Islamic Banking in National Bank of Pakistan ~ Research Article

Islamic Banking in  National Bank of Pakistan

                       

 Subject: Corporate Governance

NBP is proud to expand its range of products and services to include Shariah Compliant Islamic Banking products, now available at our dedicated Islamic Banking Branches at Karachi, Lahore and Peshawar.
ISLAMIC BANKING MISSION
“To become a leading player in the growing field of Islamic Finance in Pakistan and abroad, providing depositors and shareholders in a truly SHARIAH COMPLIANT way, the best combination of returns and future growth”

ISLAMIC BANKING VISION

To set standards of best practices and performance through efficient asset allocation, and offer / develop products based on the true spirit of Islamic finance.

PRODUCTS AND SERVICES AVAIABLE AT ISLAMIC BANKING BRANCH

Products and services being offered by our Islamic Banking Branch are fully Shariah Compliant and have been certified by NBP’s Shariah Advisor.
Core values
• Highest standards of Integrity
• Institutionalizing team work and performance culture
• Excellence in service
• Advancement of skills for tomorrow’s challenges
• Awareness of social and community responsibility
• Value creation for all stakeholders

Goals

To enhance profitability and maximization of NBP share through increasing leverage of existing customer base and diversified range of products.
Board of Directors
Qamar Hussain Chairman Board, President
Mr. Tariq Kirmani Director
Mrs. Haniya Shahid Naseem Director
Mr. Aftab Anwar Baloch Director
Mr. Shahid Aziz Siddiqi Director

Mr. Zahid Hussain Director
Syed Muhammad Ali Zamin Director
Audit comittee
Tariq kirmani chairman
Nazrat Bashir member
Haniya bashir member
Auditors: Independent Auditors’
Anjum asim shezad rehman
Charted accountants
KPMG Taseer hadi & co.
Charted  accountants
Legal advisers
Mandviwala & zafar
Advocate and legal consultants
Members of Strategic  Policy Committee
Mr. Qamar Hussain President, NBP
Dr. Mirza Abrar Baig Secretary & Membe
Dr. Asif A.Brohi Member
Shahid Anwar Khan Member
Mr. Amer Siddiqui Member

Internal Contr olReporting of Internal Control System

Bank’s Management has established and is managing an adequate and effective
system of Internal Control which encompasses the policies, procedures processes and
tasks as approved by the Board of Directors that facilitate effective and efficient
operations. The management and the employees at all levels within the bank are
required to perform as per these approved Internal Control System components. The
Internal Control System ensures quality of external and internal reporting,
maintenance of proper records and processes, compliance with applicable laws and
regulations, and internal policies with respect to conduct of business.
The management ensures that an efficient and effective Internal Control System is in
place by identifying control objectives, reviewing existing procedures and policies and
ensuring that control procedures and policies are amended from time to time
wherever required.
However, Internal Control system is designed to manage rather than eliminate the risk
of failure to achieve objectives and provide reasonable but not absolute assurance
against material misstatement or loss.

Evaluation of Internal Control

The Bank has an independent Internal Audit & Inspection function in the name of
Audit & Inspection Group with three Audit Offices that conduct audit of branches,
Regions and Groups at Head Office on an on-going basis to evaluate the efficiency and
effectiveness of Internal Control System. In addition to that Compliance set up is also
in place with 130 independent Branch Compliance Officers in category III Branches
and 28 Regional Compliance Officers and a Branch Compliance Officer in Sub-region
Gilgit with supporting staff to take care of Compliance related issues to strengthen the
control environment.
For the year 2010 the Bank has made its best efforts to ensure that an effective internal
control system continues to perform in letter and spirit. The observations made by the
external / internal auditors and SBP Inspection team in their respective audits /
inspections are promptly reviewed and measures are taken by the Board, Board Audit
Committee and management for rectification of such observations to safeguard the
Bank’s interest.
We assess that the internal control environment is showing signs of improvement as
compared to previous years. The Bank is endeavoring to further refine its internal
control design and assessment process as per guidelines issued by the State Bank of
Pakistan. Accordingly, Bank is making all possible efforts to improve the professional
skills and competency level of staff through need based training programs.
Sharia’h Advisor’s
I) The business and overall affairs of Islamic banking branches carried out
during the year 2010 are in accordance with Shariah principles and also these
affairs are in compliance with SBP Shariah guide lines. I found the activities
according to the guide lines issued by Shariah Advisor from time to time
during the previous years and current year.
II) A number of new Ijarah, Murabaha and Diminishing Musharika transactions
were executed successfully.
The profit and loss sharing scheme (PLS) was launched last year, During
current year more categories were added to it. All PLS schemes were
managed according to Shariah principles and the Shariah guidelines issued
by the State Bank of Pakistan.
During the year, for the first time, special pools were created to match the
special profit rates offered to the customers. The special pools were managed
properly through proper documentations.
III) Any earnings that have been realized from prohibited sources or by declaring
the transaction void (Fasid) have not been pointed out yet with the grace of
Allah Taala. Islamic Banking Division received an amount of three million
eight thousand three hundred and fifty rupees (Rs. 3,008,350) in charity
account. This amount was distributed equally to the three approved charity
organizations as per the policy of the charity.
IV) Islamic Banking Division appointed a Shariah Compliance Officer, and he
carried out a detailed Shariah compliance audit.
V) NBP also conducted a Shariah Audit during the year.
VI) The staffs of islamic banking branches were trained during 2010 in islamic
banking and finance through comprehensive courses.

Code of Corporate ate Governance

The Bank has complied with the principles contained in the Code in the following manner.
1. The Board of Directors of the Bank is appointed by the Government of Pakistan (GoP) as per
the provisions of the Bank’s (Nationalization) Act. 1974. At present all the Directors (Except
for the President / Chief Executive who is also the Chairman of the Board ) are independent
non-executive Directors, including the Director representing minority shareholders as
required by the Code.
2. Directors have confirmed that none of them is serving as a Director in more than ten listed
Companies including the Bank.
3. All the Directors of the Bank are registered as Tax Payers and none of them has defaulted in
payment of any loan to Banking Company, a DFI or an NBFI or being a member of Stock
Exchange, has been declared as defaulter by the Stock Exchange.
4. During the year Two Directors Mr. Ibrar A Mumtaz and Mian Kausar Hameed Completed
their tenure of directorship of three years on 30th March 2010, who were appointed in terms
of Section 11 (III-A) of Banks Nationalization Act, 1974.Federal Government nominated Ms
Nazrat Bashir in place of Mr. Muhammed Ayub Khan Tarin on 01-03-2010 as Director on the
Board of National Bank of Pakistan.
5. The Directors have confirmed that neither they nor their spouses are engaged in the Business
of Stock Brokerage.
6. The Bank has prepared “ Statement of Ethics and Business Practice” which is already
approved by the Board of Directors.
7. Board has approved the Vision, Mission, Core Values, Objectives and NBP Strategic Plan.
8. The Bank has comprehensive frame work of written policies and procedures on all major
areas of Operations such as Credit, Treasury Operations, Finance, Internal Audit and
Compliance etc. Many of these policies have been approved by the Board and are being
constantly reviewed.
9. There exists in the Bank a framework defining the limit of the authority of various
Management levels. All the powers were exercised by the relevant authorities within the
materiality thresholds.
10. All the Powers of the Board have been duly exercised and decisions on material transactions
have been taken by the Board.
11. The meetings of the Board of Directors were presided over by the Chairman. The Board met
10 times during the year, written notices of the Board meetings, along with Agenda

Credit & Risk Management

Risk management function has been restructured and made independent of all risk taking
and approving units. Its functional reporting is to the Board of Directors and
administrative reporting to the President of the bank. An executive risk management
committee has been established to emphasize on the bank’s commitment to a robust risk
management process and risk culture. In compliance with the risk management
guidelines, issued by SBP, an operational risk management unit has been established. An
operational loss database, risk & control self assessment (RCSA) exercise and key risk
indicators (KRIs) are being developed and will subsequently be implemented. A separate
credit risk architecture unit has also been formed for formulation/ proposition of credit
risk strategies, policies, credit assessment methodologies, credit portfolio/sector
management. A dedicated Basel II unit is responsible for managing the Basel II project in
close coordination with the consultant and with the active support & involvement of other
functions across the bank.

NBP CSR Division

Corporate Social Responsibility for a business entity is an out going commitment to behave ethically and contribute to economic development while improving the quality of life of the local communioty in which it is operating. It is about capacity building for sustainable development.

National Bank of PAkistan always remains committed to to exploring opportunities and avenues for uplifting people's lives acress all provinces. the ban's CSR Program leaves no stone unturned in the of removing and reducing the challenges faced by individuals from different walks of life

NBP CSR Program revolves around the doctrine yhat there is more to come - ambitious plans, higher degree of commitment and a strong belief to make the nation one of the greatest in the world.

Being fully aware of its social obligations, it continues to proactively contribute towards social welfare, healthcare, education etc to help improve the quality of life for the underprivileged members of the country. In the last 6 months NBP's social support activities were speeded up, and it also extended support to a number of charitable institutions to
Health
Up-Gradation Cardiology  Care unit of GMC Hospital Sukkur Medical Camp at Gaddani, Baluchistan
Medical Camp at Winder, Baluchista
Patients Welfare Society Shaikh Zaid Hospital
Educatio
Motivational Volunteer Empowerment Program (MOVE)
Development of Computer Training Centre at Lyari
Women and Child Welfare
Distribution of Sewing machine to Destitute women
Sponsorship - Development of Bus Waiting Areas (Women)  at Sialkot
Women Football & Hockey Coaching Camp

Research Conducted By :

Faisal Arfat Student From NUMLCh Farrukh Niaz Student From NUML