INVESTMENT BANKING

An investment bank is a financial institution that raises capital, trades

securities and manages corporate mergers and acquisitions. Investment
banks profit from companies and governments by raising money through
issuing and selling securities in capital markets (both equity, debt) and
insuring bonds (e.g. selling credit default swaps), as well as providing advice
on transactions such as mergers and acquisitions.

Dealing with the pension funds, mutual funds, hedge funds, and the
investing public who consumed the products and services of the sell-side in
order to maximize their return on investment constitutes the "buy side".

Investment banking is the traditional aspect of the investment banks

which also involves helping customers raise funds in the capital markets and
advise on mergers and acquisitions. Investment banking may involve
subscribing investors to a security issuance, coordinating with bidders, or
negotiating with a merger target.

FUNCTIONS OF INVESTMENT BANKING

The meaning of investment banking is not the financial investment in the
banking sector. But in fact, investment banking is a kind of banking function
which is used to help clients in creating wealth and funds. The commercial
banks use this type of banking in accord with sensible and practical use of
the available resources. Not only this, investment banking and people
engaged in this sector also provides advice on how to transact in business
they are currently in.

Corporate Finance: this is the sector where investment banking works and
supports companies the most in getting extra money. Lets take an example
that a company needs more money to finance the market research of a
product to-be launched to stay forward in competition. Here, investment
banking can help you by getting your company’s shares sold and raising
funds for you. The other way, how an investment bank

can get you money is by trading in stocks on behalf of their clients.

[M&A] Merger and Acquisitions: this point doesn’t have any explanation
and it can be defined only through an example. Let’s take an example of a
company who is going strong in business and market and wish to buy
another company just to add more authority to their name and business.
Professionals from investment banking sector makes them realize that on
merging; both these companies can be a great group and can acquire major
part of the market and also the business. They also tell them what are the
other benefits of getting merged and also what is the right time according to
market conditions

for both the companies to get merged into each other.

Among other important functions that investment banking sector performs,

sales is the most important one. Sales persons from investment banking
sector performs the tasks of a professional sales person. These sales people
convince investors and develop relationships with them to sell their stock.
They are also ready to provide advice relating to stocks and trading. This
advice makes buying and selling of stocks and other business transactions
very easy. Research programmers are present to analyze the working and if
some shortcoming is seen, they also help by suggesting them the right time
to transact in stocks.

ISLAMIC BANKING

Islamic banking refers to a system of banking or banking activity that is

consistent with the principles of Islamic law (Sharia) and its practical.
Financial services that meet the requirements of the Shariah, or Islamic law.
While designed to meet the specific religious requirements of Muslim.

MODES OF ISLAMIC BANKING:

Following are the modes of Islamic banking:

MUDARBAHAH: “Mudarabah” is a special kind of partnership where one

partner gives money to another for investing it in a commercial enterprise.
The investment comes from the first partner who is called “rabb-ul-mal”,
while the management and work is an exclusive responsibility of the other,
who is called “mudarib”.
MUSSAWAMAH: Musawamah is the negotiation of a selling price between
two parties without reference by the seller to either costs or asking price.

BAI SALAM: Bai 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.

MURABAHA: "Mudarabah" is a special kind of partnership where one

partner gives money to another for investing it in a commercial enterprise.
The investment comes from the first partner who is called "rabb-ul-mal"

ISTISNA: In Islamic finance, a contract to manufacture goods, assemble or

process them, or to build a house or other structure according to exact
specifications and a fixed timeline. Payments are made as work on the
property is finished. Istisna avoids making or receiving interest payments,
which is forbidden by the Islamic religion.

RIBA: The word "Riba" means excess, increase or addition, which correctly
interpreted according to Shariah terminology, implies any excess
compensation without due consideration (consideration does not include
time value of money).

IJARAH: Ijarah means lease, rent or wage. Generally, Ijarah concept means
selling benefit or use or service for a fixed price or wage.