meezan bank limited by mohib haroon momand

2 MEEZAN ISLAMIC BANK

Name: Mohibullah Haroon

Roll Call: 102

Subject: Islamic Banking and Theory

Topic: Meezan Bank (the premier Islamic Bank)

Submitted to : Sir Qazi Sikandar Hayat

Disipline: BS Banking and Finance 7th Semester

Management Science Department AWKUM


Meezan Bank Limited

Meezan Bank Limited, a publicly listed company, was incorporated on January 27, 1997 and started operations as an investment bank in August that year. In January, 2002 in an historic initiative, Meezan Bank was granted the country‟s first full-fledged commercial banking license as a dedicated Islamic Bank, by the State Bank of Pakistan.

Strategy By implementing robust and aggressive strategic and tactical initiatives on the side of consumer banking, Meezan Bank aims to fulfill its prime objective of providing customers accessibility and convenience, within an atmosphere and culture of dedicated service and recognition of their needs.

Growth Of Meezan Islamic Banks Since its inception as an Islamic commercial bank in 2002, Meezan Bank has been one of the fastest growing banks in the history of the country‟s banking sector. The Bank‟s deposits grew at an average rate of 46% p.a. from December 2002 to December 2012 while its branch network grew from 6 branches in 2002 to 328 branches in October 2013, an average growth rate of 48% p.a. The Bank has established a strong and credible management team comprising of experienced professionals that has achieved a strong balance sheet with excellent operating profitability and strong ratios. The JCR-VIS Credit Rating Company Limited has upgraded the Bank‟s long-term entity rating to AA (Double A) from AA- (Double A minus) and short term rating at A1+ (A One Plus) with stable outlook. The short term rating of A1+ is the highest standard in short term rating. Meezan Bank is the only Islamic bank with AA credit rating in the Islamic banking industry At Meezan Bank, human capital is our most valuable equity, and it is the people of Meezan Bank who carry the mission and vision forward. As dedicated Islamic Bankers, it takes a special breed of person with a belief and commitment in Islamic Shariah with an unwavering professionalism to carry the responsibility of making Islamic Banking the banking of first choice.

Meezan Bank provides the tools needed for our people to develop world-class analytical, leadership, management and relationship-building skills. We ensure the proper development of our employees to cope with the current market trends and business needs. Achievements are a milestone in an individual's career as well as in the Bank's growth, and thus needs to be recognized in the most effective manner. We continuously strive to make our policies more customized & competitive to improve our working environment, foster teamwork, encourage innovation, and to ensure career progression.

At Meezan Bank, we are committed to providing an ideal professional environment which enables our employees to pursue the highest possible level of professionalism as well as supporting their personal fulfillment. We believe that our strategic mix reinforces in our


employees the ability to think 'out of the box' and discover new ideas and concepts, while challenging the status quo.

If you think you can make a difference, you are invited to apply and explore the possibility of a dynamic, challenging and rewarding career with Meezan Bank.

The Bank‟s main shareholders are leading financial institutions of the Region namely, Noor Financial Investment Company, Pak-Kuwait Investment Company, and the Islamic Development Bank of Jeddah. The established position, reputation, strength and stability, of these institutions add significant value to the Bank through Board representation and applied synergies.

The Bank has an internationally renowned Shariah Supervisory Board Chaired by Justice (Retd.) Maulana Muhammad Taqi Usmani, an internationally renowned figure in the field of Shariah, particularly Islamic Finance. He holds the position of Deputy Chairman at the Islamic Fiqh Academy, Jeddah and in his long and illustrious career has also served as a Judge in the Shariat Appellate Bench, Supreme Court of Pakistan. The Board also includes Sheikh Essam M. Ishaq (Bahrain), Dr. Abdul Sattar Abu Ghuddah (Saudi Arabia) and Dr. Imran Usmani who is also the resident Shariah Advisor of the Bank. Dr. Imran is assisted by a team of professionals who strictly monitor the regular transactions of the Bank and are also responsible for Product Development.

Meezan Technology Meezan Bank has a strong technology focus. It has invested heavily in state-of-the-art software

applications – namely Temenos T-24 and Oracle. It has also recently upgraded its hardware

platform and also has a „hot‟ disaster recovery site in place to cater to any unforeseen

eventualities

Growth of Islamic Banking in Pakistan Since 2002 In Pakistan, we have seen steady growth of Islamic banking during the last decade when the first license for Islamic commercial banking was given in 2002 to Meezan Bank. Alhamdulillah, since 2002 the progress and success of Islamic Banking in Pakistan has been admirable despite all challenges. Currently there are seventeen financial institutions licensed by State Bank of Pakistan to offer Islamic financial services including five licensed full-fledged Islamic Banks and twelve Islamic banking windows of conventional banks operating with more than 950 branches in different cities of Pakistan. During the year, addition of 2 new Islamic banking windows are expected to start their operations The expanding branch network and offering of Islamic financialproducts and services by the large conventional banks will boost the growth of

Islamic banking and would increase its reach to the underserved population that are sensitive to


Riba.

According to the SBP figures of June 2012, the market share of Islamic banking in terms of overall banking deposits the Islamic Banking share stands at 8.9% at Rs. 603 billion up from the June 2011 figures of 7.6%. Islamic banks are now offering competitive saving and deposit products that are targeted to all segments of the society including senior citizens, pensioners, household and even for kids and teens. In the recent years, despite competition from conventional counter parts and government saving plans Islamic banks are witnessing healthy growth in their deposits figures

and customer base.


In terms of financing transactions, the challenge is much greater for Islamic banks as Islamic banking modes are either trade based (like Murabaha – buying and selling of raw material and assets, Istisna – manufacturing contracts) or rental based for assets owned by Islamic banks (like Ijarah or Diminishing Musharakah) or partnership based (like Musharakah or Mudarabah – where sharing in profit or loss is done). However, Islamic bank are working their way up by focusing on research and new product development and now we can find Islamic financing solutions starting from microfinance and SME clients, agri-industry, middle market customers and large corporate houses to large infrastructure and projects. In Pakistan, the Islamic banking assets now constitutes

more than 8.2% share of overall banking industry‟s assets and now stands at of Rs. 711

billion.

Growth and Profitability of Meezan Bank

The Board of Directors‟ of Meezan Bank Limited in its meeting held on July 30, 2011 approved the financial statements of the Bank for the half year ended June 30, 2011. The Board also appointed Mr Abdullateef A. Al-Asfour as the Vice Chairman of Bank. The Bank recorded robust growth of 92% in its half year after-tax profit which increased to Rs. 1,382 million from Rs. 719 million in the corresponding period last year. Comparative Earnings


Per Share also increased to Rs. 1.72 from to Rs. 0.90. As a result of the strong profitability of the Bank, the Board approved a 10% interim cash dividend, continuing the Bank‟s unbroken payout record since its date of listing on the Stock Exchange. Deposits of the Bank increased by 13% to Rs 148 billion on June 30, 2011. The growth in deposits reflects the strong demand for Islamic financial products and the dominance of Meezan Bank in the Islamic Banking industry. The Board also reiterated its confidence in the Bank‟s branch expansion strategy that has enabled it to remain at the forefront of the Islamic Banking sector in Pakistan. The Bank has achieved growth in all business segments and consolidated its position as the leading Islamic Bank in Pakistan. The total assets of the Bank grew by 12% to Rs 173 billion over the half-year. Significant growth was also recorded in Investments which increased by 61% to Rs. 89 billion mainly on account of investments in GoP Ijarah Sukuk issued by Government of Pakistan in the period under review. During the period, the JCR-VIS Credit Rating Company Limited upgraded the Bank‟s short term rating from A-1 (A-One) to A-1+ (A-One Plus), the highest standard in short-term rating. The long-term entity rating has been maintained at AA- (Double A Minus) with stable outlook. The rating indicates sound performance indicators of the Bank. Meezan Bank has been consistently recognized as the best Islamic Bank in Pakistan by various local and international institutions over the past several years. The Bank won the award of „Best Islamic Bank in Pakistan‟ by Islamic Finance News of RED money Group, Malaysia for 5 consecutive times from 2005 to 2010; „Best Islamic Financial Institution in Pakistan‟ by Global Finance Magazine, New York from 2008 to 2011; „Best Islamic Bank in Pakistan‟ by ASIA MONEY Magazine, Hong Kong for 2009, „Islamic Bank of the Year‟ by the CFA Association of Pakistan for 2009 and 2010 and 'Best Islamic Bank in Pakistan' and „Best Islamic Trade Finance Bank in Pakistan‟ by Asset Triple A Awards, Hong Kong


A Growth % of Meezan bank in the years of 2010 and 2011


1.Deposits and other account has grown by 30% from last year 2010

2.Profit earn from financing has also grown by 9% in 2011.

3.Investment profit had shown dramatic increase of 79%

4.The money due from financialinstitutions has also drop down by 61%, thisshown healthy sign

of recovery

5.Total assets increases by 30%,which shows company has progressed from last year

6.Share capital increases by 15%, this means investors are willing to buy shares of meezan

bank.

7.Shareholders equity increases by 24%, this means that shareholder are alsorewarded for their

trust in meezan bank.

Growth of Meezan bank in particulars years 2010 to 2011


Meezan Bank profit jumps 106% Banks assets crosses Rs200bn mark Meezan Bank Limited

(MEBL) reported Rs3.39 bn (EPS: Rs4.22) for CY11, thus showing growth of 106 % as

compared to Rs1.65 bn (EPS: Rs2.05) in the same period of last year.Some of the key

determinant in this core earnings growth includes1.Nearly 65% net spread earned to Rs

9.4bn;2.lower provisions of 7.2 % and;3.1.2 % surge in other income.Since banking branches

are increasing (branch led growth) and hence bank is having better deposit base. In return,

expenses on deposits also increased by 31.2% toRs8.66 bn compared to Rs6.60 bn in

CY10.The Bank recorded Rs1.38 bn as non-performing loan against advances for CY11versus

Rs1.49 bn in 2010, depicting decline of 7.2 % while operating expenditure increased by 35.06 %

to Rs6.12 bn for the period ended CY11. As per the MEBL management, the bank has

completed 10 years of operation and its total asset base increases to Rs 200bn which we

consider a good sign.The MEBL business models better one since it is fostering asset growth

in the country by promoting Shariah based financing. Islamic banking profitability determinants

depend upon individual banks but in case of meezan bank one can conclude that they are

benchmark for any bank to do Islamic banking business.


Income Statement of Meezan Bank for the years 2011-2014


Balance Sheet of Meezan bank For the year 2011- 2014


Also Visit the Spread Sheet Program


Different Fatwa in the Favor and Against

Of Islamic Banking

Abdallah ibn Hanzala reported that the Messenger of Allah, sallallahu alayhi wa sallam, said: “A

dirham of Riba, which a man receives knowingly, is worse than committing adultery thirty-six

times.” (Ahmad) Baihaqi transmitted it, on the authority of Ibn Abbas, with the addition that the

Prophet, sallallahu alayhi wa sallam, continued to say: “Hell is more fitting for him whose flesh is

nourished by the Haram.”

Abu Huraira reported the Messenger of Allah, sallallahu alayhi wa sallam, as saying: “On the

night I was taken up to heaven I came upon people whose bellies were like houses which

contained snakes which could be seen from outside their bellies. I asked Jibril who they were

and he told me they were people who had consumed Riba.

Ibn Rushd wrote:

“As for usury in sales, the ulama are in agreement that it is of two types: deferred payment

(nasiah) and disparity (tafadul) – except what has been transmitted from Ibn „Abbas, who

reported that the Prophet, may the peace and blessing of Allah be upon him, said: “There is no

usury except in deferred payment.” The majority of the fuqaha, however, have concluded that

usury does exist in these two types because this has been affirmed in other statements from

him, may the peace and blessings of Allah be upon him.”

This fatwa (signed by three giant scholars of modern times: Mufti Taqi Usmani, Mufti

Abdurrauf Sakkharwi and Mufti Mahmud Ashraf Usmani) was posted in a separate thread,

the title of which is rather distasteful in my worthless opinion, hence I am re-posting it here as a

new thread


riah advice on structures of Islamic financial products and on compliance of such


products with the Islamic law are a necessary pre-requisite and a regulatory requirement

for financial institutions in many countries, including Pakistan. Consequently, Shariah

costs are included in the transaction costs associated with Islamic financial products.

Financial fatwas play an integral part in the development of Islamic financial products, as without an explicit endorsement from a Shariah viewpoint such products cannot be successfully marketed.

A fatwa in the context of Islamic banking and finance is a religious opinion by a qualified Shariah scholar on structure of an Islamic financial product, like a mortgage, the conduct of management, like a fund manager, and operations of an Islamic financial institution, like an Islamic bank, determining their compliance or otherwise with the Islamic law.

Fatwa, if issued by an individual scholar or jurist, is non-binding and therefore, its utility is rather limited in this sense. However, if a collective body of scholars issues a fatwa under an enforcement regime, like a government or another such authority, it could be made binding on the market participants.

Legislation in Malaysia makes it compulsory, not only for all market players (Islamic banks and Takaful companies) but also for the judges hearing the cases related with Islamic banks and finance in Malaysian courts, to abide by the fatwas and Shariah rulings publically issued by the Shariah Advisory Council of Bank Negara Malaysia, the central bank.

In Pakistan, the Shariah Advisory Board of the State Bank of Pakistan issues fatwas to govern Islamic banking operations in the country. The legal standing of such fatwas has yet to be tested in a court of law.

Many observers of Islamic finance frequently refer to what is now rather cynically known as “Fatwa shopping.” Those who use the term, refer it to the process of an institution approaching a number of Shariah scholars (simultaneously or one after one) to solicit their Shariah advice on an individual basis and then choosing the one, which is the least restrictive or most liberal. This notion of Fatwa shopping is considered as bad and in fact most Shariah scholars discourage this practice.

If this is what people mean by Fatwa shopping then it should not be entirely wrong, as long as the quality of Shariah advice thus obtained fulfils strict Shariah requirements. This indeed has cost implications for the party seeking Shariah advice but if one is willing to pay relatively high costs of procuring Shariah advice, it should be left to the individual to do so.

In the absence of the Islamic law in most countries (including the ones with majority Muslim population), it is important that there is an independent Shariah verification of the products, practices and operations of Islamic financial institutions and other institutions offering Islamic financial services.

Ideally, this verification should come from a government authority like a central bank or any other financial regulator.

The best option remains a government authority, as it has enforcement power. Other organisations are ineffective unless the governments accept their Shariah Standards and make them binding on the institutions offering Islamic financial services.


In a less ideal scenario, the Shariah verification function must be offered by professional Shariah advisory firms registered with a regulator (like the Securities and Exchange Commission of Pakistan or the State Bank).

It is important to note that a new fatwa is required only when there are no clear guidelines available on a product. Thus, now that setting up an Islamic equity or mutual fund has received mainstream relevance in a number of countries, there is no need for obtaining a new fatwa from a Shariah board or a Shariah scholar. However, it remains important that the fund/transaction is supervised and monitored by a competent body to ensure its strict adherence with Shariah.

There is sometimes an over-emphasis on the importance of fatwa. For instance, there are some training providers in Islamic finance, who advocate the issuance of a fatwa on the Shariah authenticity of the training materials and their delivery. While importance of Shariah authenticity of the content and delivery of Islamic finance training cannot be underestimated, this is nevertheless needlessly stretching the concept of fatwa and its modern applications.

The writer is an economist and a PhD from Cambridge University


References: 1. http://www.tauhid.net/FatwaOnBanking.pdf

2. http://books.google.com.pk/books?id=qS1KW5IFTJoC&pg=PA212&lpg=PA212&dq=olmaa+fatw

a+on+islamic+banking&source=bl&ots=8CsFahC1I6&sig=o3yfRwAg8JqBQyigCHnQXUSxjow&hl=e

n&sa=X&ei=0MRAVJ-

AHpXiatPlgZgB&redir_esc=y#v=onepage&q=olmaa%20fatwa%20on%20islamic%20banking&f=fa

lse

3. http://www.meezanbank.com/

4. History of Meezan bank

5. https://encrypted.google.com/#q=total+number++of+islamic+banking+in+pakistan+2014

6. Meezan Bank Article

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