Chapter B – Frequently Asked Questions For
Customers of Converting Branch

Q1. Will account no. and branch code will change after conversion?
Ans. No, account no. and branch code will remain the same.

Q2. Will I be able to continue to use my conventional Cheque book fully after conversion of Account?
Ans. Yes, old cheque book will be accepted till new cheque book requested.

Q3. Will the treatment of locker remain the same after conversion into Islamic account?
Ans. Islamic Locker form shall be required whereas rent free lockers against security deposit will be
converted to rental lockers or shall be transferred to nearest branch.

Q4. Will ATM/Debit Card to be required be re-issued upon conversion to Islamic account?
Ans. There is no need to re-issue the ATM/Debit Card.

Q5. Does conversion of account impact the relationship /history?
Ans. There is no impact on customer relationship with the Bank.

Q6. What is meant by Shari’ah/Islamic Law?
Ans. Shari’ah lexically means a way or path. In Islam Shari’ah refers to the divine guidance and laws given by the
Holy Quran, the Hadith (sayings) of the Prophet Muhammad (Peace Be Upon Him) and supplemented by the juristic
interpretations by the Islamic scholars. Shari’ah embodies all aspects of the Islamic faith, including beliefs and
practices. Islamic Shari’ah or the divine law of Islam 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 Ummah)
4. Qiyas (Analogy)

Q7. What is meant by Riba?
Ans. The word “Riba” means excess, increase or addition, which correctly interpreted according to Shari’ah
terminology, implies any excess compensation without due consideration (consideration does not include time
value of money). This definition of Riba is derived from the Quran and is unanimously accepted by all Islamic
scholars. The meaning of Riba has been clarified in the following verses of Quran (Surah Al Baqarah 2:278-9)
“O those who believe; fear Allah and give up what still remains of the Riba if you are believers. But if you do not do
so, then be warned of war from Allah and His Messenger. If you repent even now, you have the right of the return
of your principal; neither will you do wrong nor will you be wronged.”

Q8. What is interest? Is there any difference between interest and Riba?
Ans. The origination of the term interest dates back to 17th century with the emergence of banking system at global
level. Interest means giving and/or taking of any excess amount in exchange of a loan or on debt. Hence, it carries
the same meaning/value as that of Riba as defined in the previous question. Further, it is narrated that “the loan
that draws interest is Riba”. There is consensus among the Muslim scholars of all the Fiqhs that interest is Riba in all
its forms and manifestations.

Q9. What are the different kinds of Riba?
Ans. There are two kinds of Riba:
1. Riba-An-Nasiyah/Riba-Al-Quran
2. Riba-Al-Fadl
Riba An Nasiyah/Riba Al-Quran: In the Holy Quran, Allah (SWT) says in Sura Al-Baqarah (2-279):
“And if you repent, yours is your principal”
It is reported by Harith ibne Abi Usamah in his Musnad that Sayyidna Ali Radi-Allahu Anhu reportedly referred that
:said(صلی ہللا علیہ وسلم ( Prophet Holy the
کل قرض جر نفعا فھو ربا
“Every loan that derives a benefit (to the lender) is riba”
Example of Riba-al-Nasiyah/Interest: If Mr. A lends Rs.100 to Mr. B (a borrower) with a condition that Mr. B shall
return him Rs.110 after one month. In this case, the extra amount of Rs. 10 is Riba or Interest.
Riba-al-Fadl: Abu Said al Khudri Radi-Allahu anhu narrated that Holy Prophet ) وسلم علیہ ہللا صلی )said:
it may be noted that economically speaking it would be irrational to exchange one kilogram of wheat with one and
a half kilogram of wheat in a spot exchange. Therefore, some fuqaha have pointed out that Riba-al-Fadl has been
prohibited because if it was left un-prohibited it could be used as a subterfuge for getting Riba-al-Nasiyah. Of the
six commodities specified in the hadith, two (gold and silver) unmistakably represent commodity money used at
that time. One of the basic characteristics of gold and silver is that they are monetary commodities. As a matter of
fact, each of the six commodities mentioned in the hadith has been used as a medium of exchange at some time or
the other.
During the dark ages, only the first form (Riba An Nasiyah) was considered to be Riba. However, the Holy Prophet
) وسلم علیہ ہللا صلی )also classified the second form (Riba-al-Fadl) also as Riba.

Q10. Does interest/Riba is related only to consumption loans or it applies to commercial loans also?
Ans. The interest is prohibited whether it is consumption loan (loan for meeting day to day human needs) or
commercial loan (loan for business purpose). There are quite a number of ahadith which clarify that in the days of
Holy prophet, people not only borrowed for consumption purposes but also for productive purposes. A few of the
ahadith are given as follows for reference:
(i) Ibn Saad has reported Hazrat Umar ( Radi-Allahu anhu), wanted to send a trade caravan to Syriya. He borrowed
four thousand dirhams from Sayyidna Abdurrahman ibn Awaf, Radi-Allahu anhu for this purpose.
(ii) Ibn Jarrir has reported that Hind, daughter of Utbah and wife of Abu Sufyan borrowed four thousand dirhams
from Sayyidna Umar, Radi-Allahu anhu, for the purpose of her trade. She invested this money in purchasing goods
and selling them in the market of the tribe of Kalb.
This is an ample testimony that the commercial loan was in practice when Quranic verses on Riba were revealed
and the term Riba covers not only consumption loan but also the commercial loan.

Q11. Does the prohibition of Riba apply equally to the loans obtained from or extended to Muslims as well as
non-Muslims?
Ans. With respect to the receipt and payment of interest, there is no distinction between Muslims and non-Muslims
or between individuals and states because interest is prohibited not only in Islamic scriptures but also in other
religious scriptures of the world as given in Question No. 10 above. Therefore, prohibitions of interest apply to
Muslims as well as to non-Muslims.

Q12. Is there any concept of banking in Islam?
Ans. Indeed, yes. If an institution receives funds through a Shariah-compliant arrangement and invests those funds
in a Shariah-compliant manner in commercial transactions to generate profit, and if such an institution is referred
to as a ‘bank,’ then the concept of such an institution certainly exists in Islam. However, if a bank engages in interestbased transactions, then there is clearly no such concept in Islam.
In the early years of Islam, we have the example of a famous companion, Hazrat Zubair bin Awam (RadiAllahu anhu),
with whom people wished to deposit their money on a trust basis (amanah) due to his trustworthiness. He would
decline to accept funds on a trust (amanah) basis; however, he agreed to accept funds as loans (qard) and would
then invest those funds in trading activities. This practice of Hazrat Zubair (RadiAllahu anhu) of receiving funds and
subsequently investing them in trade activities closely resembles the practices of modern banks today (Page no. 68,
‘A Historic Judgment on Riba’ by Mufti Muhammad Taqi Usmani).

Q13. What is Islamic Banking?
Ans. Islamic Banking is defined as a banking system which is in consonance with the spirit, ethos and the value
system of Islam and governed by the principles laid down by Islamic Shari’ah. Interest-free Banking is a narrow
concept denoting a number of Banking instruments or operations, which avoids interest. Islamic Banking, in
general term, is based not only to avoid interest-based transactions prohibited in Islamic Shari’ah but also to avoid
unethical and un-social practices. In the practical sense, Islamic Banking is the transformation of conventional
money lending into transactions based on tangible assets and real services.

Q14. The end result of Islamic Banking and Conventional Banking is the same. Why do they appear
similar?
Ans. The validity of a transaction does not depend on the end result but rather the process and activities executed
and the sequence thereof in reaching the end. If a transaction is done according to the rules of Islamic Shari’ah it is
halal even if the end result of the product may look similar to Conventional Banking product.
For example, a normal McDonalds burger in USA and Pakistan may look similar, smell similar and taste similar but
the former is haram and the latter is halal due to its compliance of Islamic guidelines of slaughtering animals.
Similarly, if a person is feeling hungry, he may steal a piece of bread and eat or alternatively buy a piece of bread to
eat. The apparent end result would be same but one is permissible in Shari’ah and the other is not allowed.
The same is also true for Islamic and Conventional Banking. Therefore, it can be concluded that it is the underlying
transaction that makes something “Halal” (allowed) or “Haram” (prohibited) and not the result itself. Apparently,
Islamic Banks may look similar to Conventional Banks, however the contracts and product structures used by Islamic
Banks are quite different from that of the Conventional Bank. In the verse 2:275 of the Holy Quran, Allah the
Almighty has responded to the apparent similarity between trade and interest by resolutely informing that he has
permitted trade and prohibited Riba (though they may look similar to some).

Q15. If Islamic Banks do not invest in interest based activities then how do they generate profit to pay to their
customers?
Ans. The Islamic Bank uses its funds in various trade, investment and service related Shari’ah compliant activities
and earns profit thereupon. The profit earned from such activities is passed on to the depositors according to the
agreed terms.

Q16. What are the major modes of Islamic banking and finance?
Ans. The following are the modes of finance which can be bifurcated into three categories:
1) Participatory modes of Finance
a) Mudarabah
b) Musharakah
2) Non Participatory modes of Finance
a) Murabaha
b) Musawamah
c) Salam
d) Istisna
e) Ijarah
f) Ijarah wa Iqtina (Ijarah Muntahiyyah Bittamleek)
3) Sub contracts
a) Wakalah
b) Kafalah
c) Rahn

Q17. Briefly define the some modes of Islamic Banking and Finance?
Ans. The major modes of Islamic Banking and Finance have been defined below:
Mudarabah
A form of partnership where one party provides the funds while the other provides expertise and management. The
latter is referred to as the Mudarib. Any profits accrued are shared between the two parties on a pre-agreed basis,
while loss is borne only by the provider of the capital.
Musharakah
Musharakah means a relationship established under a contract with the mutual consent of the parties for sharing
of profits and losses in the joint business. It is an agreement under which the Islamic bank provides funds, which are
mixed with the funds of the business enterprise and others. All providers of capital are entitled to participate in
management, but not necessarily required to do so. The profit is distributed among the partners in pre-agreed
ratios, while the loss is borne by each partner strictly in proportion to respective capital contributions

Chapter C – Deposit Products Based FAQs

Q1. Can an Islamic Bank guarantee a fixed rate to its depositor?
Ans. The Islamic Banking Deposit structure is based on the model of Mudarabah, in which the profit rate is based
on the actual gross income earned for the period. Therefore, Islamic Bank cannot guarantee any rate prior to earning
of the gross income of the said period.

Q2. Is profit rate to depositors guaranteed by announcing weightages?
Ans. In actual, the weightages are only preference profit ratios amongst (Rabb-ul-Maal) the different products of
different categories and are announced at the beginning of the period to eliminate any chances of guaranteeing a
particular profit rate. Based on the actual gross profit of the pool, the Mudarib and the depositors’ shares will be
distributed as per the announced weightages.

Q3. Where are the funds from depositors invested by the Islamic Bank?
Ans. All the funds received from the depositors are invested in Shari’ah Compliant financing modes such as
Murabaha, Ijarah, Diminishing Musharakah, Salam, Istisna, etc., thus returns received from this financing is Halal.
Whereas in Conventional Banking, the funds received from depositors are invested in interest based transactions,
thus render their income as Haram.

Q4. Can we open accounts for every individual?
Ans. No, individuals whose whole or predominant income is from Haram sources are not eligible to open an account,
that is for Islamic Banking, the business activities of its customers cannot conflict with Shari’ah. Such Haram
sources/activities include:
a) Liquor
b) Pork
c) Gambling
d) Conventional insurance
e) Conventional leasing companies
f) Conventional Mutual Funds
Any other business defined negative by the CRO/Relevant Risk Head/CCC or the RSBM/Shari’ah Board from time to
time based on experience.

Q5. What is the structure of Mustaqeem Islamic Current Accounts?
Ans. Islamic Current Account is based on the structure of Qard. Mustaqeem Islamic Banking cannot give any
profit/non-routine service to the Customer, as any incentive over the loan is Riba.

Q6. Are deposits in Islamic Current Accounts treated as Amanah?
Ans. No, it is not treated as Amanah because Amanah cannot be used by the holder and the holder cannot be held
responsible for any damage or loss suffered to Amanah without the holder’s negligence. In Islamic Banking,
depositors permit the bank to utilize their Current Account balances and guarantee the principle as per Account
Opening TORs. Therefore, Current Account deposits are treated as Qard.

Q7. What happens in the case of loss in Mudarabah Based Accounts?
Ans. In the case of loss, as per the Mudarabah rules, the deposit pool (pool members) bears the loss on a pro rata
basis (according to their investment ratios).

Q8. What happens if a customer redeems his/her TDR before maturity?
Ans. If a customer redeems his/her share before the time of maturity, the schedule of early redemption will be
applied and all profit payment (accrued/paid) will be adjusted accordingly. Early redemption schedule is available
at Soneri Mustaqeem branches/windows.