibition


Say God: "For the wrong doing of Jews, we made unlawful for them
certain good foods which had been lawful for them - and for their
hindering many from God's way. And their taking of Riba"(usury)
though they were forbidden from taking it. (Quran, 4:160-161)

Third stage of prohibition


Says God: "O you who believe: Eat not Riba (usury) doubled and
multiplied, and fear God that you may be successful. (Quran, 3:130)

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Fourth and final stage of prohibition
Says God: "O you who believe! Be conscious of Allah and give up what
remains (due to you) from Riba (usury) (from now onward), if you are
(really) believers. And if you do not do it, then take a notice of war
from Allah and his Messenger, but if you repent you shall have your
capital sums. Deal not unjustly (by asking more than your capital
sums) and you shall not be dealt unjustly (by receiving less than your
capital sums).

Prohibition of Riba in the Sunnah


Reported by Jabir bin Abdullah that the Prophet (PBUH) said: "Cursed is
the receiver and the payer of interest, the one who records it and the
two witnesses to the transaction". And he said: "They are all alike".
(Muslim)

ISLAMIC BANKING in Pakistan (a brief


history)
At the inauguration of the State Bank of Pakistan (SBP) in 1948, Mr.
Muhammad Ali Jinnah said,
“I shall watch with keenness the work of your Organization in
evolving banking practices compatible with Islamic ideas of
social and economic life. We must work our destiny in our own
way and present to the world an economic system based on
true Islamic concept of equality of manhood and social
justice.”
History of Islamic Banking started from the Era of Mr. Zia-ul-Haq
(former president of Pakistan) in 1980’s where initial steps were taken
to Islamize the Banking sector.
Following are the major steps afterward.
 (1980) and Usher (tithe) (March, 1983) and elimination of
interest from the operations of Specialized Financial Institutions
(July, 1979 to July, 1985) and the commercial banks (January,
1981 to July, 1985).

 Commercial banks transformed their nomenclature during January


1981 to June 1985 based on the 12 modes. From July 1, 1985 all
commercial banking in Pak Rupees was made interest-free.
However, foreign currency deposits in Pakistan and on lending of
foreign loans continued as before.

 However, procedure adopted by banks was declared un-Islamic by


the Federal Shari at Court (FSC) in November 1991. The

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Government and some banks/DFIs preferred appeals to the Shari at
Appellate Bench (SAB) of the Supreme Court of Pakistan.

 SAB delivered its judgment of December 23, 1999 rejecting the


appeals and directing that laws involving interest would cease to
have effect finally by June 30, 2001. However, SAB gave exemption
for dealing with foreign parties on the basis of interest.

 The Government, in line with directives of SAB, constituted a high-


level Commission and a number of tasks forces and Committees to
study the prospects of transformation of Pakistan’s financial system
for interest based to Shariah compliant and to chalk out the
transformation plan. However, the Government came to the
conclusion that transformation of the financial system as whole was
not possible in short term due to a variety of factors/reasons.
Developing a viable and complete model of Islamic finance and
putting it into practice was complex and difficult tasks and it would
not be wise to under-estimate those difficulties and risks. Therefore,
it was decided to promote Islamic banking on parallel basis with
conventional system.

 State Bank has issued the criteria for establishment of Islamic banks
in private sector and subsidiaries and stand-alone branches by
existing commercial banks to conduct Islamic banking in the
country.

 A Musharaka-based Export Refinance Scheme has been designed by


the State Bank in order to provide export finance to eligible
exporters on the basis of Islamic modes of financing. Efforts are
underway to develop Islamic money market instruments like Ijarah
Sukuk to facilitate the banks in respect of liquidity and SLR
management.

 In addition to Meezan Bank as a full-fledged Islamic bank operating


exclusively on Shariah compliant basis, three banks are operating
seven BBs (MCB, BoK, Bank Alfalah). Habib Bank Limited has also
been given in principle approval for one stand-alone branch. State
Bank has received applications for 24 IBBs to be opened in 2004.

 A full-fledged Islamic Banking Department has been created in the


State Bank that would serve as a focal point for all matters relating
to Islamic banking and finance in the country.

 9A Shariah Board comprising two Shariah scholars and three


experts in the areas of banking accounting and legal framework has

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been established in the State Bank of Pakistan to advise it one
modes, procedures, laws and regulations for Islamic banking
ensuring Shariah compliance and smooth operations of Islamic
banks.

DIFFERENCE BETWEEN ISLAMIC


BANKING & CONVENTIONAL
BANKING
There are a number of key differences between the products and
services offered by a conventional bank in comparison to an Islamic
financial institution.
 Firstly, Islam is the back bone of interest free banking, moral
principles and objectives play a more important role in its
operations. As such it is organized on the basis of cooperation with
each other as stated in the Quranic injection: "Help you one another
in righteousness and piety but help you not one another in sin and
transgression" (Quran, 5:2). The Quran also calls for trade "Eat not
up your property among yourselves in vanities but let there be
amongst you, traffic by mutual goodwill"(Quran, 4:29). Honesty and
trustworthiness is so essential in business, thus the Prophet (Pbuh)
had declared that dishonest transactions are illegal (reported by
Bukhari).
 Secondly, no gain is accepted without either effort or liability. Islam
forbids receiving a monetary advantage without giving a counter
value, but is not opposed to profit or financial gain as long as an
effort is performed or (partial) liability is accepted for the financial
result of a venture.
 Thirdly, general conditions of a debtor should be evaluated
genuinely. If one is in financial distress, and is not able to pay back
the principal, one should be given an extension on humanitarian
ground without any penalty. (Quran, 2:280)
 Fourthly, certain business transactions are considered unlawful in
Islam and cannot be carried out in an Islamic bank. For example
trading in alcohol, intoxicating drugs, gambling or producing
pornography are contrary to Islam.
 Fifthly, Islamic banks offer no interest-bearing products or services,
and in its organizational structure and corporate governance.
islamic banks have Shariah board, to ensure that the bank practices
are in conformity with the Shariah and do not oppress the
disadvantaged client.

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INTRODUCTION TO ASKARI BANK

Askari Commercial Bank Limited was built-in on October 09, 1991 and
commence its operations in April 1992 as a public limited company.
The bank principally busy in the banking business. It has a varied
customer base comprise of corporate, SMEs, individuals, households
and farmers etc. The registered office of the Bank is situated at AWT
Plaza, The Mall, and Rawalpindi. Army Welfare Trust directly and
indirectly holds a significant portion of the Bank’s share capital.
Its share price has remain approximately 12% higher than the average
share price of quoted banks during the last four years. Askari Bank has
expanded into a nationwide presence of 200 Branches, 199 in Pakistan
and Azad Jammu and Kashmir, including 31 Islamic Banking branches,
1 sub branch and an Offshore Banking Unit in Bahrain. A shared
network of over 800 online ATMs covering all major cities in Pakistan
supports the delivery channels for customer service. The Mobile
ATM’s facility is first time started by Askari commercial bank in 2005
dedicated to serving the urban consumer market; Askari is committed
to aggressively market this segment
ACBL has a reporter Bank Network in more than 95 countries with
about 167 banks. Askari Bank is the only bank with its operational
head office in the twin cities of Rawalpindi-Islamabad, which have
relatively limited opportunities as compared to Karachi and Lahore.
Corporate banking division was established in April 1999 with the
primary focus on servicing large corporate and multi-national
companies. Askari Bank had set up a retail-banking group in July 2000;
Askari Investment Management Limited (AIM) is the wholly owned
subsidiary of the Askari Bank. The bank has an offshore banking unit in
Bahrain. In 2006, the bank launched Islamic Banking under the name
"Askari Islamic Banking" The strategy is to provide their customers
with a basket of innovative products to meet their varying needs.

The Bank Basically provides four kinds of services;


Consumer Banking Services.
Islamic Banking Services.
Agriculture Finance Solution.
Corporate and Investment Banking.

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BOARD OF
DIRECTORS
ENTITY RATINGS
Askari Bank has the following Entity Ratings from the Pakistan Credit
Executive
Rating Agency Limited (PACRA): Audit & Inspection
Committee Division
Short Term A1+
Long Term AA

Askari Bank has the President


followingand
Entity
ChiefRatings from the Pakistan Credit
Rating Agency Limited (PACRA):Executive
Definitions by PACRA:
A1+:
Obligations supported by the highest capacity for timely repayment.
AA:
'AA' ratings denote a very low expectation of credit risk. They indicate
Corp.
very strong capacity Retail commitments.
for timely payment of financial
Operation Islamic This
Investment
capacity is not significantly
Group vulnerable
Regions to Banking
foreseeable events. Banking
Banking Division
Group
Group

Asset
International Operations North Products & Operation
Credit Card

Electronic &
Technology Area office Investment Human
Treasury North-I &II products Resource
/Establishment

Corporate & Credit


Investment Central Finance
Banking
Division

Area office
Compliance &
Central-
Data I&II

Legal Affairs South

Area
Office
South
I&II

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Area Office-
Quetta
ATM’s Installed in Pakistan

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ASKARI ISLAMIC BANKING
Askari Bank Limited-Islamic Banking (AKBL-IB) is a part of Askari Bank
Limited, works under the prudential regulations of the State Bank of
Pakistan and engaged in business of banking as defined by the
Banking Companies Ordinance 1962.State Bank of Pakistan awarded
license for Islamic Banking branch operations on November 21,
2005.The Authorized capital of Askari Islamic Bank is Rs.50
million.Initially Askari Islamic Banking started its business with the
network of only four branches in Rawalpindi, Peshawar, Quetta,
Karachi, Multan and Islamabad. AKBL entered into its second phase of
development, in which SBP authorized bank to open its more Branches
in the year 2008.It has already fourteen branches in almost all big
cities.
Islamic Banking was launched under the brand 'Askari Islamic Banking',
by opening 6 dedicated Islamic Banking branches in major cities of the
country. Further expansion is planned with improved capabilities for
offering products conforming to the Shariah principles.Askari Islamic
Banking opens the doors for Halal banking solutions. Our objective is to
put in place an efficient banking system supportive to economic justice
and welfare of society in line with Shariah standards.A comprehensive
range of Islamic Banking products and services is being offered, in
order to meet customer's demand of Shariah Compliant Banking, in the
following areas:
Islamic Corporate Banking
Islamic Investment Banking
Islamic Trade Finance
Islamic General Banking
Islamic Consumer Banking
Islamic Banking products have been approved by the Bank's Shariah
Advisor. As per Shariah requirements, funds and products of Islamic
Banking are managed separately from the Conventional Banking side.
All funds obtained, invested and shared in Halal modes & investments,
under supervision of the Shariah Advisor.
At the end of 2011 total branches of Islamic Banking were thirty one.

MISSION STATEMENT
THE MISSION STATEMENT OF THE BANK IS
“TO BE THE LEADING ISLAMIC BANKING SERVICES PROVIDE AMONGST
PRIVATE SECTOR BANK IN PAKISTAN .DELIVERING QUALITY SERVICES
THROUGH INNOVATIVE TECHNOLOGY AND EFFECTIVE HUMAN
RESOURCE MANAGEMENT IN A MODERN AND PROGRESSIVE

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ORGANIZATION CULTURE OF MERITOCRACY, MAINTAINING HIGH
ETHICAL AND PROFESSIONAL STANDARDS, WHILE PROVIDING
ENHANCED VALUE TO ALL THEIR STAKEHOLDERS, AND CONTRIBUTING
TO SOCIETY”

VISION
“TO BE THE BANK OF FIRST CHOICE OF ISLAMIC BANKING SERVICES”

Core Values
The intrinsic values, which are the corner stone’s of our corporate
behavior, are:
 Commitment
 Integrity
 Fairness
 Team-work
 Service

OBJECTIVES
 Deliver solutions that meet customer’ financial needs
 Build and sustain a high performance culture
 Build trusted relationships with all stakeholders
 Build and manage the Banks’ portfolio of business to achieve
strong and sustainable shareholder return.
 Create and leverage strategic assets and capabilities for
competitive advantage.
 To facilitate the bank with modern banking technique
 To accelerate commercial activities and capture large market
share.

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Code of Ethics and Conduct

Askari ISLAMIC Bank seeks to maintain high standards of service and


ethics enabling it to be Perceived as impartial, ethical and
independent. In addition to the general guidelines, the following are
the salient features of the Bank’s code of ethics and conduct.
Presence of a corporate culture that seeks to create an environment
where all employees are treated equitably and with respect.
 Employees must carry out their responsibilities in a professional manner at all
times. They must act in a prudent manner and must avoid
situations that could reflect unfavorably on themselves, the Bank
or its customers.

 Employees must commit to the continued development of the


service culture in which the Bank consistently seeks to exceed
customers’ expectations. Fairness, Truthfulness and
Transparency govern our customer relationships in determining
the transactional terms, conditions, rights and obligations.
 Employees must safeguard confidential information which may
come to their possession during the discharge of their
responsibilities. Respect for customers’ confidential matters,
merits the same care as does the protection of the Bank’s own
affairs or other inters
 Employees must ensure that ‘know your customer’ principles are
adhered to by Obtaining sufficient information about the
customers to reasonably satisfy ourselves as to their reputation,
standing and the nature of their business activities.
 Employees must avoid circumstances in which their personal
interest conflicts, or may appear to conflict, with the interest of
the Bank or its customers. Employees must never use their
position in the Bank to obtain personal advantage or gain.
 Employees must not enter into an agreement, understanding or
arrangement with any competitor with respect to pricing of
services, profit rates and / or =marketing policies, which may
adversely affect the Bank’s business.
 Employees must not accept gifts,business entertainment or other
benefits from a customer or a supplier / vendor, which appear or
may appear to compromise commercial or business relationship.
 Employees must remain alert and vigilant with respect to frauds,
thefts or illegal activities committed within the Bank premises

CORPORATE INFORMATION

SHARIAH ADVISOR

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Dr. Muhammad Tahir Mansoori

BOARD OF DIRECTORS
Lt. Gen. Javed Zia
Lt. Gen. (R) Imtiaz Hussain
Mr. Kashif Mateen Ansari, FCMA
Mr. Zafar Alam Khan Sumbal
Mr. Muhammad Riyazul Haque
Mr. Shahid Mahmud
Mr. Ali Noormahomed Rattansey, FCA
Dr. Bashir Ahmad Khan
Mr. Tariq Iqbal Khan, FCA (NIT Nominee)
Mr. M.R. Mehkari

AUDIT COMMITTEE
Dr. Bashir Ahmad Khan (Chairman)
Mr. Ali Noormahomed Rattansey, FCA
Mr. Zafar Alam Khan Sumbal

Company Secretary
Mr. Saleem Anwar, FCA

Auditors
]A. F. Ferguson & Co
Legal Advisors
Rizvi, Isa, Afridi & Angell

ASKARI ISLAMIC BANKING SERVICE DIVISION


Dr. Muhammad Tahir Mansoori Shariah Advisor
Hashim Khan Hoti Country Head Islamic Banking
Division.
Aamir Khalil SVP, Head Corporate &
Structured Finance
Arif Habib Malik Head Operations Vice President
Amjad Bokhari Head (Consumer Finance)
Abdul Rahim Head Shariah Audit
Amjad Ayub Head Credit Risk
Ejaz Farooqi HR Head

Askari Islamic bank DIVISIONS

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1. International Division
International Division strives to place at the disposal of our branch
network, efficient correspondent banking arrangements on global
basis, thereby catering the needs of our client diaspora. In short, this is
made possible through a variety of arrangements with various banks
which, amongst other benefits, ensures placement of suitable Credit
lines at our disposal by our counter-party banks to facilitate Foreign
Trade and Treasury related activities.
Today International Division boasts of multi-faceted correspondent
banking relationships with over 200 Banks in 77 countries around the
world thereby improving the capacity of our branches in serving their
clients.
Alongside, International Division is entrusted to arrange
evaluation/approval of exposure limits favoring various local/overseas
banks and Non-banking Financial Institutions with whom our Treasury
and branches deal on day-to-day basis. Within the context comes the
Country exposure, which is managed and monitored at this division,
whereas our liaison with State Bank of Pakistan, in respect of Foreign
Trade related issues, helps us to provide timely directions and efficient
advisory to our branch network.
Optimum monitoring of business reciprocity with banks compliments
our efforts to manage the business flows and ensure greater
profitability and balanced distribution of business amongst our
correspondents.
In addition and as a part of the ongoing exercise of Know Your
Customer (KYC) compliance with regard to our correspondents,
International Division carries out regular Due Diligence exercises to
ensure that our bank deals only with financial institutions that are able
to meet the prescribed standards and criteria
2. Legal Affairs Division
The LAD is responsible for managing all legal matters pertaining to
Bank and is mainly involved in the Opinion Making, addressing queries,
advising on the laws applicable to Bank and other concerns relating to
carrying out of pre-contractual investigations and securitisation
aspects. This area includes, carrying out of analysis, preparing
research studies and examining, scrutinizing, drafting of documents.
LAD has also to strategies legal actions and supervise implementation
and ensure compliance. Advising on legal viability of the corporate and
commercial lending agreements also falls into the ambit of LAD’s
duties. More frequently LAD suggests ways for the efficient structuring
of the transactions, effecting mortgages, perfection of securities and
provides general assistance to deal with the impacts of Regulatory,
Corporate, Labour and Fiscal Legislation. Attending litigation portfolio,
which includes Recovery cases and suits filed either for or against the
Bank, is also one of the core functions of LAD.

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3. Corporate & Investment Banking Group (CIBG)
As Askari Bank, we understand the unique business requirements of
our corporate and institutional clients, and accordingly, strive to meet
their expectations through the provision of a customized, relationship
based banking approach, through the Corporate and Investment
Banking Group (CIBG).
CIBG is a one-window operation that provides all requisite banking
services for our corporate clientele in an efficient, dependable,
consistent, and competitive manner – the objective being to become
your “bank of first call” for all your financial needs.
CIBG is specifically structured to provide dedicated banking services
and products to its corporate customers through two key divisions.

Islamic Banking Services


Islamic Banking was launched under the brand 'Askari Islamic Banking',
by opening 6 dedicated Islamic Banking branches in major cities of the
country. Further expansion is planned with improved capabilities for
offering products conforming to the Shariah principles.
Askari Islamic Banking opens the doors for Halal banking solutions. Our
objective is to put in place an efficient banking system suuportive to
economic justice and welfare of society in line with Shariah standards.
A comprehensive range of Islamic Banking products and services is
bieng offered, in order to meet customer's demand of Shariah
Compliant Banking, in the following areas:
Islamic Corporate Banking
Islamic Investment Banking
Islamic Trade Finance
Islamic General Banking
Islamic Consumer Banking
Islamic Banking products have been approved by the Bank's Shariah
Advisor. As per Shariah requirements, funds and products of Islamic
Banking are managed separately from the Conventional Banking side.
All funds obtained, invested and shared in Halal modes & investments,
under supervision of the Shariah Advisor

Products and Services


IJARAH
Ijarah is a contract of a known and proposed usufruct against a
specified and lawful return or consideration for the service or return for
the benefit proposed to be taken, or for the effort or work proposed to
be expended. In other words, Ijarah or leasing is the transfer of
usufruct for a consideration which is rent in case of hiring of assets or
things and wage in case of hiring of persons.

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Advantages of Ijarah
 Ijarah provides the following advantages to the Lessee:
 Ijarah conserves the Lessee' capital since it allows up to 100%
financing.
 Ijarah gives the Lessee the right to access the equipment on
payment of the first installment. This is important as it is the
access and use (and not ownership) of equipment that generates
income.
 Ijarah arrangements aid corporate planning and budgeting by
allowing the negotiation of flexible terms
 Ijarah is not considered Debt Financing so it does not appear on
the Lessee' Balance Sheet as a Liability. This method of "off-
balance-sheet" financing means that it is not included in the
Debt Ratios used by bankers to determine financing limits. This
allows the Lessee to enter into other lease financing
arrangements without impacting his overall debt rating.

MUSAWAMAH
Musawamah is the negotiation of a selling price between two parties
without reference by the seller to either costs or asking price. While
the seller may or may not have full knowledge of the cost of the item
being negotiated, they are under no obligation to reveal these costs as
part of the negotiation process. This difference in obligation by the
seller is the key distinction between Murabaha and Musawamah with
all other rules as described in Murabaha remaining the same.
Musawamah is the most common type of trading negotiation seen in
Islamic commerce.

MUDARABAH
This concept refers to the sale of goods at a price, which includes a
profit margin agreed to by both parties. The purchase and selling price,
other costs, and the profit margin must be clearly stated at the time of
the sale agreement. The bank is compensated for the time value of its
money in the form of the profit margin. This is a fixed-income loan for
the purchase of a real asset (such as real estate or a vehicle), with a
fixed rate of profit determined by the profit margin. The bank is not
compensated for the time value of money outside of the contracted
term (i.e., the bank cannot charge additional profit on late payments);
however, the asset remains as a mortgage with the bank until the
default is settled.

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MUSHARAKAH
Musharakah means a relationship established under a contract by the
mutual consent of the parties for sharing of profits and losses in the
joint business. It is an agreement under which the Islamic bank
provides funds, which are mixed with the funds of the business
enterprise and others. All providers of capital are entitled to participate
in management, but not necessarily required to do so. The profit is
distributed among the partners in pre-agreed ratios, while the loss is
borne by each partner strictly in proportion to respective capital
contributions.

BAISALAM
Salam means a contract in which advance payment is made for goods
to be delivered later on. The seller undertakes to supply some specific
goods to the buyer at a future date in exchange of an advance price
fully paid at the time of contract. It is necessary that the quality of the
commodity intended to be purchased is fully specified leaving no
ambiguity leading to dispute. The objects of this sale are goods and
cannot be gold, silver or currencies. Barring this, Bai? Salam covers
almost everything, which is capable of being definitely described as to
quantity, quality and workmanship

ISLAMIC BANKING IN PRACTICE


Islamic banks operate various types of transactions the most important
of which are:

I. Collection of Deposit
Since interest bearing deposits entail Riba, Islamic banks offer two
different kinds of deposits.
 Current account
 Investment account
1. Current account: The deposited capital is guaranteed and made
available to the client on demand. No reward is paid on the
deposit but is mainly used for transactions and safety keeping.
2. Investment account: Deposits remain with the bank for a certain
previously agreed period. Customers open investment account to
yield financial return based on trust financing. The depositor is
the financing partner, while the managing partner is the bank.

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II. Financing contracts

1. Murabaha (mark-up sale)


It comes from the Arabic word 'ribh' which means profit (short –term
trade financing). Murabaha is selling a commodity as per the
purchasing price with a defined and agreed profit mark-up. This mark-
up may be a percentage of the selling price or a lump sum. Murabaha
financing differs from a conventional financing, as it involves the
financing of physical assets. The bank shares in the risk of ownership.
Rather than simply advancing money to a client, the bank itself buys
the goods from a third party on request of a customer. The bank then
sells it to the customer for a pre-agreed price through a deferred
payment scheme, usually in the form of installments.

2. Musharaka (profits and loss sharing system)


It is an agreement between two persons or more (bank and customer)
sharing both profits and losses. It is joint enterprises where all the
partners contribute capital and the client bring in know how.
Profit/losses are shared on agreed ratios.

Islamic bank VS Conventional bank


Conventional banks have fixed rate of returns; while Musharaka, base
their returns on the actual profits made. Conventional banks as
opposed to Islamic ones do not share losses nor do they take such
risks. Conventional banks have no interest on how the business is run;
while in Musharaka the Islamic bank is directly involved in the proper
functioning of the business.

Types of Musharaka partnerships


There are many types of Musharaka ranging from traditional types of
partnerships to modern corporations. Musharaka could either be:
Permanent musharaka: An Islamic bank participates in the equity of
a project and receives a share of the profit on a prorata basis. The time
length of the contract is specified, making it suitable for financing
projects where funds are committed over a long period.
Diminishing musharaka: This allows equity participation and sharing
of profits on a prorata basis, and provides a method through which the
bank keeps on reducing its equity in the project, ultimately transferring
ownership of the asset to the customer. The contract provides for
payment over and above the bank's share in the profit for the equity
held by the bank. Simultaneously the entrepreneur purchases some of
the banks equity, progressively reducing it until the bank has no equity
and thus ceases to be a partner.

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3. Mudharaba
It is a partnership in profit whereby one party provides capital (rab al-
maal-the bank) and the other party provides the know how/labour
(Mudharib).Thebankcontributes 100% of the capital. Profits are shared
on an agreed ratio. If there is any loss the bank takes 100%
responsibility unless there was a case of misconduct, negligence or
breech of contract on the part of Mudharib.

4. Ijara
Contract (leasing) or Ijara Muntahia bi at-tamleek (lease ending in
property ownership Ijara Is the same as leasing thus leasing practiced
in interest – free banks are similar to its conventional practice. During
the life of the asset, the risk of ownership remains with the bank, while
the lessee is liable for misuse of the asset.
Ijara Muntahia bi at-tamleek (lease ending in property ownership)
This is a form of leasing contract, which includes a promise by the
lesser to transfer the ownership of the leased property to the lessee.
Example, the bank purchases the asset say a house. The client rents it
from the bank, as he enters into an agreement to buy the shares from
the bank over an agreed time frame. He then buys out small shares
from the bank from time to time ending up with 100% ownership.

5. Bay'us-Salam (Advance purchase)


Advance payment for goods which are to be delivered at a specified
future date. Under normal circumstances, a sale cannot be affected
unless the goods are in existence at the time of the bargain. However,
this type of sale is an exception, provided the goods are defined and
the date of delivery is fixed. The objects of sale must be tangible goods
that can be defined as to the quantity, quality and workmanship.

INTERN JOB

LOCATION IN THE DEPARTMENT


As internee I have worked in the Askari Islamic Bank head office
Islamabad for Six weeks.

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JOB DESCRIPTION
I worked at Askari Islamic commercial Bank limited as an internee.
First of all the Credit Administration Officer told us the rules and
regulations and a brief history of the bank. Later on the bankers in
each department told me the basic operations of their departments.

AREAS LEARNT
I worked almost in all the departments of bank, so I tried to learn as
much as possible from the bankers of each department but due to time
constraint I just could understood the basics of banking as banking is a
vast field. But I think that what I learnt will help me a lot to understand
the subjects studied in the University and how these are practiced by
bankers.
Following are my detailed department wise functions understanding of
Askari Islamic Bank Head Office Islamabad.

DEPARTMENTS OF ISLAMIC BANKING SERVICES DIVISION


There are main six departments in Islamic Banking services division
which are as in the following Chart.

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SHARIAH ADVISOR
According to the Instruction and Regulation Issued by the State Bank of
Pakistan for Islamic Banks that they should have a shariah advisor
According to Annexure 1 of IBD Circular No: 02 of 2008 (March 25,
2008)1 So Askari Bank have appointed a renowned and eminent
Scholar and recipient of the President’s medal for pride of Performance
(in Academics) for the year 2004, Professor Dr. Muhammad Tahir
Mansoori, He is presently Chairman of Islamic Law department at the
Islamic research Institute of the International Islamic University,
Islamabad.

SHARIAH AUDIT METHODOLOGY

The methodology of the shariah audit department is very good. The


have established a manual under the supervision of the worthy
Supervisor. They strictly follow the manual and they also follow the
regulations given by the State Bank of Pakistan. When I ask about the
manual then Mr. Abdul Raheem (Head Shariah Audit) brief me about
the shariah Audit manual that in the manual the Shariah Advisor has
advised to check the whole Process of the transaction. And if there is
any problem means that the transaction is not shariah compliant then
the income will be transferred to Charity Account. I asked him (Mr.
Abdul Raheem) that how they can insure e.g. in Murabha that the
agent have purchased the Commodity or processed the Commodity?
He replied that it very easy to check. He said that normally they
personally go and check the commodity and some time when it is not
possible then we check the documents like truck receipt, third party
declaration.

OPERATIONAL DEPARTMENT
There is a sound operational department in Islamic banking services
division. There working is to supervise, describe regulations and
Opening of New Branches. This is very active department of Islamic
Banking services department.

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SUPERVISION & REGULATIONS:
All rules and regulations for day to day activities of the Islamic Banking
branches are supervised by the Operational Department, e.g. Murabha
contracts of the Islamic Banking branches are supervised by this
department. This department checks the whole process of the
Branches and makes regulations for the branches.
OPENING OF NEW BRANCHES:
All the activities related to opening of new branches will be located and
supervised by operational department. It includes
 Feasibility of new branches
 Location of Branches
 Contracts with Owner of Building
 Renovation of the Building
 Establishment
 Staff arrangement in New Branches.

ASSET SIDE PRODUCTS


 Askari Ijarah Bi Sayyarah
 Askari Home Musharakah
 Murabaha
 Salam
 Istisn’a
As per Prudential Regulations Consumer financing means:
“Any financing allowed to individuals for meeting their personal, family
or household needs. The facilities categorized as consumer financing
are credit cards, Auto loans, Housing Finance and Personal Loans”

ASKARI IJARAH BI SAYYARAH

Askari Islamic Banking offers car Ijarah for consumer’s sector clients.
Under the Prudential Regulation R-9 Consumer Financing “the vehicles
to be utilized for commercial purposes shall not be covered under the
prudential regulations for consumer financing. Any such financing shall
ensure compliance with Prudential Regulations for Corporate/
Commercial Banking for SME’s financing. These regulations shall only
apply for financing vehicles for personal use including light commercial
vehicles also used for personal purposes”. For applying the said
prudential regulation the Ijarah facility under consumer finance is only
offered to individual consumers. For corporate clientele the facility is
provided through corporate Ijarah.

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MAIN FEATURES OF ASKARI IJARAH BI SAYYARAH:
 Prompt Processing Time
 Facility to Acquire More than One Vehicle.
 Family Income Evaluation Plan.
 Low Security Deposit.
 Competitive Profit Rates.

CASE APPROVAL AND DISBURSEMENT HIERARCHY


Case approval and disbursement process is designed in a way to
minimize the chances of riskier disbursement. Persons involved in
process of case collection, approval authority and disbursement are:

AT BRANCH LEVEL
Marketing Officer
Credit Analyst
In charge Consumer Finance
Branch Manager

AT HEAD OFFICE
In charge IBD Car Ijarah
Head IBD Consumer Banking

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Approved by Islamic Banking Division Credit Committee (IB-DCC)
consists of three members on board

ELIGIBILITY CRITERIA FOR ASKARI IJARAH BI SAYYARAH


A Pakistani National.
Earning at least two times more than your monthly rental installment.
Between 21 to 60 years (For salaried class), and 21-65 years (for
business persons/self employed) of age till the maturity of the lease
period.
Employment experience of minimum six months in a permanent
capacity in the current organization.
Being in business for at least one year.

DOCUMENTS REQUIRED FOR BUSINESS PERSONS


 Copy of CNIC
 Two recent passport size colored photographs.
 Last six months Bank Statement(s).
 Residential utility bills.
 Business proof required.
 Copy of Valid driving license (Optional).
 Two References.

FOR SALARIED PERSONS


 Copy of CNIC
 Two recent passport size colored photographs.
 Last six months Bank Statement(s).
 Recent Salary Slip.
 Employment Certificate.
 Residential Utility Bills.
 Copy of Valid driving license (Optional).
 Two References.

FOR SELF EMPLOYED PERSONALS


 Copy of CNIC
 Two recent passport size colored photographs.
 Last six months Bank Statement(s).
 Copy of Professional Degree/Certificate.
 Residential utility bills.
 Copy of Valid driving license (Optional).
 Two References.

TENURE OF THE CAR IJARAH


As per Prudential Regulation R-10 “The maximum tenure of the auto
loan finance shall not exceed seven years”. Keeping in view the

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limitation AKBL-IB offers the facility to its clientele for three, four and
five years.

SECURITY DEPOSIT
As per prudential Regulation R-11 “While allowing auto loans, the
bank/ DFIs shall ensure that the minimum down payment( Security
Deposit) does not fall below 10 % of the value of vehicle. Further,
banks / DFIs shall extend auto loans only for the ex-factory tax paid
price fixed by the car manufacturers. In other words, banks/ DFIs
cannot finance the premium charged by the dealers and / or investors
over and above the ex-factory tax paid price of cars, fixed by the
manufacturers.”The management of AKBL-IB keeping in view R-11
regulation set minimum security deposit of 15 % of the value of the
vehicle with a maximum of 80 % of the value of vehicle. Moreover, the
State Bank of Pakistan restricts to finance the own/premium demanded
by the car dealers for urgent delivery of vehicle. Only banks are
allowed to finance the ex-factory price of the vehicle.

ASKARI HOME MUSHARAKAH


According to this concept, a financier and his client participate either in
the joint ownership of a property or an equipment, or in a joint
commercial enterprise. The share of the financier is further divided into
a number of units and it is understood that the client will purchase the
units of the share of the financier one by one periodically, thus
increasing his own share until all the units of the financier are
purchased by the client so as to make him the sole owner of the
property, or the commercial enterprise, as the case may be.

PRODUCT FEATURES
 Shariah Compliant
 Prompt Processing
 Competitive Rentals
 Clubbing of Family Income
 Actual Documentation and Other Charges

PRODUCT TYPES
 Askari Home Musharakah Purchase
 Askari Home Musharakah Construct
 Askari Home Musharakah Improve
 Askari Home Musharakah Transfer

1. AHM PURCHASE
Financing amount ranges from Rs. 0.300 million to Rs. 50 Million

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Financing Tenure: 1 to 20 years
2. AHM CONSTRUCT
Financing amount ranges from Rs. 0.300 million to Rs. 20Million
Financing Tenure: 3 to 20 years
3. AHM IMPROVE
Financing amount ranges from Rs. 0.300 million to Rs. 5 Million
Financing Tenure: 1 to 07 years
4. AHM TRANSFER
Askari Home Musharakah help clients to switch from existing interest
based loans to Shariah compliant scheme. AKBL pays off the entire
amount outstanding against client.
Financing amount ranges from Rs. 0.300 million to Rs. 50 Million
Financing Tenure: 1 to 20 years

ELIGIBILITY CRITERIA
 A Pakistani National
 Age between 21 to 65 years
 A permanent employee with at least six months of service with
present employer
 A self employed individual with at least 3 years of business
 Income verification / documentation required

DOCUMENTS REQUIRED
 Copy of NIC
 2 colored photographs
 Copy of rent agreement (residence + office)
 Copy of last paid utility bills
 Bank statements of last one year
 Copy of recent pay slip
 Employer’s certificate
 3 years proof of business Legal status proof of business
 Membership certificate/practice license for self employed
individuals

PROCESS OF DIMINISHING MUSHARAKAH


The customer approaches the Bank with the request for Project
financing.
The Bank enters into a Musharakah (Joint Ownership) agreement with
the customer and both of them pay their respective shares to the seller
of the asset.
Customer pays rent for the use of bank’s share in the property
Ownership of the asset is gradually transferred to the customer upon
payment of asset price.

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Diminishing Musharakah involves taking shares in the ownership of a
specified asset and then gradually transferring complete ownership.
Actual purchase of the units at different stages.
Rent is adjusted according to the remaining share of the financier in
the property.

TENURE OF THE DIMINISHING MUSHARAKAH


As per Prudential Regulation R-18 “The maximum tenure for the house
financing shall not exceed twenty years”. Keeping in view the
limitation AKBL-IB offers the facility to its clients for a maximum period
of twenty years.

SECURITY OF FINANCING
As per prudential Regulation R-15 “Banks/DFIs may allow housing
finance facility for construction of houses against the security of land /
plot already owned by their customers. However, the lending bank/DFI
will ensure that the loan amount is utilized strictly for the construction
purpose and loan is disbursed in trenches as per construction
schedule”
The management of AKBL-IB keeping in view R-15 regulation collect
the ownership documents (Registry) from the customer get registered
it and keep it in safe custody. In case if the client defaults the amount,
the bank recovers the financed amount after selling it off.

PERCENT SHARING OF INVESTMENT


As per prudential Regulation R-16 “The housing finance facility shall be
provided at a maximum debt-equity ratio of 85:15”
The management of AKBL-IB keeping in view R-16 regulation set
minimum investment on the client side 20 % of the value of the
financed asset and maximum 80% investment by the bank. Moreover,
the State Bank of Pakistan under prudential regulation R-15 restricts
that “Banks/DFIs will not allow housing finance purely for the purchase
of land / plots; rather, such financing would be extended for the
purchase of land / plot and construction on it”.

3. MURABAHA
Murabaha is one of the most commonly used modes of financing by
Islamic Banks and financial institutions.
Murabaha is a particular kind of sale where the seller expressly
mentions the cost of the commodity purchased, and sells it to another
person by adding some profit thereon. Thus, Murabaha is not a loan
given on interest; it is a sale of a commodity for cash/deferred price.
The Bai’ Murabaha involves purchase of a commodity by a bank on
behalf of a client and its resale to the latter on cost-plus-profit basis.
Under this arrangement, the bank discloses its cost and profit margin
to the client.

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In other words rather than advancing money to a borrower, the bank
will buy the goods from a third party and sell those goods to the
customer at an agreed price.

DIFFERENCE BETWEEN MURABAHA AND SALE


A simple sale in Arabic is called Musawamah -a sale without disclosing
or referring to the cost of goods sold. However when the cost price is
disclosed to the client, it is called Murabaha. A simple Murabaha is one
where there is cash payment and Murabaha Muajjal is one on deferred
payment basis.

BASIC RULES FOR MURABAHAH


Following are the rules governing a Murabahah transaction:
The subject of sale must exist at the time of the sale. Thus anything
that does not exist at the time of sale cannot be sold as this makes the
contract void.
The subject matter should be in the ownership of the seller at the time
of sale. If the seller sells something that he himself has not acquired,
then the sale becomes void.
The subject of sale must be in physical or constructive possession of
the seller when it is sold to another person. Constructive possession
means a situation where the owner has not taken physical delivery of
the commodity yet it has come into his control and all rights and
liabilities of the commodity are passed on to him including the risk of
its destruction.
The sale must be instant and absolute. Thus a sale attributed to a
future date or a sale contingent on a future event is void.
The subject matter should be a property having value in the eyes of
Shari’a.
The subject of sale should not be a thing used for an un-Islamic
purpose.
The subject of sale must be specifically known and identified to the
buyer. For Example, ‘A’ owner of an apartment building says to ‘B’ that
he will sell an apartment to ‘B’. Now the sale is void because the
apartment to be sold is not specifically mentioned or pointed to the
buyer.
The delivery of the sold commodity to the buyer must be certain and
should not depend on a contingency or chance.
The certainty of price is a necessary condition for the validity of the
sale. If the price is uncertain, the sale is void.
The sale must be unconditional. A conditional sale is invalid unless the
condition is recognized as a part of the transaction according to the
usage of the trade.

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4. ISTISNA
Istisna’ is a sale transaction where a commodity is transacted before it
comes into existence. It is an order to a manufacturer to manufacture
a specific commodity for the purchaser. The manufacturer uses his
own material to manufacture the required goods.
In Istisna’, price must be fixed with consent of all parties involved. All
other necessary specifications of the commodity must also be fully
settled.

ISTISNA’ AS A MODE OF FINANCING


Istisna’ may be used to provide financing for construction of house. If
the client owns a land and seeks financing for the construction of a
house, the financier may undertake to construct the house on the basis
of an Istisna’. If the client does not own the land and wants to purchase
that too, the financier can provide him with a constructed house on a
specified piece of land.
Istisna’ may also be used for similar projects like installation of an air
conditioner plant in the client’s factory, building a bridge or a highway.
The modern BOT (buy, operate and transfer) agreements may be
formalized through an Istisna’ agreement as well. So, if the
government wants to build a highway, it may enter into an Istisna’
contract with the builder. The price of Istisna’ can be the right of the
builder to operate the highway and collect tolls for a specific period.

5. SALAM
In Salam, the seller undertakes to supply specific goods to the buyer at
a future date in exchange of an advanced price fully paid at spot. The
price is in cash but the supply of purchased goods is deferred.
This mode of financing can be used by the modern banks and financial
institutions especially to finance the agricultural sector.

PURPOSE OF USE:
To meet the need of small farmers who need money to grow their
crops and to feed their family up to the time of harvest. When Allah
declared Riba haram, the farmers could not take usurious loans.
Therefore Holy Prophet allowed them to sell their agricultural products
in advance.
To meet the need of traders for import and export business. Under
Salam, it is allowed for traders to sell the goods in advance so that
after receiving their cash price, they can easily undertake the aforesaid
business. Salam is beneficial to the seller because the price is
received in advance and it is also beneficial to the buyer because the
price in Salam is lower than the price in spot sales.
The permissibility of Salam is an exception to the general rule that
prohibits forward sale and therefore it is subject to strict conditions.

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LIABILITY SIDE PRODUCTS
 Askari Islamic Investment Account (AIIC)
 Askari Khas Islamic Deposit Account (AKIDA)
 Askari Islamic Term Quality Deposit (AITQAD)

1. Askari Islamic Investment Certificates


Askari Islamic Investment Certificates (AIIC) are based on Mudaraba
concept, whereby the client is the rabb-ul-mal and bank acts as
mudarib. Minimum investment amount is Rs.100,000/- and the tenure
is flexible with a minimum period of 3 months. The profits payment
options are open for monthly, quarterly, or at maturity. Options are
available on maturity to full reinvestment of principal and profit, full
encashment of principal and profit or profit encashment with
reinvestment of principal amount.

2. Askari Khas Islamic Deposit Account


Askari Khas Islamic Deposit Account (AKIDA) whereby the bank collects
the principal amount from the client as mudarib and invests in
Murabaha/Ijarah/other business of the bank. The minimum investment
amount is Rs.10,000 with a flexible tenure of investment with a
minimum tenure of 3 months. Profit so earned on the investment is
distributed only on maturity of investment. On maturity option may be
given either to reinvestment the full amount of principal and profit,
encash principal and profit fully or encash only profit with reinvestment
of principal amount.

3. Askari Islamic Term Quality Deposit


Askari Islamic Term Quality Deposit (AITQD) is available for flexible
tenure of minimum 3 years and minimum investment is set at
Rs.10,000. Profit is distributed on 06 monthly or on maturity basis.
Rab-ul-mall have the option on maturity to reinvest principal and profit
so earned, encash principal and profit or encash only profit and
reinvest the principal amount.

ACCOUNT OPENING DEPARTMENT


ACCOUNT OPENING
A bank account is the establishment of a relationship between a
customer and a bank.

ACCOUNT OPENING FORM


Account opening form is the document that carries
 The detail of a customer
 The terms and conditions applicable to the relationship.

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 Signatures/thumb impression of the account holder.
 General terms and conditions applicable to the operating of an
account specified by the bank.

ACCOUNT OPENING PROCEDURE


Customer fills in the account opening form in duplicate, along with
cheque book request, Specimen Signature Cares (SS cards) and
submits relevant documents as per bank’s requirements. These forms
and other documents should be signed in the presence of officer
designated to open accounts. The customer provides the attested
photocopies of his Computerized National Identity Card or passport.
The account opening officer interviews the customer to ensure the
genuineness of the information provided. The branch manager
approves the account opening form and refers to the account opening
officer and allots an account number and dully updated in computer
system. New Account number is noted on account opening form, SS
card and all other relevant documents. Customer fills the pay in slip
and deposit cash with cashier/cash officer, and dully mentioned in
account opening form. These documents are put in the respective box
filer in sequential order and kept under dual control in cabinet/
Almirah. Letter of thanks is prepared /mailed to customer’s introducer.
Returned letter of thanks be entered in a register and filed with the
account opening form.
Every account must be introduced by an existing account holder of the
bank or an account holder of another bank provided that the
signatures of such account holder are verified by his/her bank.
Different types of accounts require different documents to be
submitted to establish a relationship. In case of an individual account a
copy of CNIC or a valid passport are considered sufficient.
Different types of accounts require different types of documents based
on the nature and the type of organization going to operate it.

TYPES OF ACCOUNTS
1. Individual Account
2. Joint Account
3. Proprietorship Accounts
4. Partnership Accounts
5. Private Limited Companies Accounts
6. Public Limited Companies Accounts
7. Trust Account
8. Societies, Associations and Club, etc.

PROPRIETARY FIRMS ACCOUNTS


 Ensure status of the Business.
 Obtain clear instructions regarding operations of account.

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 The name of proprietor with full particulars.
 Proprietor has to submit a declaration of proprietorship, signed in
his personal capacity.
 The proprietor may authorize person to operate the account.

MINOR’S ACCOUNT
Accounts in the names of minors are opened with complete name of
minor and Guardian as well.
Birth certificate is required in case of minor.
Natural Guardian can open such account without courts order, other
requires orders of court.
The account will be operated by the guardian even if minor attains the
age of majority. On attaining adulthood minor can open a new account,
in which funds can be transferred from minor account.

ILLITERATE PERSONS ACCOUNT


Two photographs are required one for Account Opening Form, and
second for S.S Card.
As per State Bank of Pakistan directions both thumb impression are
affixed.
Customer has to come personally for each withdrawal.
The account holder having no power to issue cheque to third party.
If the signs are of shaky hand writing, then sign in capital letters.
Mark of identification is also mentioned.

JOINT ACCOUNT
Joint accounts can be opened with mutual agreement of two or more
parties who can be relatives, friends or business associated. The can
take shape of:
 Any one to sign
 Either or survivor
 Any two or more to sign
 All to sign jointly
 All have to sign the AOF and any change in instructions, SS card
will be signed only by authorized signatories.
 Any joint account holder can stop the payment.

PARTNERSHIP FIRM ACCOUNTS


When 2-20 persons join resources to start a business and earn profit,
the business terms as partnership firm. These firms are governed by
the Partnership Act 1932. All the partners have equal right except any
contrary agreement. Profits are shared as per agreement and in case
of loss shared as per percentage of investment.
 List of Partners with signatures.

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 Copies of CNIC of all partners.
 Specimen Signatures Cards signed only by authorize signatories.
 Attested copy of partnership deed duly signed by all the
partners.
 Attested copy of registration certificate in case of registered firm.
 Letter of authority duly signed by all the partners on behalf of
the firm.
 A letter of partnership signed by all the partners in joint and
several capacities.

PRIVATE/PUBLIC LTD COMPANY’S ACCOUNTS


The companies have distinct existence apart from its owners. These
are highly regulated from of business. Companies can be differentiated
on the basis of liability of the stock holders i.e. Limited liability and un-
limited liability. The stock holders have limited liability to bear the loss
of the company up to the share of investment in the business; the
stocks representing the ownership can be easily transferred. In
Pakistan SECP regularize companies. Certificate of incorporation issued
by the Registrar of SECP. A private limited company may start
conducting its business after issuance of certificate of incorporation.
Certificate of commencement of business is granted to public limited
company only and entitles a company to starts its business.
Documents required by banks for open an account in the name of
company:-
 Attested copies of CNIC/Passport of all the directors.
 Certified copies of Certificate of Incorporation.
 Memorandum & Articles of Association.
 Resolution of Board of Directors regarding opening and conduct
of account.
 Certificate of commencement of Business.
 Attested copies of CNIC of all directors.
 List containing names and signatures of Directors duly certified
by SECP.
 Form 29 duly certified by the SECP is required for verification of
present Directors of the company.
 Certified true copy of Certificate of commencement of Business.
 S.S card and AOF must be in accordance with the resolution.
 Attested copy of the certificate of registration.
 List of the members of board of trustees.
 Attested copies of CNIC of all board members.
 Certified copy of trust deed.

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CLOSURE OF AN ACCOUNT
Account holder upon written request or on prescribe form of the bank
can close his/her account. He may or may not mention the reason of
closure of account; signatures are verified from the SS card. The
number of unused cheques shall be noted on the application form. The
balance available paid by bank through pay order/slip prepared in
favor of account holder. ACBL charges Rs.200 as account closure
charges.

CHARITY FUND
A penalty amount goes to charity account. Askari bank has a specific
account and treatment for charity account. If some of the branches are
involve in some non Shariah compliant transaction then they are
terminating that. But if they are are doing some voide transaction then
the income of branch becomes charity.

INVESTMENT ANALYSIS OF ASKARI ISLAMIC BANK

ISLAMIC FINANCIAL INSTRUMENTS


BALANCE SHEET FIGURE (2008-2010)

Annual Annual Annual


2008 2009 2010
Murabha 901983 650043 243525
Ijarah 2087884 1863205 1284925
Musharaka 0 0 0
D.M. 3116617 3323294 1827436
Salam 139098 22069 105534
Other Islamic Modes 12253 13681 18957
Total 6257835 5872292 3480377

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Annual
2008

Annual
2009

Annual
2010

PERCENTAGE RATE OF
ISLAMIC FINANCIAL INSTRUMENTS
FROM (2008-2010)

Annual Annual Annual


Instruments 2008 2009 2010
Murabha 14.4137 11.0697 6.99
Ijarah 33.3643 31.7288 36.9
Musharaka 0 0 0
D.M. 49.8034 56.5928 52.5
Salam 2.22278 0.37582 3.03
Other Islamic Modes 0.1958 0.23298 0.54
Total 100 100 100

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Annual
Annual
2010
2010

SWOT ANALYSIS
A SWOT analysis is an analytical tool that can help analyze a
business. "SWOT" stands for strengths, weaknesses, opportunities, and
threats. This type of analysis represents an effort to examine the
interaction between the particular characteristics of your business and
the external marketplace in which you compete.
The internal portion of a SWOT analysis looks at the individual
strengths and weaknesses of your specific business. Similarly, the
external analysis looks at the opportunities presented by the
marketplace and the threats that you face in your chosen market.

STRENGTHS
Implementation of advance technology in all branches recently Askari
bank has purchased new software because of it the staff can perform
much faster.
Professional staff, right person hired on the right place.
With the passage of time askari bank has expand their branches and
now running almost 140 branches.
Askari bank is providing quality services to it customers.
One distinctive feature of the bank is that it is the only bank working
for the welfare of army officers, which was established by the Army
Welfare Trust.

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WEAKNESSES
Askari bank has lesser number of branches as compare too many other
branches. Due to this problem army officers cannot avail the benefits
of their own bank.As far as deposits rate are concern askari bank has
very low deposits rates.
Need to work more on agriculture and Islamic banking.
Plan makers of ACBL are not competent they are not focusing on the
marketing (new product development, attract new customers)

Opportunities
Askari bank is surrounded by many competitors. It has an opportunity
to do aggressive marketing to increase its business.
Offshore, Islamic and corporate banking

THREATS
AIBL has many competitors, which are continuously increasing its
products and marketing aggressively. It may cause its customers to
shift to competitors.
Some other banks have competent taskforce, which is also threat for
AIBL because human resource is the most valuable resources.

COMPETITIVE ANALYSIS
In competitive analysis we analyze that on which ground our company
has a competitive edge on its competitors.A competitive advantage is
an advantage over competitors gained by offering consumers greater
value, either by means of lower prices or by providing greater benefits
and service that justifies higher prices. Askari bank has some
competitive edge on the following ground.
Union bank gives free ATM card but requires you to maintain
Rs.100000/-Avg monthly balance, otherwise deducts Rs.200/month
while Askari bank does not deduct any charges.
Askari bank is offering I Net facilities but Alfalah bank is not offering
such facility.
Union bank charges Rs. 20/ leaf for cheque book and Askari charge Rs.
5/ leaf.
If you are an account holder of Askari bank then you can enjoy the
online information facility you can also transfer your funds but ABN
AMRO do not provide such type of facilities.
AIBL provide online utility bills payment facility like PTCL, Mobile Bills
etc, but Standard chartered do not provide this facility to its account
holders.
The withdrawal limit of Askari ATM card is Rs. 25000 but HSBC
withdrawal limit is 15000.
BOK is not offering ATM card do you believe?

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BOP charges Rs. 10 for each ATM transaction but Askari do not cut any
charges on ATM transaction.
ACBL provide you free account statement twice in a year but after that
deduct Rs.50 if you want to take more than provided limit and hand
over you on the spot but Standard chartered gives you monthly
statement, deducts Rs.50 per statement and usually hand over you
after 1 day.
The initial deposit of ACBL current account is Rs. 5000 but initial
deposit of S.C current account is Rs. 25000.
Minimum balance requirement for profit of ACBL SB account is
Rs.10000 while standard chartered requirement is Rs. 25000.ACBL
provides free online transfer up to Rs 1.0 million and every branch is
online.
Free issuance of traveler’s cheques with incentives for retention
beyond one month. As far as profit rates are concern Askari bank offers
very low profit rate currently Askari profit rate is 9% for 5 years but
Faysal bank is giving 11% for one year.
Askari bank cut Rs.175 ATM charges after every six months but Bank
Alfalah does not cut any ATM charges from its customers.As compare
to HBL, ABL, UBL, NBP, and MCB, askari bank has very less number of
branches.

RECOMMENDATIONS

1. Workshops and Counseling


Work shop programs should be conducted in every city, rather than
just two centers, for all Askari Islamic employees. These workshops
should relate to all aspects of Islamic banking and finance and may
also be conducted with other banks as a joint program.
The lower staff employed at Askari Islamic should also be given a
chance to succeed in life by training them in different simple jobs at
the bank, which my include sorting of cheques, phone banking etc.
2. Innovative Products
New and innovative products should be introduced by Askari Islamic
Commercial Bank, like its competitor in Islamic banking; special teams
of Islamic banking professional should be developed that include
professional from all departments of the banks to come up with ideas
of new Shariah compliant products. This process will increase the
number of ideas generated and even produce innovative Islamic
financial products for the bank that might give them the edge.

Marketing Plan
A comprehensive marketing should be introduced for the introduction
of their products in detail to their customers, and to make people of
aware of their presence in Islamic banking.

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Technological Advancements
Askari Islamic Commercial Bank should develop a modern connectivity
architecture to effectively maintain an online connection of the branch
with other branches and also the ATM link, which may include using
modern technologies like fiber cables, routers etc. Also backup links
should also be developed,
Also a proper IT department should be established in all branches, with
professional having the knowledge to maintain a secured connection
with other banks. Also scheduled backups of data should be done with
in the bank.

Placements of Employees
There are some departments in the bank that do not have enough
employees, while some have more than needed. All this creates
inefficiencies and so the operations manager should look at the
department of the branch and see where inefficiencies lie, in
consultation of with the heads of the departments and hire individuals
where there are less employees or rotate employees from other
departments.
Priority Banking and Business Development Department
There is no priority banking department at Askari Islamic Commercial
Bank, like that of other bank. A priority banking department should be
developed so as to give even more exclusive and customized services
to high end customers with large deposit accounts. Also Business
Development Department should be developed in all branches, so that
they can actively find prospect customers to take up products from
Askari Islamic Commercial Bank.

ATM FACILITIES
Automated Teller Machines have gained importance because
customers can access their bank accounts in order to make cash
withdrawals and check their account balances even in the hours when
the branch is closed. Many ATMs also allow people to deposit cash or
checks, transfer money between their bank accounts, pay bills and
many more facilities. ASKARI BANK LTD ISLAMIC BANKING BRANCH has
not started its ATM system till now. This is also a great cause of not
attracting the deposit of people. People do not even want to wait till
next morning for opening of branch and then taking cash or check their
account balances. This facility is provided by all the banks around the
country.

LACK OF TRAINED STAFF


Staff in different departments doesn’t have the basic knowledge of
Islamic Banking. They normally are unable to explain and satisfy a
visiting client about the structure of product and its Islamic essence.

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Many of the Bank officers lacking the essence, spirit and philosophy of
Islamic banking, they can’t persuade a client. They are confused about
the consequences and difference between Islamic & Conventional
banking. If this problem persist how an Islamic bank can improve.?
According to my knowledge & experience this is the biggest problem
with Islamic Banks. Most of the top management of the bank is hired
from a non Islamic bank, which just have experience but nothing about
Islamic banking concept. They know how to maximize profit because
they have experience of the materialistic banking system.

LACK OF AWARENESS AMONG PEOPLE ABOUT ISLAMIC


BANKING
Marketing as a tool is not being used as appropriately as it was to be
used. That’s why majority of the public not only is unaware about the
Islamic modes of finance but also does not know about the major
distinctive features of these products. More surprising is that, a
majority of general public does not know about the initiation of the
Islamic Banking Branches by Askari Bank Ltd. Hence, the bank is
unable to compete face to face the other Islamic Banks in the market.

COMPLICATED DOCUMENTATIONS
An Islamic bank has complicated documentation as compared to
conventional banks. Manual Working is also a hurdle in the way of
Islamic banks to compete with other financial institutions; Islamic
banks need special softwares which can facilitate Islamic transaction,
its cash flows, expected return etc. All the softwares need to be
compatible with international general accounting standards

CONCLUSION
After doing internship in ASKARI BANK LTD ISLAMIC BANKING BRANCH,
I am in a position to conclude that the Islamic Banking Services
provided to the customers are properly screened and checked by the
Shariah Advisor in comparison with conventional banks. The working
environment of the Bank is very much friendly and cooperative.
The Askari Islamic Bank has a unique status among other Islamic
Banks because of its low profit rates, security deposits and quick
processing methods for processing of applications. There is a good
training system for the internees as well. The staff currently working in
the Bank is highly cooperative and experienced.
I found there a good environment of skilled persons who are working
for asking bank. At Head office level all the staff is trained and efficient
having good knowledge of Shariah as well as Islamic Banking &
Finance. But at Branch level the employees are not skilled and nor
having good knowledge of Islamic Banking.

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I personally checked and according to my observation all the
transactions are according to Shariah and if any problem there the
whole amount goes to Charity. It is very difficult to summarize six
weeks internship in some pages but the conclusion is “Askari Islamic
Banking Services is providing best HALAL Islamic Products to
their clients”

REFERENCES
Askari Bank Limited IBSD. (2010). Financial Statements of years 2008, 2009 and 2010.
Askari Bank Head Office, Islamabad, Pakistan.
Mr. Ali Khan (2010). Murabaha Monitoring Sheet: Askari Bank
Mr. Asif Malik (2010) Home Musharkah and Car Ijarah:
Mr. Sheikh Kamran (2010) Operations and Reporting.
Askari Bank (2010) Investment record. Askari Bank Head Office Islamabad ,Pakistan.

Online References
www.askaribank.com.
http://www.pakistanbanks.org/members/profiles/askari_profile.html
http://www.alhudacibe.com/askari.php
http://en.wikipedia.org/wiki/History_of_banking
http://en.wikipedia.org/wiki/Bank
http://www.bankjobs.pk/branch-banking/2009/02/15/branch-manager-askari-bank/
http://www.historyworld.net/wrldhis/PlainTextHistories.asp?historyid=ac19

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