INTRODUCTION

The thrust for Islamic Banking is founded on the desire to submit to the Divine
Instructions on all transactions, particularly those involving exchange of money for
money. However, it would be quite unfair to limit Islamic Banking to elimination of Riba
only.

Riba is but one of the major undesirable elements of an economic transaction, the others
being Gharar (uncertainty) and Qimar (speculation). While elimination of these
objectionable aspects in a transaction is indeed a critical aim of Islamic banking system,
it is by no means its ultimate objective.

At the heart of Islamic Banking is a system of commercial transactions that not only
provides Halal modes of commercial transactions by avoiding that which is obnoxious
and objectionable, but also fosters ethical, fair and just practices.

A key element of Islamic economics is distribution of equitable rewards to the different

factors of production. Islamic economic system seeks system of Redistributive justice
where concentration of wealth in a few hands is countered and flow of money into
economy is fluent. Islamic Banking is, therefore, seen as a lynchpin to achieving the
economic and social goals of the Islamic economic system.

Riba

It has been argued in vain for long in some circles that the prohibition in Islam is that of
excessive interest only. Or that it is the interest on consumptive loans that has been
forbidden and as such loans extended for commercial purposes are entitled to an excess
over the principal amount lent. Such tendentious arguing fails to give due understanding
to verses 278 and 279 of Surah Al-Baqarah (quoted below).

“O ye who believe! Be afraid of Allah and give up what remains (due to you) from
Riba (usury) (from now onwards) if you are (really) believers! 2:278

And if you do not do it, take notice of war from Allah and His Messenger! But if you
repent, you shall have your capital sums 2:279

However, this does not mean that Islam prohibits any gain on principal sums. In Islam,
profit is the recognised reward for capital. When capital employed in permissible
business yields profit that “excess over capital” becomes the rightful and just claim of the
owner of the capital. As a corollary, the risk of loss also rests exclusively with the capital
and no other factor of production is expected to incur it.

Another important element of Islamic finance is that profit or reward can only be claimed
in the instance where either risk of loss has been assumed or effort has been expended.
Profit is therefore received by the provider of capital and wages/remuneration by
labour/manager.

A depositor in an Islamic bank can therefore make earnings on his or her deposit in
several ways. Through return on his capital when that capital is employed in a business
venture; through sharing of profit when his capital is part of the capital that is employed
in a partnership, and finally through rental earnings on an asset that has been partially
financed by his capital.

Islamic financing: Asset-based financing

A key feature of Islamic banking is that unlike conventional banks which deal primarily
in money and financial securities, Islamic financing is related to an asset that is a feature
of the transaction, and quite often the principal feature itself. From this springs an
important distinguishing feature of Islam wherein Islamic financing is always based on
illiquid assets that have intrinsic value. Profit to Islamic financing is generated through
bonafide sale of these assets.

Conventional banking, on the other hand, is free of such limitations. It lends money and
makes its earnings through this act of lending. Its earnings are unconcerned with the
economic fate of its lending.

A Perspective

The history of Islamic banking from its recorded inception is less than 40 years old. From
a humble beginning in a small village in Egypt in the late 60’s, it has spread to the four
corners of the world. By normal standards in a time span that is less than half a century it
could have hardly been expected to establish foothold in Muslim world, let alone make
its presence felt in Muslim-minority countries. Yet such has been its phenomenal rate of
growth that not only is it taking firm roots in its homestead, but is also attracting genuine
interest among the standard bearers of conventional banking and in swathes of land
where Muslims are a small minority only.

Still there is much ground left to cover. In Pakistan, Islamic Banking is less than 3% of
the Banking sector. Even in the Gulf states, where it has a larger footprint, in no single
country is the volume of Islamic banking more than a third of the entire sector.

Many blame Islamic Banking’s small share against conventional banking to a smaller
portfolio of products. A standard complaint against Islamic banks is that they do not have
the same variety of financial instruments as found in conventional banking. Though valid
to an extent, this popular jeremiad needs to be seen in the perspective of Islamic
Banking’s brief history against more than two centuries of conventional banking adopted
in full force across the globe, its competition against an entrenched system of banking
and the constraints within which it must operate.

Notwithstanding, Islamic banking is still growing at more than twice the growth rate of
conventional banking worldwide, and while it may not have the latter’s plethora of
financial products, its repertoire of Islamic financial products is steadily increasing.

In the following space, principal Islamic instruments are briefly described to acquaint the
reader with their fundamental aspects. Following that, Islamic Products in BAL-IBD’s
portfolio are illustrated in terms of their features.

PRINCIPLEAOS ISLAMIC INSTRUMENTS

Musharakah

Musharakah is one of the two ideal modes of Islamic financing. The other one being
Mudarabah. Musharakah is a contractual relationship formed through mutual consent of
the parties for sharing of profits and losses in a joint venture. Assets in the venture are
jointly owned in proportion to each partner’s contribution. The profits are shared in a pre-
agreed ratio. Losses, however, are incurred in proportion to each partner’s investment.
Islamic Bank representing share of its depositors invests funds in the joint venture
alongside other investor(s).

Mudarabah

Like Musharakah, Mudarabah is also a form of partnership. Whereas all partners in

Musharakah contribute capital, under Mudarabah partnership is formed between provider
of capital and provider of expertise or human resource. Proportions for sharing profit are
decided upfront. Losses are incurred solely by the partner contributing capital.

Murabaha

Murabaha is a non-participatory mode of Islamic financing where the bank sells the asset
required by its client to the client on cost-plus basis. The asset is first purchased by the
bank and the bank incurs the risk of any loss or damage to the asset as long as the asset
remains under its ownership. Upon sale of the asset, the Islamic bank is obligated to
inform the client of the exact cost incurred in the purchase of the asset and the margin of
profit incorporated in the sale price. Payment by the client of the sale price may be
deferred in which case it would become Muajjal. The selling price once agreed cannot be
changed even when the client fails to pay on the agreed date.

Ijara

Under this facility a client may take on rent, property, vehicle or any other real asset
belonging to the bank. The bank transfers the right of use of the asset to the client, while
retaining the ownership of the asset. The client pays periodic rent to the bank for the use
of the asset. Basis for rentals can be fixed as well as floating. Any change is rental may
be made through mutual consent.

Salam

Salam is a contract of advanced payment against deferred delivery of goods. Goods paid
for in advance by the buyer are delivered by the seller after an interval of time. The Seller
receives in advance fully paid price of the goods at the time of contract undertaking to
deliver the goods specified by the buyer at a future date.

Istisna

Manufacture of a specific product against precise specifications by a manufacturer for

delivery to buyer. It is necessary that the price of the product and product specifications
are fully agreed upon by the manufacturer and the buyer, and that the material required
for manufacture is arranged by the manufacturer.

PERSONAL BANKNG
Personal Accounts

Bank Alfalah – Islamic Banking Division (BAL-IBD) offers Current, Savings and Term
Deposit facilities to its customers seeking personal banking relationships with the
following features:

Facility Minimum balance Profit‡ Zakat deductions

Current deposit PKR 10,000/= Nil Not applicable

Musharakah PKR 5,000/= Tiered structure, 6 Applicable

Savings deposit monthly pay-out

Musharakah Term PKR 50,000/= Tiered structure, 6 Applicable

deposit monthly pay-out

‡ All profits subject to 10% withholding tax

On-line cash deposit facility at all branches of Bank Alfalah

On-line transfer facility between all branches of BAL-IBD

Remittances

Foreign and local remittances are both available. Foreign remittances are available in the
following currencies: US dollars, Pound Sterling and Euro.
Locker services

Locker services are offered at select branches. Lockers are available in three sizes –
small, medium and large. Annual charges for the lockers are as follows:

Small Rs 1,000/-
Medium Rs 2,000/-
Large Rs 3,000/-

Lockers are available to account holders and carry an insurance value of Rs.250,000/-

CORPORATE BANKING
Murabaha Finance

• Types of Murabaha
o Local purchases: For purchase of locally available goods

o Imported goods/commodities/assets

• Mode of repayment:
o Immediately in cash

o On a mutually agreed future date

o Spot Murabaha (Import)

o Deferred Sale Murabaha

Trade Finance

• Imports
o Letter of Credits

o Import Murabaha Finance

o Full range of services related to imports e.g. Contract registration, Import

bills for collection, Shipping Guarantees and Advance payments against
imports.

• Exports
o Export Murabaha Finance

o SBP Islamic Export Finance Scheme

 o Other export related services e.g. Collection of export bills, Negotiation
under Sight LCs, Advising/Confirmation/Transfer of Letter of Credits
opened by other banks

Bank Guarantees

A host of Guarantee types are offered by BAL-IBD including performance, financial and
payment guarantees. BAL-IBD also issues guarantees securing financing facilities to be
availed from Islamic Banks and/or Conventional Banks’ under Islamic modes of
financing.

CONSUMER BANKING

Alfalah Musharaka Homes

With Alfalah Musharaka homes, you can participate with
Bank Alfalah-Islamic Banking Division (BAL-IBD) in
joint ownership of property where BAL-IBD invests a
certain amount, usually up to 80% of the property value.
Through monthly payments – a composite of rent for use
of property and purchase of BAL-IBDs’ Musharaka
shares/units in the property – to BAL-IBD you will be
able to increase your stake in the property every month.
The rental component will be readjusted every month to
reflect your growing share of ownership in the property.
Following purchase of all Musharaka units initially owned
by BAL-IBD you shall become the sole owner of the
house with a free Title to the property.

The Alfalah Musharaka Homes product can be used in multiple situations, giving you
pure Islamic solutions for your desired objectives.

• Purchase an already constructed house (Alfalah Buyer)

• Purchase a plot and subsequently construct upon it (Alfalah Builder)

• Renovate, extend, restore and enhance your already owned housing unit (Alfalah
Renovation)

• Transfer your existing exposure of housing finance facility from another financial
institution to our Riba-free facility

You have the option to choose tenures for the purchase of units from between 3 to 20
years* * 3 to 7 years in case of renovation.
Alfalah Car Ijarah
A Shariah compliant car-leasing scheme with added
features such as:

• No upfront registration charges

• No upfront insurance premium

• No rentals before delivery of car

The facility applies to all locally-assembled new cars up to Rs 4 million. Used cars not
older than three years can also be considered.

The International VISA Debit

Alfalah Hilal Card
Card

Carry your bank account in your wallet with Alfalah HilalCard

Bank Alfalah Islamic Banking Division (IBD) offers Alfalah HilalCard to its customers
for a conscious free spending in a modernized form of currency that provides you with a
wide range of accessibility using VISA’s worldwide network.

Alfalah HilalCard can be utilized for all your financial needs around the world, round the
clock, wherever VISA cards are accepted locally and Internationally, giving you a more
secure and convenient mode of payment.

The Alfalah HilalCard

The Alfalah HilalCard is an International VISA Debit card which gives you an unlimited
access to your current/savings (musharka) account with a simple swipe, at more than 1
million ATMs and 27 million outlets around the world.

The reasons that make Alfalah HilalCard different from others

• HILAL CARD IS A BUY NOW, PAY NOW OPTION.

• 4 No monthly repayment
• 4 No interest charges
• 4 Backed by a customer maintained current/savings (musharaka) account
• 4 Your limit is your balance

HilalCard can be used electronically at any retail outlet or ATM that accepts any VISA
cards.

How Can I apply?

All you need to do is open a current/savings (musharaka) account in any branch of Bank
Alfalah Limited and apply for your Alfalah HilalCard.

INTRODUCTION
 HBL established operations in Pakistan in 1947 and moved its head office to
Karachi. Our first international branch was established in Colombo, Sri Lanka in 1951
and Habib Bank Plaza was built in 1972 to commemorate the bank’s 25th Anniversary.

With a domestic market share of over 40%, HBL was nationalized in 1974 and it
continued to dominate the commercial banking sector with a major market share in
inward foreign remittances (55%) and loans to small industries, traders and farmers.
International operations were expanded to include the USA, Singapore, Oman, Belgium,
Seychelles and Maldives and the Netherlands.

On June 13, 2002 Pakistan's Privatization Commission announced that the

Government of Pakistan had formally granted the Aga Khan Fund for Economic
Development (AKFED) rights to 51% of the shareholding in HBL, against an investment
of PKR 22.409 billion (USD 389 million). On February 26, 2004, management control
was handed over to AKFED. The Board of Directors was reconstituted to have four
AKFED nominees, including the Chairman and the President/CEO and three Government
of Pakistan nominees.

HBL has the largest Corporate Banking portfolio in the country with an active
Investment Banking arm. It encompasses product offerings and services in Retail
Banking and, in recent years, Consumer Banking as well.
HBL is expanding its presence in principal international markets including the UK, UAE,
South and Central Asia, Africa and the Far East.

RATING
HBL is currently rated AA (Long Term) and A-1+ (Short term). HBL is the first
Pakistani bank to raise Tier II Capital from external sources.

MISSION & OBJECTIVES

 O

Our brand identity is the outward expression of what we stand for as an

organization. This is summarized in our vision, mission and is supported by our
values.

V
I
S
S
I
O
N

s
“Enabling people to advance with confidence
and success”.

“To make our customers prosper, our

staff excel and create value for
shareholders”

VALUES
Our values are the fundamental principles that define our culture and are
brought to life in our attitudes and behavior. It is our values that make
us unique and unmistakable. Our values are defined below:

EXCELLENCE
 This is at the core of everything we do. The markets in which
we operate are becoming increasingly competitive, giving our
customers an abundance of choice. Only through being the
very best - in terms of the service we offer, our products and
premises - can we hope to be successful and grow.

INTEGRITY
We are the leading bank in Pakistan and our success depends
upon trust. Our customers - and society in general - expect us to
possess and steadfastly adhere to high moral principles and
professional standards.

CUSTOMER FOCUS
We understand fully the needs of our customers and adapt our products
and services to meet these. We always strive to put the satisfaction of our
customers first.

MERITOCRACY
We believe in giving opportunities and advantages to
our employees on the basis of their ability. We believe
in rewarding achievement and in providing first-class
career opportunities for all.

PROGRESSIVENESS

We believe in the advancement of society through the

adoption of enlightened working practices, innovative
new products and processes, and a spirit of enterprise.

INDIVIDUAL CUSTOMERS
HBL caters to all market segments, offering products that are as diverse as the people we
service. We remain resolute in our commitment to provide products that are competitive
and services that are exemplary.

Whether establishing a new venture or expanding an existing business, our team

understands your banking needs and works closely with you to realize your goals.

HBL provides the following products and services to meet its individual customer
requirements:

IINDIVIDUAL CUSTOMERS
 Debit Card
 Deposit Accounts
 PhoneBanking
 BancAssurance
 Mutual Funds

DEPOSIT ACCOUNTS

HBL offers a wide range of accounts suited to meet individual customer needs. They are:

Term Accounts:

Offered in a variety of tenors with deposits as low as Rs. 10,000.

Current Accounts:

Our Current Accounts offer features that meet your daily banking needs.

Saving Accounts:

HBL’s Saving Accounts cater to individual saving habits.

Foreign Currency Accounts:

Offered in multiple currencies with interest paid on a quarterly basis.

BANCASSURANCE

HBL and New Jubilee Life Insurance Company Limited (NJLI) introduce Amaan
(Retirement Plan) and Tabeer (Child Education & Marriage). These products have been
designed keeping HBL’s customer base as the focus and will provide life insurance along
with an investment option.

Amaan - Retirement Plan:

A pension plan that offers attractive investment returns.

Tabeer – Children Education:

An insurance plan that enables parents to cover education and marriage costs.

DEBIT CARD

HBL Visa Debit Card allows you to pay for your purchases directly from your bank
account. You don’t have to carry cash and your monthly statement provides you with a
complete record of all your transactions so you can manage your expenses with ease.

It has the following prominent features:

 No Interest
 Ease & Security
 No Liability
  International Recognition& Acceptability
 Spending Limits
 Free Account Statement
 24 hour Customer Service
 Global Customer Assistance Service

PHONE BANKING

Your bank is just a phone call away.

You can now call HBL PhoneBanking and save a trip to the branch. Your query will be
resolved in a single telephone call from anywhere and at anytime.

HBL has a long history of being a partner of growth for business and industry. We
provide tailored banking solutions to business customers of all sizes in a wide range of
industries.

We cater to the needs of a broad spectrum of clients. To do this, the business banking
group is segregated by the size of the customer. For customers with an annual turnover
between PKR 50 million to PKR 300 million, our Commercial Banking group provides a
wide range of products that meet specific customer needs.

The Corporate Banking Group focuses on personalized services to large corporate

borrowers who need tailored facilities. The Corporate Bank manages a diverse portfolio,
being an active player in a multitude of sectors including textiles, sugar, leather,
pharmaceuticals, fertilizer, petrochemicals, power, aviation, automotive, telecom, oil and
gas and FMCGs.

The Investment Banking Group is a market leader. It provides innovative capital strategy
solutions to major local and multinational entities.

HBL offers a wide range of products and services for its business customers. They are as
follows:

BUSINESS CUSTOMERS
  Commercial Banking
 Corporate Banking
 Islamic Banking
 Investment Banking
 Cash Management
 Asset Management

CORPORATE BANKING

HBL Corporate Banking Group comprises a seasoned team of Relationship Managers

(RMs) to meet the demanding service standards of large corporations. A long history of
financing and nurturing relationships in Pakistan has given HBL a unique insight,
enabling us to provide timely and effective financial solutions for our customers to meet
the growing challenges of a global economy.

If you are a corporate customer, with a turnover of at least PKR 300 million, we have a
range of solutions designed to help you with your banking needs. Our RMs have the
expertise you need to create tailored financial solutions catering to the specific
requirements of your business.

Whether establishing a new venture or expanding an existing business, our team

understands your banking needs and works closely with you to realize your goals.

S
e
r
v
i
c
e
s
v
i
c
e
s
We provide the following services to meet your funding requirements:
• Working Capital Finance, including Overdraft, FE Loans, etc.
• Pre and Post Shipment Export Financing (PKR and USD based)
• Import Financing (PKR and USD based)
 • LMM Funding
• Receivable Discounting
• Islamic Banking facilities
• Cash Management Services

• Trade Services including Letter of Credit, Letter of Guarantee and Standby Letter of
Credit, etc.

Centres C
Corporate Center, Karachi
Export Processing Zone, Karachi
PIA Branch, Karachi
Karachi Port Trust, Karachi
Steel Mills, Karachi
Stock Exchange, Karachi
Stock Exchange, Lahore
Corporate Center, Islamabad
Morga Branch, Rawalpindi
Corporate Center, Faisalabad
Corporate Center, Multan

COMMERCIAL BANIKNG

HBL’s Commercial Banking Group targets medium sized companies with a turnover of
at least PKR 50 million. Our business units are located in Karachi, Lahore, Faisalabad,
Sialkot, Gujranwala and Peshawar. Each unit is dedicated to service business clusters
located within these cities.

We have the ability and the resources to meet the needs of your business with our pro-
active, responsive and experienced Relationship Managers who are committed to
understanding your business.

We cater to the needs of a broad spectrum of clients. To do this, the business banking
group is segregated by the size of the customer. For customers with an annual turnover
between PKR 50 million to PKR 300 million, our Commercial Banking group provides a
wide range of products that meet specific customer needs.
Services

We offer financing for the following:

• Working Capital
• Procurement of Inventory
• Receivables
 • Procurement of Machinery
• Expansion of production facilities
• Import of raw materials
• Exports

• Guarantees

Centres C

Al-Noor, Karachi Panorama, Lahore

Foreign Exchange, Karachi Badami Bagh, Lahore
Korangi Industrial Area, Karachi Peco Road, Lahore
Napier Road, Karachi
Saddar, Karachi Kashmir Road, Sialkot
S.I.T.E., Karachi Paris Road, Sialkot
Tariq Road, Karachi Small Ind. Estate, Sialkot
Circular Road, Faisalabad Gujranwala Trust Plaza
Peoples Colony, Faisalabad Peshawar Super Market

INVESTMENT BANKING

HBL offers full-service Investment Banking capabilities to its clientele. This year alone,
HBL has closed over thirty transactions with a cumulative worth of over USD 2 billion.
This is a testament to the out-of-box thinking and the innovative products we bring to our
customers.

The Investment Banking Group functions in three specialist business areas:

 Project Finance,

 Debt Capital Markets & Syndications and

 Equity Capital Markets & Advisory.

ISLAMIC BANKING
 Islamic Banking is a growing market segment that offers attractive opportunities to
potential and existing customers. At HBL, Islamic Banking offers Shariah compliant
products and services to meet the short and long term requirements of business and trade.

Islamic Banking provides Ijarah (leasing) for vehicles, plants and machinery to meet
long-term customer resource requirements. Murabaha (local & import) facilities are
provided to meet the short-term financial needs of mid-market and corporate customers.
HBL’s Islamic Banking products are fully Shariah compliant and duly certified by
independent Shariah Advisors.

Services
Visit our Islamic Banking branch for the following services:

 Opening of Current Account and Basic Banking Account (BBA)

 Collection of Foreign/Inland Bills
 Acquisition of Assets on Ijarah
 Purchase of Raw Materials, Semi-Finished/Finished goods or Store or
Spares through Murabaha
 Foreign/Inland Remittances
 Utility Bills Collection
 E-banking/Internet Banking services

CASH MANAGEMENT

HBL offers a comprehensive platform for customers to avail Cash Management Services
throughout Pakistan. Our Cash Management Services reduce the cash turn around of your
company, thereby making it cost efficient.

Advantages
* Centralized Collections / Funds Transfer
* Centralized Payments / Disbursements
* Customized MIS Reporting
* Centralized Customer Support through
I IT/Operations
 Products and Services Collections
* Easy Collect
* Standing Instruction via Debit Authority (SIDA)
* Outward Bills for Collection (OBC)

Payments
* Salaries / Expenses
* Online Cheque Payments (Vendor Payments)
* Utility Bill Payments

eBanking/InternetBanking
* Electronic MIS reporting through email
* Viewing of account statement through E-Banking service
* Dedicated Customer Support Officers for Query Handling
and Reconciliation

RURAL FINANCE

HBL’s Agriculture loans are spread across the country and provide financing through
over 800 branches. We have the largest private bank portfolio in the country with over
PKR 18 billion in various agriculture sectors. HBL’s presence in all agriculture belts of
the country ensures easy access to farmers in rural areas.

We provide loans to small-scale land owning farmers as well as large institutionalized

and alliance based financing to boost the country's economy and yield better harvests.
HBL enables farmers to buy good quality seeds, fertilizers, pesticides, agricultural
implements and non-farm setups through its various product programs.

The following products ensure that customer needs are fully met with respect to their
farming requirements:
 Revolving Agri Scheme
 Haryali Farm Transport Scheme
 Agri Development Loan
 Agri Development Loan (Fish Farming)
 Agri Development Loan (Drip Irrigation)
 Agri Production Finance
 Haryali Livestock Loans

ASSET MANAGEMENT

HBL Asset Management Limited - A Wholly own subsidiary of Habib Bank Ltd. was
incorporated on 17 February, 2006 as a public limited company under the Companies
Ordinance 1984 and was licensed for Investment Advisory and Asset Management
Services by Securities and Exchange Commission of Pakistan on 3rd April, 2006.