Institute of Islamic Banking (IIB)

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Perception of islamic bankers towards the use of Karachi inter-bank offer rate (KIBROR)
(University of Management and Technology, 2013) Shahjahan Alamgir
Islamic finance and banking industry have rapidly flourished in current years. The importance of this industry as a substitute method of investment can no longer be refused. Recent international economic and financial crisis has exposed the methodical problems and failures of conventional finance and highlighted the strength and stability of Islamic financial system. Anyhow, Islamic finance has been practicing conventional benchmark, such as Karachi Inter- Bank Offer Rate (KIBOR), to determine its own cost of funds, to price their Shariah-compliant products and services, and hence getting returns on their financial investments. This is so because Islamic finance has always dealt as a financial mediator for surplus and deficit units. This study documents the perception of key players i.e., Islamic Bankers working with Islamic banks, to highlight the issue directly responsible for slower-than-potential growth and expansion of this industry. Findings suggest that the industry could not perceive Islamic banking correctly, because professionals did not feel satisfied with the use of KIBOR as a benchmark.
Liquidity management in Islamic banks
(University of Management and Technology, 2013) Amir Islam
Liquidity Management, undoubtedly, is among the most imperative areas for any bank. Its importance multiplies manifold in an Islamic Bank (IB) as compared to a Conventional Bank, based on the fact that an Islamic Bank is conditioned to invest just in real assets. Thus, continuous creation of assets is vital for an IB. Moreover, IBs suffer from the absence of a mechanism programmed to divert surplus liquidity towards an IB faced with a liquidity crunch. Consequently, surplus funds in an IB multiply expense and liability until and unless these funds are put to investment. As an outcome, there may also be a compromise on Shariah guidelines, like investment in products such as Commodity Murabah which do not enjoy consensus of varied Islamic schools of thought. At the same time, an IB undergoing a liquidity crunch has to enhance profit rates to attract more deposit or to present a call option for adjustment of financing, in order to maintain balance in assets and liabilities. Resultantly, whichever of the two situations is being faced, bank profitability suffers a negative impact. A clearly defined mechanism among Islamic Banks, seemingly absent, can be helpful for a bank to manage liquidity crunch and aid another one in handling surplus liquidity, so that shortfall and surplus within the banking industry may be adjusted. There is also a dearth of money market instruments in the market, complying with the Shariah standards, to absorb excess liquidity of an Islamic bank. Similarly, there is an apparent paucity of money market tools or mechanism to bail the bank out of a liquidity crunch. The research analyzes the position of Islamic banks in Pakistan with regards to liquidity management and puts forth proposals for multiple systems of Liquidity Management with the intention that surplus liquidity may be adjusted to compensate shortfall in liquidity within the Islamic Banking Industry.
Need for global uniform framwork for Islamic financial instruments
(University of Management and Technology, 2014) Abdul Rafay Siddique
Islamic financial instruments are confronted by many difficulties due to non-existence of a uniform global framework. A particular problem in developing this framework is the existence of different madhahib within Islam. This research aims to discuss the urgent need to develop a sound and robust universal framework that would prove helpful in creating uniform acceptability of Islamic financial instruments. To provide a basis for conclusion of this problem, this author selected an Islamic financial instrument Sukuk al-Ijarah. It was analyzed why there existed a need for the development of a robust and comprehensive framework for globalization of Islamic financial instruments which should be acceptable to all stakeholders. Moreover, specific steps are also analyzed that must be taken to issue Sukuk al-Ijarah that is acceptable to all madhahib. It was in this context that research was conducted using secondary sources and data was collected for Sukuk al-Ijarah issued by all the madhahib. Data was collected for twenty Sukuk al-Ijarah, basic differences among madhahib were highlighted and then analyzed for few variables to see the possibility of convergence. The results of this study showed that global Sukuk al-Ijarah can be issued as there were many similarities in the rulings among the four Sunni madhahib and Shia madhab. These results were used to find the stipulations of a global Sukuk al-Ijarah that did not raise problem with followers of any madhab. Ingredients were determined that would help make a truly global Sukuk security; a model which can then be replicated for other securities. Thus, an asset-backed Sukuk, with fixed rental, transfer of both usufruct and title on an Islamic underlying, passed to an independent Special Purpose Vehicle (SPV), without guarantee of principal or profit is most probably going to be acceptable by all madhahib.
Salam transaction in currencies
(University of Management and Technology, 2014) Hassan Bukhari, Muhammad
The main purpose of the study is to analyse terms and concepts of currency salam product according to shariah ruling and the Islamic scholars point of view against and in favour of the currency salam transaction. The practical procedure of currency salam transaction in Islmaic banking is also addressed. To address the first two objectives the literature is thoroughly referred and to cater the last objective 60 questionnaires were distributed among bankers of Islamic banks who deal in currency exchange transactions, out of which 52 were returned and usable. To justify or reject the salam transaction, all depends upon the status of money, bai-sarf and transaction of salam and its conditions in front of Islamic and fiqh scholars which will be analysed thoroughly. The content and descriptive analysis techniques were employed to analyse the data. The SPSS software is used to anlayse the data collected by questionnaire. The results suggest that salam transaction in currencies of same country is not allowed/prohibited and salam transaction in currencies of different countries is permissible. The results indicate that currency salam transaction is allowed and most of the bankers believe that practically this transaction is in accordance with the laws of Shariah. The study supports the literature and according to data almost 71% respondents of Islamic banks believe that salam transaction is practically implemented in selected Islamic banks. As per author knowledge, this proves to be a pioneer study in this area of research in Pakistan. Hence, it is recommended the future studies are recommended firstly to take shariah scholars point of view on the procedure of currency salam transaction provided by the selected bankers, secondly it should be extended to other banks of different countries as well.
Impact assessment and future potential of Islamic microfinance
(University of Management and Technology, 2014) Zubair Mughal, Muhammad
Initially microfinance was introduced for the first time in 1970s and now, actually, Islamic microfinance has been proved as successful poverty alleviation tool. The purpose of this descriptive study is to evaluate the Islamic microfinance impact on poverty alleviation in Pakistan and Yemen. This research project was designed to study Islamic microfinance institutions and the impact of the Islamic Microfinance on their IMF clients in Pakistan and Yemen. Surveys (Structured Questionnaires), Focus Group Discussions (FGDs) and Interviews were conducted for data collection. Data source was primary and collected through structured questionnaires from Islamic Microfinance beneficiaries/ clients of Islamic Microfinance institutions in Pakistan and Yemen. The sample selection technique was non probability and convenience based. The variables were Living Standard of Islamic Microfinance clients, Income Level, Health conditions, availability of Islamic Microfinance, Islamic Microfinance innovative products and level of knowledge. The approach of this research study was mixed and I relied on both quantitative and qualitative data. In this descriptive research study I found that Islamic microfinance had positive impact on its beneficiaries in both the countries of this research study and future potential to address the poverty problems. I, on the basis of this research study, am confident in saying that the Islamic Microfinance product line needs to be innovative to benefit more untapped and potential clients of Islamic Microfinance in financially excluded segments of these countries for ultimate poverty alleviation and generation of economic activities. Finally, it is explicitly stated that this research work is as original as done by the candidate solely which was not utilized for any other academic title/ degree and would be a good contribution to research studies in Islamic Microfinance industry and may identify the future areas of research for Islamic microfinance researchers.
شریعت اسلامیہ کی روش نی میں قلیل المیعاد اسلامی بازار مالیات )ملائیش یاء( کے قابل عمل آ لات
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) عطا الرحمٰن
یہ بات اظہر من الشمس ہے کہ اسلام ہر لحا ظ سے دین کامل ہے۔ چاہے معاملہ عبادات کا ہو معاملات یا اخلاقیات کااسلام نے اپنے پیرو کاروں کو مکمل رہنمائی مہیا کی ہے۔اس ہی طرح انسانی میں کاروبار کو بہت اہمیت حاصل ہے ۔اس ہی کے مد نظر اسلام نے کاروباری معاملات کے متعلق مکمل رہنمائی فراہم کی ہے۔ اس ہی کے تحت اسلام نے کاروبار سے وابسطہ احکامات کی درجہ بندی بھیی فرمائی ہے مثلا حرام کاروبار مکروہ کاروبار اور جائزکاروبار کی مکمل تشریح کی ہے
The impact of macroeconomic variables on financing by Islamic banks in Pakistan
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Muhammad Aman Ul Haq
This study determines the financing by Islamic banks is facing the impact of factors like Interest rate, real effective exchange rate, whole sale price index, Production index, and stock exchange index. It also examines Islamic banks financing is a complementary/supportive to conventional banks or substitute of it. ARDL bound testing approach to co-integration is applied to data in order to investigate whether a long run or short run relationship exists or not. The sample period is stared from January 2007 and taken up to December 2014 on quarterly basis. E-Views statistical software is employ for data processing and analysis. Financing by Islamic banks is not affected by macro economic variables (Interest, Real Effective exchange Rate, Whole sale price index, Production index and Stock exchange index) in Long Run. While in short run it has been affected by these variables simultaneously.
Islamic banks and social development
(University of Management and Technology, 2015) Usman Waheed, Muhammad
Islamic finance and banking industry have rapidly flourished in current years. Islamic banking means it should be financilay, morally and socially. In Pakistan most of the Islamic banks working only for the profit maximization. Most of the scholars are argued that the name of Islamic banking should be changed with western HALAL banking This study has been conducted with the help of the key playes, Islamic bankers, working in Islamic banks to check weahther Islamic banks provide the resources to impove the social indicators. After result it is found that Islamic banks provide and motivate the social development with in the society.
Interest rate volatility and the performance of islamic banks
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Muhammad Nadeem Khalil
Market interest rates in an economy keep on changing. The objective of this research study was to analyze the impact of interest rate changes on the performance of Islamic Banks. For this purpose, four independent variables named, Discount Rate (DR), Karachi Interbank Offer Rate (KIBOR), Treasury bill (T.bill) rate, and PakistanInvestment Bond (PIB) rate were taken as a proxy for interest rates while the performance of Islamic Banks was measured using Return of Asset (ROA) and Return on Equity (ROE) ratios. Secondary data was used for this research study which was obtained from the State Bank of Pakistan's official website. Vector Auto Regression (VAR) model, Impulse Response Function (IRF) and Variance Decomposition Analysis (VDA) was used to see the impact of interest rate changes on the performance of Islamic Banks. The findings showed that there was not a significant impact of interest rate changes on the performance of Islamic Banks. The study also concluded that although Islamic Banks use KIBOR as benchmark rate, Islamic banks still able to effectively mitigating interest rate risks by using various interest mitigating techniques. The research also recommended that Islamic Banks, instead of using KIBOR as benchmark should adopt a business model which do not take into consideration the market interest rates and carry out their operation keeping in view the true principles of Islam. A complete new business model for Islamic Banks is proposed in this regard.
Application of bai salam in agriculture sector of Pakistan
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Mir Sajjad Rafiq
Islamic Banking is taking up its roots fast in the Muslim World including Pakistanmainly due to the Islamic Shariah prohibition of indulging in the practice of Interest (Riba) and hence to earn their livelihood in conformity with the Shariah framework. The seed of Islamic Banking was sowed in Pakistanin 1981 with the establishment of Federal Shariat Court. But with the start of Islamic Banking in Pakistan, criticism also followed on its working and interpretation of Shariah Principles. Majority of the Ulemas of different Schools of Thought in Pakistandid not approve of the prevalent Islamic Banking which has thrown a challenge to the Islamic Scholars to bring forth True Islamic Products on the Financing side and their mode of administration to conform to Shariah laws. On the liability side the Scholars are in conformity that it should be done on Modarababasis. Bay al-Salam is a contract for supply of goods at a later date i.e., at the time of harvest in case of Agri produce, but the price is negotiated and FULLY PAID in advance at the time of the Contract. This mode was specifically approved by the Holy Prophet to favor the farmers who needed money for their livelihood till the time of the harvest. But this ruling of the Holy Prophet is also being applied in other fields of production to facilitate the suppliers. However in Pakistanthe farmers are forced to borrow from the “Aarthi's” stationed in the Market Committees at exorbitant interest rates for their financing needs of buying the required inputs for harvesting of their fields. Thus the advent of Islamic Banking in Pakistanhas thrown a challenge to Islamic Bankers and Islamic Institutions to implement true Islamic Products on the Financing side specially in the Agriculture Sector where small farmers are victim of centuries old usurious practices of Aarthi system. Bai Salam is being practiced in Pakistanat a very small level making it insignificant for the economic benefit. This study documents the viability of practicing Salam in the Agriculture Sector and chalks out some practical models for administration of Salam. Findings suggest that Salam is the most desirable product not only for the betterment of the Farmers and the Economy but also for the Administrator of Salam i.e., it is a WIN WIN situation for all the stake holders.
Towards a more holistic understanding of Sukuk
(University of Management and Technology, 2015) Talha Waqar
Sukuk (singular Sakk) are Islamic certificates of investment. They are tied to an underlying physical asset. Depending on select factors (such as legal, jurisdictional concerns and the preference of market participants), this link to the underlying asset may vary in terms of its legal and accounting treatment. While it is true for conventional securitization, the role of Special Purpose Vehicles (SPVs) is equally crucial in Sukuk structuring; other parallels with conventional securitization may be drawn readily. There are, however, defining Shariah characteristics (mainly in the shape of prohibitions), which distinguish Sukuk from securitization. Various ways to classify Sukuk are discussed with the main focus on the bifurcation into Asset-based and Asset-backed Sukuk. The difference between the two is highlighted by the discussion on ownership of the underlying Sukuk asset, ability of the investor to dispose of this asset and right of recourse in the event of default or insolvency. The Shariah validity of equity-based asset-based Sukuk is called into question by renowned scholars such as Sheikh Mufti Taqi Usmani and others. Accordingly, the AAOIFI Sukuk clarification (issued in 2008) and its implication for market participants is elaborated upon. A change is evidenced in the market in the wake of the clarification, with equity-based Sukuk registering a negative growth for a 4 year period hence. Challenges to the overall growth and acceptability of Sukuk are discussed; legal and jurisdictional inadequacies and Shariah ruling heterogeneity are some of the obstacles to be overcome moving forward.
People's perception and attitude towards islamic banking in Pakistan
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Muhammad Zaman
The purpose of this study is directed to gage the impression of general populace perception and attitude about Islamic Banking in Pakistan. The sample of the study scattered to customers of Islamic banking keeping accounts with the respective banks. The results revealed that the majority of the people don‟t have adequate data of the thoughts of Islamic Banking. A rate of the individuals did not even understand that Riba is forbidden in Islam. Less care about the Islamic dealing with record thoughts can be the essential driver of negative wisdom among general populace. This study moreover revealed that various people trust that Islamic banks have not expected their fitting part in making the care and data about the thoughts and working of Islamic dealing with a record. The study may help the Islamic banks to re-examine their publicizing systems so that the negative impression of the general population may be changed to a positive one.
Risk manafement of murabaha: A practical approach
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Haroon Siddique
Purpose:The purpose of this research study is to understand and identify the risk involved in Murabaha while reviewing financing proposals, their execution and to propose relevant mitigating tools. Research Methodology / Approach:The research design is more of descriptive in nature. The selection of topic for research study is based on the researcher study in the field of Islamic finance. Further, the selection of topic is driven owing to personal interest in the topic. Findings:After identifying and analyzing the different stages of Murabaha transactions, it is found out that Murabaha transactions consist of various stages and in each of its stages, there are specific risk (Direct and Indirect Risk considerations) pertaining to each stage. Hence, it is inevitable for the professionals to get acquainted and understand the risk stages in Murabaha transactions. Research Limitation:The research has limitation of its applicability to the extent of Islamic banking institutions of Pakistanwith the exemption of applicability on commodity Murabaha transactions and transactions executed by Islamic Micro Finance institutions. Practical Implication:This study supports the risk analyst managers while reviewing the financing proposals before allowing disbursement so that they can approve and structure the facility with minimum risk. Moreover, this study will also be helpful for the finance managers of Islamic banks to execute the Murabaha transaction with mitigated structured in Shariah compliant manner. Originality:Considering the facts of wide utilization of Murabaha transactions at such a wide level, there is an enormous requirement of creation of document which helps the banking professional and students to get benefited. This research studyhas been conductedto understand and identify the risk involved in Islamic financing product of Murabaha while reviewing financing proposals execution and to propose relevant mitigating tools.
Preventing the next financial crisis: Does islamic finance hold the key?
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Muhammad Imran Ejaz
The Capitalist system has undergone numerous crises in its history and they seem to come one after the other. The Financial Crisis of 2007-2008 shook the whole foundations of the International Financial architecture and raised further questions as to what was inherently wrong with the system. Eyes turned towards the principles of Islamic Finance to see if here lay the answer to the problems facing the financial system in place in the world. This study has aimed to answer the question as to whether Islamic Finance principles offer a solution to preventing Financial Crises. Initially an analysis of the Conventional (International) and Islamic Monetary systems has been made in this study. This study has then gone on to analyze three crises ; Black Wednesday 1992-the currency crisis that shook Britain ; East Asian Currency Crisis and the Financial Crisis of 2007-2008.The mechanisms and the causative factors of these crises have been studied and isolated. These causative factors have then been studied under the light of Islamic Finance principles. In order to arrive at answers the methodology employed has been analysis of existing literature and use has been made of podcasts of leading financial experts. Access to experts who are at the same time well versed in knowledge of the workings of the International Monetary System and Islamic Finance is very difficult and limited. The study is unique in studying the Black Wednesday Currency Crisis in the light of principles of Islamic Finance. The researcher has not come across any previous study carrying out the above mentioned task. This study is also distinguished, from any previous work, in analyzing these three crises from the perspective of Islamic Finance as the contents of one thesis. The study has shown that the underlying causative factors of the three crises are in violation of the principles of Islamic Finance. The main causative factor behind the Currency Crises is shown to be the ability to carry out a Speculative attack which is possible due to the facility of short sales. The study shows that short sales are contrary to the teachings of Islamic Finance. Likewise the role of speculation in the 2007-2008 crisis is also highlighted along with the other causative factors. The study concludes that if the causative factors isolated in the three crises, which are in violation of the rules of Islamic Jurisprudence and still persist in the system, are removed from the International Financial Architecture then this system would be given great stability and the chances of a further crisis would significantly diminish.
بیمہ ذمہ داری اور اسکا شرغی متبادل
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) رافع, اشرف غثمانی غفرلہ
POTENTIAL OF LIVESTOCK TAKAFUL IN PAKISTAN: AN EMPIRICAL STUDY
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Mubeen Butt
Livestock Takaful has emerged as Shariah compliant alternate to conventional livestock insurance. The focus of the study is to access the demand for the livestock Takaful in Pakistan. Livestock sector is considered the backbone of the economy and contributing 11.8% of GDP. It is engaging significant portion of population of the country. Pakistanis fifth largest milk producing country. Livestock insurance confronts with different types of risks faced by the farmers like flood, heavy rainfall, earthquake and other natural disasters. Livestock insurance is used to mitigate risk. Livestock is yet prohibited by Shariah scholars to elements of Riba, Gambling, Gharar and Qimar. A sample survey of 250 dairy farmers was conducted between January to March 2015 in the three main Areas of Punjab which have abundant of livestock Lahore, Kasur and Raiwind i.e. is to assess, to what extent farmers are willing to livestock Takaful .Descriptive statistics and Binary logistic Regression is were used to assess the potential and demand for livestock Takaful The result of a Binary logistic model indicates that Gender, Farm income, Household income and No of animals have significant positive relation with demand for livestock Takaful. Result of this study determined most of the farmers are willing to purchase Islamic livestock Takaful for Cow share is 80(55.17). Policy implication, such as the need to establish a Shariah compliant product for livestock with using different awareness programs through different media sources.
Axioms of financial market in islam Past-present-future
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Fahad Ahmed Qureshi
Shariah law states that the responsibility of a man is to structure this world without annihilation force, in the interim or after the building. If acerbic tree to make caricature expedite to the terra firma deterioration then that acerbic tree categorized as annihilation to the terra firma and intrinsically become prohibited.
Impact of Islamic microfinance on poverty: A case study of Pakistan
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Rahil Arif Tarar
In 1970s microfinance was introduced for the first time and now Islamic microfinance has been proved as a successful tool for poverty alleviation. The purpose of this study is to evaluate the Impact of Islamic microfinance on poverty in Pakistan. This research project was designed to study Islamic microfinance institutions and the impact of the Islamic Microfinance Institutions on their clients in Pakistan. Questionnaire, Group Discussions and Interviews were conducted for data collection. Primary data was collected through structured questionnaire, interviews and group discussions from Islamic Microfinance beneficiaries and clients where as secondary data is collected through online journals, articles and findings of already conducted surveys. The sample selection technique was non probability and convenience based. The variables were Living Standard of Islamic Microfinance clients, Income Level, Health conditions, availability of Islamic Microfinance, Islamic Microfinance innovative products and level of knowledge. In this descriptive research study I found that Islamic microfinance had positive impact on its beneficiaries in the country. I, on the basis of this research study, have no doubt in saying that the Islamic Microfinance product line needs to be innovative to benefit more untapped and potential clients of Islamic Microfinance in financially excluded segments of this country for ultimate poverty alleviation and generation of economic activities. Finally, it is explicitly stated that this research work is as original as done by the candidate solely which was not utilized for any other academic title and would be a good contribution to research studies in Islamic Microfinance industry and may identify the future areas of research for Islamic microfinance researchers.
Market potential of Islamic banks in agriculture business
(University of Management and Technology, 2015) Asim Shahzad
Agriculture is an important sector of any economy; country like Pakistanagriculture sector has leading position in the growth of economy. Agricultural mechanism boosts up the GDP growth rate and revolutionizes the frame of Pakistaneconomy. This revolutionary epoch make role of financial sector most crucial to meet the need of the day. Pakistani agriculturists are much bounded to the religious traits than the industrial populace, and reluctant to utilize the financial facilities provided by the conventional banking. Islamic banking system in Pakistanhas least contribution in the development of argi-business development. There is a need of short term loan financing to match the day to day or weekly expenses, purchase of raw material, medication arrangement and salaries of the staff members, as the agri business is mostly seasonal and thus it is quite difficult for the small farmers to manage their cash flows. On the other hand they are also in the need of long term financing to support their fixed assets vital for existence of the business The study found that majority of the farmers and farm managers are not aware about the short term and long term financing by the Islamic banks. They are also of the opinion that not any Islamic bank is providing short term loan facility for the availability of loan for day to day working capital requirements and for medication purposes, which indicates the low awareness level among the people regarding the Islamic banking products in this sector, known as the back bone of the economy.
Risks in salam in islamic banking
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Hammad Fazal
Purpose: The purpose of this study is to describe the risks present in different stages of Salam when it was used as mode of finance in Islamic banking. Also, to discuss the mitigation tools to avoid those risks, highlighting the boundaries and limits for risk management mentioned by Shariah.

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