Customers’ Financing Needs Vis-À-Vis Financial Products Offered by Islamic Banks in Pakistan: A Case Study of Khyber Pakhtoonkhwa Province
Keywords:
Equity-based and debt-based financing products, Islamic banking, Islamic banks in Pakistan.Abstract
The profit and loss sharing and mark- up financing products are the two parent principles of Islamic financing. Profit and loss sharing products are equity based products while mark-up (Murabaha) and lease (Ijara) are debt based financing products. Ironically, the theory of Islamic finance entirely relies on the profit and loss sharing products, while the practice is dominated by the mark-up or deferred sale. This paper analyses the products (either equity based or debt based) offered by Islamic banks in Khyber Pakhtoonkhwa (KPK) province Pakistan. It was found that there is a dichotomy between the theory of Islamic banking and what is actually practiced by Islamic banks. An analysis of this dichotomy, with special reference to investors and customers (being the main stakeholders of Islamic banks) is important for understanding the basis of Islamic financing, the future of Islamic financial institutions and the contribution which these institutions may make to individual Muslim economies as well as to the global economic scene.
References
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[15] Muhammad Aqib Ali. “The roots and development of Islamic Banking in the world and Pakistan”, South Asia Journal of Contemporary Business, Economics and Law, Vol.7, Issue 1, Pp.58-63, 2015
[16] Razi Pahlavi Abdul Aziz and Anne-Sophie Gintzburger. “Equity based, asset based and asset backed transactional structures in Shari’ah compliant financing: Reflections on the current financial crisis”. The economic society of Australia, economic papers, Vol. 28, No.3, pp 270-278, 2009.
[17] Tariqullah Khan and Habib Ahmad. “ Risk management: An analysis of issues in Islamic financial industry”, Occasional paper No.5, Islamic development bank, Islamic research and training institute, Jeddah Saudi Arabia, 2001.
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[19] Habib Ahmad. “ Risk management assessment systems: an application to Islamic banks”, Islamic Economic Studies Vol.19, No1, pp. 63-86, 2011
[20] Faysal Amrani “Financing cost and risk sharing in Islamic finance: A new endogenous approach,” presented at the 29th International symposium on money, banking and finance Nantes, France, 2012
[21] Mehboob ul Hassan. “Peoples’ Perceptions towards the Islamic Banking: A Fieldwork study on Bank Account Holders’ Behavior in Pakistan”, OIKONOMIKA, Vol.43, No. 3-4, pp.73-87, 2007.
[2] Muhammad Obaidullah. Islamic Financial Services. (1st edition) Islamic economics research center, King Abdul Aziz University, Saudi Arabia ISBN: 9960-06- 428- X. 2005
[3] Osman Babikir Ahmad. Islamic financial instruments to manage short term excess liquidity”.(2nd edition). Research paper no 41. P. 50, 2001.
[4] Muhammad Ayub . “Understanding Islamic Finance”. A publication of John Wiley and sons limited, 2007.
[5] Jean-Yves et al. “Islamic Finance: a review of the literature”. Working paper no.2014-093. IPAG Business School 184, Boulevard Saint-German 75006 Paris France, 2014. Available: http://www.ipag.fr/en/professeurs-recherche/les-publications/les-working-papers-de-lipag-lab/
[6] Zamir Iqbal and Abbas Mirakhor, “An Introduction to Islamic Finance: Theory and Practice” (2nd edition), A publication of John Wiley and sons limited, 2011.
[7] Anjan V. Thakor “The design of Financial System: An overview”. Journal of Banking and Finance, Vol. 20. PP 917-948, 1996.
[8] Mohsin S. Khan and Abbas Mirakhor. “The financial system and monetary policy in an Islamic economy”, Journal of king Abdul Aziz University, Islamic Economics Vol.1 pp. 39-57, 1989.
[9] Islamic Banking bulletin, State bank of Pakistan, June 2015.
[10] Beng Soon Chong and Ming-Hua Liu “Islamic Banking; Interest-free or interest based?” Pacific-basin Finance Journal pp. 125-144, 2009.
[11] Muammad Ramzan et al, “Growth of Islamic banking in Pakistan by using AID model” International Journal of Business and Social Sciences Vol. 3 No. 23, pp 152-164, 2012.
[12] Muhammad Firdaus Muhammad Hatta. “Examining the dominance of Islamic debt-based products in economy”. International Journal of Arts and Commerce, Vol.3 N0.6 pp51-68, 2014.
[13] Noorma Md Saad. “Towards adopting zero interest financing (ZIF) and profit and loss sharing (PLS) principle in Islamic microfinance: A case of Amanah Ikhtiar Malysia” Journal of Islamic Finance, Vol.2, No.2 pp.038-050, 2013.
[14] Muhammad Omar Farooq “ Partnership, equity financing and Islamic finance; Whiter profit-loss sharing?”, International Association for Islamic Economics Review of Islamic Economics, Vol. 11, Special issue, pp.67-88, 2007. Available: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1415239
[15] Muhammad Aqib Ali. “The roots and development of Islamic Banking in the world and Pakistan”, South Asia Journal of Contemporary Business, Economics and Law, Vol.7, Issue 1, Pp.58-63, 2015
[16] Razi Pahlavi Abdul Aziz and Anne-Sophie Gintzburger. “Equity based, asset based and asset backed transactional structures in Shari’ah compliant financing: Reflections on the current financial crisis”. The economic society of Australia, economic papers, Vol. 28, No.3, pp 270-278, 2009.
[17] Tariqullah Khan and Habib Ahmad. “ Risk management: An analysis of issues in Islamic financial industry”, Occasional paper No.5, Islamic development bank, Islamic research and training institute, Jeddah Saudi Arabia, 2001.
[18] Sajjad Zaheer and Muazzm Farooq. Liquidity Crisis; Are Islamic Banking institutions more resilient?”, Paper presented at the joint RES-SPR conference on macroeconomic challenges facing low income countries, hosted by International monetary fund, 2014.
[19] Habib Ahmad. “ Risk management assessment systems: an application to Islamic banks”, Islamic Economic Studies Vol.19, No1, pp. 63-86, 2011
[20] Faysal Amrani “Financing cost and risk sharing in Islamic finance: A new endogenous approach,” presented at the 29th International symposium on money, banking and finance Nantes, France, 2012
[21] Mehboob ul Hassan. “Peoples’ Perceptions towards the Islamic Banking: A Fieldwork study on Bank Account Holders’ Behavior in Pakistan”, OIKONOMIKA, Vol.43, No. 3-4, pp.73-87, 2007.
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Published
2016-06-21
How to Cite
Ud Din, S. (2016). Customers’ Financing Needs Vis-À-Vis Financial Products Offered by Islamic Banks in Pakistan: A Case Study of Khyber Pakhtoonkhwa Province. American Scientific Research Journal for Engineering, Technology, and Sciences, 20(1), 235–243. Retrieved from https://asrjetsjournal.org/index.php/American_Scientific_Journal/article/view/1723
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