Project on:

Islamic Banking
(Faysal Barkat Islamic Banking)

Submitted To:

Sir Saleem Mirrani

Submitted By:
: Adnan Manzoor

(8232)

: Muhammad Iltaf

(8256)

: Fahad Ali

(8266)

MBA 4th (Morning)

Department of Banking and Finance

Government College University Faisalabad

Acknowledgement

We would like to express our deepest appreciation to all those who provided us the
possibility to complete this project. A special thanks we give to our respected teacher Sir.
Saleem Mirrani Lecturer Department of Banking and Finance who provides us complete
guideline in completion of our whole project with the topic of Islamic Banking. We are really
grateful and honored to his marvelous guidance, generous support, sympathetic behavior,
scholastic attitude, research oriented approach and tremendous help throughout our project.
We are also very thankful to those who help in our work in which different bankers i.e Basit Gill
relationship officer faysal bank Barkat Islamic branch and and Imran Sahazad relationship
Manager- Liability faysal bank Islamic banking branch. We are also thankful to our friends and
fellows who show their interest in our project and help us during our work.

CHAPTER No 01

Introduction of Islamic Banking

What is Islam?
The Arabic meaning of Islam is submission to God/Allah; the creator of the universe. It is a
comprehensive and balanced system of life about the spiritual and the temporal realms.

What is Bank?
The financial institution that accept deposits from SSUs (the individuals who have surplus
spending units), lend to SDUs (the individuals who have spending deficit units) and renders
different services to its customers.

What is Islamic Banking?

The riba free banking and Banking according to the Islamic sharia or Islamic rules and regulations is
called Islamic banking.
In whole the world conventional banking becomes popular that is based on interest that is not allowed in
Islam. So the people who dislike riba are interested in doing transactions in accordance with Islamic rules
and shria, so then the concept of Islamic banking was introduce by Islamic scholars which is purely is
based on Quran and Sunna. This concept fulfills the desire of people who like Islam. But now a days
people are using negative word of mouth regarding Islamic banking e.g they said that there is no
difference between Islamic banking and conventional banking. Actually they are wrong in their comments
as each Islamic bank is bound to follow Islamic rules.

Difference between Islamic Banking and Conventional Banking:

Conventional Banking

Islamic Banking

1. The functions and operating modes of 1. The functions and operating modes of
conventional banks are based on fully Islamic banks are based on the principles of
manmade principles.
2.

The

investor

Islamic Shariah.
is

assured

predetermined rate of interest.

of

a 2. In contrast, it promotes risk sharing

between provider of capital (investor) and
the user of funds (entrepreneur) on agreed

rates basis.
3. It aims at maximizing profit without any 3. It also aims at maximizing profit but
restriction.

follow the Shariah restrictions.

4. It does not deal with Zakat.

4. In the modern Islamic banking system, it

has become one of the service-oriented
functions of the Islamic banks to be
a Zakat Collection Centre and they also pay
out their Zakat.

5. Lending money and getting it back with 5. Participation in partnership business is the
compounding interest is the fundamental fundamental function of the Islamic banks.
function of the conventional banks.

So we have to understand our customer's

business very well.

6. It can charge additional money (penalty 6. The Islamic banks have no provision to
and compounded interest) in case of charge any extra money from the defaulters.
defaulters.

Only small amount of compensation and

these proceeds is given to charity. Rebates
are given for early settlement at the Bank's
discretion.

7. Very often it results in the bank's own 7. It gives due importance to the public
interest becoming prominent. It makes no interest. Its ultimate aim is to ensure growth
effort to ensure growth with equity.

with equity.

8. The status of a conventional bank, in 8. The status of Islamic bank in relation to

relation to its clients, is that of creditor and its clients is that of partners, investors and
debtors.

trader, buyer and seller.

9. A conventional bank has to guarantee all 9. Islamic bank can only guarantee deposits
its deposits.

for deposit account, which is based on the

principle of Al-Wadiah, thus the depositors

are guaranteed repayment of their funds,

however if the account is based on the
Mudarabah concept, client have to share in a
loss position..

Purpose of Study:
Our purpose of studying the subject of Islamic banking is to get knowledge about the rules and
regulations that have been defined by Islam regarding banking system and then examining that
either these rules are practically followed by Islamic banks or not. So that we can able to clarify
the concept of people who say that there is no difference between Islamic and conventional
banking.

Project Overview:
This project is on the subject of Islamic banking. In which we have discussed different rules and
regulations explained by the Islam regarding Islamic banking. For this purpose we have choose
Faiysal bank branch Liyqat road Faisalabad. There are three chapters and the first chapter is on
introduction that includes subject intro, bank history and finally the branch intro. In second
chapter we have discussed different services and products that this branch is providing to its
clients. It also includes documentation and procedures that are used in banking operations of
branch for delivering its services to customers. At the end in third chapter we have compare these
services and products with the theory that we have studied. Finally we have concluded that either
faysal bank is following Islamic rules or not in its operations. At the end of project we have
given conclusion of our finding.

History:

Faysal Bank Limited (FBL) is a subsidiary of Shamil Bank of Bahrain E.C. (Islamic Bankers)
which is controlled and managed by the Dar Al-Maal Al-IslamiTrust (DMI).
Faysal Bank started operations in Pakistan in 1987, first as a branch set-up of Faysal Islamic
Bank of Bahrain and then in 1995 as a locally incorporated Pakistani bank under the present
name of Faysal Bank Limited. On January 1, 2002, Al Faysal Investment Bank Limited, another
group entity in Pakistan, merged into Faysal Bank Limited which resulted in a larger, stronger
and much more versatile institution. In fact it has the highest share capital amongst private banks
in Pakistan and is amongst the largest in terms of equity
DMI is headed by H.R.H Prince Mohamed Al Faisal Al Saud with its Head Office in Geneva,
Switzerland. It has been one of the leading contributors to the development of Islamic-banking in
the world, particularly with regard to promoting new modes of investments compatible with
Islamic Shariah, through its network of over 20 financial and business companies, represented in
15 countries around the world.
Shamil Bank of Bahrain E.C. (Islamic Bankers) came into existence when the board of DMI
decided to merge Faysal Islamic Bank of Bahrain and Islamic Investment Company of the Gulf.
Based on the pioneering experience of Islamic banking of both, a new entity, Shamil Bank of
Bahrain E.C was formed. The amalgamation process was completed in June 2000, with an
objective to further enhance and consolidate the financial base and to optimize the operational
economies.Shamil Bank continues to thrive with its Islamic-principles and a strong asset base of
US$ 2.9 billion and equity of more than US$ 230 million. The Bank is fully committed to the
regionand continues to hold a 60 percent controlling interest in Faysal Bank Limited,
Pakistan.
FBL was the first Bank to start Islamic-banking in Pakistan under the name of FIBB. Its strict
compliance to Shariah gives a distinctive edge over other conventional Financial Institutions.
The Bank is governed by strict Islamic banking rules and is not allowed to invest in any
government / institutional securities or financial investment schemes that are interest based.
Since 1987, FIBB operations have been extended to Pakistan in the form of full commercial
operations.

Vision:

The introduction of a just and equitable financial system by being a world class multi-purpose
financial institution, providing a range of specialized services, working on Shariah principles.

Values:
The mission statement translates into our objectives:
To comply with the spirit of Islamic Shariah this will govern our entire business by
translating it into modern financial products and services.
To strives for halal profit, prudent growth and pursuit of improved efficiency.
To focus on serving our customers and shareholders by building relationships based on trust
and mutual benefit.
To inculcate a culture of teamwork within the Bank by introducing staff training and
development programs.

Q. What is the philosophy of Islamic banking and finance?

Islamic shariah prohibits interest but it does not prohibit all type of gains on capital. It is
only the increase stipulated or sought over the principal of a loan or debt that is
prohibited. Islamic principles simply require that performance of capital should also be
considered while rewarding the capital. The prohibition of a risk free return and
permission of trading, as enshrined in the Verse 2:275 of the Holy Quran, makes the
financial activities in an Islamic set-up real asset-backed with ability to cause value
addition.
Islamic banking system is based on risk-sharing, owning and handling of physical goods,
involvement in the process of trading, leasing and construction contracts using various
Islamic modes of finance. As such, Islamic banks trade and/or invest in assets/business
deals

for

the

purpose

of

income

generation.

Profit has been recognized as reward for (use of) capital and Islam permits gainful
deployment of surplus resources for enhancement of their value. However, along with the
entitlement of profit, the liability of risk of loss on capital rests with the capital itself; no
other factor can be made to bear the burden of the risk of loss. Financial transactions, in
order to be permissible, should be associated with goods, services or benefits. At macro
level, this feature of Islamic finance can be helpful in creating better discipline in conduct
of fiscal and monetary policies.

Objective of Faysal AlBarkat Islamic Bank:

Bank according to your beliefs Our Barkat Islamic Banking is purely dedicated to Shariah
compliant banking services. With our well experienced staff, we ensure that your Islamic
banking needs are fulfilled. Moreover our Shariah advisor is a qualified mufti who oversees
business of these dedicated branches and ensures its compatibility and compliance with Shariah
principles.
Following are the main modes of Islamic banking and finance;

MURABAHA
Literally it means a sale on mutually agreed profit. Technically, it is a contract of sale in which
the seller discloses his cost and profit. Islamic banks have adopted this as a mode of financing.
As a financing technique, it involves a request by the customer to the bank to purchase certain
goods for him. The bank does that for a definite profit over the cost, which is included in the
Selling Price. To provide credit to the Customer, Islamic Banks normally allow the deferment of
Selling Price to a future date or dates. Deferment of Price is not an essential feature of Murabaha.
In practice, however, Murabaha has become synonymous with Murabaha Muajjala where Selling
Price is deferred. In such transactions, the Selling Price can be the same as Cash Price or it can
be higher or lower.

MUSAWAMAH / BAI MUAJJAL

Musawamah is a general and regular kind of sale in which price of the commodity to be traded is
agreed between the seller and the buyer through the normal process of bargaining, without any
reference to the price paid or cost incurred by the former. Thus, it is different from Murabaha in
respect of pricing formula. Unlike Murabaha, the seller in Musawamah is not obliged to reveal
his cost. All other conditions relevant to Murabaha are valid for Musawamah as well.
Musawamah can be used where the seller is not in a position to ascertain precisely the costs of
commodities that he is offering to sell. Like Murabaha, Musawamah can be on the basis of spot
payment of Price or it can be a credit sale. If latter, it is referred to as Bai Muajjal. Selling Price
can be equal to or higher or less than the cash price. Usually it is higher and this is explicitly
allowed in shariah.

IJARAH
Ijarah is a contract of a known 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 ork 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.

IJARAH-WAL-IQTINA
A contract under which an Islamic bank provides equipment, building or other assets to the
customer against an agreed rental together with a unilateral undertaking by the bank or the
customer that at the end of the lease period, the ownership in the asset would be transferred to /
acquired by the lessee under a separate Agreement of Sale. The undertaking or the promise does
not become an integral part of the lease contract. The rentals are fixed in such manner that the
bank gets back its principal sum alongwith with profit over the period of lease.

BAI SALAM
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 for
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 may be any kind of goods but 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.

MUDARABAH
A form of partnership where one party provides the funds while the other provides expertise and
management. The latter is referred to as the Mudarib. Any profits earned are shared between the
two parties in a pre-agreed ratio, while loss is borne only by the provider of the capital.

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 the partners strictly in proportion of their respective capital contributions.

CHAPTER No 2

Services of Faysal Al Barkat Islamic Bank

Barkat Kamil Business Account:
An account that not only provides return on your investments, but offers the option to avail a
wide variety of free of charge banking services to suit your banking needs. A suitable solution for
businessmen as well as individuals that are looking for free banking services due to their
business banking needs.
Designed on foundation of Mudarabah, Barkat Islamic Banking is the Mudarib (manager of
the funds) and the customer is the Rabb-ul-Maal (owner of funds). These deposits are deployed
in Shariah compliant modes such as Ijarah, Murabaha and Musharakah.
Product Features and Benefits
Previous Months Minimum Average Monthly balance of Rs. 100,000 required to avail
free of charge services.
A range of FREE services:
o Cheque books
o Payorders
o Duplicate account statements.
o Online banking services.
o Account balance and maintenance certificates.
o Online intercity clearing as well as same day clearing.
o Visa Debit card.
Unlimited transaction facility.
Profit calculated on monthly average balance and paid monthly.
Online access to your account through any Faysal Bank branch.
24-hour access to your account through Faysal Banks Call Centre, ATM network, and all
other 1-Link / MNET ATMs country-wide.

 A host of conveniences through the Faysal Bank ATM network:

o Instant funds transfer
o Utility Bill Payment
o Cash deposit (at selected Faysal Bank ATMs)
SMS Alert facility.
Dedicated Relationship Manager to advise you, as per your needs.

Current Account:
Barkat Islamic Current Account is a value added product which enables you to derive maximum
benefits from your deposits. It is a suitable solution for individuals as well as business entities
looking for a checking account based on Islamic Financing principles. This flexible account is
based upon Qard, (loan on demand). This makes it free of interest and the principle is guaranteed
to you, the depositor. You can be rest assured that your funds will be utilized in strict adherence
to Shariah principles, as all deposits are allocated in a specific pool of funds which are further
invested in Islamic assets.
Product Features and Benefits:
Nationwide access to your account through any Faysal Bank branch.
24-hour access to your account through Faysal Banks Call Centre and ATM network,
as well as all other 1-Link / MNET ATMs country-wide.
Online access to your account through any Faysal Bank branch.
A host of conveniences through the Faysal Bank ATM network:
Instant Funds Transfer
Utility Bill Payment
Cash deposit (at selected Faysal Bank ATMs)
SMS Alert facility

Saving Account:
Barkat Islamic Saving Account provides higher returns on your investments and is best-suited
solution for individuals as well as business entities that are looking for competitive returns on
their savings based on Islamic Financing principles.
Designed on the foundation of Mudarabah, Barkat Islamic Banking is the Mudarib (manager
of the funds) and you, the customer are the Rabb-ul-Maal (owner of funds). These deposits are
deployed in Shariah compliant modes such as Ijarah, Murabaha and Musharakah. The rate of
profit on your deposit will be determined through a Shariah approved mechanism for the
calculation of weightages are announced at the beginning of each calendar month and shall be
applicable for that month only.
Barkat Islamic Saving deposits will share in the profit earned by the Islamic Banking Branches
of Faysal Bank. Losses, if any, will be shared by each depositor in the proportion of investment.
Monthly weightages for profit distribution shall be calculated and displayed at all Barkat Islamic
Banking branches as well as our website.
Product Features and Benefits:
Account can be opened with as low as Rs. 100.
No average deposit balance required to earn profit.
Unlimited transaction facility.
Profit calculated on monthly average balance and paid monthly.
Tiered profit structure: the higher the tenor and balance of your deposit, the higher your
expected profit amount.
Online access to your account through any Faysal Bank branch.
24-hour access to your account through Faysal Banks Call Centre at 111 06 06 06
Faysal Bank ATM network and all other 1-Link / MNET ATMs country-wide.
A host of conveniences through the Faysal Bank ATM network:
o Instant funds transfer
o Utility Bill Payment

o Cash deposit (at selected Faysal Bank ATMs)

SMS Alert facility.

Investment Certificate:
Barkat Investment Certificate (BIC) is a suitable solution for investors who are looking for high
returns on their investments, with absolute Shariah compliance. It is a convenient and secure
financial solution for individual account holder as well as a business entity who seeks to
capitalize on an opportunity under a hybrid arrangement of Musharakah and Mudarabah Islamic
modes of financing. The deposit is allocated to a specific pool of funds that are invested in
Islamic assets, governed by predefined weightages that are based on the Profit and Loss Sharing
(PLS) mechanism in adherence to the Shariah principles. Monthly weightages for profit
distribution along with historical rate sheets shall be are displayed at all Barkat Islamic Banking
branches and our website.
Product Features & Benefits:
Minimum investment amount Rs. 50,000/-.
A range of tenures: 1 month, 3 months, 6 months and 1 year.
Monthly as well as maturity profit payment options available.
Options for automatic renewal.
Premature withdrawal option available with no penalty charges.
Dedicated Relationship Manager to advise you, as per your needs.

Foreign Currency Account:

Barkat Islamic Foreign Currency Current Account enables you to derive maximum benefits
from your foreign currency deposits. This flexible account is based upon Qard, (loan on
demand), which makes it free of interest and the principle is guaranteed to the customer. The
customer can be rest assured that the funds will be utilized in strict adherence to Shariah
principles, as all deposits are allocated in a specific pool of funds which are further invested in
Islamic assets.

Product Features and Benefits:

Choice of currency USD $, GBP and Euro.
Minimum Balance required USD $ 500 or equivalent.
Nationwide access to your account through any Faysal Bank branch.
24-hour access to your account through Faysal Banks Call Center.
Service Charges are as per Faysal Banks Schedule of Charges.

Foreign Currency Saving Account:

An account that provides greater returns on your investments and is a suitable solution for
individuals as well as business entities that are looking for competitive returns on their savings
based on Islamic Financing principles.
Opened on the basis of Mudarabah, where Barkat Islamic Banking is the Mudarib (manager
of the funds) and you, the customers are the Rabb-ul-Maal (owner of funds). These deposits are
deployed in Shariah compliant modes such as Ijarah, Murabaha and Musharakah. The rate of
profit on your deposit will be determined through a Shariah approved mechanism for calculation
of weightages which will be announced at the beginning of each calendar month and shall be
applicable for that month only. Barkat Islamic Foreign Currency Saving deposits will share in the
profit earned by the Islamic Banking Branches of Faysal Bank. Losses, if any, will be shared in
the proportion of investment by each depositor. Monthly weightages for profit distribution shall
be calculated and displayed at all Barkat Islamic Banking branches as well as our website
Product Features and Benefits:
Available in USD.
Account can be opened with a minimum balance of $ 1000
No average deposit balance required to earn profit
Unlimited transaction facility
Profit calculated on monthly average balance and paid monthly.

 Tiered profit structure: the higher the tenor and balance of your deposit, the higher your
expected profit amount

E-Statement:
Banking at your fingertips! Your e-statement service allows you to keep track of all your banking
transactions, now you can receive your account statements directly in your email.
Product Features and Benefits
Convenience: Barkat e-statement service enables you to view your current and saving
account activities, anywhere, anytime. All you have to do is access your personal e-mail
account, at your convenience.
Free: This facility comes to you at no extra cost. All you need is a personal e-mail
address to which your e-statements will be sent.
Flexibility: You can receive daily* or monthly e-statements at, up to 2 different email
addresses.
Security: While printed statements run the risk of being misplaced, your e-statement is
more secure.

Murabaha:
Murabaha is a term of Islamic FIQH and it refers to a particular kind of sale in which the seller
discloses the cost of goods being sold at as well as the margin of profit. The payment of price in
case of Murabaha may be on the spot or it may be deferred, as agreed upon by the parties.
Murabaha transactions are subject to the following rules, without which this transaction is not
valid:

Feature and Benefits:

Barkat Murabaha can be used by individuals, sole-proprietorships, partnerships and
corporate entities.
Purchase of inventories, raw materials, semi-finished / finished goods, stores & spares
and all kinds of consumables can be made through Barkat Murabaha.
BarkatMurabaha is an ideal mode for short term credit (up to 12 months) as it offers
flexible credit terms to match the Customers cash-flow.

Documentation Required for Bank Islamic Murabaha:

Brief profile of business
Copy of CNIC of the individual / proprietor (original must be shown)
06 month bank statement
Bank certificate, if proprietorship concern
Proof of income
Basic Customer Fact Sheet
Audited/Management accounts, if proprietorship concern
Details of facilities availed from other Financial Institutions
Copy of NTN certificate (original must be shown)
Form 3 (for Public Limited Companies Only)
Copy of Memorandum and Articles of Association
Certificate of incorporation and commencement of Business
Copy of Form A & 29
Certified copy of partnership deed
Facility request letter duly signed & stamped
Full details of proposed assets to be purchased

Auto Finance:
Barkat Auto Finance based on Diminishing Musharakah. Barkat Auto Finance is based on
Diminishing Musharakah, where you participate with Barkat Islamic Banking in a joint
ownership of your vehicle and the Bank provides a certain amount of financing. You agree to a
monthly payment to the Bank of which one component is rent for use of the vehicle, and the
other is for you to increase your ownership of the vehicle. Once you have made the full payment,
which has been agreed upon, you become the sole owner with a free and clear title to the vehicle.

Product Features and Benefits

Avail the financing of new, used and imported vehicle for personal use
Quick processing with minimum documentation
No Limit on financing amount starts from as low as Rs. 100,000 and minimum equity
requirement of as low as 20%
Multiple options for tenure up to 5 years
Installment repayment to start ONLY after delivery of the vehicle and no processing fee
until approval of financing
Built-in Takaful (Islamic Insurance) expense for the entire financing tenure. The bank
will arrange Takaful for the vehicle from a reputable Takaful company and will facilitate
you in claim processing
Maximum safety of your vehicle ensured through the tracker installation.

Home Finance
Barkat Home Finance based on Diminishing Musharkah. Barkat Home Finance is based on
Diminishing Musharkah, where you participate with Barkat Islamic Banking in the joint
ownership of your property, where the bank provides a certain amount of financing. You agree to
a monthly payment to the bank of which one component is rent for the use of the property and
the other is for you to increase your ownership in the home. Once you have made the full
payment, which has been agreed upon, you become the sole owner with a free and clear title to
the property.

Product Features and Benefits:

Various product options to suit your need:
o Home Buyer Purchase a readymade home of your choice.
o Home Refinance Transfer an existing Mortgage to Barkat Islamic Banking.
o Home Renovation Give a new look to your existing home.
Finance up to 75% of the appraised value of your new home or up to PKR 50 million
(whichever is lower)
Maximum convenience from 1 up to 20 years
Easy to make partial prepayments
Minimal documentation & processing fee
Quick processing time
Property takaful coverage
Accidental death takaful coverage

Basic Banking:
Barkat Islamic Basic Banking Account is a current account that enables small depositors the
comfort of banking in a secure and customer friendly environment.

Product Features and Benefits:

Account can be opened with an initial deposit of Rs. 1000/- only.
No minimum balance maintenance charges.
2 free deposits and 2 free withdrawals per month through cash / clearing. In case of
additional transactions, charges as per Schedule of Charges are applicable.
Free of charge Annual Statement of account. Standard charges apply if more than one
statement is required.
Unlimited free-of-charge withdrawals through Faysal Bank ATMs.
Service Charges are as per Faysal Banks Schedule of Charges.

Documentation Required
Duly filled Customer Relationship Form (CRF) along with Specimen Signature Card.
Proof of income.
Copy of CNIC (Original CNIC must be shown at the time of account opening).

Chapter No 3

Analysis
In this chapter we are going to analyze the services which are in actual according to the Islamic
rules and regulations and what actually Faisal bank Al barkat is offering to their customer. Faisal
bank Albarkat basically is offering the services not in purely Islamic ways but also it is the
mixture of both conventional and Islamic just like hybrid services they are offering. Faisal bank
started its operations as Islamic bank recently that is why maturity of Islamic services does not
exist in the service delivery.
Faisal bank albarkat is basically offering the deposits facilities saving account and current
account and kamil business account.

Analysis of Deposits
Saving Account:
Faisal bank albarkat is offering saving account to its clients. This account is maintained under the
MUDARABA contract. In this service faisal bank takes deposits from the customer and make a
Mudaraba contract with the customer. Bank acts as Modarib and customer as a rab ul maal.
Bank told the approximate profit to the customer not in exact. Mostly it is 50, 50 percent
distributed to the both parties in this bank.
It is not actually based on the profit and loss basis but also here is confirm profit is given to the
customer never bear the loss. . We asked the reason they said in our bank there is no chance of
loss because our portfolio is too strong. They said that Weightages for each calendar month will
be pre-announced and applied as per rules to determine the actual amount of profit payable to
each depositor. Profit will be paid every month. In practice they use the kibor for determining the
profit minimum criteria for loan profit is kibor. Rate of Profit on deposits will be determined
through

shariah

approved

weightage

mechanism

Business Kamil Account

Faisal bank albarkat is offering business kamil account to its clients. There is unrestricted
Mudaraba relationship between depositor and bank. Designed on foundation of Mudarabah,
Barkat Islamic Banking is the Mudarib (manager of the funds) and the customer is the Rabbul-Maal (owner of funds). In our point of view this is not an Islamic way of mudaraba reason is
this profit on this mudaraba is dependent upon the regulations given by state bank of Pakistan but
also profit of mudaraba is based on purely profit and loss basis. And in mudaraba profit sharing
ratio is decided already at the time of establishment of contract but they do not decide the ratio of
profit distribution. But also they tell the approximate rate of profit to depositor and on the day of
profit distribution it is distributed at the rate of 50, 50 percent.

Current Account
Current account is offered by the faisal bank albarkat in riba free account form. In this account
no profit is paid to the investor and his amount is used under pure Islamic way. In our point of
view this type of account is not breaching the Islamic rules.

Analysis of Financing
In financing faisal bank albarkat is offering only one service that is AUTO FINANCING. This
facility is based on the MUSHARKAH business. In their website it is mentioned that they are
offering this service under diminishing musharkah in practice they are offering this service on
just musharkah. But their operations procedure is strange not based on pure Islamic system. The
different features of this auto finance facility is following.
First thing is that when they buy a car on the request of client faisal bank does not
transfer its ownership to its own name but also it is directly transferred to the name of
client. But in Islamic point of view seller must have the ownership of car at the time of
sale which does not exist in reality.
Faisal bank does not take funds from the client just like the investment of other partner
but also all payment for the purchase of car is made by the bank itself. Only bank takes
the down payment that is 20% of total value of car.
According to the Islamic jurisprudence in musharkah asset or property cannot be lent out
as lease to the third party as Imam Abu Hanifa said but in faisal bank it is mentioned
in agreement that the client can lent out this car to the third party by saying that I have

paid some installment if you want to buy this you pay the remaining installment and get
ownership of car from me.
It has been mentioned in website that they are bearing the expenses of takaful of car but
in actual client bears the expenses of takaful.
Unit of price and rent and takaful charges are settled by the bank on the basis of
instructions received from the SBP. Because their unit of price involves the rent and
takaful and kibor plus rate e.g if one installment is of Rs 20000/- it means in this amount
the rent, unit of price and takaful charges are included. This installment is fixed for a
year.
Price of installment changes with the passage of time but here case is that reason of
changing the price is not to decline the value of car but also due to change in kibor rates it
is changed.
Customer is bearing the kibor interest rate and this is 10.5% now a days and 9% is plus
and 5% is of takaful expenses which totally 24.5% this becomes the total cost of one
installment. Which is totally different from the Islamic point of view.
If customer fails to make payment then customer down payment perform the functions of
security this is also against the Islamic rule. Because it is not mentioned in the agreement
about the use of down payment.
If we say that the faisal bank is running its operations under sharia compliance it will not
be right. Because Islamic rules under diminishing musharkah are something else and
rules which they are using are something else. In car financing here is no concept of
deciding the unit of price after revaluation of asset at the time of settlement of each
installmen so that actual price can be charged from the client. When they decide fixed
amount of installment then it becomes the form of riba. Neither bank has ownership of
subject matter at the time of delivery which is also non Islamic. Then how we can say
that faisal bank albarkat is Islamic bank. There is no relation of Islamic bank with fixed
interest or kibor and this bank is offering different services under riba or fixed interest.

Conclusion
After doing this project we concluded that thefaisal bank al barkat is not following the
Islamic rules and regulations but also they are offering these services under their own
made rules. Faisal bank is dealing with halal products this is their focus and in these

services bank must follow the Islamic rules. This is so called Islamic bank not a pure
Islamic bank. Mufti Muhib ur Rehman is the sharia advisor of faisal bank albarkat. In
auto financing bank is not following the actual rules of diminishing musharkah as it is
based on KIBOR plus.