Table of contents

Introduction Major products offered by Meezan bank Portfolio of Meezan bank Securitization Musharakah securitization Ijarah securitization Sukuk Types of Sukuk

Data for Analysis on securitization

Introduction Meezan Bank Limited is a publicly listed company offering Islamic Banking in Pakistan. It was first incorporated on January 27, 1997, starting operations as an Islamic investment bank in August of that year. In January 2002, the Bank was granted Pakistan's first full-fledged commercial banking license dedicated to Islamic Banking, by the State Bank of Pakistan. The Bank has an internationally renowned Shariah Supervisory Board Chaired by Justice (Retd.) Maulana Muhammad Taqi Usmani, an internationally renowned figure in the field of Shariah, particularly Islamic Finance. What Distinguishes Islamic Banking from Conventional Banking? All transactions are asset-based. It is socially responsible banking because it operates under Shariah restrictions. Does not permit financing of prohibited goods/Industries. It starves evil out of the society. Key Misconceptions: Islamic banking looks the same as conventional banking A halal meat and haram meat may look exactly the same but one is permissible while the other is not. Our Vision

Establish Islamic banking as banking of first choice to facilitate the implementation of an equitable economic system, providing a strong foundation for establishing a fair and just society for mankind.

Our Mission To be a premier Islamic bank, offering a one-stop shop for innovative value-added products and services to our customers within the bounds of Shariah, while optimizing the stakeholders value through an organizational culture based on learning, fairness, respect for individual enterprise and performance.

HISTORY OF MEEZAN BANK LIMITED 1947 The inception of Pakistan as the first Islamic Republic created in the name of Islam. 1980 CII presents report on the elimination of Interest genuinely considered to be the first major comprehensive work in the world undertaken on Islamic banking and finance. 1985 Commercial banks transformed their nomenclature stating all Rupee Saving Accounts as interest-free. However, foreign currency deposits in Pakistan and foreign loans continued as before. 1997 Al-Meezan Investment Bank is established with a mandate to pursue Islamic Banking. Mr. Irfan Siddiqui appointed as first and founding Chief Executive Officer. 1999 The Shariat Appellate Bench of the Supreme Court of Pakistan rejects the appeals and directs all laws on interest banking to cease. The government sets up a high level commission, task forces and committees to institute and promote Islamic banking on parallel basis with conventional system. 2001 The Shariah Supervisory Board is established at Al-Meezan Investment Bank led by Justice (Retd.) Muhammad Taqi Usmani as chairman. State Bank of Pakistan sets criteria for establishment of Islamic commercial banks in private sector and subsidiaries and stand-alone branches by existing commercial banks to conduct Islamic banking in the country. 2002 Al-Meezan Investment Bank converts itself into a full-fledged Islamic commercial bank. The first Islamic banking license is issued to the Bank and it is renamed Meezan Bank. President General Pervez Musharraf inaugurates the new Islamic Commercial Bank at a formal ceremony in Karachi. 2003 Meezan Bank establishes itself as the pioneer of Islamic Banking in Pakistan and quickly establishes branches in all major cities of the country. A wide range of products are developed

and launched consolidating the Banks position as the premier Islamic Bank of the country Al Meezan Investment Management Limited (AMIM), the asset management arm of Meezan Bank, introduces Meezan Islamic Fund (MIF), the countrys first open-end Islamic Mutual Fund 2004 The State Bank establishes a dedicated Islamic Banking Department (IBD) by merging the Islamic Economics Division of the Research Department with the Islamic Banking Division of the Banking Policy Department. A Shariah Board has been appointed to regulate and approves guidelines for the emerging Islamic Banking industry. The Government of Pakistan awards the mandate for debut of international Sukuk (Bond) offering for USD 500 million. The offering is a success and establishes a benchmark for Pakistan. Meezan Bank acts as the Shariah Structuring Advisor for this historic transaction. 2005 Meezan Bank becomes the first customer of Islamic Insurance (Takaful) by signing the first Memorandum of Understanding MoU with Pak-Kuwait Takaful Company Limited (PKTCL). The signing of this MoU has ushered Pakistan into a new era of Islamic Insurance (Takaful). 2006 A number of new dedicated Islamic Banks, namely Bank Islami and Dubai Islamic Bank, commence operations in Pakistan. Meezan continues its leadership position in the industry by more than doubling its branch network to a total of 62 branches in 21 cities, clearly establishing itself as the largest Islamic Bank of the country. Meezan Bank becomes the first Islamic bank to introduce 8 am to 8 pm banking at selected branches in Karachi. 2007 Meezan Bank opens up its 100th branch. Two new dedicated Islamic Banks start operations in Pakistan, namely Emirates Global Islamic Bank and Dawood Islamic Bank. 2008 With 166 Branches (including 35 sub-branches) in 40 cities across Pakistan, Meezan Bank is clearly positioned as the leading Islamic Bank in the country. Work starts on the construction of Meezan Banks new Head Office building. The financing and investment portfolio of local Islamic banks reached Rs. 185 billion in December 2008 compared to Rs. 137.6 billion in December 2007. Market share in the overall banking increased to five per cent at end December 2008 compared with four per cent at end December 2007. Total assets of Islamic banking reached Rs. 271.1 billion in December 2008 compared to Rs.205.2 billion in December 2007.

2009 Branch network of six dedicated Islamic banks increases to 480 Branches (Including SubBranches) with Meezan Bank having a 42% share of the Islamic Banking branch network in the country with 201 branches in 54 cities across the country. Islamic Banking's share grows to over 5.5% of the total Banking industry. 2010 Meezan Bank developed a number of new deposit products to cater to the unique needs of different market segments In 2010 banks deposits are increases by 13% and investments by 61%. The bank has opened 25 new branches, now there are 226 branches in more than 63 cities and it became the 11th largest bank in Pakistan in terms of branch network. Bank has started new scheme Laptop Ease, in which they provides laptops in lower rates. Total assets and share capital are also increases from last year. The Bank demonstrated robust business growth in 2010, closing the year with a deposit figure of Rs. 131 billion and Import/Export business of Rs. 143 billion. Products offered by Meezan Bank Types of products offered by: Riba Free - Dollar Saving Account Riba Free - Rupee Saving Account Riba Free - Current Account Riba Free - Meezan Business Plus Riba Free Meezan Bachat Account Car Ijarah - Islamic Car Financing Riba Free - Certificates of Islamic Investment Riba Free - Monthly Musharakah Certificate Riba Free Meezan Providence certificate Riba Free Meezan Amdan certificate Riba Free Meezan Mudarbah Certificate

Securitization Islamic institutions are growing in the global market. They also participate in global securitization in Islamic perspective. Securitization is recent invention in conventional banks. Islamic banks also involved in this dynamic line of business. Basically securitization means issuing of certificate of ownership against an investment pool or business enterprises. In defining securitization we focus on processes 1. The process of pooling interest 2. The process of packaging them into securities 3. The process of distributing securities to investor An Islamic institution focus on package not process of package. They focused that package should be interest free. Securitization is the invention of Americans but no longer remain to be used only by Americans. It grew into significant business in 1990s. Today securitization is not only for mortgaging on properties but also credit card receivables, computer lease, equipment leases, auto loan sand notes financing etc. The growth of securitization is basically driven by four factors. Imposition of capital adequacy ratios and Reserve requirement on financial institutions by regulatory agencies guide safer place to invest When global cost increases secr helps securitization helps financial institutions to raise cheaper capital for their businesses at the asset level instead of the enterprise level. there is a growing convergence of many capital markets into one, as the barriers between them were removed. As all segments of the economy now compete for the same capital, efficient, low cost of financing have become more necessary. Fourth, increased ability to generate and utilise information through popular use of rapidly improving computer technology has resulted in significant gains for the securitization business.

MUSHARAKAH SECURITIZATION Some people claim that the conventional bonds and Musharakah certificate appear similar. It must be understood that a bond is issued to evidence a loan and has nothing to do with the actual business undertaken with the borrowed money while the Musharakah certificate represents direct pro rata ownership of the holder in the assets of the Project. IJARAH SECURITIZATION The well-established Islamic Financing structure of Ijarah is considered acceptable by Islamic scholars. On basis of Ijarah Sukuk, a secondary market of Islamic bonds or Sukuk can be created. The owner/lessor purchases a proportion of the leased asset and as evidence; a certificate is given to the lessor which may be called 'Ijarah certificate'. This certificate will represent the holder's proportionate ownership (undivided part of the asset) in the leased asset and they will assume the rights and obligations of the owner/lessor to that extent. Each holder of this certificate will have the right to enjoy a part of the rent according to his proportion of ownership in the asset. Similarly the investors will also assume the obligations of the lessor to the extent of their ownership. Therefore, in the case of total destruction of the asset, they will suffer the loss

to the extent of his ownership. These certificates can be negotiated and traded freely in the market and can serve as an instrument that is easily convertible into cash.

Sukuk Sukuk is a recently-developed Islamic investment product that first appeared in 2002, when Malaysia issued a government-backed Sukuk, the first of its kind. Sukuk (the plural of the word Sak, or Sanadat, meaning certificate of investment or simply certificates) are certificates that represent the holders proportionate ownership in an undivided part of an underlying asset where the holder assumes all rights and obligations to such asset. 187 The Accounting and Auditing Organization for Islamic Financial Institutions ("AAOIFI") has issued the Standard for Investment Sukuk. Under the AAOIFI Sukuk Standard, Sukuk are defined as certificates of equal value put to use as common shares and rights in tangible assets, usufructs, and services or as equity in a project or investment activity. The AAOIFI Sukuk Standard carefully distinguishes Sukuk from equity, notes, and bonds. It emphasizes that Sukuk are not debts of the issuer; they are fractional or proportional interests in underlying assets, usufructs, services, projects, or investment activities. Sukuk may not be issued on a pool of receivables. Further, the underlying business or activity, and the underlying transactional structures (such as the underlying leases), must be Sharia-compliant (for example, the business or activity cannot engage in prohibited business activities). 191 To sum up, the AAOIFI standard stipulates that Sukuk must demonstrate. Types of Sukuk Ijara Sukuk Mudaraba (or Muqarada) Sukuk Musharaka Sukuk Murabaha Sukuk Salam Sukuk Istisna Sukuk Hybrid Sukuk

Analysis
Investments The Bank classifies its investments as follows: - Held for trading These are investments acquired principally for the purpose of generating profit from short-term fluctuations in price. year 2006 2007 2008 2009 428505 517172 174110 - Held to maturity These are investments with fixed or determinable payments and fixed maturity and the Bank has positive intent and ability to hold to maturity. year 2006 2007 2008 2009 1320548 1621200 1735329 116848 - Available for sale These are investments, other than those in subsidiaries and associates, which do not fall under the held for trading or held to maturity year 2006 2007 2008 2009 233358 6547189 10743499 20026241 The Bank values its investments as follows: - Quoted securities, excluding investments categorized as held to maturity securities and investments in subsidiaries and associates, are stated at revalued amounts. - Investments in quoted associates are stated at cost less impairment, if any - Unquoted securities including investments in associates and subsidiaries are stated at cost less provision for impairment, if any. - Investments in securities categorized as held to maturity are carried at amortized cost less impairment.

Skuk certificate
year 2006 2007 3598000 2007 146280 2008 4075750 2008 146280 2009 4831840 2009 146280 Preference shares year 2006 143280

Paid up ordinary shares(listed) year 2006 564285 Paid up ordinary shares(unlisted) year 2006 191050

2007 627962

2008 962807

2009 943419

2007 191050

2008 191050

2009 191050

Subsidiary (unlisted) year 2006 63050 Associate listed year 2006 595068 Associate unlisted year 2006 271280

2007 63050

2008 63050

2009 63050

2007 1568794

2008 2020161

2009 2020161

2007 274280

2008 274280

2009 274280

year

2006

2007

2008

2009

Investment by Types

Held for trading securities Available for sale securities Held to maturity securities

174,110 10,743,499 1,735,329

517,172 6,547,187 1,621,200

Investment by segments Fully paid up ordinary shares - Listed companies - Unlisted companies Preference shares Global Sukuk Bonds WAPDA First Sukuk Certificates WAPDA Second Sukuk Certificates GOP Ijarah Sukuk Sukuk Certificates 962,807 191,050 146,280 980,822 1,150,000 1,750,000 3,640,000 3,836,000 627,962 191,050 146,280 781,200 1,150,000 1,550,000 3,598,000