A bank is a financial institution, which deals with money and credit. It accepts deposits from individuals, firm and companies at a lower rate of interest and gives at a higher rate of interest to those who need them. The difference between the terms at which it borrows and those at which it lends from the source of it profit. A bank, thus, is a profit earning institution.
The inception of Pakistan as the first Islamic Republic created in the name of Islam. 949 The Objectives Resolution was adopted by the first Constituent Assembly based on the ideology of a sovereign Islamic state. This was the first step in the conception towards Pakistan’s Constitution. 1956 The first Constitution defined Islam as State Religion and all laws to be according to the injunction of the Quran and Sunnah. 1962 The establishment of Council of Islamic Ideology (CII) was followed by the conception of the second constitution of Pakistan. 1973 The third constitution of Pakistan was passed allowing comprehensive legislation on Islamic principles and establishment of Federal Shariat Court. 1980 CII presents report on the elimination of Interest genuinely considered to be the first major comprehensive work in the world undertaken on Islamic banking and finance. In this period President Zia ul Haq imposed profit and loss sharing accounts as a compulsion instead of interest bearing accounts, he also started deduction of Zakat from bank accounts in Islamic prospect. 985 Commercial banks transformed their nomenclature stating all Rupee saving accounts as interest-free. However, foreign currency deposits in Pakistan and on lending of foreign loans continued as before. 1991 Procedure adopted by banks in 1985 was declared unIslamic by the Federal Shariat Court (FSC). The Government and some banks/DFIs made appeals to the Shariat Appellate Bench (SAB) of the Supreme Court of Pakistan. In 1991 thsese two new Islamic banks started their operations in Pakistan.
MEEZAN was established as an Islamic Investment Bank in 1997 as “AL MEEZAN INVESTMENT BANK LTD”. After the successful completion and great struggle First Islamic Commercial Bank’s license was awarded to Al Meezan Investment Bank in year 2002, to start the commercial banking facilities they bought the local operations of “Socite General” (French Bank) 03 branches and started the commercial Islamic banking in the country. Meezan Bank stands today at a noteworthy point along the evolution of Islamic Banking in Pakistan. The banking sector is showing a significant paradigm shift away from traditional means of business and is catering to an increasingly astute and demanding financial consumer who is also becoming keenly aware of Islamic Banking. Meezan Bank bears the critical responsibility of leading the way forward in establishing a stable and dynamic Islamic Banking system replete with dynamic and cutting-edge products and services. The Bank has made fundamental and significant progress forward, and in doing so has established a strong and credible management team comprised of experienced professionals, which have achieved a strong balance sheet with excellent operating profitability, including a capital adequacy ratio that places the Bank at the top of the industry, a long-term entity rating of A+, and a short-term entity rating of A1+, the highest short-term rating.
In Millions% Pakistan Kuwait Investment Company (Pvt. Ltd1,13430 Shamil Bank of Bahrain E. C52726 Islamic Development Bank Jeddah19009 Noor Financial Investment Co. 13416 Others39619 Paid up capital 3780100 Shariah Board The members of the Shariah Board of Meezan Bank are Internationally-renown scholars, serving on the boards of many Islamic banks operating in different countries. The members of the Shariah Board are:
ACHIEVEMENTS CREDIT RATING:
Meezan Bank has reaffirmed its entity ratings at A+ for medium to long-term and A1+ for short-term. This rating was made by JCR-VIS Credit Rating Company, which has also set Meezan Bank’s outlook on medium to long-term rating as “Stable”. The rating is yet another milestone achievement in the Bank’s endeavor to be the Bank. Meezan Bank’s ratings are based on its shareholding with world-renowned financial institutions, pioneering role in the industry, strong management initiatives in continuously introducing various range of Islamic products. The Credit Rating agency JCR-VIS has expressed commendation to Meezan Bank management’s ability to deploy funds in core banking assets, which reflected healthy growth trends last year.
FIRST LADIES BANKING IN PAKISTAN:
The Bank is the first in the country to introduce ‘Ladies Banking’ a dedicated banking section only for ladies. This new service provides an exclusive banking area as per the set Shariah principles for our lady customers in a more comfortable environment. The dedicated Customer Services Officer in our ladies only banking area will provide consultancy for a full range of our Halal banking services including, 9am to 5pm Online Banking, Term Certificates, Current & Saving Accounts, Consumer Financing and 24/7 banking services.
Over 70 branches are working all over the Pakistan.
Best Islamic Bank 2005 (Islamic Finance News) Best provider of Islamic financial services year 2005
VIEWS OF PRESIDENT OF PAKISTAN:
I wish Meezan Bank success in initiating the cause of Riba-free banking. ” General Pervez Musharraf President of Pakistan Meezan Bank Inauguration, September 2002 Vision Statement Establish Islamic banking as banking of first choice to facilitate the implementation of an equitable economic system, providing a strong foundation for establishing a fair and just society for mankind. Mission Statement To be a premier Islamic bank, offering a one-stop shop for innovative value added products and services to our customers within the bounds of Shariah, while optimizing the stakeholders value through an organizational culture based on learning, fairness, respect for individual enterprise and performance. Service Quality Mission To develop a committed service culture which ensures the consistent delivery of our products and services within the highest quality service parameters, promoting Islamic values and ensuring recognition and a quality banking xperience to our customers.
There are 5 main departments at the branch:
Account opening and closing is the function of customer services deptt. The bank’s customers includes individuals (single or joint), firm (partnership/proprietorship), Autonomous corporations, Limited companies, Charitable Institutions, associations, Educational Institutions or local bodies. Brief Explanation of these accounts is as follows Products offered by this department:
a) Riba Free Rupee
b) Riba Free Dollar
RIBA FREE-RUPEE SAVING ACCOUNT
As a step towards the mission of providing a one-stop shop for innovative value added products to our customers, Meezan Bank is pleased to offer RIBA FREE Current Account, a flexible Rupee based account that is ideal for businesses and individuals looking for Shariah compliant banking and professionalism under one roof. The deposits of the customers together with the bank’s contribution are invested in a pool that consists of Ijarah and Murabaha financing. The profit earn on this pool is calculated every month, and if you maintain a minimum average monthly balance of Rs. 10, 000/- you shall be eligible to receive profits that will be disbursed to you every month. But if u’r balance is less then 10000 then u get no profit or no penalty is charges to u. there is no fixed profit b/c every month new rate declared.
Requirements: Mini deposit:::::::::::::::::::::::::::::::::::::
Rs. 10,000/- only Other requirements are mentioned in detail in appendix. CURRENT ACCOUNT Current account is basically used to meet the daily transactions. The money kept in current account is in the form of CARZ-E-HASNA gives the advantage for paying debts by the convenient and safe means of sending cheques through the post thus avoiding the trouble and loss.
Requirements: Mini deposit:::::::::::::::::::::::::::::::::::::
Rs. 10,000/- only Other requirements are mentioned in detail in appendix. b) Riba Free Dollar Savings Account The return earn on the Mudarba pool is calculated every month and profit ratio is declared for all investors is declared at the beginning of the month. If you maintain a minimum average monthly balance of $500, you shall be eligible to receive profits that will be disbursed to you every month.
Requirements: Mini deposit:::::::::::::::::::::
$100 under Mudarba arrangement. Other requirements are mentioned in detail in appendix
Account opening is the basic and first relationship, which is established between Bank and the customer. In account opening extreme care has to be exercised in case of completion of account opening documentation. Whenever a client comes in the bank in order to open an account the first information that is given to him/her about the types of accounts, which can be opened, so far this purpose the client is given detailed information about the accounts and their respective profit rates.
TYPE OF ACCOUNTS OPENED:
Sub-categories of Accounts and the Basic Requirements:
As evident from the name these accounts can be jointly opened by any number of persons. The minimum number of persons required to open a joint account is two but there is no maximum limit.
The options available to operate the account are:
CLUB /SOCIETY/ASSOCIATION [Requirements]:
CORPORATE ACCOUNTS ACCOUNTS OF SOLE PROPRIETOR (Requirements)
ACCOUNT OF PARTNARSHIP (Requirements)
ACCOUNT OF LIMITED COMPANIES (Requirements)
ACCOUNTS OF LITERATE [Photo Account]
These accounts can be opened individually or jointly. For men, the right hand thumb impression and for women, the left hand thumb impression is taken on account opening form. The customer is given advice to come to bank himself in order to withdraw any cash or deposit the cheque.
THINGS TO BE CONSIDERED BEFORE OPENING AN ACCOUNT
PROCEDURES FOR ACCOUNT OPENING
First of all, after inquiring from the customer what type of account he/she wants to open, the account opening form is got filled from the customer and signed it. Along with the account opening form, the customer is also signed two Specimen Signatures Cards. After fulfilling all the formalities of account opening, the computer generated account number is given to the customer that is of special series depending on the type of account.
A requisition slip is given to the customer to sign it so that the customer can get chequebook. Chequebook is issued after one day of receiving the requisition slip.
LETTER OF THANKS
After opening the account “A Letter Of Thanks” is send to the customer in order to thank the customer for opening an account in the Bank. This letter tells all the information regarding his/her account, which are kept very confidential.
ACCOUNT OPENING REGISTER
After an account is opened, an entry is made in the account opening register, which has the following columns:
Overall functions performed by Customer Services Department:
GENERAL CLIENT DEALING 2-OPERATIONS DEPARTMENT FUNCTIONS PERFOMED:
In the morning, the bank receives its own cheques, which have been presented by the customers in some other bank to be deposited in their account. NIFT provides the facility of bringing cheques for inward and also takes the cheques of outward clearing to other banks. The cheques received in inward clearing are the cheques drawn on bank and the bank has to pay for them. For this purpose the bank makes clearing in computer by checking the balances of the respective customer, if their balances are up to the mark then that cheque is cleared and the respective customer account is debited with the respective amount. If the balances are short then that cheque is bounced back to the related bank.
Reasons for returning a cheque: All required stamps of Clearing, Crossing and Endorsement are not present on cheques.
If any of these reasons exists then that cheque is returned through NIFT and deducts Rs. 300 from customer’ account as cheque returned charges. For this purpose an entry is passed on multi entry voucher like: Customer’s AccountDr. State Bank Of PakistanCr. Cheque returned chargesDr. Other commissionsCr. Then the report of returning any cheque is sent through fax to the head office Karachi. After this put the entry in Cheque return register showing the following columns:
All the cheques of other banks which are deposited to MBL are presented in outward clearing. This is said as outward clearing because they are presented on the very next day after depositing a cheque. In outward clearing, the entry is made like: Customer Account Cr. State Bank of Pakistan Dr. This entry is made when we come to know about the clearing of all cheques, which are sent to other banks.
I. TRANSFER OF AMOUNT
If a customer holds two accounts in the bank and he/she wants to transfer money from one account to other account, customer writes a cheque and fills deposit slip in which he/she writes account number to which amount is to be transferred. After making transfer entry in the computer, affix transfer stamp in the middle of the cheque, crossing on the upper left and bank’s endorsement stamp on the backside of the cheque.
II. TELLING ACCOUNT BALANCES
Whenever clearing officer receives phone call from the customer inquiring about his/her account balance after confirming the name, address and other information he tells the balance through computer.
III. ISSUING CHEQUE BOOKS
It is also the duty of department to issue a chequebook when an officer receives request from the customer.
PAY ORDER: Pay order is an order to pay money but this payment is to be made within city. In other words it can be said that the payee and the payer should be in one city.
In pay order the payment can be made in
In case of pay order first of all the customer has to fill a pay order application form in favoring section: name, account number, amount, beneficiary name, address, etc. The data is entered in already set format of pay order in computer and pay order print out is taken. An authorized person and manager operations are signed pay order. The original copy of the pay order is given to the customer and carbon copy is kept with bank for office record.
An order to pay money to the payee who is residing outside the city. DD can be for a customer who may or may not have an account in the bank but the other person’s account must be maintained with the bank for which the payer has demanded the DD.
When the bank receives cheques of any other bank from its any branch situated in the some other city, then those have been dealt as inward collection.
After receiving the cheque, an entry is made in inward collection register and then all stamps are affixed on the cheque (clearing, endorsement, IC # stamp) and make outward clearing voucher which shows the following entry: Remittance payable Cr. On the next evening after the delivery of clearing cheques make reversal entry like Remittance Payable Dr. Respective Branch Cr. Also make a fax message to inform the respective branch that we have credited their nostro account.
OTHER FUNCTIONS UNDER OPERATIONS DEPARTMENT LOCKERS
Lockers operations shall not be permitted under power of attorney of a customer. A customer wishing to allow another person or agent may be requested to open a new locker account under joint names and close the existing account. In offering this facility branches have to be selective and should provide lockers to the customers whose identity and integrity is verified, who should maintain account with the branch and have potential for deposits and other banking business. It is reiterated that honesty, creditability and good reputation of the customer is of utmost importance in the selection of customer for lockers.
RIBA FREE TERM DEPOSITS OFFERED BY BANK
Certificate of Islamic Investment Riba-Free Certificate of Islamic Investment (COII) works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. On agreeing to become a COII holder, the customer enters into a relationship, based on Mudarabah, with Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers. The bank allocates the funds received from the customers to a deposit pool. These funds are utilized to provide financing to customers under Islamic modes that include, but are not restricted to, Murabaha and Ijarah, Tenor:
Profit Payment Options 3 Monthson maturity 6 monthson maturity 1 year monthly or quarterly min investment 200K 2 yearmonthly or quarterly min investment 200K 3-5 year monthly or quarterly min investment 200K There will be different rate of profit according to the profit payment option and amount and tenor. Pre-mature encashment In case of pre mature encashment the profit rate will be calculated according to the completed tenor, if extra profit is paid that will be recovered. No pre-mature encashment penalty in MBL Payment of Premium Bank pay premium from its own share of profit to high depositors. Premium Rate 5M9. 99M1% 10M29. 99M1. 25% 30M49. 99M1. 50% 50M+2% Karobari Munafa Account Riba-Free Karobari Munafa Account works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. On agreeing to become an account holder, the customer enters into a relationship based on Mudarabah with Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers. The bank allocates the funds received from the customers to a deposit pool. These funds from the pool are utilized to provide financing to customers under Islamic modes that include, but are not restricted to, Murabaha and Ijarah.
Monthly Mudarabah Certificates RibaFree Monthly Mudarabah Certificates is a flexible investment product which has been designed to give you a monthly return which is Halal. The minimum investment required is only Rs. 100,000 and you receive profit for each complete month of investment with the Bank. How Monthly Mudarabah Certificates works? Riba-Free Monthly Mudarabah Certificate (MMC) works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. On agreeing to become a MMC holder, the customer enters into a relationship based on Mudarabah with Meezan Bank. Under this relationship, the Customer is an Investor (Rab ul Mal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers. The bank allocates the funds received from the customers to a deposit pool. These funds from the pool are utilized to provide financing to customers under Islamic modes that include, but are not restricted to, Murabaha and Ijarah.
Dollar Mudarabah Certificates On agreeing to become a DMC holder, the customer enters into a relationship based on Mudarabah with Meezan Bank. Under this relationship, the customer is an Investor (Rab ul Maal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers. The Bank allocates the funds received from the customers to a deposit pool. These funds from the pool are utilized to provide financing to customers under Islamic modes that include, but are not restricted to, Murabaha and Ijarah.
Profit payment Options:
Other details n requirements are mentioned in detail & appendix. Meezan Amdan Certificates The Riba-Free Meezan Aamdan Certificate (MAC) is a long-term deposit certificate with an exceptionally high monthly profit designed especially for those individuals and corporations who are in need of regular stream of monthly income. MAC is a monthly income (mahana aamdani) certificate with a variety of free packaged benefits. Working The Riba-Free Meezan Aamdan Certificate (MAC) works under the principles of Mudarabah and is strictly in conformity with the rules of Islamic Shariah. On agreeing to become a MAC holder, the customer enters into a relationship based on Mudarabah with Meezan Bank. Under this relationship, the customer is an Investor (Rab ul Maal), and the Bank is the Manager (Mudarib) of the funds deposited by the customers. The Bank allocates the funds received from the customers to a deposit pool. These funds from the pool are utilized to provide financing to customers under Islamic modes that include, but are not restricted to, Murabaha and Ijarah.
Min. deposit 01 Million Tenor
The Meezan Islamic Institution Deposit Account (MIIDA) is a unique product, tailored exclusively for Islamic Financial Institutions (IFIs). With MIIDA, any IFI now has the opportunity to manage excess liquidity in an immediate and profitable manner, by maintaining a checking account with Meezan Bank. All eligible Islamic Banks can enter into a Mudarabah relationship with Meezan Bank. Under this relationship, the respective Islamic Banks are the Investors (Rab ul Maal), and Meezan Bank is the Manager (Mudaarib) of the funds deposited by them. Meezan Bank allocates the funds received from the Islamic Banks to a deposit pool consisting of financing under Islamic modes that includes, but is not restricted to, Murabaha and Ijarah.
3- CASH DEPARTMENT
The cash department is the most important department of the bank. It receives cash from customers and then deposits it into the accounts of the customers and maintained their balances. In cash department following books are maintained.
When cash is received at the customer it is recorded in the scroll book.
PAYING CASH BOOK
The cashier makes entry in the paying cashbook when cash is paid.
CASH BALANCE BOOK
The consolidated figure of receipt and payment of cash is entered in cash balance book.
CREDIT / FINANCE DEPARTMENT
Islamic Financing for the following:
Diminishing Musharaka (Islamic Financing) With Easy Home you can participate with Meezan Bank in a joint ownership of your property, where the Bank will provide financing up to 85%. On agreement of a monthly payment to the Bank of which a component is for the use of the home (rent), and another for your equity share. The total monthly payment is reallocated regularly by the partnership to reflect your growing equity and to allocate increasing amounts to your investment. When you have made the full investment, which had been agreed, you become the sole owner with a free and clear title to the property. Easy Home Easy home works under the Diminishing Musharakah where customer participates with Meezan Bank in joint ownership. Easy Home finance is available for:
? Professional Experience Salaried person:
Car Ijara Ijara is a rental agreement under which bank purchase a vehicle and give the same on rent to customer Car Ijarah is Pakistan’s first “Interest Free” car financing based on the Islamic financing mode of Ijarah (Islamic leasing). This product is ideal for individuals looking for car financing while avoiding an interest-based transaction.
Scope of Facility
Rates offered: (For New)(For used)
Eligibility: Pakistani National
OTHER PRODUCTS OFFERED
On line Real Time ATM Free ATM Card
On line Real Time Facility
Banking Facility at all MBL Branches for
Call Center 24/7 call center provides you access to a wide range of Tele-banking solutions and personalized banking service. Key Features
Internet Banking allow to have access to accounts regardless of where they may be in the world. Key Features
SUGGESTION & RECOMMENDATIONS
Balance Sheet as on March 31, 2007 [pic] Profit and Loss Account as on March 31, 2007 [pic] Cash Flow Statement as on Marc 31, 2007 [pic]
FINANCIAL ANALYSIS AND COMMENTS DEBT RATIO:2007-2006 T. Debt 44,865,94741,675,264 T. Assets49,822,34946,438,623 90. 05 %89. 74 %
Comments: Debt ratio basically shows that, how much assets are financed by the debt. It shows that how much an investor is protected in case of default. From above information its obvious that, in year 2006, this ratio is 89. 74 % and this year it is 90. 05 %. It shows more debt financing as compared to previous year.
DEBT / EQUITY RATIO:20072006 T. Debt44,865,94741,675,264 T. Equity3,779,8973,779,897 87. 1. 03 1187 %1103 %
Comments: This ratio is an alternative to the debt ratio. One of these ratios can be used by the investor. It shows the basic ratio between debt and equity. This ratio is very high, as we know that, banks are totally depend on the debt. However equity also make a part pf its total financing but its very little as compared to total debt. Due to this reason this ratio is very high in case of banks. As this ratio increased gradually, it shows increase in debt financing as compared to equity.
RETURN ON ASSET [R. O. A]:20072006 Net profit after tax190,577181,655 T. Assets 49,822,349 46,438,623 0. 383 %0. 391 %
Comments: This ratio shows the efficiency of the total assets, means how much efficiently the company using its assets to earn its net profit. As we know that in banks, assets are not a big source of generating earnings, and basic function is of debt and equity. That’s why this ratio is decreased this year as compared to the previously.
RETURN ON INVESTMENT [R. O. I]2007 2006 Net profit after tax 190,577 181,655 Investment 2,811,033 2,877,554 6. 8 % 6. 3 %
Comments: This ratio shows the return or net profit on the investments. Means how much profit the bank is making in terms of investments, rather than total profit. In this ratio it is obvious that profit ratio is increasing gradually as compared to previous years. And shows the better performance of the bank with the passage of time.
RETURN ON EQUITY [R. O. E]:2007 2006 Net profit after tax 190,577 181,655 T. Equity 3,779,8973. 779. 897 5. 42 % 4. 80 %
Comments: This ratio shows the profit in terms of equity. This profit is increasing gradually year after year as shown above. As there is no change in total equity, but the profit ratio increased. It shows the efficient operations an allocation of resources, as a result, the return on the equity is increased.
EARNING PER SHARE [EPS]:20072006 Net profit 0. 50 0. 58 Total number of shares out standing
Comments: EPS decreased this year. As net profit increased this year, EPS should also be moved respectively, but due to increases no of shares outstanding, it is decreased this year.
Islamic banking is a very young concept. Yet it has already been implemented as the only system in two Muslim countries; there are Islamic banks in many Muslim countries and a few in non-Muslim countries as well. Despite the successful acceptance there are problems. These problems are mainly in the area of financing. With only minor changes in their practices, Islamic banks can get rid of all their cumbersome, burdensome and sometimes doubtful forms of financing and offer a clean and efficient interest-free banking. All the necessary ingredients are already there. The modified system will make use of only two forms of financing loans with a service charge and Mudaraba participatory financing both of which are fully accepted by all Muslim writers on the subject. Such a system will offer an effective banking system where Islamic banking is obligatory and a powerful alternative to conventional banking where both co-exist. Additionally, such a system will have no problem in obtaining authorization to operate in non-Muslim countries. Participatory financing is a unique feature of Islamic banking, and can offer responsible financing to socially and economically relevant development projects. This is an additional service Islamic banks offer over and above the traditional services provided by conventional commercial banks.
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