Islamic Banking Made Easy

Foreword

The word Saadiq means 'truthful' in Arabic, representing our commitment to

provide Shariah compliant banking solutions that meet the unique needs of

our clients without compromising their beliefs and values.

As you know, Islamic banking is rapidly growing in the global financial

markets and Standard Chartered Bank has been a forerunner. To facilitate

our clients, it is imperative, that we are well informed about the key principles

of Islamic banking along with the products offered by Standard Chartered

Bank. This handbook provides a comprehensive overview of Islamic banking

in a user-friendly manner. It is not just a training guide for frontline staff, but is

also an effort to clarify misconceptions in the minds of our clients.

Afaq KhanChief ExecutiveGroup Islamic BankingStandard Chartered Saadiq

Contents

Section 1 : What is Islamic Banking? 02

Section 2 : Shariah Compliant Retail Products 10

Section 3 : Shariah Compliant Modes of Banking & Finance

Section 4 : Shariah Compliant Corporate, Commercial, & Trade Products

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19

Section 5 : Further Learning Resources 21

Section 6 : Testimonials 22

Section 7 : Concluding Note 26

This handbook contains Quranic verses & Ahadiths, all readers are requested to show due respect in this regard.

The purpose of this handbook is to provide basic information about the principles of Islamic Banking and Finance. It is based on presentations developed by local trainers and material contained in State Bank of Pakistan’s “Frequently Asked Questions on Islamic Banking” and “SBP Annexure 1 of IBD Circular No. 02 of 2008”.

WHAT IS ISLAMIC BANKING?

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Islamic banking is a system of conducting banking activities in line with the principles of Shariah while avoiding all the prohibited activities such as Interest/Riba, Gharar* (uncertainty), dealing in prohibited businesses (e.g. alcohol, gambling), etc.

‘Interest free banking’ is just one of the pillars of Islamic banking. Islamic banking means not only to avoid interest-based transactions, but also to avoid unethical and socially unacceptable practices prohibited in Shariah, such as unfair trade practices, hoarding, speculation, etc.

Hence, Islamic banking transactions are based on ‘tangible assets and real services’ as opposed to ‘conventional money lending’. *Gharar: The uncertainty that is present in the basic elements of an agreement (i.e. wording of the agreement, subject matter, etc.)

Is Islamic banking meant only for Muslims?The teachings of Islam are meant for both Muslims and non-Muslims. Universal values like honesty, justice, avoiding fraud, etc., form the basic principles of Islamic banking. Therefore, Islamic banking is for everyone irrespective of what religion they follow.

What is meant by Shariah?

Shariah means a “Way” or “Path”. In Islam, Shariah means guidance and laws given by the Holy Quran and the Hadith/Sunnah of the Holy Prophet (Peace Be Upon Him). It also includes juristic interpretations of Islamic scholars. Islamic Shariah is derived from the following four sources:

1) The Holy Quran 2) The Sunnah of the Holy Prophet (Peace Be Upon Him)3) Ijma’ (consensus of the Mujtahideen - ‘Independent Jurists’) 4) Qiyas (Analogy)

WHAT IS ISLAMIC BANKING?

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What is Riba or Interest?

"Riba" means excess, increase or addition. As per Hadith of the Holy Prophet (Peace Be Upon Him), “Every loan that derives a benefit (to the lender) is Riba”. Therefore, interest means giving and/or taking of any excess amount in exchange of a loan or on debt. Hence, it has the same meaning as that of Riba.

What are the different kinds of Riba?

According to Islamic jurists, there are two types of Riba: (1) Riba Al Nasiah and (2) Riba Al Fadl.

(1) Riba al Nasiah (also known as Riba or Sood): This refers to any increase or addition of debt. It means “addition or premium” that must be paid by the borrower to the lender along with the principal amount as a condition for the loan or debt.

Example of Riba al Nasiah: Mr. A lends Rs.10,000 to Mr. B with the condition that Mr. B shall return back Rs.12,000 after one month. In this case, the premium (Rs. 2,000) paid by Mr. B to Mr. A is Riba or Interest.

(2) Riba al-Fadl: The prohibition of this Riba is based on Sunnah. Hence, it is also called Riba al Hadith. Riba al-Fadl refers to the excess or increase which is taken in exchange of specific homogeneous commodities and encountered in their hand-to-hand buy and sell. This is explained in the famous Hadith:

The Prophet (Peace Be Upon Him) said, "Sell gold in exchange of equivalent gold, sell silver in exchange of equivalent silver, sell dates in exchange of equivalent dates, sell wheat in exchange of equivalent wheat, sell salt in exchange of equivalent salt, sell barley in exchange of equivalent barley, but if a person transacts in excess, it will be usury (Riba). However, sell gold for silver anyway you please on the condition it is hand-to-hand (spot) and sell barley for date anyway you please on the condition it is hand-to-hand (spot).”

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What are the revelations / verses in Holy Quran and Sayings / Ahadiths of our Holy Prophet (Peace Be Upon Him) regarding prohibition of Riba / Interest?

The prohibition of Riba has been announced in Quran and Ahadiths. There are four sets of revelations about Riba which were revealed on different occasions:

First Revelation: In Surah Ar-Rum, verse 39, dealing in Riba has been discouraged in the following words:

"Whatever Riba (increased amount) you give, so that it may increase in the wealth of the people, it does not increase with Allah; and whatever Zakah you give, seeking Allah’s pleasure with it, (it is multiplied by Allah, and) it is such people who multiply (their wealth in real terms)" .

Second Revelation:In Surah An-Nisa, verse 161, Muslims were informed about the practice of taking Riba by Jews:

"and for their charging Riba (usury or interest) while they were forbidden from it, and for their devouring of the properties of the people by false means. We have prepared, for the disbelievers among them, a painful punishment.”

Third Revelation:In Surah Al-Imran, verse 130, Riba/Interest was abolished in the following words:

"O you who believe, do not eat up the amounts acquired through Riba (interest), doubled and multiplied. Fear Allah, so that you may be successful."

Fourth Revelation: In the Surah Al-Baqarah, verse 275-281, Riba has categorically been prohibited in all its forms."Those who take Riba (usury or interest) will not stand but as stands the one whom the demon has driven crazy by his touch. That is because they have said: “Sale is but like Riba”, while Allah has permitted sale, and prohibited Riba. So, whoever receives an advice from his Lord and desists (from indulging in Riba), then what has passed is allowed for him, and his matter is up to Allah. As for the ones who revert back, those are the people of Fire. There they will remain forever. [275] Allah destroys Riba and nourishes charities, and Allah does not like any sinful disbeliever [276].

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Surely those who believe and do good deeds, and establish Salah (prayer) and pay Zakah will have their reward with their Lord, and there is no fear for them, nor shall they grieve. [277] O you who believe, fear Allah and give up what still remains of Riba, if you are believers. [278] But if you do not (give it up), then listen to the declaration of war from Allah and His Messenger. However, if you repent, yours is your principal. Neither wrong, nor be wronged. [279] If there is one in misery, then (the creditor should allow) deferment till (his) ease, and that you forgo it as alms is much better for you, if you really know. [280] Be fearful of the day when you shall be returned to Allah, then every person shall be paid, in full, what he has earned, and they shall not be wronged. [281]"

According to Islamic jurists and scholars, there are around 40 different Ahadiths of Holy Prophet (Peace Be Upon Him) on the subject of Riba and its prohibition.

Few of them are as follows:

1. Jabir ibn Abdullah (Allah Be Pleased With Him) narrated that the Prophet (Peace Be Upon Him), cursed the receiver and the payer of interest, the one who records it and the witnesses to the transaction and said: "They are all alike [in guilt]." (Al Saheeh al Muslim, Jam e Tirmidhi and Musnad Ahmad)

2. Abu Hurayrah (Allah Be Pleased With Him) narrated that the Prophet (Peace Be Upon Him) said: "On the night of Ascension I came upon people whose stomachs were like houses with snakes visible from the outside. I asked (Gabriel) who they were. He replied that they were people who had received interest." (Sunan e Ibn Majah and Musnad Ahmad)

3. Abu Hurayrah (Allah Be Pleased With Him) narrated that the Prophet (Peace Be Upon Him) said: "Riba has seventy segments, the least serious being equivalent to a man committing adultery with his own mother." (Sunan e Ibn Majah)

4. Abu Hurayrah (Allah Be Pleased With Him) narrated that the Prophet (Peace Be Upon Him) said: "There will certainly come a time for mankind when everyone will take Riba and if he does not do so, its dust will reach him." (Sunan e Abu Dawud and Sunan e Ibn Majah)

Therefore, all Islamic jurists have consensus that interest is Riba in all its forms and manifestations.

Quranic Verse’s translation from “The Meanings of the NOBLE QURA’N with explanatory notes by Mufti Muhammad Taqi Usmani”.

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Are Islamic banks not just paying interest and dressing it as profit on trade and investments?

This is not the case. Islamic banks accept deposits from customers on profit and loss sharing or on the basis of “Qard”. These funds are used in Shariah compliant modes of finance, trade or investment. The income generated by these Shariah compliant modes are then distributed among the depositors as profit.

How can Islamic banks be considered Islamic when they are using an interest based system (KIBOR) as a benchmark while determining profit?

As we all know, the Islamic banking industry is in its initial development stage. Ideally, Islamic banks should have their own KIBOR equivalent benchmark system. However, the nature/structure of the transaction determines its validity and using an interest rate benchmark for determining the profit of any permissible transaction does not render the transaction as invalid or Haram.

Why is the end result of Islamic banking and conventional banking the same. What is the difference between the two?

The validity of a transaction does not depend on the end result, rather it depends on the process and the sequence of activities performed in reaching the end. If a financial transaction is done according to the rules of Islamic Shariah, it is Halal even if the end result of the transaction may look similar to a conventional banking transaction.

For example, the meat of a goat which is not slaughtered according to the principles of Islam and the meat of a goat which is slaughtered as per Islamic principles may look similar, smell similar and taste similar, but the former is Haram (prohibited) and the latter is Halal (allowed).

The same example can be used for Islamic and conventional banking as well. Making a transaction valid or Halal will depend on the process and sequence of transactions and not the end result. Hence, on face value, Islamic banks may look similar to conventional banks, but the contracts and product structures used by Islamic banks are different from conventional banks.

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Furthermore in the verse 2:275 of the Holy Quran, Allah has responded to the apparent similarity between trade and interest by saying that He has permitted trade and prohibited Riba (though they may look similar).

What is the difference between conventional banking and Islamic banking?

The following are the main differentiating points between conventional banking and Islamic banking.

CONVENTIONAL BANKING

Money is a commodity as well as a medium of exchange. Therefore, it can be sold at a price higher than its face value and it can also be rented out.

1 Money is not a commodity. It is only used as a medium of exchange. Therefore, it cannot be sold at a price higher than its face value or rented out.

Profit is earned by charging interest on capital. ‘Time value’ is the basis for charging interest on money/capital.

2 Profit is earned through trade of goods or charging for providing services.

Interest is charged even in case the organisation suffers losses by using the bank’s funds. Therefore, it is not based on profit and loss sharing.

3 Islamic banks may operate on the basis of profit and loss sharing. If the business has suffered losses, the bank will share these losses based on the mode of finance used (e.g. Mudarabah and Musharakah).

While disbursing cash finance, running finance or working capital finance, no agreement for exchange of goods and services is made.

4 The execution of agreements for the exchange of services is a must while disbursing funds under Murabaha, Salam and Istisna contracts.

Conventional banks use money as a commodity which leads to inflation.

5 Islamic banking tends to create link with the real sectors of the economic system by using trade related activities. Since money is linked with real assets, it contributes directly to economic development.

ISLAMIC BANKING

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What is Standard Chartered Saadiq?

Standard Chartered Saadiq is the dedicated Islamic banking division within Standard Chartered Bank (Pakistan) Limited to meet the needs of customers who want Shariah compliant products and services.

Our Shariah compliant products are developed under the guidance of a dedicated Shariah Advisor. Currently Mufti Muhammad Abdul Mubeen is the Shariah Advisor of Standard Chartered Bank (Pakistan) Limited Saadiq. He is a specialised jurist in ‘Fiqh’ (Islamic commercial jurisprudence). The fatawa and rulings of the Shariah Advisor are binding on the Bank.

SHARIAH COMPLIANTRETAIL PRODUCTS

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Islamic structure used behind each product

SHARIAH COMPLIANT RETAIL PRODUCTS

Saadiq Current Account Qard

Saadiq Savings Accountand Term Account

Mudarabah

Saadiq Credit Card Ujrah

KEY POINTS• Current account is based on the concept of Qard• Customers provide funds to bank under the mode of Qard• Bank is allowed to invest these funds only in Islamic assets to earn

profit • Customers agree not to take any profit on their funds deposited in

current account• Funds shall be repayable to the customer on demand

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What is Saadiq Current Account?

Saadiq Current Account is based on the Islamic concept of “Qard”. Qard is a contract of loan between two parties in which the borrower is required to pay back only the principal amount borrowed. Qard is repayable on demand. This means that the bank must return the money to the depositors when they ask for it.

Application to Retail Banking:• For a current account, customers provide funds to the bank on the basis

of Qard• Customers are the lenders and bank is the borrower• Bank can invest these funds in Shariah compliant avenues only (on its

discretion) to earn profit• Customers agree not to take any return (profit) on the funds provided to the bank• Customers can withdraw their funds from the current account whenever

they want, partially or completely

What are Saadiq Savings & Term Accounts?

Saadiq Savings & Term Accounts are based on the principle of Mudarabah. Mudarabah is a special kind of partnership where one party gives money to another party for investing it in a business.

• The partner who invests is called Rab-ul-Mal (Investor)• The partner who looks after management is called Mudarib (Working

Partner)• Rab-ul-mal cannot participate in management of the business• In terms of a savings account, the depositors (customers) are the

Rab-ul-Mal and the bank is the Mudarib• Profit is shared as per the pre-agreed ratio between the bank and the

customer• In case of loss, the same is borne by the depositors in proportion to their

investments, and the bank bears the loss of its efforts/services in managing Mudarabah

• In case the loss is caused by the negligence or misconduct of the bank in managing the depositors’ fund, the loss will be borne by bank

• The Mudarabah will terminate when its period is complete. It can also terminate at any time by mutual understanding of both parties by giving notice. This means that the depositor can withdraw his money out of his savings account at any time. On the other side, the bank also has the right to close any account, after giving prior notice to the customer

Investment of Funds:• Bank invests these funds only in Shariah Compliant businesses. Under no

circumstances will the funds be invested in non-Shariah Compliant businesses

• Deposits received from customers/depositors are utilised by the bank to earn profit by providing financing to other customers under Islamic financing modes like Musharakah, Murabaha, etc.

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KEY POINTS• Savings and Term Account is based on Mudarabah structure• It is a partnership, where bank is Mudarib and depositor is

Rab-ul-Mal• Profit for any party cannot be fixed, profit sharing ratio is agreed

between the bank and the depositor at the beginning of contract• The bank and the depositor have the right to end the contract of

Mudarabah at any time by mutual understanding

Distribution of Profit:• It is necessary in Mudarabah that parties agree, at the beginning, on a

profit sharing ratio between them• No particular percentage has been prescribed by Shariah. Rather, it has

been left to the mutual consent of Rab-ul-Mal and Mudarib to decide the profit sharing ratio

• While deciding the profit sharing ratio, it is not permissible to: (a) Fix a lump sum amount of profit for any party; e.g. party A will get

Rs. 50,000 profit/return every month (b) Fix a profit percentage; e.g. party A will get 10% profit of the invested

amount every month • However, both parties can agree on a fixed profit sharing ratio; e.g. 40%

of the actual profit shall go to party A and 60% shall go to party B • For example, at month end, actual profit earned from the business is

Rs. 1,000. 40% of the actual profit (i.e. 1,000 x 40% = Rs. 400) will be retained by bank as Mudarib’s (bank) share while 60% of the actual profit (i.e. 1,000 x 60% = Rs. 600) will be distributed among Rab-ul-Mal (depositors) as per the announced weightages before the start of every month

This means that only a profit sharing ratio/percentage has to be decided at the start but the actual profit will be received after the completion of every month

Premature / Early encashment of Term Accounts:• The Term Accounts can be premature/early encashed at the request of

the depositor as per the terms and conditions of the Term Account

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What is Saadiq Credit Card?Saadiq Credit Card is a Shariah compliant credit card based on the concept of ‘Ujrah’. The term Ujrah means ‘fee or financial payment for the utilisation of services’.

• A fixed monthly maintenance fee is charged by the bank (as per Schedule of Charges) for continued usage and the benefits/privileges associated with the card

• The fixed maintenance fee depends on the type of card (e.g. Gold, Platinum, etc.) and is based on the different services and benefits offered against each card type

• The fixed fee is charged on a monthly basis. However, the bank on its sole discretion can waive the charges for any given month

• This fixed fee does not depend on the outstanding balance or the duration of the balance revolved/outstanding

• Customer is not allowed to use Saadiq Credit Card for non-shariah compliant transactions like alcohol, gambling, etc. Hence, there is a restriction to use the card at those merchant categories

• If the customer is late on making payment, the late payment fee is charged and given to charity

KEY POINTS• Saadiq Credit Card operates on Islamic concept of 'Ujrah', which is

a ‘fixed fee’ structure• Fixed fee is charged for providing several services available to the

customer on their credit card• Fixed fee is charged on a monthly basis and the bank reserves the

right to waive this fee

SHARIAH COMPLIANT MODESOF BANKING & FINANCE

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Investment / Participatory Modes Mudarabah: Mudarabah is an arrangement in which a person (called Rab-ul-Mal) participates with his money and another person (called Mudarib) participates with his efforts. The parties agree, at the beginning, on a profit sharing ratio between them.

Musharakah: Musharakah is a partnership contract. The profits are shared as per agreed ratios between partners and losses are borne in proportion to their respective capital contributions.

Diminishing Musharakah: Diminishing Musharakah (DM) is a form of co-ownership in which two or more persons share the joint ownership of a tangible asset (e.g. house) in an agreed proportion. It is agreed that one of the co-owners will purchase, in periodic instalments, the share of the other co-owner until the ownership of that tangible asset is completely transferred to the purchasing co-owner. Furthermore, along with the purchase of share, the (purchasing) co-owner will also make periodic payments for the usage of other co-owner’s share in the asset.

Trading / Sales Modes

Murabaha: Murabaha means sale of goods where the seller is obliged to disclose to the buyer the cost of goods sold. The sale could either be on cash or on a deferred payment basis. The parties agree on the cost of goods sold and the profit margin included in the selling price.

Musawamah: Musawamah is the general sale of goods whereby the seller is not obliged to disclose to the buyer the cost of goods sold.

Salam: Salam is a sale transaction in which the seller agrees to supply specific goods to the buyer at a future date against an advance payment which is fully paid at spot. The basic purpose of Salam is to meet the needs of the small farmers for the production of agricultural products.

SHARIAH COMPLIANT MODES OF BANKING & FINANCE

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Istisna: Istisna is a sale transaction where a commodity is transacted before it comes into existence. In Istisna, the buyer is given an order to manufacture a specific commodity. Following are necessary conditions for Istisna: (a) Price is fixed with the consent of parties. (b) The specification of the commodity to be manufactured must be

agreed between parties.

Ijarah:Ijarah is a type of rental contract whereby the owner of an asset (e.g. car), transfers the right to use to another person for an agreed period and price.

Fee / Service Modes

Wakalah: Wakalah is an agency contract in which one person appoints another person as his agent to perform a certain task on his behalf on agreed terms and conditions, usually against a certain fee. A contract of Wakalah can take place only in respect of such acts which the principal is competent to perform himself, provided such act can be performed by the agent.

Kafalah: Kafalah is a contract in which a third party becomes surety i.e. provides guarantee for the payment of debt on behalf of the debtor. It is a pledge given by a third party to a creditor to the effect that if the debtor defaults in payment of the debt, it will be paid by said third party as Kafeel or guarantor.

SHARIAH COMPLIANTCORPORATE, COMMERCIAL,

& TRADE PRODUCTS

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Saadiq Murabaha FinanceMurabaha means sale of goods where the seller is obliged to disclose to the buyer the cost of goods sold. The sale could either be on cash on a deferred payment basis. The parties agree on the cost of goods sold and the profit margin included in the selling price. Murabaha can be used for the purchase of physical assets e.g., raw material, inventory, equipment, etc. This structure cannot be used to purchase services.

Saadiq Term Finance under Diminishing MusharakahThe Term Finance is based on the concept of Diminishing Musharakah (DM). Diminishing Musharakah is a form of co-ownership in which two or more persons have joint ownership of a tangible asset in an agreed proportion. Then, one of the co-owners purchases, in periodic instalments, the share of the other co-owner until the ownership of that tangible asset is completely transferred to the purchasing co-owner. Furthermore, along with the purchase of share, the (purchasing) co-owner will also make periodic payments due for the usage of other co-owner’s share in the asset. Diminishing Musharakah can be used for medium to long term finance for plant, machinery, equipment, etc.

Saadiq Term MusharakahUnder this arrangement, the Bank enters into a Musharakah agreement with the customer whereby the Bank agrees to finance the customer’s business on a profit and loss sharing basis. The Bank can take profit on provisional payment basis which would be subject to adjustment when the customer’s financial statements are published.

Saadiq OverdraftThis is used to provide working capital to customers for their day to day business requirements. The product operates on the concept of Musharakah whereby the Bank enters into a Musharakah agreement with the customer where the Bank agrees to invest funds in customer’s business on a profit and loss sharing basis.

Saadiq LC Issuance and Import Finance under MurabahaProduct is based on the concept of Murabaha. The Customer opens LC as the Bank’s undisclosed agent and upon receipt of import documents, the

SHARIAH COMPLIANT CORPORATE, COMMERCIAL, & TRADE PRODUCTS

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Bank makes payment to the supplier. On arrival of goods, the Bank sells the goods to the customer. In case the customer is not seeking finance, the Bank sells the goods to the customer against spot payment. If the customer is seeking finance, goods will be sold to the customer on a deferred payment basis.

Saadiq LC Issuance under KafalahProduct is based on the concept of Kafalah. In case of LC Issuance under Kafalah, the Bank Issues LC as Kafeel (guarantor) on behalf of the customer and upon receipt of import documents to the Bank, the customer makes payment to the supplier from their own sources.

Saadiq Import Invoice FinancingThis product operates on similar structure as Saadiq Import Finance under LC issuance.

Saadiq GuaranteesThis product is based on the concept of Kafalah. A contract is made between the Bank and another party (the beneficiary) whereby the Bank undertakes to pay an agreed sum if the customer fails or defaults in fulfilling his performance/financial obligation to the beneficiary under the terms and conditions of the guarantee.

Saadiq Export LC ConfirmationIslamic LC confirmation operates on the principles of Kafalah. The product is essentially a guarantee by the Bank (the confirming bank) to make payment of an LC which has been opened by some other Bank (the issuing bank) upon failure of the issuing Bank to honour its commitment under the LC.

Saadiq Export Bills under LCThis product is based on the concept of Musawamah. Under this structure, the exporter sells the underlying goods of the LC to the Bank for a discounted price and the Bank then sells the same goods to the importer for the LC value by making the exporter an agent for the Bank. Saadiq Credit Bill Collection operates on the Bank’s general practice.

Saadiq Export Invoice FinanceThis product operates on similar structure as Saadiq Export Bills under LC.

Detailed ‘Fatawas’ on Saadiq products are available on website www.sc.com/pk/saadiq.

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(1) An Introduction to Islamic Finance Written by Mufti Muhammad Taqi Usmani

(2) Frequently Asked Questions on Islamic Banking Published by SBP

(3) Supreme Court of Pakistan’s Ruling on Riba Written by Justice Khalil-ur-Rehman

FURTHER LEARNING RESOURCES

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TESTIMONIALS

As practising Muslims, we try and observe the requirements of our religion, as much as possible. However, Allah alone knows how many sins we continue to commit. When we look at all the things that we need to do, to comply with our religious requirements, we also tend to look at how practical it is, in our day to day life, to adapt to all the requirements. The harder or more impractical it is to adapt, the more we may tend to delay the adaption. With Islamic Banking, I have found, that in the last few years, the industry has developed so well, that practically all my banking requirements can now be catered to by Islamic Banking, atleast in countries like UAE, Malaysia and Pakistan. That being the case, how could I not justify moving to Islamic Banking. After all, I am not inconvenienced, nor do I find it impractical.

Wasim SaifiGlobal Head, Islamic Banking, Retail Clients & Chief Executive Officer,

Standard Chartered Saadiq, Berhad Malaysia

Why I practice Islamic Banking?

Khurram HilalHead, Islamic Products, UAE

I see a career in Islamic Banking as probably one of the very few career choices where you could actually have the best of both worlds; have a fulfilling professional career and make a contribution in the path of Allah (towards eradication of Riba). All it requires is getting your Niyah (inten-tions) right.

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Muhammad Abdul MubeenHead, Shariah Department, UAE

Islamic Banking is an effort to provide an alternate to the existing conventional banking system which has a number of non Shariah compliant activities such as Riba and Gharar etc. This effort is to facilitate Muslims to carry out their financial activities in conformity with the principles of Shariah and I engage in Islamic Banking as it satisfies my financial needs in a Shariah compliant manner.

Why I practice Islamic Banking?

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Azhar AslamHead, Islamic Banking, Pakistan

My reasons for practicing Islamic Banking are primarily faith based and over period of time also professional – niche skill set.

Ali AllawalaHead, Islamic Banking – Retail Clients, Pakistan

The verses in Surah Baqarah 275-281, and the arguments presented in Supreme Court of Pakistan’s ruling on Riba/Interest was a an eye opener and ‘reality check’ for me. We live in a predominantly Muslim country where it is extremely easy to practice Islamic Banking. Also in a pure career sense, Islamic Banking is a strong skill set. So, if something is commanded by Allah and not obeying it has a huge downside yet at the same time it is also easy to practice Islamic Banking, then not doing it cannot be justified. May Allah always continue to guide and make things easy for us.

Why I practice Islamic Banking?

Here for good. These are three words that individually have little meaning. However, together they make a very powerful statement, our brand promise. It signifies being here for people, here for progress and here for the long run. Standard Chartered has over 150 years of experience in serving the financial needs of clients worldwide. We have been going strong for all these years because we evolve our financial solutions with the changing needs of our clients.

We are “pro-choice” when it comes to offering customised solutions. We align our products and services to the type of banking our clients demand, thereby catering to all the requirements of our diverse clientele. In Pakistan, our clients began demanding Islamic solutions, so we aligned ourselves to the market need and offered competitive Islamic Banking solutions while continuing to provide products and experience expected from an international bank.

Our Islamic Banking segment has been growing steadily over the last few years. To cater to this need, all of our relationship managers are trained and well equipped to provide information on Islamic financial solutions. This handbook is a great guide to refer to and stay informed on Islamic Banking concepts enabling us to facilitate our clients better. Thank you, to the Islamic Banking team, for making the “Islamic Banking Made Easy” handbook, it is a convenient and useful tool which will be beneficial for all.

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Naseer HasanHead, Retail Clients, Pakistan

Standard Chartered, Serving Diverse Needs

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CONCLUDING NOTE

Standard Chartered Saadiq has provided its clients with a suite of innovative products and financial solutions since 1993 in Malaysia and 2003 in the UAE, Pakistan and Bangladesh. Markets, where our Saadiq brand is present, have seen immense growth of Islamic Banking clients in the last few years and continues to grow at a strong pace.

Islamic Banking is often oversimplified as ‘interest free banking’. However, as has been clarified in this handbook, fair and ethical trade are also basic components of Islamic Banking. Such information is important when answering customer queries about the do’s and dont’s of Islamic Banking. The two questions customers often ask are, how Islamic Banking differs from conventional banking and how Islamic profit is calculated, both of which are sufficiently covered here. Finally, the explanation of the bank’s products, particularly how Saadiq Credit Cards are structured, is a key take-away, especially since Standard Chartered is the only bank providing Shariah compliant credit cards in Pakistan.

I congratulate the Retail Islamic Clients team in Pakistan for putting together this meaningful and insightful document and ensuring that our customers are offered the best Islamic financial services in Pakistan.

As demand for Islamic Banking products increases, it is crucial that we - as a bank - are equipped with the best talent to address this demand. Therefore, it is important that our staff has the necessary training to handle clients’ requests. This handbook serves as an important guide for both frontline staff as well as those interested in Islamic banking to familiarise themselves with the main principles of Islamic banking and product suite currently offered by Standard Chartered Bank Pakistan.

Raheel Ahmed Global Head, Retail Islamic ClientsStandard Chartered Bank

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