FINAL PROJECT

AGH
A
WOS

Comparison between Islamic and Conventional

Banking
I am doing job in Faysal Bank Barkat Islamic, the reason for selecting this topic is
because I want to prove Islamic banking is better than conventional banking and
gradually it is promoting in our country, trend is making to invest in Islamic banking,
investor are now more clear concepts and satisfied with Islamic banking.

I will define Islamic banking and conventional banking.

Give the comparison between Islamic and conventional banking.

Describe advantages and disadvantage of both Islamic banking and

conventional banking.

Prove: Why Islamic banking is better than conventional banking?

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ACKNOWLEDGEMENT

I would like to express my gratitude to all those who helped me during the whole of my project. I
gratefully acknowledge the help of my counselor Fahad Asghar who has offered me valuable
suggestions in the academic studies. In the whole of final project, he has spent much time to help
me and provided me with inspiring advice. Without his patient instructions, insightful criticisms
and expert guidance, the completion of this project would not have been possible.
In the end, my gratitude also extends to my family and friends who have been assisting,
supporting and caring for me all of my life.

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Table of Contents
Introduction:............................................................................................................ 8
Islamic Baking.................................................................................................... 11
Beginning of Islamic Banking............................................................................. 11
Major policies..................................................................................................... 12
Products offered In Islamic banking.......................................................................12
Mudarabah......................................................................................................... 12
Hibah (gift)......................................................................................................... 13
Ijarah.................................................................................................................. 13
Sukuk (Islamic bonds)........................................................................................ 14
Takaful (Islamic insurance).................................................................................14
Conventional Banking............................................................................................... 14
Types of loans granted by commercial banks...........................................................15
Secured loans........................................................................................................ 15
Unsecured loan..................................................................................................... 15
Bank overdrafts.................................................................................................. 15
Corporate bonds................................................................................................. 16
Credit card debt................................................................................................. 16
Credit facilities or lines of credit.........................................................................16
Personal loans.................................................................................................... 16
Background.............................................................................................................. 17
Difference between Conventional Banking & Islamic Banking..................................20
Objectives................................................................................................................. 21
Significance.............................................................................................................. 22
Data Collection Sources............................................................................................ 23
Primary Sources.................................................................................................... 23
Secondary Sources................................................................................................ 23
Data Collection Tools/Instruments............................................................................ 24
Subjects/Participants................................................................................................ 24
Data Processing & Analysis.............................................................................. 24
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Faysal Premium:....................................................................................................... 29
Faysal Mahfooz Sarmaya:........................................................................................... 29
FCY Saving Plus:...................................................................................................... 30
Introduction of the student....................................................................................... 38
Bibliography............................................................................................................. 40

Executive Summary
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The quick advancement in banking industry has led banks to come up with the new solutions for
the customers. For valuable services the conventional and Islamic banking are playing the major
role in the financial markets. The aim of this study is to propose a mechanism to understand
Comparison between Islamic banking and conventional banking. For this, we have selected
two banks, Meezan Bank (Islamic) and Faysal bank (Conventional). The major significant
comparability is based on products, liabilities and assets. Meezan Bank is the most established
and leading Islamic bank in Pakistan. Meezan Bank is the first bank which is totally sharia-based
organization. Meezan bank offers Riba free Islamic products which attracts the customers who
want to avoid Riba. Customers who invest in Meezan bank gets their share in the form of profit.
Meezan Bank dont exploit the customer and all their products are in well balanced nature.
Faysal bank is a regular conventional bank. Its operations are based on materialism like other
conventional banks. However, it captures different sectors of economy like corporate financing
and agriculture. Their products are very competitive nature and interest based. In Pakistan
conventional banking is inclined to Islamic banking as people are more interested in Islamic
banking these days and give value to their products.

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Introduction:
Banks are performing numerous functions to give a variety of products and services for
distinctive sections of the economy. Since its creation, Pakistani banking sector part has
encountered exceptionally rough environment because of unstable approaches and vulnerability.
Private part banks dominated within 1950s and 1960s however they were nationalized in 1974.
Nationalized banks demonstrated extremely poor execution because of second rate
products/services that came about into the privatization of banking sector in 1992. State Bank of
Pakistan has started working for the commencement of Islamic banking practices in 2000 and
Meezan Islamic bank was enrolled as first undeniable Islamic bank in 2002. Islamic banks are
new contestants in the Pakistani banking industry furthermore oblige a near study to survey the
execution of their operations and products/services. Services industry especially managing an
account part is developing over the globe during the decade of 1990s.
Banks are performing various functions to give a mixed bag of items and administrations for
different segments of the economy. Since its creation, Pakistani saving money part has
experienced particularly harsh environment on account of temperamental methodologies and
defenselessness. Private part banks ruled inside 1950s and 1960s anyway they were nationalized
in 1974. Nationalized banks showed amazingly poor execution due to worthless items/benefits
that happened into the privatization of saving money part in 1992. State Bank of Pakistan has
begun working for the initiation of Islamic saving money rehearses in 2000 and Meezan Islamic
bank was selected as first obvious Islamic bank in 2002. Islamic banks are new contenders in the
Pakistani saving money industry moreover oblige a close study to overview the execution of
their operations and items/administrations. Administrations industry particularly dealing with a
record part is creating over the globe amid the decade of 1990s.
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The 21st century accompanied mixing of chances and dangers for the managing an account area
because of initiation of Islamic banking rehearses in diverse nations the way in other countries
such Bangladesh, Malaysia and other Non-Muslim part of the world. It is observed that Islamic
banking framework is better than conventional banking framework as it guarantees more steady
money related segment (Khan, 1986).

SBP issued detailed criteria in December 2001 for the foundation of undeniable Islamic bank in
the private division. Al Meezan Investment Bank got the permit from SBP in January 2002 and
began its operations with the name of Meezan Islamic bank as the first Islamic bank from March
20, 2002 (SBP, 2002). Islamic banks have various open doors in Pakistan with a populace of
more than 96% Muslims. Islamic banks need to face numerous difficulties because of solid
response from conventional banks on the grounds that they were profound established and
prevalent among people in general to meet their prerequisites.

The 21st century went hand in hand with blending of chances and dangers for the dealing with a
record region in view of start of Islamic managing an account practices in various countries the
path in different nations such Bangladesh, Malaysia and other Non-Muslim a piece of the world.
It is watched that Islamic saving money structure is superior to customary managing an account
system as it promises all the more unfaltering cash related fragment (Khan, 1986).

SBP issued point by point criteria in December 2001 for the establishment of obvious Islamic
bank in the private division. Al Meezan Investment Bank got the license from SBP in January

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2002 and started its operations with the name of Meezan Islamic bank as the first Islamic bank
from March 20, 2002 (SBP, 2002). Islamic banks have different open entryways in Pakistan with
a masses of more than 96% Muslims. Islamic banks need to face various troubles in light of
robust reaction from ordinary depends on the grounds that they were significant built and
common among individuals when all is said in done to meet their essentials.

The expanding number of conventional and Islamic banks made a sound rivalry for the
procurement of value services to hold satisfied customers for long term benefits. The banking
business

encountered

an

extension

because

of

enhancement

and

advancement

of

products/services. Everybody tries to present innovative products and services by wonderful

mixing of customary offices and advanced engineering to adapt to one another for more
noteworthy number of customers that prompts more gainfulness. Pakistani banking part saw a
real change because of key part of private segment having around 80% of banking resources
(Economic Survey of Pakistan, 2007-08).

This study looks at how benefit quality influences the customer judgments towards satisfaction
of the Islamic banks and also conventional banks in Pakistan This examination is a push to fill
this hole in the writing. This study may help the experts, bank supervisors, and academician and
approach creators to figure out the example of satisfaction for bank customers in Pakistan. This
study is likewise imperative on the grounds that Islamic banking is developing as far as size is
concerned at the rate of one hundred fourteen percent every year (SBP, 2006).

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The growing number of customary and Islamic banks made a sound contention for the
obtainment of worth administrations to hold fulfilled clients for long haul advantages. The
managing an account business experienced an augmentation due to improvement and headway of
items/administrations. Everyone tries to present inventive items and administrations by eminent
blending of standard work places and propelled designing to adjust to each other for more vital
number of clients that prompts more profit. Pakistani saving money part saw a genuine change
due to key piece of private fragment having around 80% of managing an account assets
(Economic Survey of Pakistan, 2007-08).

This study takes a gander at how profit quality impacts the client judgments towards fulfillment
of the Islamic banks furthermore traditional banks in Pakistan This examination is a push to fill
this opening in the written work. This study may help the masters, bank directors, and
academician and methodology inventors to make sense of the case of fulfillment for bank clients
in Pakistan. This study is moreover basic because Islamic keeping money is creating the extent
that size is concerned at the rate of one hundred fourteen percent consistently (SBP, 2006).
Islamic Baking

Islamic banking, a banking or banking activity that is consistent with the

principles of sharia and its practical application through the development of Islamic
economics. As such, a more correct term for 'Islamic banking' is 'Sharia compliant
finance'.

Beginning of Islamic Banking

An early market economy and an early form of mercantilism, called Islamic
capitalism, was developed between the eighth and twelfth centuries. The monetary
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economy of the period was based on the widely circulated currency the gold dinar,
and it tied together regions that were previously economically independent.

Major policies
Islamic banking has the same reason as conventional banking: to profit for the
banking institute by lending out capital. Be that as it may that is not the sole reason
either. Adherence to Islamic law and guaranteeing reasonable play is additionally at
the center of Islamic banking. Since Islam disallows basically lending out money at
interest, Islamic rules on transactions (known as Fiqh al-Muamalat) have been made
to forestall it.
In an Islamic mortgage transaction, as opposed to lending the buyer money to buy
the thing, a bank may buy the thing itself from the seller, and re-sell it to the buyer
at a profit, while permitting the buyer to pay the bank in installments.
Notwithstanding, the bank's profit can't be made express and along these lines
there are no extra punishments for late payment. So as to ensure itself against
default, the bank requests strict collateral. The goods or area is enlisted to the
name of the buyer from the beginning of the transaction. This course of action is
called Murabahah.

Products offered In Islamic banking

Mudarabah

"Mudarabah" is an unique sort of partnership where one accomplice offers money to

an alternate for investing it in a commercial endeavor. The capital investment ought

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to regularly originate from both accomplices. both ought to have some skin in the
game(timur 2004).

The Mudarabah (Profit Sharing) is a contract, with ONE gathering giving 100 percent
of the capital and the other party giving its specific information to contribute the
capital and deal with the investment venture. Profits generated are imparted
between the gatherings as per a preagreed ratio. On the off chance that there is a
misfortune, the first accomplice "rabb-ul-mal" will lose his capital, and the other
party "mudarib" will lose the time and exertion put resources into the venture The
profit is normally imparted half or 60%-40% for rabb-ul-mal.

Hibah (gift)

This is a token given willfully by an indebted person in exchange for a loan. Hibah
normally emerges practically speaking when Islamic banks intentionally pay their
clients a "gift" on investment account parities, speaking to a share of the profit
made by utilizing those investment account adjusts as a part of different exercises.

Ijarah

Ijarah means lease, rent or wage. Generally, the Ijarah idea alludes to selling the
profit of utilization or administration at a fixed cost or wage. Under this idea, the
Bank makes accessible to the client the utilization of administration of assets/

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supplies, for example, plant, office computerization, engine vehicle at a fixed period
and cost.

Sukuk (Islamic bonds)

Sukuk, is the Arabic name for financial testaments that are what might as well be
called bonds. In any case, fixed-salary. Those assets which agree with the laws of
Islam can be ordered as per their usage and non-usage in the auxiliary markets.

Takaful (Islamic insurance)

Takaful is an option manifestation of cover that a Muslim can profit himself against
the risk of misfortune because of mishaps. Takaful is based on the thought that what
is dubious as for an individual may stop to be indeterminate as for a substantial
number of comparable people. Insurance by consolidating the risks of numerous
individuals empowers every person further bolstering appreciate the good fortune
gave by the law of vast numbers.

Conventional Banking
In the United States the term "commercial bank" was often used to recognize it from
an investment bank because of contrasts in bank regulation. A commercial bank is a
kind of bank that gives services, for example, tolerating deposits, making business
loans, and offering fundamental investment products. Commercial bank can likewise
refer to a bank or a division of a bank that basically manages deposits and loans

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from corporations or expansive businesses, instead of individual parts of people in

general (retail banking).
In the United States the expression "business bank" was frequently used to
remember it from a speculation bank in view of differentiations in bank regulation. A
business bank is a sort of bank that gives administrations, for instance, enduring
stores, making business credits, and offering principal speculation items. Business
bank can moreover allude to a bank or a division of a bank that fundamentally
oversees stores and advances from companies or extensive organizations, rather
than individual parts of individuals as a rule (retail banking).

Types of loans granted by commercial banks

Secured loans

A secured loan is a loan in which the borrower pledges some advantage (e.g., an
auto or property) as collateral for the loan, which then turns into a secured debt
owed to the creditor who gives the loan.

Unsecured loan

Unsecured loans are monetary loans that are not secured against the borrower's
assets (no collateral is included). There are little business unsecured loans, for
example, credit cards and credit lines to extensive corporate credit lines. These may

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be accessible from financial institutions under various pretenses or marketing

bundles.

Bank overdrafts

A bank overdraft is a breaking point on getting on a bank current record. With an

overdraft the measure of obtaining may shift every day. A bank loan is a fixed sum
for a fixed term with consistent fixed repayments. The interest on a loan has a
tendency to be lower than an overdraft

Corporate bonds
A corporate security is a security issued by an enterprise. It is a security that a
company issues to bring cash sufficiently up with a particular final objective to
develop its business. The term is regularly associated with longer-term obligation
instruments, for the most part with a development date falling in any occasion a
year after their issue date.

Credit card debt

Credit card debt is a case of unsecured buyer debt, got to through credit cards. Debt
results when a client of a credit card organization purchases a thing or
administration through the card framework.

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Credit facilities or lines of credit

An arrangement between a monetary foundations, for the most part a bank, and a
client that makes a most prominent advance adjust that the bank will permit the
borrower to keep up. The borrower can draw down in question of credit at whatever
point, the length of he or she doesn't surpass the most amazing set in the
comprehension.

Personal loans

A personal loan is an unsecured loan, importance the borrower does not set up any
collateral or security to ensure the repayment of the loan. Thus, personal loans have
a tendency to convey high interest rates. In the event that a borrower owns a home,
a lower interest rate option is a home equity loan.

Background
Islamic banking practices came about into a striking increment in the supply of credits. It is
observed that legislature intercession assumed an imperative part to oversee supports other than
other monetary variables in the economy (Makiyan, 2003). Levesque and Mcdougall (1996)
explored the impact of key determinants of service quality on customer satisfaction in money
related establishments. They discovered a considerable effect of service issues on customer
satisfaction and their intensions to switch. It is recommended that service quality is a
fundamental determinant of customer satisfaction (Yavas et al., 1997).

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Islamic banks working in diverse parts of the world evaluated their execution in reference to
service quality and customers' reactions. An experimental study was led to gauge customer
awareness and satisfaction by utilizing an example of 206 respondents towards Islamic banking
in Jordan. It is watched that customers have awareness about products of Islamic bank yet
communicated a feeling of dissatisfaction towards a percentage of the services (Naseer, Jamal
and Al-Khatib, 1999).
Islamic banks working in differing parts of the world assessed their execution in reference to
administration quality and clients' responses. A test study was directed to gage client mindfulness
and fulfillment by using a sample of 206 respondents towards Islamic keeping money in Jordan.
It is viewed that clients have mindfulness about results of Islamic bank yet conveyed an
inclination of disappointment towards a rate of the administrations (Naseer, Jamal and Al-Khatib,
1999).

Bahia and Nantel (2000) created an option scale for estimation of service quality in retail
banking. They created BSQ and contrasted and SERVQUAL. They found that BSQ
measurements are more dependable than SERVQUAL measurements. In an alternate study
SERVQUAL is contrasted and Technical/Functional quality of services in private banks. Results
demonstrated that Technical/Functional quality model is better (Lassar et.al, 2000). A study of
801 customers demonstrated that customers' view of service quality contrasts as far as
demographic qualities (sex, ethnicity, training and salary) of the respondents (Urban and Pratt,
2000).

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Jamal (2004) watched that customers have fluctuated encounters of satisfaction and
dissatisfaction for usage of organization toward oneself advances. Money related segment is
getting to be more cognizant about the execution assessment with respect to quality of
products/services as indicated by customers' desires. In an alternate study, discoveries uncover a
positive relationship between money related execution and customer service quality scores
(Duncan and Elliott, 2004).
Curry and Penman (2004) reported that service quality is certain for separation to contend in the
banking part. They recommended that the right service could hold the customers for long haul
advantages. Thus, Banks ought to keep up the level of services by legitimate distribution of
assets to meet customer prerequisites. Discoveries showed that financial institutions require
sensible systems to assess the general satisfaction of their customers. Be that as it may,
understanding of changing needs and desires of customers is a fundamental essential for the
budgetary area (Joseph et al. 2005).
Bahia and Nantel (2000) made a choice scale for estimation of administration quality in retail
saving money. They made BSQ and differentiated and SERVQUAL. They found that BSQ
estimations are more tried and true than SERVQUAL estimations. In an interchange study
SERVQUAL is differentiated and Technical/Functional nature of administrations in private
banks. Results showed that Technical/Functional quality model is better (Lassar et.al, 2000). An
investigation of 801 clients showed that clients' perspective of administration quality
differentiations the extent that demographic qualities (sex, ethnicity, preparing and
compensation) of the respondents (Urban and Pratt, 2000).

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Jamal (2004) viewed that clients have varied experiences of fulfillment and disappointment for
utilization of association to oneself advances. Cash related section is becoming more mindful
about the execution appraisal regarding nature of items/administrations as showed by clients'
cravings. In a substitute study, revelations reveal a positive relationship between cash related
execution and client administration quality scores (Duncan and Elliott, 2004).

Curry and Penman (2004) reported that administration quality is sure for division to battle in the
keeping money part. They prescribed that the right administration could hold the clients for
whole deal points of interest. Accordingly, Banks should keep up the level of administrations by
honest to goodness dispersion of resources for meet client essentials. Revelations demonstrated
that budgetary foundations require sensible frameworks to evaluate the general fulfillment of
their clients. Nevertheless, understanding of changing needs and yearnings of clients is a major
vital for the budgetary range (Joseph et al. 2005).

Difference between Conventional Banking & Islamic

Banking

CONVENTIONALBANKING

ISLAMICBANKING

In conventional banking money lending

In Islamic banking partnership built on profit

activities conducted containing Riba (Interest).

& loss sharing.

Conventional banking run their business on

Islamic banking charge no interest/Riba. They

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charging interest.

charge halal profit.

Conventional banking do not differentiate to

Islamic banking do not finance in haram

the business type.

businesses.

Conventional banking not involves in real

Islamic banking involves in real economic and

economic and socially permissible business.

socially permissible business.

Conventional banking take money as

Islamic banking conduct financial activities on

commodity and charge interest on it.

real asset backed products (trade, lease,

partnership etc.) and do not use money as
commodity.

Conventional banking mainly the risk is bear

Islamic banking take on risk of the transaction

by the customer.

according to Shariah Principles.

Objectives

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 To find and investigate the products of conventional banking.

To find and investigate the products of Islamic banking.
To compare the products/services of both systems.
To find major differences between products of both systems.
To get know how of policies and procedures of conventional banking
To get know how of policies and procedures of Islamic banking.
To compare and find the difference between policies and procedures of
both banking system.
To compare operations of both banking systems.
Future and potential growth of both systems.
To present easy to understand differences.
To give common man sufficient information about functioning of both
banking system for choosing the either of two.

Significance

In this project comparison gives the knowledge to the customers, investors, banks and other
parties about the difference in Islamic and conventional banking. Customers, investors, banks
and other parties will get clear, deep and sufficient knowledge about different products of Islamic
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and conventional banking. On behalf of this knowledge customers, investors, banks and other
parties will be able to choose their products according to their needs, demands and importance of
the document.

In future customers, investors, banks and other parties are more vigilant in choosing Islamic and
Conventional banking. Islamic and conventional banks will have to be more product conscious
because of the all stakeholders sufficient and effective knowledge about the products. Both
Islamic and Conventional Banks will have to give user friendly ways of banking, customer
satisfaction will have to be on their top preferences and interest/profit rates competition will be
increase.
Because I am a Muslim person and I follow the sayings of Islam. Islam says Riba (Interest) is
haram and also never invest in haram products. I thought banking is totally haram because they
give interest on savings and also do investment in haram products. But when I do comparison
between Islamic and conventional banking, I found Islamic banking is interest free banking and
its investments are purely in halal products.

Now I am satisfied with Islamic banking. The way they are doing banking is under Islamic rules
and regulations. Sharia Compliance is also there to monitor Islamic baking. So now I have
comprehensive knowledge about Islamic baking and Conventional banking products, policies,
procedures, features and their differences. Now I am able to take decision on behalf of this
knowledge and can also give suggestions to others.

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Data Collection Sources

Primary Sources

Interviews

Questionnaire

Secondary Sources

Journal Articles(Published papers)

Google scholar

Data Collection Tools/Instruments

Structured Interviews has been taken from two banks (Islamic and Conventional Bank)
Structures interviews has been conducted by the Branch Managers (BMs) and Operational
Managers (OMs).

Subjects/Participants

Faysal Bank Limited for Conventional Banking

Meezan Bank for Islamic Banking

Five branches of each Bank which will cover the most geographical area of Lahore.

Branch Manager (BM) & Operation Manager (OM) of each Branch are target audience.

30 minutes at least taken of each Manager

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It was completely Structured Interviews

Data Processing & Analysis

After the data will be collected by the target population, the data will be analyzed based on the
responses of each manager. In this case, comparison will be conducted not only of their products
and services but with the operations of these banks (Faysal bank and Meezan bank ltd.)

Introduction to the selected banks (Meezan and Faysal Bank)

Products and services offered by the selected conventional bank

(Faysal bank)

Products and services offered by the selected Islamic bank (Meezan

bank)

Difference in products and services of selected conventional and

Islamic banks (Meezan and Faysal Bank)

Policies and procedures of selected conventional bank (Faysal Bank)

Policies and procedures of selected Islamic bank ( Meezan Bank)

Differences in policies and procedures of selected conventional and

Islamic banks (Meezan and Faysal Bank)

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ANALYSIS:

Background of Faysal Bank Limited

Faysal Bank Limited started its operations in Pakistan since 1987, first as an opening
set-up of Faysal Islamic in Bahrain and thereafter in 1995 as a commonly unite
Pakistani bank under the present name of Faysal Bank Limited. On January 1, 2002,
Al Faysal Investment Bank Limited, a substitute social occasion substance in
Pakistan, united into Faysal Bank Limited which achieved a greater, stronger and
significantly more versatile association. Surely it has the most foremost offer capital
among private banks in Pakistan and is among the greatest the extent that esteem.
Faysal Bank Limited is a full organization banking foundation offering client,
corporate and wander banking business locales to its customers.
Background of Meezan Bank Limited
Meezan bank is a largest Islamic bank and unreservedly recorded association at first
melded on January 27, 1997. It started operations as a theory bank in August of that
year. In January, 2002 in a noteworthy action, Meezan Bank was permitted the
nation's first obvious business banking grant focused on Islamic Banking, by the
State Bank of Pakistan.

Meezan Bank stands today at a basic point along the headway of Islamic Banking in
Pakistan. The banking part is exhibiting a tremendous perfect model change a long
way from standard strategy for business and is reveling an obviously competent and
asking for cash related purchaser who is in like manner becoming doubtlessly aware
of Islamic Banking. Meezan Bank bears the segregating commitment of driving the
course forward in making an unfaltering and component Islamic Banking system
stacked with dynamic and forefront things and organizations.

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Mezzan Bank
Current Account (Riba Free):
This bank product is best for those customer
who demand Shariah complaint banking and
ease of access. This account can be opened
just only Rs. 1000. This product offers you
many type of benefits like this product offers
you to access your account personally through
online banking, no restriction are on numbers
of transaction, call centre facility is free, free
statements of balance, priority banking and
gives much more than your expectations.

Faysal Bank
Faysal Sahulat:
Faysal Sahulat is an account which is
maintained for individuals or business
customer who use their account on regular
basis in Pakistan at all branches of FBL. The
account is opened with minimum amount of
5,000.

Main Characteristics Of Faysal Bank

Current Account:
Account is access through online banking
at all branches of Meezan bank.
No restrictions on transactions.
No need to maintain average balance of
1000,000 or more. This account provide
free of cost additional facilities like free
cheque book, pay orders, visa ATM/debit
card, no deduction on low balance
maintenance.

Main Characteristics Of Faysal Bank

Current Account:
Account is access through online banking
at all branches of FBL.
No restrictions on transactions.
No need to maintain average balance of
500,000 or more. Its provide free of cost
additional facilities like free cheque book,
pay orders, visa ATM/debit card, demand
draft, duplicate statement of account free
online access.

COMPARISON OF LIABILITY PRODUCTS

CURRENT ACCOUNT:
Current account is the type of account in which the customer can deposit or withdraw money
from his account at any time. The Clients can deposit or withdraw money several times in a day.
Bank deduct service charges on current account. Many advantages are provided by current
account for paying debt by the opportune and save the time of sending cheques by post. Avoid
different types of losses and problems.

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Outcomes and Recommendation:

Both banks offered almost same facilities but have some difference on account opening amount
and maintenance amount. Meezan open account in less amount than Faysal bank. Meezan bank
free of cost additional facilities but in Faysal you have to maintain minimum monthly balance. If
you want to get free additional facilities in Meezan bank no charges will be deducted on low
balance maintenance but in Faysal bank charges will be deducted on low balances maintenance.

SAVING ACCOUNT:
This account is used to save money or earn profits (interest) on the account over time. Money is
deposited and withdraw through any branch of bank at any time. Bank cannot deduct any
charges. Bank may demand only minimum amount to open this account or maintain this account.
Many people More preferably use or open this account to save money or get high return/ profits
(interest) at interest way.
Meezan bank
Rupee Savings Account (Riba Free):

Under Musharakah agreement account can

be opened with only Rs.10,000.
The profit is calculated every month
according to the interest rate at the time of
calculation.
If the customer has balance of Rs.10,000 in
his account then the customer is eligible for

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Faysal bank
Faysal Savings Account:
Faysal savings account facilitates hard
earned savings peoples who want to
earn profits.
This very beneficial account for account
holders. Initial deposit for this account
is Rs. 10,000/.
Calculations of profits is on minimum
balance.

the interest (profits) which is distributed

every month.

Meezan Bachat Account (Riba-Free):

High monthly returns with the flexibility to

withdraw at any time, is provided by Meezan
Bachat Account which is unique saving
account.
Meezan bank in this bachat Account gives
profits
to
account
holders
even
accountholders in any month their balance
drops below Rs. 25,000.

Semiannually profits are distributed to

account holders.

Rozana Munafa Plus:

Faysal bank offers another savings

account which is Rozana Munafa Plus.
In this account calculated of profit
(Interest) is done at day of end balance,
profits are distributed on monthly basis.
Benefited are provided to customer like
high rate monthly profit (Interest) on
account balance.
Minimum balance for account opening
is Rs. 100,000 for individual customers
and for corporate customers Rs. 500,000
is required.

Every month profits are credited to their

account.

Profits are calculated according to preceding

month minimum balance maintain by
account holder.

This Bachat Account is working under

Faysal Premium:
principles of Mudarabah.

Maximum balance limit for getting highest

profit rate is Rs. 1,000,000/-

High amount deposits with attractive

profit rates is offered by Faysal
Premium savings account.

Mudarabah-based account has a other type

Meezan Business Plus which offers
customers banking transaction.

Account is designed as it opened with

first deposit of Rs. 5000,000/-.

Calculations of Profit is on daily balance

basis.

extensive kind of free services are availed

by Customer

Distribution of Profit are on monthly

basis.

They provides best convenience and

flexibility which are given by Islamic
banking.

To open an account minimum deposit

Customers can access to Faysal

premium at all Faysal Bank branches
and also Pakistan through online
banking.

Meezan Business Plus:

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requirement is Rs. 100,000/

No restriction on withdrawals.

Individuals
(Sole
Proprietorships)
Partnerships, Limited Companies can open
Meezan Business Plus Account.

Faysal Mahfooz Sarmaya:

Faysal bank Mahfooz Sarmaya foreign

currency account is designed to provide
convenience to customers who want to
deal in foreign currency.

This account attract customer through

features.

In these major foreign

accounts are opened:

Dollar saving Account (Riba Free):

Initial deposit required for opening dollar

saving account is $100 in Meezan bank
under Mudarabah Arrangement.

currencies

US Dollars

Strictly in conformity with principles of

Islamic Shariah.

Pound Sterling
Euro.

At the beginning of the month profit ratio is

declared for all investors.

This Account opened with Minimum

balance of 1000 units of the currency.

On monthly basis return earned on Mudarabah

Pool is calculated.
Faysal Moavin Savings Account:

Designed for genuine individual savers.

Faysal Moavin saving account offers

flexibility in account as similar to
current account.

Karobari Munafa Account for large

Corporate or GoP (Govt. Of Pakistan)
controlled entities.

Initial deposit required for account

opening is Rs. 20,000.

Number of
restricted.

High profits on surplus cash balances are

earned by customers.

On daily balance basis profits are

calculated.

Profits are disbursed on monthly basis.

Incentive are given to account holders to

Karobari Munafa Account(Riba Free):

Another type of high profit savings account

is Karobari Munafa.

transactions

are

not

No restrictions on transaction
Another benefit is that this account Offer

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variety of packages.

Calculations of profits are on a Daily

Product Basis.

Minimum balance requirement for account

opening is Rs. 1,000,000.

Deposits and withdrawals are not restricted.

Labbaik Saving Aasaan:

Labbaik Saving Aasaan is design for small saver

who wish to save their money (incomes) for their
children, their life partners, or for their parents
etc.

save more on Tiered profit structure. We

can say profit will increases if deposit
amount increases.
FCY Saving Plus:

A new foreign currency savings account

offered by Faysal bank which is named
as FCY saving plus account.

Attract customers with profit rates.

Profit are calculated on a monthly basis.

This account deals with these foreign

currencies which are mention below:
US Dollars

Provide special benefit to Mudarabah based

Deposit account.

This account is a plan to save money for Umrah

& Hajj from six month to twenty years

This account provides bigger incentive on

savings or deposits in account for Umrah /Hajj
purpose

Pound Sterling
Euro

Balance required by FCY Saving Plus is

500 units of the currency at the
beginning when account is opened.
Profit is calculated on monthly average
balance. Profit is disbursed on monthly
basis.

No charges are deducted by FCY for

cash depositing.

Additional benefits as mention below

are provided if customer maintains
monthly average balance which is equal
to USD 50k or if above then USD 50k.

90% of FCY can be Borrowing in PKR

For consumer financing special rates

are offered.

The Karobari Munafa Account:

Working under principles of Mudarabah.

Follow rules of Islamic Shariah.

Profit are also calculated according to

Islamic Shariah

No restrictions on transactions but must

have to adherence Islamic Shariah.

Shariah Advisor and the Shariah Supervisory

Board examined Karobari Munafa Account

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and take decisions about it.

Main Characteristics Of Meezan Bank Saving Main Characteristics Of Faysal Bank

Account:
Saving Account:

Visa Debit Card.

Through online banking account can be

access at all Faysal Bank branches
across Pakistan.

High and halal economical returns.

Profit are distributed on monthly basis.

Profit are distributed on monthly basis.

Bank balance statements are free

Online banking facility is free.

Many facilities are free like cheque books

and pay orders.

Many facilities are free like cheque

books and pay orders

Opening account with

agreement compliance

In this Priority is provided to Banking.

Minimum required balance for Car Ijarah

and Easy home is Rs. 500,000.

Musharakah

Outcomes and Recommendation:

In saving account, numbers of products are offered by Meezan and Faysal bank just because of
the developing interest of customers towards opening saving account. Bank gives return in form
of profits or interest on specific rates. Faysal bank disbursed profits in form of interest that is
against the rules of Islam (haram in Shariah). In Meezan bank returns are in term of profits which
are halal with respect to Shariah. Faysal banks should have to introduce new products according
to Islamic rules regulations.
CUSTOMER FINANCE:
Retail banking deals with consumers who want to lend money to fulfil their financial needs.
Customer financing offers loans as mention below:
Credit cards
Mortgage loans
Auto loans
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 Loans taken by prime rate or the sub prime rate.

Meezan Bank
Faysal Bank
Islamic Car Financing:
Faysal Car Financing:
Car Ijarah is first Islamic product
Faysal car finance product is made to
which is interest free.
meet the need of customer by providing
them facility.
This product is established according
Faysal bank finance for local car,
to Islamic financing mode or
considering Islamic leasing.
imported cars, secondhand (used car).
This product is best for whose
Car financing duration is 5 years.
individuals who want to buy a car
20% of car is only down payment.
through car financing on minimum
Customer
also
have
to
pay
interest rate or interest free.
documentation charges.
This product is specially design to
Customer has option to dismiss the car
prevent transaction who are based on
financing.
interest charges.
Quick service.
Car Ijarah is halal because it is interest
free.
Eligibility:
It facility is easily affordable.
Customer can owns a car easily and
In Ijarah basically fixed assets is
affordable prices if customer have:
transfer to another person under some
National identity card of Pakistan
agreed consideration. In car Ijarah
hold by customer.
agreement, for a specific period of

Those are eligible for car financing

time car is taken by the customer.
whose age is above 19 year.
Ownership of asset hold by bank so
Minimum experience of 1 ear in
bank has no risk.
professional field (business man or
Only Rental amount is paid by the
self-employed).
customer.

Minimum 2 year employed history

Car Ijarah is developing day by day in
of salary person.
Overall Country. It becomes famous in
customer.

Characteristics:
Limitation:
Free of cost
Facility is not for judgeas, lawyers,
Can get any new local car
police, army.
No expenses of insurance payment
Facility not for landlord.
Monthly rent is low
No amount of advance is paid
Term and Conditions :
Time period is 3 to 5 years
20% of asset must be deposit as
Insurance company ADAM G and EFU
security
Insurance of car 5%
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Easy home financing:

Lease term 3,4 and 5 years
Internal rate of return 18.5%
Easy home financing is according to
20% of car Down payment
Shariah compliant home financing.
Symbols and lines are use in software
This product is affordable and provide
Less than 33% should debt burden.
excellent and quick service to their
customers.
Meezan bank fulfil the needs of their Faysal housing finance:
customers by considering Shariah
Faysal housing finance facilitate their
which indicate that it is Islamic
customer much more than customer
housing finance.
expectations.
Easy home based on diminishing
Facilitate customer to move in an
muskarakah mode
easy way and manner
The customer can buy house, renovate
Customer can manufacture his on
this old house or can replace current
house or can buy house ready mate,
mortgage
or can renovate his old house, current
Packages:
expensive mortgage finance balance
Easy buyer
can be transfer, through Faysal house
Easy renovate
financing.
Customer should have resident of
Easy replacement
Pakistan and should hold national;
Easy builder
identity card.
Eligibility:
25 to 60 year age of salaried person
65 year age if businessman
Minimum professional and business
years required by the house
financing is 3 years.
3 year experience required if
continuous employment
1 year for existing employers.
If monthly income is Rs. 30,000 or
more than Rs. 30,000 then eligible.

Meezan personal finance:

For non-salaried and salaried person Meezan
bank is not dealing with personal finance at Faysal Personal Finance:
current period.
Unsecured because no security is
pledged.

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Customer

has

opportunity

to

withdraw only 6 cheque range of

withdraw money is from Rs. 100,000
to Rs. 5,00,00

Designed for salaried and business

person.

Recovery of loan is not easy.

1.5 million is the target of this

department which they have to meet.
If they meet that target bank give
bonus to their employees.

Personal loan is divided in to two

types:
Secured loan

Unsecured loan
Unsecured loan:
Unsecure loan
Range 1 lack to 5 lack
High mark up
Meezan Agri-Finance:
Secured loan:
Secure
No facility is provided to agriculture
High mark up
sectors at current time.
Rang is above 5 lacks
Faysal Khushaal Kisan Scheme:

35 | P a g e

Designed especially for agriculture

sector.

Located in different areas of overall

country to facilitate the farmer

This product helps to improve yield

and procedures of farming.

Cheap and affordable rates.

Payback period for loan is generally

between one to five years.

Faysal bank divided Agriculture loan in two

types: Production loan and developing loan.
Developing loan:

For long term purpose.

Loan for development of land

For example: Farm Power, Farm

Machinery and Equipment, Farm
Transport, Farm Irrigation, Land
Improvement, Godowns, Silos and
Cold Storage, Seed Processing Units.

Faysal Developing loan are also of two

types:
Form loan
Non-form loans
Form loans:
This loan is just for forms like tractor or
machines use in fields.
Non Form Loans:
This product is for dairy, poultry forms,
fishing, for buying animals and for shading.
Product Loan:

Used for input used in fields like for

seeds, fertilizers, water expenses, cost of
diesel, labor, storage, nurseries,
vegetable farming, transportation and
other working capital requirements of
crop farming, orchards, floriculture etc.

Two types of product loan:

Form loan
Non-Form loan
36 | P a g e

Form Loan:
Facilitate in providing input used as seed,
fertilizer, water expenses in fields.
Non-Form Loan:
This product facilitate customers to take loan
for feeds of animals like oil cakes, green
food etc.
Charged Interest by KIBER 18.5%,
14.5%
4% charged by FBL.
For all banks KIBER interest rates
remain same.
4% markup changed by Faysal bank
requirement
Down payment for dairy and poultry
form is 20%, for tube well is 10%
only.
For fertilizers, pesticides, seeds no
down payment.

Main Characteristics Of Faysal Bank Main Characteristics Of Faysal Bank

Customer Finance:
Customer Finance:

High mount of loan can be taken

Affordable reducing rental amount
Property play a role of security
Customer has facility to make partial
prepayments
Processing charges are low

37 | P a g e

Customer has facility to make partial

prepayments.
Customer can terminate partially or
fully
Time period of loan is between 1 to
20 years.
Forward towards Improvement.
Property play a role of security. 80%
loan is offered against market value
of property
Fast processing

Outcomes and Recommendation:

The customer financing product is offered by the both banks but their modes of financing varies
with term and conditions. Faysal bank is conventional bank but Meezan is working according the
Shariah laws. Meezan bank financing is based on rental amount but Faysal bank charge interest
on loan. Car Ijarah finance and easy home finance is offered by Meezan bank while the Car
financing, Home financing, Personal & Agri Loan facility is offered by Faysal bank.
Conventional financing is converted in Islamic banking by Faysal bank. Both banks providing
best services. But Meezan bank has more market shares then Faysal bank.
COMPARISON OF ASSETS BETWEEN MEEZAN BANK & FAYSAL BANK:

CONCLUSION

After a complete and detail examination of both banks we have to accept that both the banks are
performing well in their individual fields. But conventional is referred to as the interest bearing
bank and earns profit based on those interest, however the Islamic banking is interest free, earns
profit based on the deposits and investments in different areas. In Pakistan conventional banking
is inclined to Islamic banking as people are more interested in Islamic banking these days and
give value to their products. I also mention that Faysal bank is doing business in Islamic banking
but it needs to improve their Islamic banking unit to represent his country in Islamic world.

38 | P a g e

However, Meezan bank needs to enhance its market share nationally and internationally by
giving awareness programs to the society for creating better understandings related to Islamic
banking. It might be fascinating to repeat the study based on distinctive banks in Pakistan.

RECOMMENDATIONS
1. Islamic banking should give profit to the customers above the interest paid by the
conventional banking system retain the customers.
2. Islamic banking cost more than conventional whether in terms of transactions, products,
etc. Islamic banking system should work on providing less cost to the customers.
3. Conventional banks must give stress on their operations such as in Faysal Bank,
customers were not very happy with the operations management of the system.
4. Product awareness must be given to the people in Islamic banking
5. Product flexibility must also be provided to the individual customers.
6. Conventional banking should focus on the procedures in Pakistan, they need to improve
them as per policies followed in the western world.
7. New innovative techniques should be applied in both banking systems.
8. Investment plans must be specific and for the good of their customers.

LIMITATIONS
1. The study is limited to only two different banks in Pakistan.
2. The study is conducted in geographical area of Lahore.
3. The study is comprised of limited sample.
39 | P a g e

Introduction of the student

Graduation.

Faysal Bank Barkat Islamic

Branch Services Officer

Experience (2 Years)

40 | P a g e

41 | P a g e

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