Welfare is a condition of having good health, comfortable living and pleasant working conditions (Hornby). Hence, it can be said that welfare services are those which ensure conditions of having good health, comfortable living and working conditions, which are generally one's basic needs. Islam views work as the primary means of earning and acquiring income and wealth. As such, a well-known example may be cited here, Recall a beggar who approached the Prophet Muhammad (Pbuh) for alms, he (the beggar) was asked to bring what he had in his house. Accordingly, the man brought a blanket. The Prophet (Pbuh) asked him to sell it out and buy an ax, which could then be used to cut wood from the jungle to sell at the market for income. Thus, instead of begging, he could be self-reliant which is more dignified life than begging. Therefore, in the Islamic way of life, productive and remunerative work (employment and self-employment) and consequently real income becomes the primary source for buying necessities such as food, clothing, shelter, household goods, transportation, fuel and medicines.

But if real income is not sufficient to purchase necessities of life, then welfare services become essential in a society to maintain the minimum standard of living of the people. In fact, in every society, there are many people who lack the necessary income and, consequently, face inadequate lifestyles due to unemployment and under-employment. Their condition cannot improve if welfare services remain absent and concentration wealth remains in certain segments of society. The Quran states the principle that "wealth should not circulate only among the rich" [59:7]. Irfan Ul Haq (1996, pp.170-71). opined that "this verse, revealed in the context of the utilization of state income, when read completely, asserts that such income besides being meant for necessary state expenditures, is also meant to uplift the weaker section of society and not intended to be a benefit for those who may already be well off."

The Quran also encourages people to contribute generously to social welfare and helping the needy in society. This is again clearly stated, "They will ask you as to what they should spend on others. Say (O Muhammad): whatever of your wealth you spend shall be for your parents, and for the near of kin, and the orphans and the needy and the wayfarer; and whatever good you do, verily, God has full knowledge thereof" [2: 215]. Thus the Quran establishes the general principle of generous welfare spending while encouraging sacrificial levels of spending perhaps for social crises and for conditions demanding high financial support. Thus Islam calls for the meeting of the basic needs of the poverty groups through welfare services, which might include -

• Care for others and

• Zakat

• Care for others: Siddiqi (1995, pp.2-3) mentioned that care for others, or helping behavior, is another cardinal principle of Islamic economic behavior. It tempers the self-interest that is ingrained in human nature to ensure survival. It is a natural concomitant of trusteeship, since one serves the Master by caring for His people. The Prophet, peace be upon him, said: "Mankind are God's dependants, so the most beloved of people in the Sight of Allah are those who do good to His dependants." (Mishkat, Bab-al-Shafqah wa'l-Rahmah 'ala'a-Khalq).

Helping behavior is required because of the interdependent nature of manhood life. There is no fulfillment in life without interaction with others; individual facility requires socialization. The exclusive pursuit of self-interest in social relations is counter-productive; it defeats its own purpose. Men serve their individual and collective interest best when each individual cares for the welfare of others while striving to protect and promote his own interest. This is what religion teaches. Those who deny it, deny religion.

Allah says,  "Thus, when they are told, 'Spend on others out of what God has provided for you as sustenance', those who are bent on denying the Truth say unto those who believe, 'Shall we feed anyone whom, if (your) God had so willed, He could have fed (Himself)? Clearly, you are but lost in effort" [36: 47]. "Have you observed him who denies religion? That is he who repeals the orphan, and urges not the feeding of the needy? " [107: 1-3].

1. Zakat: Zakat is one of the five pillars of Islam. In a broad sense, it is only for social welfare purposes as specified by the Quran: "The Zakat is (meant) only for the poor and the needy, those who collect the tax, those whose hearts are to be won over, for the freeing of human beings from bondage, for the relief of those overwhelmed by debts, for the cause of God (all priority social needs), and for the wayfarer: (this is) an ordinance from God and God is all-knowing, Wise"[9:60].

Haq (Ibid, p.179) mentioned, that "the first verse on Zakat [73: 20] was revealed in the early Meccan period signifying the importance of welfare expenditures in the Islamic Scheme of life. Since the Muslims were a relatively small group without formal installations, Zakat was given privately, without specific rules or rates. It was essentially used for two purposes: to assist the indigent and the poor and to buy the freedom of those, in slavery or bondage. In the initial Madanian period, Zakat was given both privately to needy individuals and families as well as to the state.

The Welfare Services of Islamic Banks

This chapter deals with both pure welfare services and non-investment services offered to the clients as well as general public.

Islamic banks, as a part of the Islamic economic system, are being operated with the objective to implement the economic and financial principles of Islam. "The objective of Islamic banking is not only to earn profit, but also to do good and bring welfare to the people" According to Islam, money, income and property belong to Allah and this wealth is to be used for the good of the society (IBBL 1995, p.7) It was mentioned earlier that welfare service might include (i) care for others and  (ii) Zakat. Islamic banks take care of others through Qard Hasan (benevolent loan) financing transactions. It also mobilizes Zakat resources.

• Qard Hasan (benevolent loan)

Since interest on all kinds of loan is prohibited in Islam, a loan, which is to be given in accordance with the Islamic principle, has to be, by definition, a benevolent loan (Qard Hasan), i.e. a loan without interest. It has to be granted on the grounds of compassion; to remove the financial distresses caused by the absence of sufficient money in the face of dire need. Since banks are profit-oriented organizations, it would seem that there is not much scope for the application of this technique. However Islamic banks also play a socially useful role. Hence, they make provisions to provide Qard Hasan besides engaging in income generating activities. However practices differ in this respect. "Some banks provide the privilege of interest free loans to the holders of investment accounts at the bank. Some other banks have the provision to provide interest free loans to needy students and other economically weaker sections of the society. Yet, some other banks provide interest free loans to small producers, farmers, entrepreneurs who are not qualified to get financing from other sources. The purpose of these interest-free loans is to assist them in becoming financially independent or to assist in raising their incomes and standard of living" (Ausaf Ahmed 1992, p.86).

Islamic banks of Pakistan provide Qard Hasan loans without service charges (Ibid) Islamic banks can charge the cost of disbursement, account maintenance and recovery of these Qard Hasan loans, though they cannot realize excess profits. The method and schedule of repayment of these loans are determined at the time of funding the request. However, the bank must keep in mind what is convenient to its customers (Hussain 1996, p.95). 

•  Mobilization of Zakah

A pioneering experiment putting the principles of Islamic banking into practice was conducted in Mit-Ghamr in Egypt from 1963 to 1967, in which three types of accounts were operated. A Zakah account was one of them. The Zakah account attracted the stipulated amount of Zakah for redistribution amongst the poor (Ausaf Ahmed, op cit, p.21).  Since Islamic banks follow the rules of The Islamic Shariah, they have to pay Zakah on their own resources (capital assets etc.), which paved the way for mobilization of financial resources for the needy and poor.  "An Islamic bank accumulates its Zakah in the Zakah fund and distributes amongst the poor as per Islamic Shariah" (Hussain, op cit).

SOCIAL INVESTMENT BANK LIMITED

Social Investment Bank Ltd. of Bangladesh, a newly incorporated Islamic Bank, also has some welfare programs under its non-formal and voluntary sector of banking. Those are as follows:

(a) Rotating Savings and Credit Associations: This credit program is intended  to alleviate poverty. Under this program a small number of individuals, typically six to forty, form a group and select a leader who periodically collects a given amount (a share) from each member. The money collected (the fund) is then given in rotation to each member of the group. The leader receives no special consideration (other than possibly getting the first fund). He may also get commission, who in return may assume liability for defaults. Loans are interest-free.

The popularity of this program among low and middle-income groups shows that people like to save even under trying circumstances. It also shows the potential for pooling individual savings among small farmers or micro-entrepreneurs.

This program helps to generate economic activities among the poor in the non-corporate sector. It deals with informal finance and credit packages that improves the situation of poorer families and creates local income opportunities for the people. It also discourages internal migration. At a grass root village and local level it is directed towards landless laborers, marginal farmers, fishermen, small artisans, (e.g. blacksmith, carpenter, potter and handicraft producer), urban unemployed, small traders, rural industries, and small to medium scale business enterprises.

(b) Empowerment and Humanizing  Family Credit Program: Under this program, the bank is operating with a human face. For example, it offers financing of consumer durable assets for the newly married couple provided marriage is dowry free.

(c) Environmental Friendly Business Program: This credit program is directed towards small traders of Tokai (mainly street children of distressed parents) with a recovery rate of 100%

(d) Social Fund: SIBL has already established its social fund by mobilizing voluntary social saving, linked to its all Formal, Non-formal and Voluntary Sector Banking operations. SIBL has been able to mobilize a surplus Social Fund for social investment purposes in the family empowerment action program, social education fellowship program, and in the health and social services sector.

(e) Cash Waqf Certificate: SIBL has already introduced the Cash Waqf Certificate Scheme intended to empower the family heritage of the rich and to benefit society as a whole.. It could, be the most effective and perpetual mode of deposit mobilization and use of its profit for perpetual social investment and benefits is virtually unlimited. A waquif can choose the purpose (s) to be served by his investment from the list of 32 purposes identified by SIBL; which are related with Family Rehabilitation, Education and Culture, Health and Sanitation, Social Utility Service, or any other purpose(s) approved by Islamic Shariah.

 NON-INVESTMENT SERVICES OF ISLAMIC BANKS

 Banking is a service industry. Most services of the bank are rendered for the benefit of its customers directly or indirectly. Non-Investment Services of Islamic banks are those that are not related with general investment activities of a bank. To provide the non-investment services, a bank is not required to play the role of an investor. The income realized in return for such services will certainly be interest free. The following is a discussion of the various non-investment related services offered by Islamic banks

• Collection of Negotiable Instrument: The bank takes possession of negotiable instruments from its customer for safekeeping until the date of their maturity. When payment comes due. At maturity, the bank collects the proceeds from the debtor on behalf of the customer. The benefit to the client is that they are relieved of the burden of safekeeping and collection of the debt instrument.. All classes of traders and other citizens have an opportunity to take advantage of these bank services in this regard.

If the matter is considered according to the concept of Islamic jurisprudence, it would be found that it does not contain anything which conflicts with the general guidelines. It is appropriate for a bank to receive a fee for acting in the capacity of agent on behalf of the client in safekeeping and collecting the debt. Therefore, this is a viable source of Shariah approved profit to banks.

• Sale of Share: Islamic banks sell primary shares of a company registered with the Stock Exchange in exchange for a commission. This contributes to the raising of capital for a company. Companies make arrangements with Islamic Banks to issue shares for public subscriptions. These are known as "new issues" which a company intends to sell to the public. Islamic banks are the most effective method of selling the shares to the public.

• Transfer of Money: Islamic banks transfer money from one place to another place as per the order of its customers through Mail Transfer (MT), Telephonic Transfer (TT), Demand Draft (DD), and Pay Order (PO). They receive a fee  or commission for performing such services. Customers benefit from these services, as it helps them to fulfill their financial needs timely.

• Maintenance of Budget Accounts: Islamic banks can maintain budget accounts for their customers. Laborers who earn regular monthly wage, may deposit money into a budget account. The bank pays the client's bills such as: taxes and donations for example, on the client's behalf. Thus the client benefits because his financial affairs are handled automatically and his monies are set-aside on a monthly basis to handle bills that are due quarterly or annually.  In exchange the bank receives a fee for providing this service. Only the Al Wadiah Current account and Mudaraba Savings account holders can maintain budget accounts with Islamic banks.

• Settlement of Transactions: Islamic banks pay Bills of Exchange, and Checks of their customers to settle transactions with third parties. Thus, financial relations between the bank and its customer, and the customer and any third party (the Beneficiary) of the bill or check are maintained.

• Providing Bank Guarantee: A bank guarantee is a written agreement that guarantees the performance or payment of debt by a bank client to a third party.  Under the agreement, if the customer fails to perform in the capacity stipulated, the bank is held responsible for ensuring performance or payment of debt. . Islamic Banks provide this guarantee based upon cash held on deposit by taking a mortgage on other assets. In some cases the bank can act as a guarantor taking a partial mortgage on an unsecured basis. Some Islamic Banks receive a commission based on the lower of  2% or 3% of the amount guaranteed or simply incidental expenses.

• Account Maintenance Activities: The opening of an account is the beginning of the relationship between a banker and a customer within the framework of banking deposits. The account is established with a standard proforma contract, which must be signed by the customer who wishes to deal with the bank concerned. A number of subsidiary operations are related to the account opening operation, such as the receipt of deposits into the account, payment of checks drawn on the bank and the execution of bank transfers and payment orders. Furthermore, among the services rendered, the bank must prepare and communicate to its customer periodic statements of the account.

A non-usury bank is able to render these services in full and to receive fees commensurate with the costs involved.

• Safe Custody: A safe custody account is a small box, which is maintained in a secured area within the bank. This box is adjoined to other boxes belonging to other customers of the bank. Each box has two keys. The banker has a key and the customer has a key. Both keys must be used simultaneously to open the safe custody box. Thus, the client is assured his assets are safe in the custody box due to the dual control. Clients may access their box during normal business hours and can step into a private room in order to add items of value to the safe custody box or remove items from the safe custody box.

Islamic Banks charge a relatively low fee for this service. The main objective of offering this service is one of convenience which the bank hopes will attract additional customers.

• Opening of L/C: Islamic Banks also offer Letters of Credit (L/C) for domestic and international trade on a commission basis. Thus, they facilitate business relationships between importers and exporters through this service.

• Issue of Solvency Certificate: Islamic banks issue solvency certificates to their customers as per an order received. This certificate is required for business purposes, to acquire assets on an installment basis, or to go abroad for study.

• Business Advising Service: Islamic Banks can provide business-advising services (BAS) to its clients as well. The bank offers counseling on technological issues, marketing and other important business information to industrial entrepreneurs of small and medium sized business of any nature. A banker should be an expert in banking as well as in business to provide BAS. Moreover, he will conduct an extensive survey of the customer's business.

• Transaction of Foreign Currency: Islamic banks buy and sell foreign currencies. They allow their customers to draw local currency against foreign currency deposited in a foreign currency account with the bank.

• Publication Works: Islamic banks publish books, journals, booklets, pamphlets to advertise the bank's services. Important information related to trade, commerce and industry are published in these forums to address the needs of the banks customers. Such services have created social awareness about Islamic banking in the economy. Today, more people are familiar with the terms of Islamic banking like Bai-Murabaha, Mudaraba, and Musharaka. In addition, they also know the special features of the Islamic Economy.

• Exchange of Information: Islamic banks exchange information with other banks, organizations and individuals pertaining to the credit worthiness of its customers. In addition, banks seek this information prior to extending a loan to a prospective customer. Thus the bank can be assured it has made  a good decision on whether or not to make the loan to the customer.

• Financial help: Islamic banks provide financial help to different organizations through paid advertisements describing various services that the bank offers. These advertisements increase the competitiveness of Islamic banking products in the market by creating awareness among the people.

• Computer Service: Like other commercial banks, Islamic banks also provide computer services to process investment proposals, check clearance, statement preparation, and account maintenance. It can handle dividend payments of a company and can send reports to the company electronically. Use of computers provides various responsive services to its customers.

• Use of Automatic Teller Machine: Islamic banks offer Automatic Teller Machines (ATMs) to allow customers access to their accounts after the banks are closed. The ATM provides service twenty-four hours a day, and seven days a week.

Peter J. Hall and B. Julian Beecham (1987, p.150)  mentioned that to use the ATM service a customer is given a plastic card, which may be linked to a current account, credit card, or be restricted solely to ATM usage. It is electronically imprinted with the customer's branch and account number. The customer inserts the card into a machine and on a keyboard he taps out his personal identification number (PIN). The card will only operate if the correct PIN is keyed in thus safeguarding the customer and the bank in the event of loss or theft of the card. Having inserted the card and keyed in the correct PIN, the customer then has a variety of services offered by the ATM. Cash dispensing is the most important but, in addition, most machines allow check books to be ordered, account balances to be obtained and statements to be ordered.

• Issue of Qard Cards: Islamic banks can issue Qard Cards (QC) unto certain limits to their valued customers. The card will enable a holder of it to purchase goods from the market without cash or a check. The merchants indicate clearly which cards they will accept. At the point of purchase, the Cardholder presents his card to the merchant who runs the card through a special machine, which imprints account information on a form to be signed by the Cardholder. Thus, a customer can make his purchase without having to pay cash on the spot. In addition, the (QC) can also be used like an ATM card at participating banks.

The seller then presents the form signed by the Cardholder to the Card-issuing bank for reimbursement of the sale to be deposited into his account. Ultimately,  the cardholder receives monthly invoices for the total amount of goods purchased during the month on the QC. This amount is usually payable to the card-issuing bank at some prescribed date in the future. To be consistent with Islamic law, no interest is charged on the service. However, the bank can accept service charges against the issue of a QC. Once the QC is issued, it has no expiration date and can be used until the cardholder requests it to be cancelled. Thus, Qard Hasana facilities are usually given to the most dignified customers of the bank.

• Issue of Travelers Checks:     Islamic banks also issue Travelers Checks (TC). These are special types of checks drawn on the issuing bank and signed by the person to whom they are issued. The issuing bank guarantees the payment of these checks . Thus, it is accepted worldwide without a question. When the item is presented for payment, the person to whom it was issued needs to countersign it. The signature should be similar to the one that already appears on the check. Normally a passport is required as proper identification when the check is being used for payment. If a TC is lost or stolen it can be replaced again through a local branch/agent of the issuing bank subject to verification of the signature.

• Factoring Service: The factoring agreement covers assessment of creditworthiness of all potential buyers and provides complete protection against bad debt, provided the credit limits are not exceeded. The small and medium sized business houses benefit from this service of Islamic banks. In exchange for this service, these businesses pay a service charge or commission to the bank. As part of this service, the bank will maintain sales ledger records, and control the finances of the client's business house. This makes business easier for the wholesalers.

• Night Safe: Night safe (Ibid, p.158) facilities represent a short-term bailment. The customer is given a key, which enables him to operate a specially constructed metal door on the outside of the bank premises. A wallet is provided and cash may be placed in the wallet and deposit in the safe for overnight safe - keeping. The customer then collects the wallet during the bank's business hours and deposits the money into his account. Alternatively, the bank may be authorized to open the wallet and deal with the contents according to the customer's instructions. The night safe service is potentially useful to business customers who accumulate large amounts of cash after the bank is closed and do not want to hold the cash until the next morning when the bank is open.

• Home Banking Service: This service may be provided with a combination of a television, computer and a telephone in which a customer can transfer money from one account to another, obtain his account's details and issue necessary instructions regarding standing orders. It provides convenience to those customers who do not have time to deal directly and personally with the bank.

• School Banking: A mobile unit of an Islamic bank branch travels to area schools on a weekly basis. Students make small deposits into a bank account.  Thus, the students save money from their Tiffin expenses. In addition, children develop a thrift habit at an early age and the bank collects deposits to be used for investment purposes. In addition, school banking teaches children and their guardians about all of the banking services available at the bank.

• Ahmed, Ausaf. (1992)."Contemporary Experience of Islamic Banks: A Survey" In Journal of Objective Studies, Vol.4; No.1, July.

• Haq, Irfran Ul, (1996). Economic Doctrines of Islam, Academic Dissertations No.3, First edition, IIIT, Herndon, Virginia, USA,

• Hornby, A. S, Oxford Advanced Learner's Dictionary of Current English, Oxford University Press.

• Hussain, Mohammad Sharif, (1996).  Islami Banking: A Superior Banking System (in Bangla), First Edition, IBBL, October.

• IBF Welfare Programs, October 1994.

• Islami Bank Bangladesh Ltd. (IBBL) (1995). Islami Bank: An Era of Progress, July.

• Siddiqi, Mohd. Nejatullah, (1995). "Islamic Banking and Insurance" in Encyclopaedia of Islamic Bank and   Insurance, Institute of Islamic Banking and Insurance, London.