Emirates Islamic Bank started in 2004 for supplying high quality Islamic banking and related services across the United Arab Emirates. They offer a scope of merchandises and services conforming which are Shari’a compliant to the highest criterions related to Islamic finance. All the bank activities are by and large overseen by a Shari’a board which comprises several assorted esteemed bookmans expert in Islamic jurisprudence.
Emirates Islamic Bank ‘s desire to follow with all facets of Shari’a regulations means that they are making things otherwise from major conventional Bankss. They as per Islamic Bankss neither charge nor pay involvement. They normally seek to avoid any uncertainness in their minutess. Against conventional recognition installations which offer loans and overdrafts, they use Muslim funding compliant methods such which include Murabaha, Ijarah and Salam. Against paying involvement for savings histories or puting their client ‘s money in some involvement paying financess, EIB use Muslim policy of profit-sharing constructions or Islamic investing financess. Most of their merchandises are wholly different from usual merchandises offered by most other Bankss. Emirates Islamic bank promise consumers to anticipate the superior degrees of service from them.
Aim of Study
Here we are traveling to analyze with a hypothesis that Muslim Bankss like Emirates Islamic Bank though they are different from normal Bankss in operation, are profitable and making good. We are traveling to turn out this hypothesis with the illustration of Emirates Islamic Bank.
UAE Banking Industry
Common thing about most of the Bankss of UAE is that they have Islamic banking in common. They are different from other types of traditional banking in many different ways. Traditional banking and finance involved money doing activities by using different chances and working resources to gain maximal net income. The Islamic banking and fiscal establishments do n’t run harmonizing to traditional banking rules. The Islamic establishments involve rule of Sharia and seek protecting benefits of common people. They tend to supply 0 % involvement loans and several fiscal instruments that can do to prefering to concern growing.
Islamic banking and finance depends upon the rules of Sharia that defines several thoughts of selling. It is Islamic spiritual mention that is applied to the existent universe by the Islamic Bankss. These fiscal establishments are responsible for successful execution of these rules. They try to supply 0 % involvement loaning to set up concern and trading. Sharia besides opposes the monopoly of any concern and so do n’t let any type of patent or right of first publications that can protect any merchandises or services. Islamic fiscal establishments trade in supplying best chances for the individual interested in trade enlargement. Sharia besides protects ownership of concern and ownership merely belongs to one who invests capital and attempt both. Harmonizing to the Sharia, the corporate coup d’etat is non allowed and any type of acquisition or amalgamation can non be entertained.
The aims of the Islamic Bankss in peculiar in UAE have been mentioned as follows:
The first aim of the Islamic Bankss is to do the universe free from economic unfairness.
They believe in a different convention as compared to the non-Islamic Bankss in the state and worldwide.
It is one of the most ethical signifiers of banking even though it might look a batch more alien in the beginning.
They are committed to Islamic ideals and regulations of Sharia in about all their activities.
They are focused on 100 % client satisfaction. They deliver choice service as per the client demands.
They aspire to go a Bank that makes their employees experience proud and are willing[ 1 ]to offer a opportunity to larn and progress on virtues.
They use creativeness and engineering to distinguish between their services. Try to do their merchandises and services easy accessible to their clients.
They will honor their stockholders by supplying them competitory returns on their investing in the Bank.
The Bankss aim at bear downing 0 % involvement rates as it is a wickedness in Islam.
It is clearly discernible that the fiscal establishments of UAE & A ; other Islamic states are doing immense return from their services offered.
Islamic banking is turning quickly with 10-15 % growing rate every twelvemonth. It has spread in whole universe with 300 establishments in 51 states including United States, with 250 common financess running on the rules of Islamic thoughts.
Fiscal Products, Instruments related to Islamic banking
The instruments and services that are provided by Muslim Bankss and fiscal establishments are:
Bai’al-inah ( sale and buy-back understanding ) : In this strategy a sold plus can be acquired back after some period of clip without bear downing any involvement from the purchaser in instance of late payment or defaulting.
Bai muajjal ( recognition sale ) : In this strategy the bank gets the net income from leting the sale of a merchandise or plus on the footing of payment made in installments. The trade is made by make up one’s minding the net income border that is needed and adulthood day of the month of loan.
Bai ‘ bithaman ajil ( deferred payment sale ) : The trade can be made for an plus that is sold and payment is made after some period of clip. The trade is made sing the net income border for both the parties.
Mudarabah ( net income sharing ) : Here the bank or capital investor portions the net income made by the enterpriser by puting the money in concern activity. All the expertness, direction and labour are provided by enterpriser with the capital provided by the investor.
Sukuk ( Islamic bonds ) : These are the Islamic binds that are certification of fixed[ 2 ]sum of rule that will be given back after adulthood with some net income.
Murabahah ( cost plus ) : The plus is traded at a monetary value that involves the net income border that is fixed with the understanding of both the parties. It is fixed income loan strategy and involves a predefined net income earning.
Musawamah: It is the dialogue of monetary value between the two parties for an plus whose cost monetary value is non subjected to uncover during the trade. The selling party may besides non be holding cognition of cost monetary value and trade is made with understanding of both parties. It is really common manner of dialogues in Islamic states.
Ijarah: Here the merchandising of benefit of usage or service is made at a fixed monetary value for a period of clip. It is pay, rent, or rental that is decided for the specified period and the purchaser may take benefit merely up to the given period. As in UAE, the belongings is non available for purchase for good by any exile. They can take it on rental or pay high rent for the fixed continuance. It is really common pattern in these states.
Bai salam: It is scheme in which the progress payment of the monetary value for an plus is made for the future bringing. The quality and specifications of the merchandise is predefined and any disagreement may take to differences.
Qard hassan/ Qardul hassan ( good loan/benevolent loan ) : It is a type of loan that is provided on the goodwill footing and it is subjected to merely payback the sum taken.
Takaful ( Islamic insurance ) : It is a hazard direction strategy, where a Muslim can hold cover for their hazardous clip.
Hibah ( gift ) : This is a type of inducement given by a debitor to the creditor in return of the sum. This is the net income sharing mechanism of Bankss with salvaging money invested by people by supplying them dividend.
Wadiah ( safekeeping ) : It is a type of safe sedimentation in Bankss that is guaranteed with the refund at the demand of depositor.
Wakalah ( power of lawyer ) : This is leting a individual to hold all the dealing on his behalf.
Emirates Islamic Bank ‘s Recent Financials
Balance sheet and Income statement of the company straight shows that the company does n’t hold any involvement income. Its major gross is from fiscal investings and committee. The bank chiefly operates as per the shari’a rule and its income includes income from fiscal activities, short term investings and short term Murabaha. It besides invests in belongings related investings. It does n’t hold any involvement related expense. Its disbursal chiefly includes administrative and rental disbursals. Over and above this, Bankss besides have depreciation and damage disbursals which includes loss due to obsolescence and expiry losingss.
Above shown graph shows company ‘s equity and net income portions from period 2000-2006. It has been increasing continuously from twelvemonth 2000 to twelvemonth 2006. In period 2005 to 2006, Company ‘s equity remained changeless but its net income has taken the major leap by increasing more than 17 % .
Above graph shows the alteration in constituents of fiscal statement with twelvemonth on twelvemonth footing. Assetss have been increasing at a rate of 93 % per annum. Deposits have been increasing systematically at the rate of 124 % with intensifying growing. Equity in the bank has been increasing at the rate of 18 % whereas the income of the bank has been increasing at the rate of mammoth 150 % . Buy the image has non been everyplace rose-colored. Outgo of operation has besides been increasing a batch with 96 % one-year growing rate
Financial ratio which is besides known as accounting ratio is a ratio stating comparative magnitude of division of two numerical values normally taken from a firm’sA fiscal statements. It is by and large used in for Air Combat Command, there accounting intents. There is assortment of standard ratios used to explicate the comprehensive fiscal place of a corporation or an organisation. Fiscal ratios can be used by inside directors to utilize the company ‘s fiscal position and specify the program on which they have to do the company better its fiscal efficiencies. These ratios can be utilized by foreigners such as investors to analyse the company ‘s economic place to look into out whether they can put in the house or non. By analysing the ratio, investors can to the full verify whether company ‘s stock monetary value is logical or non. Whether they are basically right non? Security analysts by and large use fiscal ratios to analyse the strength and failings of assorted companies.
Fiscal ratios by and large quantify many quality facets of a concern. They are normally an built-in portion analysis of the fiscal statement. Financial ratios get categorized as per the fiscal act which ratio steps. They are grouped together in different classs each informing different facets of the company.A Liquidity ratiosA by and large mensurate the presence of hard currency available to pay debt. Activity ratiosA by and large step that how rapidly a house is able to change over its non-cash assets into hard currency assets. Debt ratiosA by and large measure the capableness of house to refund its long-run debt pending.A Profitability ratios basicallyA step the public-service corporation of house ‘s assets and control of its entire disbursals to bring forth a allowable rate of return. Market ratiosA fundamentally measure investor ‘s response of having a company ‘s stock. It besides checks the cost of publishing stock. These ratios are normally analyzed with company ‘s ability to return the sum invested or really merely the return on equity. The relationship gets formed between return investor can presume and the sort of value of an investing associated with company ‘s portions.
Fiscal ratios facilitate for comparings:
between different companies
between different industries
between different clip skylines for one company
between a company with its industry norm
Ratios by and large do n’t hold any significance until they are related and compared with something else. Therefore they form the chief footing of comparative analysis of two house ‘s fiscal and operational position.
( return on equity ) = net income / mean common equity.
( return on assets ) = net income / mean entire assets.
( net involvement border ) = net involvement income / mean entire assets.
Efficiency ratio = noninterest disbursal / ( net involvement income + noninterest income )
Fee Income Ratio
Fee income ratio = noninterest income / ( net involvement income + noninterest income )
( net incomes per portion ) = net income / # of outstanding portions
( net net income border ) = net income / sum operating grosss
( Asset Utilization ) = entire operating grosss / mean entire assets
( Equity Multiplier ) = entire assets / common equity
Emirates Islamic Bank
Net Interest Income
Fee Income Ratio
Above ratio Analysis shows a batch of parametric quantities about company ‘s fiscal wellness. Recently in twelvemonth 2009 company ‘s Return of equity has non been that great. It has reduced systematically from 57 % in 2007 to 5.7 % in 2009. This shows that investors are non acquiring proper return on their investing in bank. Asset use is besides systematically diminishing twelvemonth on twelvemonth. Asset use has been decreased late from 3.8 % to 0.5 % in merely two twelvemonth. This 85 % lessening within two old ages shows that company ‘s plus ‘s income generating capacity on diminution late. Company ‘s efficiency and fee income ratio has been on addition late. Investor ‘s portion investors are gaining a batch late. Bank ‘s Net incomes per portion has increased from 0.01 to 0.14 in last two twelvemonth clip span with a extremum of 0.26 in 2008. Equity Multiplier which is ratio of entire assets and common equity is besides diminishing systematically from 2007 to 2009. Its value has decreased a batch from 22.68 to 10.93 late. Therefore here we can see that company ‘s fiscal has shown a downward form late. Its plus has lost its efficiency and most portion of them has become nonperforming plus.
From above survey we can reason that Emirates Islamic bank is successful in doing its grade in the field of Islamic banking. It is one of the most accepted names in the field of Banking in UAE. They prefer Shari’a rule to be base of their operation. Recently they are non making good in keeping operational and plus efficiency but its history shows that they are good and they have raised the degree of Islamic banking. They merely have to convey back their efficiency.