Project Proposal

Comparison of Islamic Banking & Commercial Banking

Muhammad Kamran Danish

VU ID: mc070400254

Virtual University of Pakistan

Submitted To:
Instructor (FIN-619)
Project Management Department FIN-619

Date of Submission: 27th May, 2010

 Table of Contents

CHAPTER – 1 --------------------------------------------------------------------- 3
1.1: Introduction of the project --------------------------------------------------------- 3
1.2: Background -------------------------------------------------------------------------- 4
1.3: Research Objective ----------------------------------------------------------- 5
1.4: Significance of the Study ---------------------------------------------------------- 5

CHAPTER – 2: PROJECT PROCEEDINGS------------------------- 6

Chapter # 1: INTRODUCTION -------------------------------------------------- 6
Chapter # 2: ISLAMIC BANKING SYSTEM --------------------------------- 6
Chapter # 3: CONCEPTS IN ISLAMIC DEBT BANKING ----------------- 6
Chapter # 4: PRODUCTS OFFERED UNDER JURISPRUDENCE OF
ISLAMIC SHARIAH --------------------------------------------- 6
Chapter # 5: PAKISTANI ISLAMIC BANKS (3 Islamic banks) ---------------6
Chapter # 6: RESEARCH FINDINGS (Analysis & interpretation) --------------6
Chapter # 7: CONCLUSION & RECOMMENDATIONS --------------------- 6
BIBLIOGRAPHY------------------------------------------------------------------ 6

CHAPTER – 3: METHODOLOGY------------------------------------- 6
3.1: Data Collection sources------------------------------------------------------- 6
3.2: Data Collection Tools--------------------------------------------------------- 7
3.3: Data Processing---------------------------------------------------------------- 7

Bibliography--------------------------------------------------------------------------7

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Chapter 1:
1.1 Introduction of the project:
In today’s 21st century time proven that all the economic system fail completely (i.e.
socialism, capitalism, mix system) only system which still holds its importance is the
Islamic economic system. Islamic economic system has no loop hole it’s laid perfectly
considering the human needs and psychology.
Bank plays an intermediary role between depositors and investors, similarly in Islamic
system banks are the hub of the economic system, and it provide equal opportunity to
utilize the market resources equally to create balance between different sectors of society.
The major difference between Islamic banking and conventional banking is “Interest rate”
Islamic banks operate without the interest rate factor. Islamic banking serves as a key
vehicle to improve strength and develop financial and non-financial product by bringing
in financial innovation that can cater adequately to diverse demand of its key customers.
Islamic economic system is not only for Muslims the objective of the Islamic economic
system laid in the welfare of the humanity. In the 20th century it was more or less an
abstract concept. The first Islamic bank with finance started in 1963 when Mit Ghamber
savings bank began offering interest free banking in Egypt. The Islamic summit of
Lahore, Pakistan in 1974 recommended the creation of Islamic bank and Islamic
development bank and from 1980’s various Islamic banks have begun their operation in
many countries only Iran and Pakistan have implemented Islamic banking in the whole
banking sector. Islamic banking establishing both in Muslims countries and international
financial markets with over 500 institutions involved all over the world which creating it
global industry. Assets managed in accordance with the Islamic laws are worth over US
$300 billion, including financial facilities made available by banks and investments by
mutual funds that have been screened for shariah compliance.

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According to first hand knowledge about Islamic banking from general public I got
diverse opinion they rate it very high but they are not satisfied because of many reason, so
it always create interest for me to find out where the problem is, what are the reason
which create dissatisfaction among the public, and for me Islamic banking has under
perform according to his potential.

1.2 Background:
Islam is the complete religion; this statement is true and valid and can be prove on the
reality and logical ground. Islam is the only religion which understands human
psychology more than any religion, it will provide guidance in every field of life without
any lope hole either its religious matters, social matters or economic related issue Islam is
there to guide.
Islam define sound economic system 14th centuries ago, time proved there is no better
system other than Islamic system, Islam clearly prohibited “RIBA” interest in our dealing
either business transaction or personnel dealing on the basis of which Islamic economical
system’s building block is laid down.
Banks play a vital role in economy development similarly in Islamic system bank has its
own importance without which a complete sound system can not placed in the society.
The only difference between an Islamic bank and a conventional one is the rate of return
in conventional bank rate of return is fix you get fix rate of return over a period of time
and rate of return is dependent on the investment participation in which no chance of lost
which is against the Islamic principles, in Islamic system rate of return is not fix it
fluctuate along with the performance of the market and other factors.
For Islamic banks the target audience is there to capture the only thing which required
badly is to give right information to convince them because the value of Islamic bank is
already there but proper information about products and moods of operation is not clear.
Islamic banks need to improve there customer relation along with new products. People

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adopted Islamic banks just for the sake of religious point of view and some said both that
is religion & economic.
This research will examine Muslim knowledge of Islamic banking and its products, as
well as their awareness in adopting Islamic principles as a way of life. The reasons behind
this lack of knowledge about Islamic banking are extremely important in drawing up a
new education strategy for Islamic banks for the next century with this new finding, it is
hoped that the management of Islamic banks will put some effort into educating the
public not only about their services and their products, but also adopting Islamic
principles in their customers financial activities.

1.3 Research Objective

I want to conduct this study to find out the deviation among the theoretical aspect of
Shariah and actual practicing of the Islamic banks in Pakistan, if any.
The main research problem which will be under discussion in this report is:
Is there any “difference between theoretical and actual/practical aspects of
Islamic Banking in Pakistan?”
And following are its subsidiaries:
• Intend to understand the theoretical aspects of Islamic Banking as per Shariah
rules.
• Intend to know the practicing of the Pakistani Islamic Banks.
• Intend to know any significant change among theoretical and practical aspect of
Islamic Banking in Pakistan.

1.4 Significance of the Study:

In Pakistan lot of activities are visible in the Islamic banking segments. Many new banks
are establishing their offices while local banks are gearing-up to provide Islamic banking
services.

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However it is interesting that people know little about Islamic banking. Those who know
something also believe that Islamic banking is almost the same as the conventional
banking.
Islamic banking is a subjective issue different people have different opinion, so this
research not only clear ambiguity related Islamic banking but also give suggestions and
recommendations for improvement of the system.

Chapter 2: Project Proceedings

CHAPTER 1: INTRODUCTION
CHAPTER 2: ISLAMIC BANKING SYSTEM (Theoretical Aspects of Islamic Banking)
CHAPTER 3: CONCEPTS IN ISLAMIC DEBT BANKING
CHAPTER 4: PRODUCTS OFFERED UNDER JURISPRUDENCE OF ISLAMIC
SHARIAH
CHAPTER 5: PAKISTANI ISLAMIC BANKS (Practical Aspects of Islamic Banking)
(3 Islamic banks, i.e Meezan bank, Islamic Bank and Dubai Islamic)
CHAPTER 6: RESEARCH FINDINGS (Gaps between theoretical and practical aspects
of Islamic Banking in Pakistan, Analysis & interpretation)
CHAPTER 7: CONCLUSION & RECOMMENDATIONS
BIBLIOGRAPHY

Chapter 3: Methodology
3.1 Data Collection sources:
My research primarily depends on secondary data but I will also use primary data to
understand and give clear picture for my research findings. I will use the data in following
respects.
Primary Data:
• I will conduct Interviews to only bank personnel about their views, likes/dislike
and help to understand conceptual ambiguity.

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Secondary Data:
Secondary Data have studied to provide the concepts, Hence
• Standard Chartered, State Bank, Dubai Islamic bank and Islamic bank have made
a lot of studies in this direction and my research finding will form the preliminary
base of this study.
• Research journal, different studies, Magazines regarding Islamic banks will be
analyzed and presented.

3.2 Data Collection Tools:

The data collections tools will be used in this report are as follows:
Interviews for Bank Personnel’s, profile of the respondent's will be shown. (Try to
interview those bank personnel’s which banks are included in our research i.e. Meezan
bank, Islamic Bank and Dubai Islamic)
In this research secondary data plays an important role because it’s a yardstick on the
basis of which banks operations will be analyzed and interpreted.

3.3 Data Processing:

I will use secondary data as a building block to my research on the basis of which my
research findings will depend. On the other hand primary data is also used for primarily to
get first hand knowledge to my research problem and after getting primary data I will
analyze the result of my interviews to conclude my findings.

Bibliography
www.scb.com.pk
http://en.wikipedia.org
http://www.apvision.com.pk/islamic_banking_finance_economics
.html

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Ahmed Mamud Shaikh.(1989), towards interest free banking
institute of Islamic culture. Lahore, pp171-196.