Soneri Bank Limited commenced its Islamic Banking operation in year 2004. Currently the bank is operating sixteen Islamic banking branches.
What are the liabilities side products offered by Soneri – Mustaqeem Islamic Banking?
Currently, Soneri – Mustaqeem Islamic Banking is offering broad range of 100% Shari’ah compliant deposit products to its customers. These products are as follows:
- Soneri – Rahat Business Account
- Soneri – Aasan Account
- Soneri – Bachat Savings Account
- Soneri – Munafa Savings Account
- Soneri – Meadi Term Deposit
- Soneri – Jari (Current) Account (Local and Foreign currencies)
What are the Financing side products offered by Soneri – Mustaqeem Islamic Banking?
Financing products of Soneri – Mustaqeem Islamic Banking are as follows:
- Murabaha
- Commercial Ijarah
- Consumer Ijarah
- Salam
- Istishna
- Diminishing Musharakah
- Islamic Export Refinance
- Letter of credit and guarantees
Does Soneri – Mustaqeem Islamic Banking charge penalty in case of late payment?
Soneri – Mustaqeem does not charge penalty in case of late payment as it is not allowed by Shari’ah, because it amounts to charging interest. However, in order to assure the creditor of prompt payment, the debtor may undertake to give some amount in charity in case of default. This is, in fact, a sort of Yamin (vow) which is a self-imposed penalty to keep oneself away from default.This procedure is adopted at SoneriMustaqeem and it only meant to prompt the customers to pay their dues on time. The amount received as charity is disbursed to charitable institutions and do not become part of the income of the bank.
What are the major modes of Islamic Banking and Finance?
Following are the main modes of Islamic banking and finance:
MURABAHA
Literally, it means a sale on mutually agreed profit. Technically, it is a contract of sale in which the seller declares his cost and profit. Islamic banks have adopted this as a mode of financing. As a financing technique, it involves a request by the client to the bank to purchase certain goods for him. The bank does that for a definite profit over the cost, which is stipulated in advance.
IJARAH
Ijarah is a contract in which the utility of certain goods or services of the persons are transferred against predetermined consideration. Example is taking a car or home on rent against some compensation.
IJARAH-WAL-IQTINA
A contract under which an Islamic bank provides equipment, building or other assets to the client against an agreed rental together with a unilateral undertaking by the bank or the client that at the end of the lease period, the ownership in the asset would be transferred to the lessee. The undertaking or the promise does not become an integral part of the lease contract to make it conditional. The rentals as well as the purchase price are fixed in such manner that the bank gets back its principal sum alongwith with profit over the period of lease.
MUSAWAMAH
Musawamah is a general and regular kind of sale in which price of the commodity to be traded is bargained between seller and the buyer without any reference to the price paid or cost incurred by the former. Thus, it is different from Murabaha in respect of pricing formula. Unlike Murabaha, seller in Musawamah is not obliged to reveal his cost. Both the parties negotiate on the price. All other conditions relevant to Murabaha are valid for Musawamah as well. Musawamah can be used where the seller is not in a position to ascertain precisely the costs of commodities that he is offering to sell.
ISTISNA
It is a contractual agreement for manufacturing goods and commodities, allowing cash payment in advance and future delivery or a future payment and future delivery. Istisna can be used for providing the facility of financing the manufacture or construction of houses, plants, projects and building of bridges, roads and highways.
BAI MUAJJAL
Literally it means a credit sale. Technically, it is a financing technique adopted by Islamic banks that takes the form of Murabaha Muajjal. It is a contract in which the bank earns a profit margin on his purchase price and allows the buyer to pay the price of the commodity at a future date in a lump sum or in installments. It has to expressly mention cost of the commodity and the margin of profit is mutually agreed. The price fixed for the commodity in such a transaction can be the same as the spot price or higher or lower than the spot price.
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 by 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.
BAI SALAM
Salam means a contract in which advance payment is made for goods to be delivered later on. The seller undertakes to supply some specific goods to the buyer at a future date in exchange of an advance price fully paid at the time of contract. It is necessary that the quality of the commodity intended to be purchased is fully specified leaving no ambiguity leading to dispute. The objects of this sale are goods and cannot be gold, silver or currencies. Barring this, Bai Salam covers almost everything, which is capable of being definitely described as to quantity, quality and workmanship.
What is the difference between Islamic Banking and Conventional Banking?
The differences between Islamic and conventional Banking are follows:
| S. No | Islamic Banking | S. No | Conventional Banking |
|---|---|---|---|
| 1. | Money is not a commodity though it is used as a medium of exchange and store of value. Therefore, it cannot be sold at a price higher than its face value or rented out. | 1. | Money is a commodity besides medium of exchange and store of value. Therefore it can be sold at a price higher face value and it can also be rented out. |
| 2. | Profit on trade of goods or charging on providing service is the basis for earning the profit. | 2. | Time value is the basis for charging interest on Capital. |
| 3. | Islamic Banking operates on the basis of profit and loss sharing. In case, the businessman has suffered losses, the Bank will share se losses based on the mode of finance used Mudarabah, Musharakah. | 3. | Interest is charged even in case the organization suffers losses by using Bank’s funds. Therefore, it is not based on profit and loss sharing. |
| 4. | The execution of agreements for the exchange of goods and services is a must, while disbursing funds under Murabaha, Salam and Istisna contracts. | 4. | While disbursing cash finance, running finance or working capital finance, no agreement for exchange of goods and services is made. |
| 5. | Islamic Banking tends to create links with the real sectors of the economic system by using trade related activities. Since the money is linked with real assets, therefore, it contributes directly in the economic development. As Islamic Banking transactions are structured on different modes of finance, therefore the funds offered to customers generate real economic activity. | 5. | Conventional Banks use money as a commodity which leads to inflation. As Conventional Banks offer interest based loans, and the transactions are not necessarily directly linked with any economic activity, therefore the impact on economic development is somewhat limited than Islamic Banks. |
The end result of Islamic Banking and Conventional Banking is the same. Why do they appear similar?
The validity of a transaction does not depend on the end result but rather theprocess and activities executed and the sequence thereof in reaching the end. If atransaction is done according to the rules of Islamic Shari’ah it is halal even if the endresult of the product may look similar to conventional banking product. For example a normal McDonalds burger in USA and Pakistan may look similar, smellsimilar and taste similar but the former is haram and the later is halal due to itscompliance of Islamic guidelines of slaughtering animals.Similarly, if a person is feeling hungry, he may steal a piece of bread and eat oralternatively buy a piece of bread to eat. The apparent end result would be same butone is permissible in Shari’ah and the other is not allowed.The same is also true for Islamic and conventional banking. Therefore, it can beconcluded 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 structuresused by Islamic banks are quite different from that of the conventional bank. In theverse 2:275 of the Holy Quran, Allah the Almighty has responded to the apparentsimilarity between trade and interest by resolutely informing that he has permittedtrade and prohibited Riba (though they may look similar to someone).