1. 30 Nov 2004Islamic Banking at Systemic Level1 Islamic Banking at Systemic Level: Issues and Approaches Prof. Dr. Sayyid Tahir IIIE, International Isl. Univ., Islamabad IRTI DLP Lecture 9

2. Islamic Banking at Systemic Level2 Agenda I.Financing private and public sector needs II.Transformations Called for in: 1.International Trade 2.Regulation & Control of Isl. Banks and Monetary Policy 3.Legal & taxation framework III.Islamic banks versus conventional banks

3. Islamic Banking at Systemic Level3 1. Financing Private Sector Needs Consumer Financing Working Capital Financing Industry’s Expansion Needs Resource Mobilization through Salam Certificates Agricultural Financing Real Estate Financing [MF, IJF or DMF]

4. Islamic Banking at Systemic Level4 2. Financing Public Sector Needs Murabahah with Divisible and Tradable Securities Project Financing through Ijarah Istisna’-cum-Murabahah Financing Redeemable Musharakah Resource Mobilization through Selective Musharakah

5. Islamic Banking at Systemic Level5 General Formula Mute Investments-MF, IJF Financing for value--MF, SF added activitiesIJF, MUF Note: Combinations of the above to suit a given instance also possible.

6. Islamic Banking at Systemic Level6 3. Special Issues in Foreign Trade Financing Intermediary role of the banks Trade Financing 1.Trade-based:Exports (MF) Imports (SF) 2.Partnership-based:MUF or MOF Some special considerations

7. Islamic Banking at Systemic Level7 4. Regulation and Control of Islamic Banks Prudential regulations Liquidity and reserve requirements Provision of liquidity to Islamic banks Checks over the role of Islamic banks Checks on misuse of Islamic Banking Shari’ah Audit

8. Islamic Banking at Systemic Level8 5. Monetary Policy Nature of the Islamic financial system: 1.Closer integration between the real and the financial sectors 2.Primacy of the private initiative Need for and Room for Monetary Policy Measures

9. Islamic Banking at Systemic Level9 6. Transformations in the Legal Domain Renewed emphasis on rights of the creditors (against the debtors) Review of laws affecting role function of Islamic banks Taxation reforms

10. Islamic Banking at Systemic Level10 7. Challenges from Conventional Banks Critical dependence on distinctive nature of Islamic banking Competitive financial products

11. 30 Nov 2004Islamic Banking at Systemic Level, IIIE Islamabad 11 Thank you.

12. Islamic Banking at Systemic Level12 Consumer Financing MF – small financing for a short period IJF – sizeable financing for longer duration

13. Islamic Banking at Systemic Level13 Working Capital Financing MF – for a single input (sugarcane) SF – working capital for the season MUF – (pure) musharakah for season MUF + IJF – musharakah blended with ijarah for the season

14. Islamic Banking at Systemic Level14 Industry’s Expansion Needs MR, SF, IJF or DMF  for purchase of machinery and equipment DMF or ISF+MF  for additions to plant

15. Islamic Banking at Systemic Level15 Resource Mobilization through Salam Certificates Presumption Tradable salam certificates The Shari’ah restrictions

16. Islamic Banking at Systemic Level16 Agricultural Financing MF or IJF  financing for inputs needed by the financing sector SF  financing with settlement in terms of produce MUF  financing for miscellaneous cases