The Role of Islamic Banks

A bank under Islamic Shariah can act as an agent (on AlWakalah basis) of the customer and can carry out the transaction on his behalf. Moreover it can charge agency fee for the services.

The agency fee can be charged in the following cases:

  • Payment / receiving of cash on behalf of the customer
  • Inward bill of collection
  • Outward bill of collection
  • LC opening and acceptance
  • Collection of export bills / bills of exchange. In this case the undertaking or guarantee commission and take-up commission can be Islamized. Bank will charge an agency fee for accepting the bills, which is bought at face value.
  • Underwriting & IPO services

Role of the Bank as Guarantor

The bank or financial institute gives a guarantee on behalf of its customer but according to Shariah, guarantee fee cannot be charged. Normally conventional banks charge fee for following guarantees:


  • Letter of guarantee
  • Shipping guarantee

Advisory Services

Most of the advisory services provided by the financial institutes can be carried out easily in compliance with Shariah as long as the nature of business is halal:

  • Financial advisory services
  • Privatization advisory services
  • Equity placement
  • Merger & acquisition advise
  • Venture capital
  • Trading (Capital market operations)
  • Cash & portfolio management advice
  • Brokerage services (Purchase & buying of share of companies involved in halal business, a fee could be charged for it).

Other allowed Islamic financial services & products

  • Remittance
  • Zakat deduction.
  • Sale & purchase of foreign currency
  • Sale & purchase of traveler's checks (local & foreign currency)
  • ATM services
  • Electronic online transfer
  • Telegraphic transfer (of cash)
  • Demand draft
  • Pay order
  • Lockers & custodial services
  • Syndicate funds arrangements services (non-interest or markup based) for some fee.
  • Opening of bank account (current & non-interest or nomarkup)
  • Clearing facility
  • Sales & purchase of shares/stock (of companies involved in halal activities)
  • Collection of dividends
  • Electronic banking window
  • Telephone banking.

Source: Dr. Muhammad Imran Ashraf Usmani, Meezan Bank’s Guide to Islamic Banking.
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