Overview And Analysis Of Albaraka Islamic Bank Finance Essay

Al Baraka Islamic BankAl Baraka Islamic Bank is one the subordinate banking units of Al Baraka Banking Group. Al Baraka Banking Group is a Bahrain Joint Stock Company listed on Bahrain and NASDAQ Dubai stock exchanges. It is a taking international Islamic bank with Standard & A ; Poor ‘s long and short-run recognition evaluations of BBB- and A-3 severally. Al Baraka Banking Group offers retail, corporate and investing banking and exchequer services purely in conformity with the rules of the Islamic Shari’a.

Impact of external environment on an organisation and relate to its schemes:

The big planetary fiscal participants have been instrumental in furthering linkages and merchandise invention. This is mostly because the investor community worldwide is being attracted by the ‘risk-return ‘ and other advanced characteristics of Islamic merchandises, the merchandise scope IF offers, and the ethical investing doctrine and administration construction it promotes. Worldwide demand for Islamic funding is besides deriving impulse as IF conforms itself to conventional finance by following proper regulative and supervisory models. Acknowledging the deductions of fiscal globalisation on IF and IF ‘s deductions for planetary finance, Multilateral Development Institutions have been back uping the Islamic Financial Services Board ( IFSB ) to guarantee effectual alliance in the regulative models, while suiting alterations and polishs of the particular characteristics and modes of IF.

Critical rating of usage PESTEL:

PESTEL ( Political, Legal, Economic, Social, Environmental and Technological ) is a model of macro-environmental factors used in the environmental scanning constituent of strategic direction

Political and Legal Environment:

The political environment of any state in which a company operates is really of import and indispensable to understand in order asses the strategic place of that organisation. Albaraka Islamic bank is runing in Pakistan, a state where

Pakistan has ever been fighting for political stableness since its creative activity. Government has been altering in Pakistan many times due to multiple grounds and most of the times Military has taken the charge of the authorities. So, there are important political hazards in Pakistan. Consecutive military and civilian governments have failed to implement and explicate sound policies for long footings. Standard & A ; Poor ‘s has rated Pakistan as high instable political environment. Pakistan has besides suffered from a long periods of hapless administration. ( Liew 2003 )

Each Government started his opinion with a different motto. Zia-Ul-Haq gave a motto of Islamization and in his times it was proposed that whole fiscal system of the state must be under Islamic Torahs. Without traveling into inside informations of this there has been a batch of ups and downs in policies. State bank of Pakistan has besides been influenced by the governing party as it was under the control of Ministry of finance. Religious groups have besides great force per unit area on the authorities in policy devising as people of the country are really sensitive in the affairs of faith. Each governing party is found involved in corruptness. So, these political instabilities and jobs like corruptness is a really large hurdle for any sector to turn decently including Islamic banking.

But the positive facet is that State bank of Pakistan has been given sovereignty and it is now an independent organic structure in doing its determinations. This factor has brought some stableness in the policies of the State Bank of Pakistan for banking sector as the alteration of authorities has no concerns with them. So, banking sector is basking some long-run policies now. SBP has played a critical function in reforming banking sector and has provided guidelines for implementing Islamic banking every bit good. From this position environment becomes suited and favourable for Islamic banking in the part as banking policies are being formed for long times and spiritual force per unit area groups are besides in favour of this sector. Muslim Bankss can do their schemes consequently as there is no opportunity for any major alteration of policies in close hereafter. Legislation is non to the full implemented but it is come oning easy and traveling in right way. Regulatory model given by SBP for banking sector has defined the parametric quantities for their operations. These parametric quantities are flexible and are supplying banking sector a just market without struggles. SBP has promoted Islamic banking as it has banned issue of new licences for conventional

Bankss but Islamic Bankss are still being granted. So, such statute law is traveling in favour for Islamic banking sector in Pakistan.


Economy of a state plays a major function in the profitableness and success of any sector and organisation. Economic environment consists of factors that affect consumer buying power and disbursement forms. About all companies examine the economic environment before strategic planning. ( Jain 1999, p.140 )

It can be analyzed from those statistics that Pakistani economic system is good for foreign investings and it is besides good for Islamic banking sector of Pakistan.

Pakistan ‘s economic system was a theoretical account economic system for developing states in 1960. But incompatibility in policies, wars with India and may other factors accounted bad for it.

But the wide-range structural reforms which were implemented over the past few old ages have helped the economic system in stabilising itself. These reforms include trade liberalisation, energy-sector deregulating, restructuring of banking sector and revenue enhancement reforms etc. So, the economic system is now less vulnerable to dazes. ( Liew 2003 )

GDP rate of Pakistan is demoing a consistence in upward way and per capita income has increased as compared to past. FDI is increasing every twelvemonth. Home economic system is in recovery stage but it is demoing good indexs for banking sector. Some minutess of Islamic banking like modaraba have been promoted by giving inducements. As Pakistani economic system is demoing some degree of stableness and consistence from last twosome of old ages, so it ‘s good mark Islamic banking every bit good.

Socio-Culture and Environmental Factors:

Deep survey of local civilization and societal apparatus is besides one of the major factors which account much in successful scheme formation. Changing types of consumer behaviours are found in different civilizations. Harmonizing to Kotler, civilization is “ the set of basic values, perceptual experiences, wants and behaviours learned by a member of society from household and other of import establishments. ” ( Kotler et al. 2004 )

Pakistan is situated at really of import geographically location and it has a diverse civilization. Islam is the faith of bulk of the population and Islam has deep and of all time permanent influences upon the civilization of the people of the country. So, the life manner of people and attitudes of consumers is favourable for Islamic banking as people are spiritual and they want to cover in Islamic fundss. Pakistani people have a regard for their spiritual and cultural jubilations. Islamic banking is taking an advantage of this socio-cultural environment of Pakistan. Pakistan is the 6th thickly settled state in the universe. So it is a large market for any sector.



Technological environment can move as the most dramatic force in altering the on the job manner and fate of the houses. Technology is altering quickly and every new engineering replaces an older 1. Sellers need to understand the new engineerings and the ways that how these engineerings can be helpful to function clients. ( Kotler 1999, p.185 )

Technology has reshaped the concerns and services every bit good. Technology has besides brought a great alteration in banking sector. A batch of installations are being provided to the clients by the Bankss which were non possible without it. In the universe of engineering, IT sector is the taking one which has revolutionized the universe. There is deficiency of proper substructure in Pakistan, for that ground different sectors are non going able to get by with the engineering. Banking sector has introduced a batch of advanced services with the aid of engineering. Islamic banking is besides on its manner but it is spread outing easy as compared with possible demand of Islamic banking.

Determinant of national advantage utilizing Porter ‘s Diamond:

Michael E. Porter argued that a state can make new advanced factor gifts such as skilled labour, a strong engineering and cognition base, authorities support, and civilization. Porter used a diamond molded diagram as the footing of a model to exemplify the determiners of national advantage. This diamond represents the national playing field that states set up for their industries.

The single points on the diamond and the diamond as a whole affect four ingredients that lead to a national comparative advantage. These ingredients are:

the handiness of resources and accomplishments,

information that houses use to make up one’s mind which chances to prosecute with those resources and accomplishments,

the ends of persons in companies,

the force per unit area on companies to introduce and put.

Evaluation of the intent and properties of SWOT analysis:

SWOT analysis

Second: spiritual entreaty, Zakat, Innovative facet, all bigger Bankss carry a Islamic portfolio because of its success.

Tungsten: Lack of standardisation, There are differences in theory and pattern, Misinterpretation of Islam

Oxygen: fastest turning faith in the universe, Traditional involvement based banking losing its value, New markets have been emerged in non Islamic parts.

Thymine: loopholes are present in its proper execution, Research in merchandises, Environment for Islamic banking in West has been declined after 9/11

Matching of SWOT to organisation competencies in order to bring forth strategic options for organisations:

Govt. has provided a model sing legislative which helped in cut downing the troubles and clip holds in recovery of defaulted loans. ( Khan 1999 ) Although the hazard involved in making Islamic banking minutess is really high but this model will well cut down the hazards.

Now Islamic Bankss have more chance to make concern in Pakistan because Govt. has reduced the revenue enhancement on Bankss from 58 % to 41 % . Govt. has besides stopped giving licences to conventional Bankss and advancing Islamic banking in Pakistan which will assist Islamic Bankss deriving more market portion in coming old ages.

Turning GDP rate and addition in per capita income reflects that economic system of Pakistan is bettering. FDI is besides increasing in Pakistan and one of the major attractive sectors for foreign investors is fiscal concern. Populating criterion of common population is increasing and as a consequence consumer power has increased. An spread outing economic system and addition of devouring power can move as a fueling demand for Islamic loans and investings from consumers and companies. ( Nambiar 2005 )

Although the literacy rate of Pakistan is low but it is increasing. There are more educated individuals in the market who have brilliant thoughts but do n’t hold the

sufficient investing to get down new concern or survey abroad for higher instruction. Islami

banking can give more loans and by presenting new minutess for these immature people

can truly bask more market portion and besides it will assist in the cut downing unemployment in

Pakistan. ( Saleem 2007 )

Micro funding is one of the major concerns of Islamic Bankss and it is besides the largest sector in Pakistan in footings of possible clients. So Muslim Bankss have great chance to put to a great extent in this sector and earn net income.

There is much infinite and possible available in lodging and existent estate sector for investors in Pakistan. So, Muslim Bankss can put in this sector as a demand of lodging in urban countries of Pakistan is increasing at the rate of 8 % .

One 3rd population of Pakistan lives in rural countries and most of them are engaged with agricultural activities in anyhow. There are non available any considerable fiscal institutes to supply services in this sector. So, Islamic banking has an chance to take advantage of low competition within this sector. ( madden 2007 )

Harmonizing to Hofstede, there is a Bolshevism civilization in Pakistan, in which people are more associated with their households and seek to back up them financially every bit good. Hofstede besides rated Pakistani civilization as uncertainness turning away civilization because people have strong spiritual believes. So Muslim Bankss can take advantage of these factors by presenting different fiscal strategies which could back up local civilization.

Islamic banking has started their concern in the twenty-first century which is the epoch of IT. They have more chances in electronic banking and online banking. IT and communicating sector is increasing in Pakistan, Islamic Bankss can take advantage from this by easing their clients through different signifiers of IT and telecom.

Pakistan is a Moslem state and 97 % of its population is Muslim. Most of the people were non making concern with the Bankss because of their strong believes against involvement based banking. Merely six full fledge Islamic Bankss are working in Pakistan and they have large pool of clients interested in covering with Islamic banking.

There is a relationship between political insatiability and per capita GDP growing, political instability has inauspicious effects on economic growing as the long term policies are non implemented affectively. ( Swagel et al. 1996 ) There has been political instability in Pakistan as Governments have been altering often. Every new Govt. starts with a new set of policies and old policies are terminated frequently. This is a major menace for new turning Muslim banking sector as they have to confront jobs in implementing long term policies.

Corruptness and graft has its deep roots in Pakistani concern civilization. The motivational factor behind this can be a combination of economic, societal and cultural factors. ( Daniele 2006 ) Our empirical findings show that even top functionaries and bank executives have been found involved in corruptness instances. It has been common pattern in Pakistan that some people of influential groups and bureaucratism take loans from the Bankss and do n’t pay back their loans. They make their loans adjusted by utilizing their different political links or utilizing graft.

Our empirical findings show that addition in oil and nutrient monetary values in the universe has caused rise in rising prices rate in Pakistan. Inflation rate rose to 7.8 % in 2006-07. Although SBP is seeking to command it by fastening its monitoring policy but it is a major menace for concerns and investors as the monetary value of merchandises additions and value of money lessenings.

Our empirical findings show that there is a hapless physical substructure in Pakistan. So Muslim Bankss have to confront jobs in pull offing their concern activities on remote locations which on the other terminal can be a good market topographic point for Muslim Bankss.

Peoples of Pakistan semen in the class of uncertainness turning away group harmonizing to Hofstede. Peoples believe on rumours with out any verification and justification. A big figure of people in Pakistani are doubted about the Islamic Bankss whether these Bankss are Islamic or they are merely utilizing name of Islam and making the same thing as conventional Bankss.

Impact of turbulency of environment alteration and the impact on strategic kineticss:

Islamic banking is now runing in Muslim every bit good as many non-Muslim states. JAK bank in Sweden and Denmark ( Douthwaite 2002 ) and figure of Bankss in other European states are good illustration of this. It means Muslim banking has more chances as it is being accepted by non Muslims every bit good. It was besides accepted by World Bank and other banking associations. Money market is the job in Islamic banking in Pakistan. But with the popularity of Islamic market there would be larger pool of money market available and it will assist in the advancement of Islamic banking.

By the growing of Islamic banking in Pakistan, conventional Bankss have now started Islamic banking subdivisions. It means they have accepted that there is growing in Islamic banking sector. They are now opening new subdivisions therefore using more capital and besides disbursement batch of money on advertisement and selling. This state of affairs has lowered their net income borders.

The followers are cardinal country where an organisation like Al Baraka Islamic should continuously update itself and develop in order to to the full work the altering circumstance.

Product Innovation- Ensuring advanced Shariah compliant merchandises.

Service and merchandise Differentiation.

Top quality service to guarantee that service criterions of IB Institutions is at par with conventional.

Aggressive Selling to guarantee that Islamic Banking reaches the tipping point in quickest possible clip.

To take conflicting confusions and uncertainties from the head of a general client


In Pakistan, both Islamic and conventional Bankss are making their concerns. Lot of conventional Bankss, both local and foreign, are opening new Islamic banking subdivisions that ‘s why competition is really intense. And one of import thing is that although Islamic banking portion to the entire banking industry is increasing but it ‘s merely 3.8 % of entire industry and conventional Bankss are basking the staying industry portion.

Islamic Banking is turning quickly in Pak it has been expected that by 2012 entire portion in Banking sector will be 12 % .