Backgound:

The word 'Bank' is said to have been derived from the words Bancus or Banque or Bank. This history of banking is traced to as early as 2000 B.C. The priests in Greece used to keep money and valuables of the people in temples. These priests thus acted as financial agents. The origin of banking is also traced to early goldsmiths. They used to keep strong safes for storing the money and valuables of the people. The persons who had surplus money found it safe and convenient of deposit their valuables with them. The first stage in the development of modern banking, thus, was the accepting of deposits of cash from those persons who had surplus money with them. The goldsmiths used to issue receipts for the money deposited with them. These receipts began to pass from hand to hand in settlement of transactions because people had confidence in the integrity and solvency of goldsmiths. When it was found that these receipts were fully accepted in payment of debts; then the receipts were drawn in such a way that it entitled any holder to claim the specified amount of money from goldsmiths. A depositor who is to make the payments may now get the money in cash from goldsmiths or pay over the receipt to the creditor. These receipts were the earlier bank notes. The second stage in the development of banking thus was the issue of bank notes. The goldsmiths soon discovered that all the people who had deposited money with them do not come to withdraw their funds in cash. They found that only a few persons presented the receipts for encashment during a given period of time. They also found that most of the money deposited with them was lying idle. At the same time; they found that they were being constantly requested for loan on good security. They thought it profitable to lend at least some of the money deposited with them to the needy persons. This proved quite a profitable business for the_ goldsmiths. They instead of charging safe keeping charges from the depositors began to give them interest on the money deposited with them. This was the third stage in the development of banking.

Meezan Bank Limited:

Introduction In the current global environment the banks are performing multiple functions to provide a variety of products and services and providing the latest facilities to their customers. In Pakistan, islamic banks and conventional banks are facilitating their customers. Due to unstable policies and uncertainty, Pakistani banking sector has experienced very unstable environment since 1950. In 1974 Pakistani banking sector dominated, nationalized bank showed very poor performance due to inferior products and services that resulted into the privatization of banking sector in 1992. In 2002 Meezan islamic bank was registered as first full fledge islamic bank by the state of Pakistan. In Pakistani banking sector Islamic banks are new entrant, this require a complete and comparative study to check the performance of islamic banks with the conventional banks regarding their facilities that they are providing to their customers and customers satisfaction. Since 1990 the service

industry in Pakistan and in the global environment particularly the banking sector are growing this creates a competitive environment in the country. The entrance of the islamic bank in the country affects the monitory system by adjusting the demand and supply forces for money. Islamic banks are insures more stable financial sector then the conventional banks (Khan, 2008). By the other study, in Tunisia it is verified that Islamic banking system showed excellent performing sector by supporting financial sector. In Iran there is another study which shows mixed result both in favor of islamic bank and in conventional banks that they both support and stabilized monitory system (Yousefi,Abizadeh, and McCormick, 1997). Islamic banks and conventional banks both create competition among banks to satisfied customers and fulfill their expectations and long term benefits for the economy. The conventional banks and the islamic banks are differentiated commonly on the basis of their goals, Riba and risk sharing practices. Islamic bank follows the Shari law given by the Quran and Sunnah. As Pakistan is a Muslim country and having the population of 96% of the Muslims. Islamic banks have different kinds of opportunities to meet the multiple challenges as strong reaction from public to meet their requirements. Islamic bank and conventional banks are also differentiated as interest free banks and interest based banks. This study tries to explore the performance of islamic banks and the conventional banks competitively by the facilities (products and services) they are providing to their customer and satisfactory level of the customers. It also tries to find the factors that are motivating customers to the islamic banks and the factors that are motivating customers to the conventional banks in Pakistan. This study is also important because the Islamic banks are growing in term of size and structure in rate of 114% per annum (SBP, 2006).

Problem Statement:
In the current global environment the banks are performing multiple functions to provide a variety of products and services and providing the latest facilities to their customers. In Pakistan, islamic banks and conventional banks are facilitating their customers. Due to unstable policies and uncertainty, Pakistani banking sector has experienced very unstable environment since 1950. In 1974 Pakistani banking sector dominated, nationalized bank showed very poor performance due to inferior products and services that resulted into the privatization of banking sector in 1992. In 2002 Meezan islamic bank was registered as first full fledge islamic bank by the state of Pakistan. In Pakistani banking sector Islamic banks are new entrant, this require a complete and comparative study to check the benefits of modes of financing of islamic banks with the modes of financing of conventional banks and other facilities that they are providing to their customers to satisfy customers needs.

Since 1990 to up till now the service industry in Pakistan and in the global environment particularly the banking sector are growing this creates a competitive environment in the country. The entrance of the islamic banks in the country affects the monitory system by adjusting the demand and supply forces for money. Islamic banks insure more stable financial sector than the conventional banks. Islamic banks and conventional banks both create competition among banks to satisfied customers and fulfill their expectations and long term benefits for the economy. The conventional banks and the islamic banks are differentiated commonly on the basis of their goals, Riba-free and risk sharing practices. Islamic bank follows the Shari law given by the Quran and Sunnah. As Pakistan is a Muslim country and having the population of 96% of the Muslims. Islamic banks have different kinds of opportunities to meet the multiple challenges as strong reaction from public to meet their requirements. Islamic bank and conventional banks are also differentiated as interest free banks and interest based banks. This study tries to explore the benefits of modes of financing of islamic bank and the conventional bank competitively that they are providing to their customers to fulfill their needs. It also tries to find the factors that compel customers towards the islamic banks and the factors that compel customers towards the conventional banks in Pakistan.

1.4

METHODOLOGY OF RESEARCH

During my research while I will be compiling the data I will use the following research methodologies.

1.4.1 Data Sources

Both primary and secondary data will be used in the compilation of this report. The methodology use is as under:

1.4.1.1

PRIMARY DATA

During the compilation of this report, I will rely mainly on the primary data. The tools which will be used for the collection of primary data will be interviews and observation. To get primary data I will also perform some practical work.

1.4.1.2

SECONDARY DATA

The secondary data will be mainly used for as a background material and for purpose of references. The major sources of secondary data were the annual report , management accountants journals, newspaper, books, and MBL website HBL websites.

1.4.2 Research Approaches

Keeping in view my limitations during and the nature of the study, two research approaches will be adopted. These research approaches are: Survey. Observation as. Participant observation and Non-participant observation.

1.4.3 Sampling Plan 1.4.3.1 Sampling Unit

The sampling unit constitutes of the following. Managers of HBL and MBL University town branch Peshawar Staff of HBL and MBL University town branch Peshawar Customers.

1.4.3.2

Sample Size

The sampling size constituted of All the customers coming into the Bank. One bank managers. Six staff members.

1.4.3.3

Sampling Procedures

The sampling procedure use will be non-probability judgmental and convenience procedure.

1.4.3.4

Contact Method

Personal contact method will be used as a contact method, which included: Structured interviews with managers and personnel from operations department. Unstructured interviews with staff members.