Case Study: Islamic Banking in Pakistan a Case of Deposit and Investment Accounts

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Islamic Banking in Pakistan
A case of Deposit and Investment Accounts
Prepared by: Abidullah
MBA 2nd Semester
Email: ims.abid@gmail.com

Introduction:

The traces of Islamic Banking meet with the Constitution of Pakistan 1973, where in article (f) of the said constitution says that “The State shall ……. Eliminate Riba as early as possible”. The process of satisfying this article was started in 1979. The aim was to convert the conventional banking system to Islamic System. All the Financial Institutions were made Riba free by the year 1985. Banking accounts were converted to PLS accounts. Mudaraba contract was introduced for investment banks. However some products were declared un Islamic in 1991 by the Shariah Court of Pakistan. The real Islamic Banking was then started in year 2003 when State Bank of Pakistan provided the first License to Meezan Bank Ltd. The regulatoing authority i.e. Islamic Banking Department in State Banking of Pakistan was established on 15 September, 2003 to promote and develop Islamic Banking as a parallel and compatible banking system in the country. Accounting Standards for Islamic banks are adapted from AAOIFI FAS and are mentioned under National Islamic standards ICAP IFAS. The standards are developed by Institute of Chartered Accountants Pakistan. Almost ten years have been passed since Islamic Banking has been introduced during ten years of Islamic Banking era, Pakistan has five full fledge Islamic Banks, while there are 308 Islamic branches of Conventional Banks.

Deposit and Investment Accounts:

There are three types of accounts for the customers of Islamic Banks namely, current accounts, saving accounts and fixed accounts. The current accounts are operated under Qard ul Hassan contract, whereas saving and fixed accounts under Mudaraba contract. Fixed account is also called as Investment Account or Term Deposit Account. In such account investment can be made from at least one month to maximum of 7 years. In worldwide...
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