Institute of Islamic Banking (IIB)

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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.
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.
A Comparative Performance Analysis of Islamic & Conventional Banking: A Case Study of Pakistan
(University of Management and Technology, 2018) Altaf Ahmad
The assessment of financial performance of banks is of particular importance in all societies and economic systems, given the scarcity of economic and financial resources compared to the large needs. Banks face a peculiar situation where most of the financial resources are borrowed from the depositors or shareholders. Therefore, one of the most important challenges facing bank managers is how to efficiently use the financial resources available to them. Financial indicators are the most common analytical tools used to assess the overall and partial performance of all organizations. The objective of this research is to critically evaluate the performance indicators which are used in previous studies and propose a comprehensive indicator to check the performance of selected Islamic and Conventional banks of Pakistanover the period of 2011-2016. The comprehensive indicator of performance is comprised of indicator of profitability, customer satisfaction and cost & revenue efficiency. The efficiencies are measured by using Stochastic Frontier Analysis, while overall indicator has been constructed by using Principle Factor Analysis. This study provides ranking of selected banks based on the new performance indicator and insights to the possible determinants in conventional and Islamic banking system. This study then compares the determinants of performance such as Bank size, Operating efficiency, Management efficiency, Employee efficiency, and Funding cost between conventional and Islamic banks which are comparable in size. To compare the determinants of performance, regression analysis is applied. Feasible Generalized Least Square (FGLS) approach is later used to estimate the determinants of performance. Findings show that Meezan bank is ranked at the top in revenue efficiency and Askari bank ranks first in cost efficiency. In overall performance comparison, Meezan bank is at the highest position. This V study identifies Operating efficiency, Management efficiency, Employee efficiency, and Funding cost as important determinants of the performance of Pakistani banking sector.
Demand side factors of insurance and Takaful
(University of Management and Technology Lahore, 2017) Arif, Maimoona
Risk is the main reason of psychological and economic stress in different countries but conventional (or Islamic) insurance is a mean to transfer (or share) risk. Insurance/Takaful is one of the risk transfer mechanism which transfer (or share) risk from policy holder to insurance operator. The aim of this study was to examine the key economic and socio-economic determinants for the demand of conventional/Islamic insurance in selected GCC and ASEAN countries. The data was taken on yearly basis from 2004 to 2016. OLS, Fixed and Random effect models were employed to examine the impact of economic (inflation, income, unemployment rate and interest rate) and socio-economic (dependency ratio, life expectancy and education level) on the demand for conventional and Islamic insurance (net premiums). The findings of the study concluded that life expectancy, per capita income, education, interest rate, dependency ratio found to be statistically significant in case of conventional insurance. However, only income and life expectancy found to be statistically positive significant, while dependency ratio and inflation found negative yet significant in case of demand for Islamic insurance.
Determinants of customer satisfaction in Islamic banking sector of Pakistan
(University of Management and Technology Lahore, 2016) Ali Aslam, Muhammad
Islamic banking in Pakistan experienced a remarkable development and increasingly challenging pace over the past decade. The primary purpose of conducting this research work was to examine the major determinants that may influence the satisfaction level of Pakistani customer’s in the Islamic banking. Service quality, product quality and awareness level was used to measure the impact on customer satisfaction in Islamic banking of Pakistan. The research study also figured out why consumers prefer Islamic banking over conventional banking system. The study made used of a questionnaire, filled by 116 customers of Islamic banks in full by random sampling. Descriptive statistics, one sample t-test and factor analysis were employed to achieve the objectives of the study. The findings of the research study suggested that product quality and service quality found to be positively and significantly impact the satisfaction level of the Islamic banking customers. The study also showed that majority of the consumers were aware of banking products and services being offered by the Islamic banks, but have no in depth understanding about the differentiation between Islamic and conventional banks. The results provides Islamic banking industry regulators, central bank, academicians and practitioners useful guides in their efforts to formulate adequate to attract more banking customer’s promotion policy.
Determinants of financial performance of takaful and insurance companies
(University of Management and Technolog, 2017) Tanveer, Zoya
Research Purpose: The main aim of this research study is to determine the financial fundamental ratios that may influence on the financial performance of the KSE - 100 index listed insurance and takaful companies. The research study determines the important selected financial variables that an investor / decision makers considers to be impact significantly on the insurer’s financial performance. Methodology / Design / Approach: The research study constitutes secondary data of 22 insurance and 5 takaful listed companies to examine the impact of retention ratio, loss ratio, liquidity ratio, efficiency ratio, capital adequacy and current ratio on the financial performance (ROA and ROE) during the period 2010 to 2016. The data is collected from the annual financial statements of selected companies. Research Findings: The finding of the study concludes that insurance company’s decision makers should consider retention ratio, loss ratio and efficiency ratio as an important financial fundamental factor that impact the performance (ROA) in conventional insurance scenario. Further, study contributed that retention ratio, loss ratio, efficiency ratio, capital adequacy and liquidity ratio have statistically significant relationship to the ROA, while retention ratio, loss ratio and liquidity ratio have significant association to the ROE in the context of Islamic insurance companies. However, the research study found insignificant relationship between current ratio and financial performance for all models. Managerial Implications / Originality: The study assist investor’s and decision making authorities of domestic and international companies to have a better look of considering financial fundamental factors, thus predict the company’s performance. First comprehensive study has been conducted on financial factors determines the stock price of KSE - 100 listed insurance and takaful companies within the Pakistan
Effect of Islamic Banking on Financial Deepening among the Pakistani Muslim
(University of Management & Technology, 2018) Sanam, Hafiza Sadia
To investigate the influence of financial deepening and Islamic banking system is the main determination of this research among the Pakistani Muslim societies. For better imperial result we selective descriptive research design for this project. Muslim community is selected target population for getting back the result of respondent. Because this research is associated with the religion that why the respondent of the study are Muslim community. For data collection approximately two hundred survey questionnaires distributed. Survey questionnaire is used for data collection and firstly apply descriptive analysis, beside this regression and Content analysis applied for investigating the associated between variables of the research. The finding of the research explore deficiency information about financial prospective which is associated with development of Islamic banking system. Success of Islamic banking also depends on the training and exposure of the mangers but this study show the deficiency of mangers training and experience. Furthermore, small and medium financial institution is badly influence from the lack of managerial training and experience. Another investigation of the research is medium and small institute of influenced from the regulation bodies and policies of our government. The rapidly change in technology is also reason of less development in financial institution. The customers of Islamic bank still facing the issue of cash inflow and cash outflow. The suggestion of the research is training of the managers and need of experience mangers for implementation of interest free banking system, for this purpose government of Pakistan take stand for the implementation of Islamic banking system. Government of the Pakistan would create the trend of training among the owners of the business and as well to train the managers as well. v It is very difficult for small and medium financial institution to developed technological environment of interest free banking because for this purpose financial institution need huge capital so government should help the financial institution with providing subsidy. The determination on vibrant policies, terms and condition about the Islamic and its usage toward their customers about the responsibility and facilities.
Factors affecting the growth of Islamic microfinance institutions In Pakistan
(University of Management and Technolog, 2017) Shahid Safdar
Pakistanis an under develop economy having a population of about 200 million. It is the six most populous country of the world with high level of poverty. The Government and social sector organizations are using many tools to alleviate poverty. However, despite many attempts have been done for the basic necessities of human, it is still growing in Pakistanrapidly. Micro Finance considered being the globally accepted as an important tool to alleviate poverty. Pakistanofficially declared Islamic Republic of Pakistanhas great potential of Islamic micro financing. This research study aimed to study and identify the factors that impact on the growth of Islamic microfinance sector in Pakistan. A questionnaire is employed to achieve the research objectives of the study. The data is collected from 60 high ranked individuals having number of years‟ experience in the Islamic micro finance industry of Pakistan. One sample t-test and regression model is applied to examine the determinants of Islamic micro financing sector growth in Pakistan. The findings of the study revealed that structural issues of Islamic micro finance institutions, availability of Shariah complaint funds, availability of Islamic micro finance products, non-entrepreneurial approach of community, lack of regulatory and policy framework are the main problem areas hampering the growth of IMFIs in Pakistan.
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.
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.
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.
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.
Islamic banker’s perception regarding regulatory challenges of Islamic banking in Pakistan
(University of Management and Technolog, 2017) Rozeen Shaukat
This current study seeks to investigate the regulatory challenges of Islamic banking in Pakistan. The research aimed to examine whether or not regulatory challenges was present among the practitioners of Islamic banking in Pakistan, and if so which dimensions contributed towards regulatory challenges. This study research design was quantitative in nature and survey method was used. The selection of each bank was made through random sampling procedure. A close ended questionnaire was used to collect data from the practitioners of Islamic banking working in Lahore. One hundred fifty two questionnaires were screened for date analysis. Descriptive and inferential statistics were applied for analyzing quantitative data by using SPSS (Statistical Package for Social Sciences). Descriptive analysis was done for frequencies, percentages, and graphical interpretation to make summaries. Data normality was checked and inferential statistics were used to test the statistical significance between groups of the study. The study using quantitative technique provided useful insights for factors causing regulatory challenges among IB practitioners. The study results indicated that the raise of employment opportunities is a good indicator but the quality to deal with practical realities of IB, as per Islamic law still challenge for many. For reliable and timely information the practitioners are required to stay informed for quality discourse with IB stakeholders. The results determined that practitioners, having high level of education regarding Islamic banking having more ability to understand and deal with challenges. Liquidity in banks resulted adequate but the issue is to manage excessive liquidity. This issue can be resolved by organizing Islamic interbank money markets for the utilization of resources, along with establishing Islamic benchmarks, and tax incentives for investors and this cannot be done with the support of regulatory government bodies. The role of Shariah advisors has high importance as he is the one who procure structure for Shariah compliance activities and resolve issue. Results reported that performance of regulatory structure can be monitored and evaluated through proper Sharaih screening and Shariah based auditing. It was suggested that SBP with the help of Shariah experts should resolve this issue on priorities. It is imperative to invite and engage academic institutions on board by the SBP and industry for quality research, products innovation and financial engineering for the betterment of Islamic banking industry. This action will also result with adequacy IB services availability in urban and rural areas. For exceptional results, regular training of the staff (Shariah professional and banking professional) was highly demanded through combined efforts of central bank, and academic institution national and internationally. This effort may result with positive direction for harmony and standardization of operating procedures, as well as for improved market development of IB industry in Pakistan. Serious efforts for the promotion of research culture' consisting empirical evidences of the IB industry was highly recommended. An effective and efficient presence of Islamic banking is recommended along with strong and logical arguments considering practical approaches to attract the potential customers for Islamic banking services. It is suggested that for development of Islamic banking industry, additional research on the same topic may also be required and it can also be extended for overall Islamic banking and finance industry including capital and financial markets. The study findings will also be helpful researchers, policy makers and financial institutions to conduct more detailed inquires based on the issues of Islamic banking in Pakistan
Islamic banking and economic Growth: Case of Pakistan
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Mushtaq, Afia
Islamic banking in Pakistan has gained recognition, in last ten to eleven years. There are many products which are different from conventional banking and the most significant element is zero interest. Currently, a large no of people have motivation towards Islamic banking compared to conventional banking especially in the view of growth in its assets,investment and deposit. The increasing number of Islamic banking institutes indicates an increasing trend of Islamic banking in Pakistan. People are trusting on this mode of banking due to which the number of Islamic banking institutes is increasing and different conventional banks are opening Islamic banking branches to cater the increasing demands of people of Pakistan. Extensive work has been done in evaluating the connection between the financial sector and development, however research work regarding the Islamic banking framework is still insufficient .The present study is unique as it investigates the short run and the long run relationship between Islamic financial investment, its diverse items and financial development, especially in Pakistan .For the analysis we have utilized the bound testing methodology of integration and error correction models (ECMs), developed within an autoregressive distributed lag (ARDL) structure by Pesaran and Shin (1995), Pesaranet al. (1996) and Narayan (2004). Using quarterly data for the period of 2006-2013 it is found that there is a supply side relation between economic growth and Islamic banking in Pakistan and Islamic banking industry exerts significant impact on economic growth.
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.
Islamic law of collateral(Reȟ’n)
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Akhtar, Aqeel
Islamic law states that the responsibility of a man is to structure this world without eradication 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. Islam is a schema for entire universe and is extravagant bounteous than Halal and Haram. In the macrocosm corporate atmosphere, Islamic law of collateral is an emerging practical field of study with a few material available in published form discussing authentic insight and practical perspective to the Islamic outlook on principles and guidelines related to its operational, managerial and ethical issues. Islamic Law of collateral address a sole feature of Islamic financial market that has been consequently slighted. It aims to support the Islamic framework for understanding the ijunctions of Reȟ‟n demonstrate practical perspective for contemporary financial market i.e. banking Industry, corporate sector and Islamic Financial Markets.
Islamic venture capital in Pakistan
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Shahzad, Arfan
One very important type of medium to long term financing is Venture Capital Financing that primarily involves long term equity financing for setting up new and high growth business ventures. Given the ever increasing unemployment numbers, the need for encouragement of entrepreneurs having excellent business ideas and skills, and investment in new business ventures cannot be over emphasised for sustainable economic growth. While the traditional Venture Capital Finance practiced worldwide has inherent similarities to Islamic Finance principles which are sharing the risks and rewards of businesses rather than financing on fixed interest, it also has oppressive and un-Islamic capitalistic hostility in it. Islamic Banking is evolving at a fast pace and a hot topic in today’s financial industry. However, it is subject to the criticism that Islamic Financial Institutions do not have out of box products to offer their customers. It is perceived that Islamic Financial Institutions will not only eradicate Fixed Interest (Riba) rather invest on profit and loss sharing basis. To understand why this practice is adopted by Islamic Banks on limited scale, it is also very important to study the brief reasons or risks due to which Islamic Financial Intermediaries are reluctant in long term equity financing and therefore, assuming business risks of the ventures to which they provide finance. To enable investment in long term equity modes of Islamic finance (e.g. Islamic Venture Capital) there is a need to critically analyse the short and long term needs of Islamic Financial Intermediaries and its investors. Moreover, at the same to boost investment on the basis of P&L sharing there has to be strict rules ensuring transparency in the conduct of businesses which seek long term finance by practicing high level of integrity and following best operating practices and timely reporting. This research study discusses the above issues by examining the importance of venture capital financing, un-Islamic practices of prevalent conventional venture capital financing, augmenting that investment based on profit and loss is preferred Islamic equity mode of financing, capital structure, investment cycle and risks faced by Islamic Banks. To conduct this survey based research and to get results for different variables, a comprehensive questionnaire has been prepared and circulated to concerned circles to get feedback which duly supports the matters emphasised in this research work. This research emphasizes the immediate need of equity based Islamic finance for new business ventures and will lead to development and growth of Islamic venture capital funds or dedicated Islamic venture capital windows in all Islamic Banks.
Issues of Bai Tawarruq in Islamic Banks of Pakistan
(University of Management and Technology, 2016) Atiq Ul Haq
The evolution of Islamic banking and finance has tremendously influenced the economy world-wide, especially in Islamic countries. In recent decades, Islamic banking has become a major competitor of conventional banking system. Conventional banking users are increasing day by day due to its Sharia compliant principles and Islamic banking diversified range of products. Tawarruq is one of the Islamic banking products which is commonly used in Islamic banks. This research has focused on the fiqh perspectives of Tawarruq and its implementation issues in Islamic banking system.In this research, initially we have done the empirical study consideringsecondary data as qualitative methods. In the result, we analyzed that the research is based on different views of the followers and challengerstowards the legality of Tawarruq in Islamic fiqh. The basic condition of valid sale is considered better than that the other aspects,and it has beenreviewed by scholars of the field for valid sale according to sharia compliant. Due to that the legality of Tawarruq, it has been discussed by sharia scholars. There are some rules and resolutions in Islamic countries forthe legality of Tawarruq. In actual practice, Tawarruq is used as a commodity Tawarruq in Malaysia andin Middle East countries, it deals with commodity transaction through Tawarruq principle. Based on the comparative study and literature results, we explored that Tawarruq is permissible with certain conditionif it is strictly followed according to Sharia compliant, otherwise Tawarruq is not allowed.
Kafalah based istisna model for registered SME(s) as vendor for corporate segment: Srahiah acquiescence
(UNIVERSITY OF MANAGEMENT AND TECHNOLOGY, 2015) Hassan, Muhammad Hasham
The study proposes product development under Shariah compliance economic model for Islamic banking sector by conducting the descriptive nature of studies of Istisna financing and Kafalah (supporting contract) base for promoting registered SMEs by Corporate segment’s identification. This study is conducted mainly for identifying that under prevailing practice of Istisna financing product available with the Islamic banking sector; the borrower provides a “Corporate Guarantee” under an independent capacity to an Islamic bank for guaranteeing the credit reputation of the buyers and undertakes for settlement of bank’s liability where the buyer fails to pay the sale price to the bank. Shariah has certain obstacles for Islamic banking for returns over investments. Investments are based on assets under various target market segmentation. Besides all the constructive role of SME sector towards employment creation and national growth of economy is notable. It is effective target market for bank’s earnings, national growth, corporate entities recognition, enterprises development and so on. The research study attempted to introduce a model for indulging the ultimate buyer specified product with Istisna transaction after issuing a work order to registered outsourced vendors (manufacturers) and attach buyer with transaction by issuing a third party corporate guarantee in favor of Islamic Bank. On the other hand supplier i.e. borrower of bank has to issue a “Performance Guarantee” for ensuring the specification according to ordering details in presence of Shart-e-Jazai. An undertaking/ promise by the buyer would secure the transaction for proceeds as per terms and conditions prescribed in the order against supplies of specify items. Thereby effective utilization of available modes of financing would beneficial for SME (s) for availing financial arrangements from banking sector against confirmed cash flows. This research highlights financial resort based on Shariah recognized models Kafalah and Istisna for entertaining small enterprises to avail financial arrangements against specific in hand orders.
Legitimacy of Bai’a Al Urboon; an Investigational study
(University of Management and Technology, 2017) Aziz Ur Rehman
A Professor at Cambridge University London argued if the Islamic Banking system is truly Shari'ah Compliant then what is the Shari'ah justification for the Urboon (the Earnest money) in case if the buyer is unable to complete the deal? This was a moment which inspired the researcher to answer the question.Through this study, theresearcher conductedan in-depth research and concluded that some Fatawa and Shari'ah edicts are famous and people are following it but in fact there is no base for that. Bai'a Al Urboon is one such practice that accepted as the normal but without any firm grounding in the Islamic Financial System.In fact, some Shari'ah Scholars taking the advantages of thumping and exceptional Fatwa and using it as a common ruling. The researcher studied and researched books, articles, papers, etc. searching for a concrete basis for “Legitimacy of Bai'a Al Urboon” based on the principles of Fiqh and Shari'ah. This is a qualitative research collecting of the opinion of four school of Fiqh and highlighting the correct Shari'ah edict and rulings. Researching and reading through books, papers, articles and other supporting material provided an exceptional opportunity to learn the fundamental underlying principles of the Islamic financial system. It created an excellent niche for the development of a fast-growing industry. This research hopes to align further align our financial system with the core Islamic financial guidelines. The importance of this research lies in the need to protect the Islamic Finance industry and its clients from being in doubts and guilty in future. Malaysia started financing based on Bai'a Al Einah and after 20 years they announced that it is Haram. They cannot justify and satisfy their clients who invested and received profits in this 20 years. Dubai Islamic bank started Bai'a Al Salam based financing and after years they stopped it reasoning that this is Haram. Dana Gas issued Sukuk and after 2 years it was announced that such Sukuk are not a Shari'ah Compliant Sukuk. National Bonds Corporation facing objections on their Prospectus and on process on Sukuk Murabaha. Why the industry experts have been forced to argue and justify the wrong practices with weak quotes. The researcher tried his best to protect the industry and highlight the weak basis of Bai'a Al Urboon.

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