ISLAMIC BANKING AND MODE OF FINANCING

Islamic Banking
Islamic banking has been defined as banking in consonance with the ethos and value system of
Islam and governed, in addition to the conventional good governance and risk management rules,
by the principles laid down by Islamic Shariah.[1]
The objective of Islamic banking system is to make a positive contribution to the fulfillment of
socioeconomic objectives of the society in all spheres, including trade, industry & agriculture
etc.[2] in general, is to promote, foster and develop the application of Islamic principles, law and
tradition to the transaction of financial, banking and related business affairs and to promote
investment companies. Islamic banks accept deposits which they can either commit to
investment or general deposits. They also have investment accounts with or without
authorization. Banks engage in investment activities based on Musharakah (equity participation)
Mudarabah or Qirad (agencies), Murabaha, Bai' Salam (post delivery sale) and/or leasing
arrangements especially for equipment. On the lending side, Islamic banks issued a number of
new lending instruments such as Al Muqarada profit bonds to finance large projects and Al-
Mudarabah certificates which were not issued for specified projects. Islamic banks practice
conventional short term financing on a profit/loss basis.[3]

Philosophy of Islamic banking and finance

The prohibition of interest by Islam is the base of the development of Islamic Banking
Phelosopghy. The Islamic system order based on a set of principles constituting the concept and
philosophy as enunciated explicitly in the Quran.This philosophy provides what can be
understood as the Islamic system of social justice. [4]In Islamic law some gain has been
prohibited which are generally fixed or if there is no concept of risk shearing. Conventional
Finance believes in return without risk, whilst Islamic Finance prohibits the latter and enforces
the opposite.[5]
Islam prohibits interest but it does not means, that it prohibits all gains on capital. The only
increase stipulated or sought over the principle loan or debt is prohibited in Islamic sharia law.
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 Holy Quran[1], makes the financial activities in an Islamic set-up real asset-
backed with ability to cause value addition.[6]
Islam deems profit, rather than interest, to be closer to its sense of morality and equity because
earning profits inherently involves sharing risks and rewards.[7] Islam encourages shearing of
risk among lender and borrower, Islamic financing system is based on this principle, it has also
another character of owing and handing of real assets, its involvement in trading, construction
and leasing using Islamic mode of financing. As such, Islamic banks deal with asset management
for the purpose of income generation. They will have to prudently handle the unique risks
involved in management of assets by adherence to best practices of corporate governance. Once
the banks have stable stream of Halal income, depositors will also receive stable and Halal
income.[8]
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 conductive of fiscal and monetary
policies.[9]
All such things/assets corpus of which is not consumed with their use can be leased out against
fixed rentals. The ownership in leased assets remains with the lesser that assumes risks and gets
rewards of his ownership. The institution may either rent the equipment or receive a share of the
profits earned through its use; Islamic leasing (Ijara wal Iqtina) are the same as Ijarah except that
the lessee can acquire ownership of the asset by making installment payment.[10]

Major modes of Islamic banking and finance

[1] Those who consume interest94 cannot stand [on the Day of Resurrection] except as one stands that
is being beaten by Satan into insanity. Holy Quran Albaqra Verse 275
Following are the main modes of Islamic banking and finance:

1. Murabaha

Literally it means a sale on mutually agreed profit. Technically, it is a contract of sale in which
the seller declares his cost and profit. Islamic banks have adopted this as a mode of financing. As
a financing technique, it involves a request by the client to the bank to purchase certain goods for
him. The bank does that for a definite profit over the cost, which is stipulated in advance.[11]

2. Ijara

Ijara 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, Ijara 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.[12]

3. Ijarah-Wal-Iqtina

A contract under which an Islamic bank provides equipment, building or other assets to the client
against an agreed rental together with a unilateral undertaking by the bank or the client that at the
end of the lease period, the ownership in the asset would be transferred to the lessee. The
undertaking or the promise does not become an integral part of the lease contract to make it
conditional. The rentals as well as the purchase price are fixed in such manner that the bank gets
back its principle sum along with profit over the period of lease.[13]

4. Istisna

It is a contractual agreement for manufacturing goods and commodities, allowing cash payment
in advance and future delivery or a future payment and future delivery. Istisnaa can be used for
providing the facility of financing the manufacture or construction of houses, plants, projects and
building of bridges, roads and highways.[14]

5. Bai Muajjal
 Literally it means a credit sale. Technically, it is a financing technique adopted by Islamic banks
that takes the form of Murabaha Muajjal. It is a contract in which the bank earns a profit margin
on his purchase price and allows the buyer to pay the price of the commodity at a future date in a
lump sum or in installments. It has to expressly mention cost of the commodity and the margin of
profit is mutually agreed. The price fixed for the commodity in such a transaction can be the
same as the spot price or higher or lower than the spot price.[15]

6. 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 accrued are shared between the
two parties on a pre-agreed basis, while loss is borne only by the provider of the capital.[16]
Murabaha in tandem with Bai Muajjal is a useful means of financing in the Islamic Mortgages
arena. It allows the Bank to purchase the house at spot price and then sell it to the client over a
deferred period thereby generating a profit for the Bank.[17]

7. 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.[18]

8. 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 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.[19]

9. Qard Hassan (Good Loan)

This is a loan extended on a goodwill basis, and the debtor is only required to repay the amount
borrowed. However, the debtor may, at his or her discretion, pay an extra amount beyond the
principle amount of the loan (without promising it) as a token of appreciation to the creditor. In
the case that the debtor does not pay an extra amount to the creditor, this transaction is a true
interest-free loan. Some Muslims consider this to be the only type of loan that does not violate
the prohibition on riba, since it is the one type of loan that truly does not compensate the creditor
for the time value of money.[20]

Ratio of Profit
There is a difference of opinion among the Muslim jurists about the Ratio of Profit.
In the view of Imam Malik and Imam Shafii, it is necessary for the validity of Musharaka that
each partner gets the profit exactly in the proportion of his investment. Therefore, if A has
invested 40% of the capital, he must get 40% of the profit. Any agreement to the contrary which
makes his entitled to get more or less than 40% will render the musharkah invalid in Shariah.
On the contrary, the view of Imam Ahmad is that the ratio of profit may differ from the ratio of
investment if it is agreed between the partners with their free consent. Therefore, it is permissible
that a partner with 40% of investment gets 60% or 70% of the profit, while the other partner with
60% of the investment gets only 40% or 30%.
The third view is presented by Imam Abu Hanifah which can be taken as a via media between
the two opinions mentioned above. He says that the ratio of profit may differ from the ratio of
investment in normal conditions. However, if a partner has put an express condition in the
agreement that he will never work for the musharkah and will remain a sleeping partner
throughout the term of musharkah, then his share of profit cannot be more than the ratio of his
investment. [21]

Islamic financing and its global evolution

As with all things Islamic, the origination of Islamic finance goes back to the time of
Prophet Muhammad (Peace be upon Him). The Quran and the example of Prophet
Muhammad (Peace be upon Him) provide direct behavioral guide and represent bedrock of
Islamic faith to over one billion Muslims globally. The Prophet Muhammad (Peace be upon
Him) happened to be a businessman serving as a trader for Khadija (May Allah be pleased with
Her). The Prophetic example was the very epitome of fair-trade. Refraining from usury, ensuring
transparency in transactions, and total honesty entitled him Al- Amin (The trustworthy) in pre-
Islamic Arabia[22]

During the Islamic Golden Age, early forms of proto-capitalism and free markets were
present in the Caliphate; the first modern experiment with Islamic banking was undertaken in
Egypt under cover, without projecting an Islamic image, for fear of being seen as a manifestation
of Islamic fundamentalism which was anathema to the political regime. The pioneering effort,
led by Ahmad El Najjar, took the form of a savings bank based on profit-sharing in the Egyptian
town of Mit Ghamr in 1963. This experiment lasted until 1967[23], by which time there were
nine such banks in the country. These banks, which neither charge nor paid interest, invested
mostly by engaging in trade and industry, directly or in partnership with others, and shared the
profits with their depositors.[24]
But some views whows that the first modern Islamic modern banking institution stablished in
Pakistan in 1950. As a former credit Union. This was first Islamic financing movement. Using
this idea Mit Ghamr saving Bank emerged as a rural institution in Egypt in 1963. [25] At
meeting of Foreign minister of Islamic countries in Karachi Pakistan in 1970, Pakistan and Egypt
jountly proposed for the establishment of international Islamic Bank for trade and development
this again discussed in 1973 with Banghzi (Libya) in a meeting which further suggested for
constituting a committee of experts for designing this international Islamic Bank. This was
finally established in 1972 as Islamic Development Bank in Jeddah Saudia Arabia.[26] The IDB
was established in 1974 by the Organization of Islamic Countries (OIC), but it was primarily an
intergovernmental bank aimed at providing funds for development projects in member countries.

The Islamic Golden Age, also sometimes known as the Islamic Renaissance, is traditionally dated from
the 7th to 13th centuries Common Era., but has been extended to the 15th and 16th centuries by more
recent scholarship. During this period, artists, engineers, scholars, poets, philosophers, geographers and
traders in the Islamic world contributed to the arts, agriculture, economics, industry, law, literature,
navigation, philosophy, sciences, sociology, and technology, both by preserving and building upon
earlier traditions and by adding inventions and innovations of their own.

A free market is a term that economists use to describe a market which is free from economic
intervention and regulation by government, other than protection of property rights (i.e. no regulation,
no subsidization, no single monetary system and no governmental monopolies).
The IDB provides fee based financial services and profit-sharing financial assistance to member
countries. The IDB operations are free of interest and are explicitly based on Shariah principles.
[27]
In the seventies, changes took place in the political climate of many Muslim countries so that
there was no longer any strong need to establish Islamic financial institutions under cover. A
number of Islamic banks, both in letter and spirit, came into existence in the Middle East,[28].
After that, numbers of Islamic Bank established in different Islamic countries. Dubai Islamic
Bank in 1975 in Dubai, Faisal Islamic Bank in Egypt and Sudan in 1972, Kuwait Finance House
in 1977. Jordan Islamic Bank in 1978 and Bahrain Islamic Bank in 1979[29]
Islamic banking made its debut in Malaysia in 1983, but not without antecedents. The first
Islamic financial institution in Malaysia was the Muslim Pilgrims Savings Corporation set up in
1963 to help people save for performing hajj (pilgrimage to Mecca and Medina). In 1969, this
body evolved into the Pilgrims Management and Fund Board or the Tabung Haji as it is now
popularly known. The Tabung Haji has been acting as a finance company that invests the savings
of would-be pilgrims in accordance with Shariah, but its role is rather limited, as it is a non-bank
financial institution. The success of the Tabung Haji, however, provided the main impetus for
establishing Bank Islam Malaysia Berhad (BIMB) which represents a full fledged Islamic
commercial bank in Malaysia. The Tabung Haji also contributed l2.5 per cent of BIMB's initial
capital of M$80 million. BIMB has a complement of fourteen branches in several parts of the
country. Plans are afoot to open six new branches a year so that by 1990 the branch network of
BIMB will total thirty-three [30]
Reference should also be made to some Islamic financial institutions established in countries
where Muslims are a minority. There was a proliferation of interest-free savings and loan
societies in India during the seventies. [31] The Islamic Banking System (now called Islamic
Finance House), established in Luxembourg in 1978, represents the first attempt at Islamic
banking in the Western world. There is also an Islamic Bank International of Denmark, in
Copenhagen, and the Islamic Investment Company has been set up in Melbourne, Australia.[32]

History of Islamic Banking in Pakistan

Pakistan now recognized one of the Islamic finance industries in the World. Muhammad Ali
Jinnah as early 1948, emphasized on Islamic principles in his address at inauguration of State
Bank of Pakistan he 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. [33]

Pakistan has a protracted history of Islamic banking with the initial attempt to Islamize banking
system in 1980s2, leading to sweeping changes in the Banking Companies Ordinance, 1962
(BCO62) and associated laws and regulations to accommodate non-interest based banking
transactions[34]. The Islamization measures included the elimination of interest from the
operations of specialized financial institutions including HBFC, ICP and NIT in July 1979 and
that of the commercial banks during January 1981- June 1985.[35]
Separate Interest-free counters started operating in all the nationalized commercial banks, and
one foreign bank (Bank of Oman) on January 1, 1981 to mobilize deposits on profit and loss
sharing basis. Regarding investment of these funds, bankers were instructed to provide financial
accommodation for Government commodity operations on the basis of sale on deferred payment
with a mark-up on purchase price. Export bills were to be accommodated on exchange rate
differential basis. [36]
In March, 1981 financing of import and inland bills and that of the then Rice Export Corporation
of Pakistan, Cotton Export Corporation and the Trading Corporation of Pakistan were shifted to
mark-up basis. Simultaneously, necessary amendments were made in the related laws permitting
the State Bank to provide finance against Participation Term Certificates and also extend
advances against promissory notes supported by PTCs and Mudarabah Certificates. From July 1,
1982 banks were allowed to provide finance for meeting the working capital needs of trade and
industry on a selective basis under the technique of Mishawaka.[37]
As from April 1, 1985 all finances to all entities including individuals began to be made in one of
the specified interest-free modes. From July 1, 1985, all commercial banking in Pak Rupees was
made interest free.[38]
From that date, no bank in Pakistan was allowed to accept any interest-bearing deposits and all
existing deposits in a bank were treated to be on the basis of profit and loss sharing. Deposits in
current accounts continued to be accepted but no interest or share in profit or loss was allowed to
these accounts.
However, foreign currency deposits in Pakistan and on-lending of foreign loans continued as
before. The State Bank of Pakistan had specified 12 modes of non-interest financing classified in
three broad categories.
However, in any particular case, the mode of financing to be adopted was left to the mutual
option of the banks and their clients. The procedure adopted by banks in Pakistan since July 1
1985, based largely on mark-up technique with or without buy-back arrangement, was,
however, declared un-Islamic by the Federal Shariat Court (FSC) in November 1991. However,
appeals were made in the Shariat Appellate Bench (SAB) of the Supreme Court of Pakistan.[39]
The Commission for Transformation of Financial System (CTFS) was constituted in January
2000 in the State Bank of Pakistan under the Chairmanship of Mr. I.A. Hanfi, a former Governor
State Bank of Pakistan.[40]
A Task Force was set up in the Ministry of Finance to suggest the ways to eliminate interest from
Government financial transactions. Another Task Force was set up in the Ministry of Law to
suggest amendments in legal framework to implement the Courts Judgment. The CTFS
constituted a Committee for Development of Financial Instruments and Standardized Documents
in the State Bank to prepare model agreements and financial instruments for new system.
The House Building Finance Corporation had shifted its rent sharing operations to interest based
system in 1989.[41] The Task Force of the M/O Law proposed amendments in the HBFC Act to
make it Shariah Compliant. Having vetted by the CTFS, the amended law has been promulgated
by the Government. Accordingly, the HBFC launched in 2001 Asaan Ghar Scheme in the light
of amended Ordinance based on the Diminishing Musharaka concept. A Committee was
constituted in the Institute of Chartered Accountants, Pakistan (ICAP), wherein the SBP was also
represented, for development of accounting and auditing standards for Islamic modes of
financing. The Committee is reviewing the standards prepared by the Bahrain based Accounting
and Auditing Organization for Islamic Financial Institutions (AAOIFI) with a view to adapt them
to our circumstances and if considered necessary, to propose new accounting standards.
It was decided in September 2001 that the shift to interest free economy would be made in a
gradual and phased manner and without causing any disruptions. It was also agreed that State
Bank of Pakistan would consider for:

1. Setting up subsidiaries by the commercial banks for the purpose of conducting Shariah
compliant transactions;

2. Specifying branches by the commercial banks exclusively dealing in Islamic products,

and

3. Setting up new full-fledged commercial banks to carry out exclusively banking business
based on proposed Islamic products.[42]
Accordingly, the State Bank issued detailed criteria in December 2001 for establishment of full-
fledged Islamic commercial banks in the private sector. The Meezan Bank was granted a
Scheduled Islamic Commercial Bank license on January 31, 2002, and formally commenced
operations as a Scheduled Islamic Commercial Bank with effect from March 20, 2002, on
receiving notification in this regard from the State Bank of Pakistan (SBP) under section 37 of
the State Bank of Pakistan Act, 1956. Currently, the Bank is engaged in corporate, commercial,
Consumer, investment and retail banking activities. Further, all formalities relating to the
acquisition of Societies General, Pakistan by the MBL were completed, and by June, 2002 it had
a network of 5 branches all over the country, three in Karachi, one in Islamabad and one in
Lahore.[43]
The Government as also the State Bank is mainly concerned with stability and efficiency of the
banking system and safeguarding the interests, particularly, of small depositors. With this
concern in mind it has been decided to operate Islamic banking side by side with traditional
banking. The approach is to institute best practice legal, regulatory and accounting frameworks
to support Islamic banks and investors alike. The year 2002-2003 witnessed strengthening
measures taken in the areas of banking, non-bank financial companies and the capital markets.

Role of Islamic Banking in the Development of the Country

Islamic banks and financing performing according to the sharia law, those are helpful for
mobilization of resources, and their use in right manner. PLS (Musharaka and Mudarabah) and
non-PLS (trading & leasing) based categories of modes and strengthening the payments systems
to contribute significantly to economic growth and development.[44] Islamic mode of financing
system offering finance in short tem, long term, and different type of instrument for liquidity
management, asset management etc, for enterprises and projects. This creates employment
opportunities in the economy. It would be necessary to create an environment that could induce
financiers to earmark more funds for Musharaka/Mudarabah based financing of productive units,
particularly of small enterprises.[45]
The non-PLS techniques, as acceptable in the Islamic Shariah, not only complement the PLS
modes, but also provide flexibility of choice to meet the needs of different sectors and economic
agents in the society. Trade-based techniques like Murabaha with lesser risk and better liquidity
options have several advantages vis--vis other techniques but may not be as fruitful in reducing
income inequalities and generation of capital goods as participatory techniques. Ijarah related
financing that would require Islamic banks to purchase and maintain the assets and afterwards
dispose of them according to Shariah rules, require the banks to engage in activities beyond
financial intermediation and can be very much conducive to the formation of fixed assets and
medium and long-term investments.
On the basis of the above it can be said that supply and demand of capital would continue in an
interest free scenario with additional benefit of greater supply of risk-based capital along with
more efficient allocation of resources and active role of banks and financial institutions as
required in asset based Islamic theory of finance. Islamic banks can not only survive without
interest but also could be helpful in achieving the objective of development with distributive
justice by increasing the supply of risk capital in the economy, facilitating capital formation, and
growth of fixed assets and real sector business activities.
Salam has a vast potential in financing the productive activities in crucial sectors, particularly
agriculture, agro-based industries and the rural economy as a whole. It also provides incentive to
enhance production as the seller would spare no effort in producing, at least the quantity needed
for settlement of the loan taken by him as advance price of the goods. Salam can also lead to
creating a stable commodities market especially the seasonal commodities and therefore to
stability of their prices. It would enable savers to direct their savings to investment outlets
without waiting, for instance, until the harvesting time of agricultural products or the time when
they actually need industrial goods and without being forced to spend their savings on
consumption.
Small and medium enterprises (SME) sector has a great potential for expanding production
capacity and self-employment opportunities in the country. Enhancing the role of financial sector
in development of SME sub-sector could mitigate the serious problems of unemployment and
low level of exports. The banks may introduce SME Financing Funds with various
geographical locations. The corporate sector and the commercial banks may set up a network of
such Funds under the aegis of SECP by establishing institutions under syndicate arrangements or
otherwise. [46]

References

[1] Muhammad Faisal Ijaz, M. Z. (2007). Islamic Banking (Presentation). Retrieved from O Papers
http://www.oppapers.com/essays/Islamic-Banking/174593

[2] Dr. Shahid Hasan Siddiqui. (2001) Islamic Banking: True Modes of Financing New horizon.
http://www.nzibo.com/IB2/truemodes.pdf

[3] Hassanien, Medhat. Money and Banking in Islam. Islamabad : Institute of policy studies Islamabad
and international research in Islamic economics. Money and Banking in Islam. p. 97.
http://islamiccenter.kaau.edu.sa/arabic/Magallah/Pdf/Old-3-1/Medhat_23.pdf

[4] Noor Ahmed Memon (2007) Islamic Banking: Present and Future Challenges Journal of
Management and Social Sciences Vol. 3, No. 1, (Spring 2007) 01-10 Department of Economics, Institute
of Business & Technology (BIZTEK)

[5] Islamic Finance Explained By Sufyan Gulam Ismail, Chief Executive, 1st Ethical Ltd.
www.1stethical.com

[6] Muhammad Ayub Can bank survive with out interest? State Bank of Pakistan
http://www.sbp.org.pk/departments/ibd/Survive.pdf

[7] Rahul Dhumale and Amela Sapcanin (1998) An Application of Islamic Banking Principles to
Microfinance. Regional Bureau for Arab States, United Nations Development Programme, in
cooperation with the Middle East and North Africa Region, World Bank

[8] Ibid
[9] Ibid

[10] Dr Khaled A Hussain (2004) Banking efficiency in Bahrain Islamic vs conventional Banks Paper No.
68 Islamic Development Bank. Islamic Research and Training Institute.

[11] SBP (2002)Glossary of Islamic Finance

http://www.sbp.org.pk/publications/islamic/book1/glossary.pdf

[12] Dawood Islamic Bank Ltd http://www.dawoodislamic.com/AskMufti.aspx

[13] SBP.(2002) FAQ on Islamic Banking. State Bank of Pakistan. [Online] [Cited: 4, 20, 2009.]
www.sbp.org.pk/ibd/faqs.pdf

[14],Ibid

[15] Ibid

[16] AIMS-UK Glossary; Islamic Banking and Finance www.learnislamicfinance.com

[17] Sufyan (2007). Islamic Finance Explained1st Ethical iLtd.UK. www.1stethical.com

[18] AIMS-uk.(2007) An over view of Islamic mode of Financing. AIMS-Uk. [Online] 2007. [Cited: 4 15,
2009.] www.learnIslamicFinance.com.

[19] SBP (2002) FAQ on Islamic Banking. State Bank of Pakistan. [Online] [Cited: 4 20, 2009.]
www.sbp.org.pk/ibd/faqs.pdf.

[20] Taken form website source can be visit at

http://www.irfi.org/articles/articles_301_350/is_islamic_banking_islamic.html

[21] Usmani, M Taqi. (2006) Introduction to Islamic Financ karachi Pakistan : Maktaba maariful Quran
karachi, 2006. e.p 37.

[22] Sufian, Fadzlan (2007), The efficiency of Islamic banking industry in Malaysia: Foreign vs domestic
banks. Humanomics, Volume 23, no. 3, pp. 174-192.

[23] Ready, R.K., 198l. 'The march toward self-determination', paper presented at the First Advanced
Course on Islamic Banks, International Institute of Islamic Banking and Economics, Cairo, 28 August l7
September.

[24] Siddiqi, M.N., (1988). 'Islamic banking: theory and practice', in M. Ariff

[25] Wilson Rodeney (1995) Islamic Banking and its Impact on international financial shcheme New
Horizon. P-8

[26] Siddiqiui Shahid Hussain. (1994) Islamic Banking Royal Book Co P-17

[27] Ibid

[28] Muhammad Ariff (1988) Islamic Banking University of Malaya

[29] Dr. Ziauddin Ahmad (1985) The Present state of Islamic finance movement International Institute
of Islamic Economics P-8

[30] Man, Zakariya, (1988). 'Islamic banking: the Malaysian experience'\

[31] Siddiqi, M.N., (1988). 'Islamic banking: theory and practice',

[32] M. Shahzad (2008) Performance of Islamic banking and conventional banking in Pakistan: a
comparative study. University of SKOVDE. School of Technology &Society

[33] Quaid-e-Azam: Speech at the foundation laying stone of the State Bank of Pakistan, 1st July 1948.

[34] Dr Shamshad Akhtaar, (2007). "Pakistan Islamic Banking; Past Present and Future". Karachi
Paksitan : State Bank of Pakistan,

[35] Mehboob UL-HASSAN (2007) The Islamization of the Economy and the Development of Islamic
Banking in Pakistan Kyoto Bulletin of Islamic Area Studies, 1-2(2007), pp. 92-109
http://www.asafas.kyoto-u.ac.jp/kias/contents/pdf/kb1_2/09mehboob.pdf

[36] Shaikh A. Hamid (2006) Philosophy and practice of Islamic economics and finance Southern New
Hampshire University Working Paper No. 2006-01

[37] SBP. (2002)FAQ On Islamic Banking. (2002)State Bank of Pakistan.[Online] [Cited: 4 20, 2009.]
www.sbp.org.pk/ibd/faqs.pdf.

[38] Ibid

[39] SBP (2007) Pakistans Islamic Banking Sector Review. 2003-2007 ISLAMIC BANKING DEPARTMENT

[40] Ibid

[41] Ibid

[42]Accountant ( 2007) Faith and Finance;the evaluation and of Islamic banking. (July- August 2007).
The Pakistan Accountant,P-7. ACCA Karachi

[43] Ibid P- 8

[44] SBP. (2002). FAQ on Islamic Banking. State Bank of Pakistan.[Online] [Cited: 4 20, 2009.]
www.sbp.org.pk/ibd/faqs.pdf.

[45] Ibid Page-2

[46] Ibid