Preface to the Islamic Banking in Bangladesh
It gives me great pleasure to prepare this handout. In preparing this handout I have greatly benefited from.. http://www.islamic.banking.com/ and other handout and books. This paper addresses and seeks to present some important issues related to the concept of Islamic banking history and interest free banking. A banking is a financial institution which deals in money and financial services whether it is traditional bank based on interest or Islamic hank which addresses strictly to the rules of Islamic Shariah in the fields of finance, trade and other dealings. The receipt and payment of interest on any of its operations is banned and prohibited in Islam. The primary goals of Islamic bank is to promote the Islamic Principals regarding order and instruction of legal and illegal and in the Muslim and human society. in fact Islam is complete code of life for human society. It may be pointed out that initially there tire two tier model in Islamic Banking. First, the depositor enters in to individual Mudarabah contracts with a bank and secondly the bank enters into contracts with entrepreneurs who is seeking capital to invest in productive enterprise. The bank and its clients for providing capital to the entrepreneurs in the Mudarahah accounts gain the right to share in any profit, on the other hand if a loss is incurred the burden of such loss is the sole responsibility of the financier. The working party does not share any tosses. To diversify risk the bank advances financing to a large number of entrepreneurs with different business plans. Thus losses incurred on some advances are offset by profits realized from other advances. Another important point is that in the event of a loss is incurred it will be distributed equal amongst the various Mudarnbah depositors. Islamic Banking in Bangladesh was started in the year 1983 with the establishment, of Islamic Bank Bangladesh Ltd. as the first Islamic bank in the South East Asia . Before I983 there was no rules and regulation for operation of interest free banking . Now there are 6 Islamic banks, 10 Islamic Bank branches in traditional bank and the number of all private commercial Banks are 30 and all schedule banks are 48. As majority people of Bangladesh Bangladesh
Islamic Banking in Bangladesh
1. Introduction on Islamic Banking :
An Islamic Banking is a financial institution that operates with the objective to implement and materialize the economic and financial principles of Islam in the banking arena.
The Organization of Islamic conference (OIC) defined an Islamic Bank as “ a financial institution whose statutes, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operations.”
According to Islamic Banking Act 1983 of Malaysia
2. Objectives:
The objective of Islamic Banking is not only to earn profit, but to do good and bring welfare to the people, Islam upholds the concept that money, income and property belong to Allah and this wealth is to be used for the good of the society.
Islamic Banks operate on Islamic principles of profit and loss sharing and other approved modes of Investment. It strictly avoids interest which is the root of all exploitation and is responsible for large scale inflation and unemployment.
An Islamic Bank is committed to do away with disparity and establish justice in the economy, trade, commerce and industry; build socio-economic infrastructure and create employment opportunities.
3. The History of Islamic Banking :
The History of Islamic Banking could be divided in to two parts. First When it still remained an Idea, Second-When it become a reality-by private initiative in some counties and by law in others.
Islamic Banking as an Idea :
The scholar of the recent past in early fifties started writing for Islamic Banking in place of Interest Free Banking. In the next two decades Islamic Banking attracted more attention.
Early seventies saw the institutional involvement. Conference of the Finance Ministers of the Islamic Countries was held. The involvement of institutions and Government led to the application of theory to practice and resulted in the establishment of the Islamic Banks. In this process the ‘Islamic Development Bank (IDB)’ was established in 1975.
The coming into being of Islamic Banks:
The first private Islamic Bank, the ‘Dubai Islamic Bank’ was also set up in 1975 by a group of Muslim businessmen from several countries. Two more private banks were founded in 1977 under the name of ‘Faisal Islamic Bank’ in Egypt and Sudan
In the ten years since the establishment of the first private commercial bank in Dubai Denmak , Luxembourg , Switzerland and the UK
In most countries the establishment of Islamic banking had been by private initiative and were confined to that bank. In Iran and Pakistan
At present there are Islamic Banks in the following countries:-
01. Afghanistan
02. Algeria
03. Albania
04. Argentina
05. Australia
06. Bahamas
07. Bahrain
08. Bangladesh
09. Brunei
10. Cayman Islands
11. Cyprus
12. Denmark
13. Djibouti
14. Egypt
15. Germany
16. Guinea
17. Gambia
18. India
19. Indonesia
20. Iran
21. Iraq
22. Jordan
23. Kazakhstan
24. Kibris Turkish Republic
25. Kuwait
26. Lebanon
27. Liechtenstein
28. Luxembourg
29. Malaysia
30. Mauritania
31. Morocco
32. Niger
33. Pakistan
34. Palestine
35. Philippines
36. Qatar
37. Russia
38. Saudia Arabia
39. Senegal
40. South Africa
41. Sudan
42. Switzerland
43. Thailand
44. Tunsia
45. Turkey
46. U.A.E.
47. U. K.
48. S. S. A.
49. Yemen
4. Problems being faced by Islamic Banking
4.1 Problems being faced by Islamic Banking in the world in general
Most of the Islamic Banks operate on Bai- Murabaha, Bai Muazzal, Bai- Salam, Istisna, Hire Purchase/ Leasing mode of Investment i.e. Islamic Banks always prefer to run on markup/ guaranteed profit basis having Shariah coverage. For this reason some times the conventional Economists and General people failed to understand the real difference between Islamic Banking and conventional Banking.
Mudaraba and Musharaka modes of Investment are ideal but Islamic Banks are not going in these two modes, the reasons for the above are as follows:
i) There is no systemic analysis and research and no real efforts to introduce above mentioned two modes but the practitioners blame the following factors:-
a) There is lack of committed entrepreneur
b) There is lack of committed professional who can create new
c) Instruments.
d) There is lack of committed sponsors who can pressurize the professionals
e) There is shortage of skilled professionals.
4.2. The problem of forward contact/booking of foreign currency.
The value of US Dollars ($), Pound Sterling, Euro and others are not fixed in Bangladesh, they are fluctuating from time to time Most of our imports and exports are made in USD and USD being a strong currency always moves upward and the exporters are in better position than the importer in our country. In Bangladesh Forward Booking is required to check the exchange fluctuation for import of heavy/project Machineries where it take long time say one year or six months to produce the same.
But due to the restrictions of Shariah we can not cover the risk of Exchange fluctuation by forward contract as Forward Booking is not permitted by Shariah. As per Shariah, currency, transaction is to be made under certain terms and conditions laid down for “sarf” by Shariah, such as spot possession of both the currencies by both the parties which is not available in forward Booking. It is also prohibited to deal in the forward money market even if the purpose is hedging to avoid loss of profit on a particular transaction effected in a currency whose value is expected to be declined. This problem requires a solution by Shariah experts.
4.3. Inland Bill Purchase/Foreign Bill Purchase :
This is another problem of Islamic Bank where the exporters immediately after export of the goods approach to the bank for fund before maturity of the bills to meet their daily needs. Here the Bank has to deploy billions of Taka each year but how and on what mode of investment ? The Bank can not take anything by providing fund to the exporter except collection fee for collection of the Bill, which is very poor.
4.4. Unfamiliarity with the Islamic Banking System
The first problem, is that despite the growth of Islamic banks over the last 30 years, many people in the Muslim and non-Muslim world do not understand what Islamic banking actually is. The basic principle is clear, that it is contrary to Islamic law to make money out of money and that wealth should accumulate from trade and ownership of real assets. However, there does not appear to be a single definition of what is or not an Islamic-banking product; or there is not a single definition of Islamic banking. A major issue here is that it is the Shariah Councils or Boards at individual Islamic banks that actually define what is and what is not Islamic banking, and what is and what is not the acceptable way to do business, which in turn can complicate assessment of risk for both the bank and its customer. More generally, the uncertainty over what is, or is not, an Islamic product has so far prevented standardization. This is difficult for regulators as they like to know exactly what it is they are authorising. It is also an added burden on the banks that have to educate customers in new markets.
4.5. Portfolio Management :
The behavior of economic agents in any country is determined partly by past experience and present constraints. The Islamic banks are still growing in experience in many countries. Regarding constraints, Islamic banks in different countries do not freely choose arrangements, which best suit, their need. As a result, their activities are not demand-oriented and do not react flexibly to structural shifts in the economic setting as well as to changes in preferences It is known to the bank management that a certain portion of the short-term fund is normally not withdrawn at maturity; these funds are used for medium or long-term financing. However, a precondition for this maturity transformation is that the bank be able to obtain liquidity from external sources in case or unexpected withdrawals. Islamic banks, without having an interest-free Islamic money and capital market, have no adequate instruments to meet this pre-condition for effective maturity transformation. On the other hand, Islamic banks can enhance term transformation if there is an interest-free bond market or a secondary market for Islamic financial papers. Adequate financial mechanism still has to be developed, without which financial intermediation, especially the risk and maturity transformation, is not performed properly.
4.6. The Regulatory environment
The relationship between Islamic banks and monetary authorities is a delicate one. The central bank exercises authority over Islamic banks under laws and regulations engineered to control and supervise both traditional banks. Whatever the goals and functions are, Islamic banks came into existence in an environment where the laws, institutions training and attitude are set to serve an economy based on the principles of interest. The operations of Islamic banks are on a profit and loss share basis (PLS), which actually do not come fully under the jurisdiction of the existing civil laws. If there are disputes to be handled, civil courts are not sufficiently acquainted with the rationale of the operations of Islamic Banking. Regarding the protection of depositors, Islamic Banks are required to let the authorities know the difference between money paid into current accounts and money paid into investment accounts. Islamic banks operate two broad types of deposits:
a) Deposits, which cover transaction balance. These have a 100 percent reserve requirement and completely safe, thus satisfying the needs of risk averters, and
b) The PLS or equity account, in which depositors are treated exactly as if they were shareholders in the bank. There is no guaranteed rate of return or nominal value of the share.
In non-Muslim counties (i.e., the countries with less than 50% Muslim population) the central banks are very stringent in granting licenses for Islamic banks to operate. In order to be established in those countries Islamic banks must also meet the additional requirements of other government and non-government authorities. (So, apart from legal constraints there are economic measures that result operations of Islamic banks in the non-Muslim world difficult). In Muslim countries also they face economic restrictions. Besides funding, acceptable investment outlets is a major challenge for Islamic financial institutions.
4.7. Absence of Liquidity Instruments
Many Islamic banks lack liquidity instruments such as treasury bills and other marketable securities, which could be utilised either to cover liquidity shortages or to manage excess liquidity. This problem is aggravated since many Islamic banks work under operational procedures different from those of the central banks; the resulting non-compatibility prevents the central banks from controlling or giving support to Islamic banks if a liquidity gap should occur. So the issue of liquidity management must come under active discussion and scrutiny by the authorities involved is Islamic banking.
4.8. Use of Advanced Technology and Media
Many Islamic banks do not have the diversity of products essential to satisfy the growing need of their clients. The importance of using proper advanced technology in upgrading the acceptability of a product and diversifying its application cannot be over emphasized. Given the potentiality of advanced technology, Islamic banks must have to come to terms with rapid changes in technology, and redesign the management and decision-making structures and, above, all introduce modern technology in its operations. Many Islamic banks also lack the necessary expertise and institutional capacity for Research and Development (R & D) that is not only necessary for the realization of their full potential, but also for its very survival in this age of fierce competition, sophisticated markets and an informed public. Islamic banking cannot but stagnate and wither without dynamic and ongoing programmes. In addition, Islamic banks have so far not used the media appropriately.
Even the Muslims are not very much aware that the Islamic banking is being practiced in the world. Islamic banks have not ever used an effective media to publicise their activities. The authorities concerned in Islamic banks should address these issues on a priority basis.
4.9. Need for Professional Bankers
The need for professional bankers or managers for Islamic banks cannot be over emphasized. Some banks are currently run by direct involvement of the owner himself, or by managers who have not had much exposure to Islamic banking activities, nor are conversant with conventional banking methods. Consequently, many Islamic banks are not able to face challenges and stiff competition. There is a need to institute professionalism in banking practice to enhance management capacity by competent bankers committed to their profession. Because, the professionals working in Islamic banking system have to face bigger challenge, as they must have a better understanding of industry, technology and the management of the business venture they entrust to their clients. They also have to understand the moral and religious implications of their investments with the business ventures. There is also a need for banking professionals to be properly trained in Islamic banking and finance. Most bank’s professionals have been trained in conventional economics. They lack the requisite vision and conviction about the efficiency of the Islamic banking.
4.10. Blending of Approach of Islamic Scholars with the Approach of the Conventional Bankers
Bankers, due to the nature of their jobs have to be pragmatic or application-oriented. There is and will be tendency in the bankers practicing in Islamic banks to mould or modify the Islamic principles to suit the requirement for transactions at hand. Additionally, being immersed in the travails of day to day banking, they find little time or inclination to do any research, which can make any substantial contribution to the Islamic banking. Islamic Scholars active in researching Islamic Banking and finance, on the other hand, typically have a normative approach, i.e. they are more concerned with what ought to be. A very few of them are knowledgeable about banking or the needs of the customers.
5. Problem Specific to Islamic Banking in Bangladesh
5.1. Absence of Islamic Money Market
In the absence of Islamic money market in Bangladesh Bangladesh Bangladesh
5.2. Absence of Suitable Long-term Assets
The absence of suitable long term assets available to Islamic banks is mirrored by lack of short term tradable financial instruments. At present there is no equivalent of an inter-bank market in Bangladesh Bangladesh Bangladesh
5.3. Shortage of Supportive and Link Institutions
Any system, however well integrated it may be, cannot thrive exclusively on its built-in elements. It has to depend on a number of link institutions and so is the case with Islamic banking. For identifying suitable projects, Islamic banking can profitably draw the services of economists, lawyers, insurance companies, management consultants, auditors and so on. They also need research and training forums in order to prompting entrepreneurship amongst their clients. Such support services properly oriented towards Islamic banking are yet to be developed in Bangladesh
5.4. Organizing Relationship with Foreign Banks
Another important issue facing Islamic banks in Bangladesh
5.5. Long-term Financing
Islamic Banks stick very closely to the pricing policies of the government. They can not benefit from hidden costs and inputs, which elevate the level of prices by certain entrepreneurs without any justification. On the other hand, Islamic banks as financial institutions are even more directly affected by the failure of the projects they finance. This is because the built in security for getting back their funds, together with their profits, is in the success of the project. Islamically, it is not lawful to obtain security from the partner against dishonesty or negligence, both of which are very difficult if not impossible to prove.
5.6 Future of Islamic Banking :
The globally-booming Islamic finance is making strides and gaining popularity in Bangladesh
"The future of the Islamic banking systems is so bright," Mominul Islam Patwary, Chairman of the executive committee of Islami Bank Bangladesh Limited, told IslamOnline.net.
The Islamic banking is seeing impressive growth in Bangladesh
Since then, five more full-fledged private Islamic banks and 20 Islamic banking branches of conventional banks have been established.
Patwary says that his bank is now one of the top performer banks in terms of business and profits among the 48 commercial banks operating in the country.
"Islamic Bank Bangladesh Limited has gained first position in the all private banks in term of deposits, investment, export & import and remittance collection."
According to the Bangladesh Bank (BB), the central bank of the country, the deposits of the Islamic banking systems are now 25 percent of all private banks deposits and its investments are 30 percent.
Bahauddin Mohammad Yousuf, vice chairman of Al-Arafah Islamic Bank, has an explanation for Bangladesh
He says that for a Muslim, whose religion prohibits earning or paying interests, Islamic banking makes it possible to operate interest-free business.
"People of this country are religious," Patwary, of the Islami Bank, agrees.
Islam forbids Muslims from usury, receiving or paying interest on loans.
Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.
6. Internet free Banking
6.1. Interest free Banking :
Any observer on banking sector of Bangladesh will admit that a remarkable change has been occurred in the structure and operation of banking business in Bangladesh since 1983 due to start of interest free Banking system in Bangladesh. Perhaps the word interest .is awakening curiosity as why the transaction of interest is prohibited by the Islam and ‘what is the meaning of interest in Islamic Shariah and how we can identify it? The ‘word used by the holy Quran concerning interest is Riba. The literal meaning of Riba are money of anything or increment of anything from its original amount. However, all increases are not Riba in Islam, Islam prohibits only those. increases that are charged on the loan with a prefixed rate , In the old age of ignorance (jahilliah) money lenders in Arabia would charge a prefixed extra amount on their money lent out. Some of them goods or corps and took back prefixed extra amount on and above the principle amount. in those times the extra amount charged on the principal amount of money or goods was also termed as Riba. The term Riba In the holy Quran has been used in the same sense.
Imam al Rajhi describes during the era of jahilliah people invested their money and charged riba on a monthly basis, though the invested amount remained unchanged. Money so invested was called back at the time of repayment. In case of the borrower being unable to pay back the lender extended the period of repayment enhancing the amount to be paid on and above the principal amount.
lbn Hajar Askalani says “Excess goods or money charged on principal amount is riba”. Allama Ibnul Arabe in the book of the Ahkamul Quran opined that
The literal meaning of Riba is increment in the Holy Quran by Riba it is meant that the increment against which there is no exchange.
Regarding Riba in the Book of Mujamu Lugaiu Fuqaha it has been quoted that
The excess goods which are received as per contract without the exchange of Islamic Shariah system it is called Riba.
Allama Mufti Aminul in his book of Qawaedul Fiqhe has written that excess goods which are received as per contract by any one the two parties in the mutual exchange without the prescribed rules of Islamic Shariah are called Riba.
The term Riba is used in Sharia in two senses.
1. Riba Al-Nasiha
2. Riba Al-Fadle
1. Riba Al-Nasiha :The term Nasiab comes from the root nasa ‘which means postpone to defer or wait and refers to the time that is allowed for the borrower to repay the Joan in return for the addition. Riba al Nasiha means interest on loans. Riba Al-Nasiha is haram or prohibited.
2. Riba Al-Fadal: It is encountered is hand to hand purchase and sale of commodities. It covers all spot transactions involving cash payment or the one hand and immediate delivery of the commodity on the other.
Prophet’s opinion is that if gold, silver, wheat, barley, dates and salt are exchanged against themselves they should be exchanged spot and be equal and alike, it may be mentioned here that the above six items did the function of money at that time it has also been prohibited.
It essentially being required for justice and fair play in spot transactions the price and the counter value should be just in all transactions where cash payment is made by one party and the commodity or service delivered reciprocally by the other. Anything that is received as extra by one of the two parties to the transactions is Riba-Al-Fadal.
Referring Fokruddin al Razi, Chapra concludes that Riba-Al-Nasiha and Riba-AlFadal are both essential components of the verse “God has allowed trade and prohibited ribs.
While Riba-Al-Nashia relates to loans and is prohibited in the second part of the verse, Riba-Al-Fadal relates to trade and is implied in the first part .Because trade is allowed in principle it does not mean that everything is allowed in trade. Since injustice inflicted through Riba may be perpetuated through business transactions, Riba al fodal refers to all such injustices or exploitation. It requires absence of rigging uncertainty or speculation and monopoly.
Two typç1of usury prohibited by Islamic Shariah.
6.2 The initial two tier model in Islamic banking:
The model as conceptualized is a two tier one based on the mudarabah contract. It is considered two tier because first the deposited, enter into individual mudarabah contracts with a banking company and secondly, the bank enters into contracts with entrepreneurs who seeking capital to invest in productive enterprise. In return for providing the capital to the entrepreneurs the bank and its clients that invest in the mudarabah accounts gain the right to share in any profit. On the other hand if a loss is inetkathe burden of such laws is the sole responsibility of the financier. This is the case of mudarabah contract that the working party does not share any losses. As mention by Siddique, all scholars of Islamic law arc unanimous on this point. In order to diversify its risk the bank advances financing to a large number of entrepreneurs with different business plans. Thus losses incurred on some advances are offset by profits realized from other advances. Ii is also important to remember that in the event loss is incurred it will be distributed equal amongst the various mudarabah depositors.
Business practices as approved by Islam are as follows:
i) Mudarabah, ii) Shirkah (Partnership), iii) Commission and agency, iv) Bay Salam (Deferred Delivery), v) Bay Istisna, vi) Muzaraa and Musaqat, vii) Bay Muajjal and Murabada viii) Lease and Higher Purchase, ix) Agency (Wakala) x) Trust (Amanat), xi) Deposits (Wadia), xii) Landing for Gratuitous use (Areya), Pledge (Riha), xiv) Suretyship (Kifala), xv) Transfer of Debt (Howla).
It has already been explained that interest free banking i.e. Islamic banking is based on the laws of Islamic Shariah. Islamic legal concepts Shirkah/Partnership and mudarabah (profit Sharing). Practically it has taken hold since 1970. Islamic banking is defined a system of financial intermediation that avoids receipt and payments of interest in its transactions and conducts its operations in accordance with the objectives of an Islamic economy.
The definition of Islamic bank is approved by the secretariat of OIC in the following manner.
‘An Islamic bank is a financial institution whose status, rules and procedures expressly state its commitment to the principle of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operations.”
This is a banking system whose operation is based on Islamic principles of transactions of which profit or loss sharing (PLS) is major feature ensuring justice and equity in the economy. That is why Islamic banks are often known as PLS banks. Jons R.. Presley in his article “ The Islamic Financial system and bank: some theoretical considerations” said that “Since the commencement of this alternative financing mechanism, development and refinement has never ceased. The methods and instruments of Islamic finance, being based upon risk and profit sharing, require an ever evolving adaptation within the paradigm of economic relationship which defined by the sharia.
Islamic banks sought the expertise of religious scholars at the beginning and have continued to seek their expertise in adapting the entire Islamic financial system to the contemporary world, while the definition of the Islamic framework of economics does not change, the innovation required for the survival of Islamic Banks necessitates the constant involvement of religious scholars (John. R. Presley, 1988).
Islam considers a loan to be given or taken free of charge to meet any emergency. Interest leads some kind of injustice. Allah Rabbul Alamin in the Holy Quran says-
Those who believe eat not up your property among yourselves in vanities, but let there be among you traffic and trade by mutual good will (Sura An-Nisa : 29).
In Surah Al-Baqarah Allah says Allah has permitted trade forbidden nba (usury).
Those who believe, fear Allah and give up what remains of your demand for usury if you are indeed believers (Surah Al-l3aqarah : 278).
you do it not, take notice of war from Allah and his Messenger, but you repent then you shall have your capital sums:
Deal not unjustly, and you shall not be dealt with unjustly (Surah Al-Baqarah : 279)
The principle regarding financial transactions in Islam is that there should not be any incentive without taking risk. This principle is pertinent to both labour and capital. As no payment is allowed for labour, unless it is applied to work there is no incentives for capital unless it is exposed to business risk .Financial relationships in Islam are participatory in nature.
Islamic banks promote risk sharing between contributor of capital (investor and the user of funds). It aims maximizing profit is related with shariah boundaries.
To accumulate and distribute the Zakat have become one of the service oriented functions of the Islamic banks. As zakat is one of the five pillars of Islam it would be levied and collected by the state during our prophet (S:) and Kholafa-e-Rashadin. Now in Bangladesh
The Islamic banks have no provision charge any extra money from the defaulters.
It gives due importance to the public interest. Its ultimate aim is to make sure to growth with equity.
For the Islamic banks it is Comparatively difficult to borrow money from the money market. Since it shares profit and loss, the Islamic banks give greater concentration to develop the project management and evaluation. It gives greater emphasis on the viability of the projects.
The status of Islamic bank in relation to its clients is that of partners, investors and trader.
6.3 Interest free Banking around the World:
At present more than 250 1slamic Financial Institution are operating worldwide
Its clientele are not only confined to Muslim countries but are also spread over Europe, USA and Far East .
Islamic banking continues to grow at a rapid rate and it draw finances from both Muslims and Non-Muslims alike. Islamic banking today is estimated to be managing fund to the tune of VS $200 billion, it has been found from another reliable source e that new system of Islamic banking which is know as profit loss sharing has emerged as many as 45-50 countries of the world.
Remark on the activities of Islamic banking in Bangladesh
in the annual report of Bangladesh Bank 2005-2006
Bangladesh Bank in its Annual Report 2005-2006 has mentioned that in spite of some problems in Islamic Banking the concerned Islamic banks have been performing their activities efficiently since last two decades.
The rapid growing activities of Islamic bank are advancing ahead constantly1 The opening and introduction of Islamic banking branch in the conventional commercial banks and their constant expansion reflects that the acceptability of interest free banking among the common people has been well familiarized. The following comparative table of Islamic bank and all other commercial bank and scheduled bank has been presented.
Table: Comparative table of heads of Islamic Banking (June 2006)
Different Types of Bank | |||||
Description | Islamic Banks | Islamic branches in traditional bank | Islamic banking head | All private commercial banks | All schedule banks |
1 | 2 | 3 | 4 | 5 | 6 |
a. Number of Bank | 6 | 10 | 16 | 30 | 48 |
b. Number of branches | 308 | 20 | 328 | 1648 (19.90) | 6425 (5.11) |
c. Total manpower | 10288 | 368 | 10565 | 38426 (27.33) | 99287 (10.73) |
d. Total deposit | 214950.00 | 18031.00 | 232981.00 | 818530.00 (28.46) | 2405330.00 (9.67) |
e. Total investment (loan) | 198270.00 | 12223.80 | 210493.80 | 717160.00 | 1414370.00 (14.88) |
f. Ratio of investment and deposit | .92 | .68 | .90 | .88 | .59 |
g. Investment of deposit Liquidity:Surplus+Deficit | 7913.60 | 1043.20 | 8956.80 | 46943.10 (19.08) | 109416.10 (8.19) |
Since 1983 till today the preservation of statutory liquid reserve @ 10% of Islamic bank has been continued, on the other hand the preservation. Rate of SLR of other commercial and scheduled banks has been increased from 10% to 18%.
6.4 Interest free banking or Islamic Banking in Bangladesh
Islamic Banking in Bangladesh was starte4 in. the year l9.3 with the establishment of Islamic Bank Bangladesh Limited as the first Islamic Bank in the South East Asia . The rafter 4 (four) Bangladeshi. Islamic Banks Al-Arafah, Social investment Bank Ltd, Shahjalal Islami Bank, Oriental Bank/Al Baraka Bank were established and (one) conventional Bank converted into Islamic Bank that is Exim Bank Ltd.
There are 308 Branches of 6 (six) lslamic Banks in Bangladesh
During the year 2004 Ministry of Finance, Government of People’s Republic of
Institution of’ the country and will ensure best utilization of the funds of Islamic Banks and development of Islamic money market.
Any resident or non-resident institution in Bangladesh
7. Challenge and prospects
The challenges of Islamic bunk past, present and future may be divided in to 2 periods.
a. Before 1983, the period of’ non existence of Islamic bank. At that period there was no provision or rules and regulation for operation of interest free banking in Bangladesh
b. From 1983 to till June 2007 and onwards. The competition with other commercial and conventional banks is remarkable .i.e. all interest free banks in Bangladesh
In addition, due to the global open market competition, These 1slamic banks will have to compete in the international market.
Moreover, it is very important that the officers and staff of the different Islamic banks should be more sincere, honest, efficient and dynamic. Besides, the customer/clients of these kinds of banks must be sincere, honest and morally developed. Otherwise the bank will not be able to survive and even may be destroyed, such as Oriental Bank Ltd (Al-Baraka Bank). it may be further pointed out that there is still misunderstanding and confusion among different sectors of people of our country regarding profit system of Islamic banks. Many of them can not distinguish between interest of traditional banks and profit system of Islamic bank. To overcome this kind of misunderstanding I would prefer to say that a central shariah based is existing for Islamic banks of Bangladesh
Prospects
As majority people of Bangladesh
Zaknt is one of the five pillars of Islam. During our Prophet (SM) and the Khaliphes it was compulsory levy for the well to do person. If the payment of Zakat in made compulsory as per Islamic Shariah and it is collect by Government as like as income tax and if the government involves the Islamic Bank and the branches of Islamic Bank in the traditional bank with the function of collection of Zakat there jurisdiction of Islamic Banks will be furthered expended. There is one Zakat Board under Ministry of Religion of GOB which is working like volunteer organization. This Zakat Board may be empowered and strengthened in number of functions and jurisdiction like NBR. The levy of Zakat may be introduced as compulsory and necessary rules id regulations may be formulated. The Islamic banks may be linked up with the deposit work of Zakat.
8. Conclusion :
In my understanding the prospect of Islamic Banking is very bright. Muslim people everywhere want Islamic Banking. In Bangladesh
The position may not be same in all countries. But if Islamic Banking succeeds in any country, the position will same in every Muslim country in my judgment. This means, that first Islamic Bank in any country should be well managed and successful so that people have faith in this system. Established Islamic Banks should co-operate by lending competent officials in setting up new Islamic Banks.
The problems mentioned in the preceding pages are not insurmountable. Most of them can be solved with more research and dedicated efforts. IDB, OIC Fiqh Academy
9. List of References :
Sl # | References | Title |
1. | Al-Arafah Islami Bank Ltd. (2006) | Report, March 2009 |
2. | Bangladesh Bank (2005-2006) | Annual Report (2005-2006) |
3. | Hasan Kabir M-2003 Chief Editor | Text book on Islamic Banking Published by : Islamic Economics Research Bureau |
4. | Islamic Bank Bangladesh Ltd. (2005) | Annual Report (2005) |
5. | John R. Presely, 1988 | Islamic Financial System and Banking, P-67 |
6. | Latifi. S. I. 25th June 2007 | Key note paper was presented in the workshop of AUB. Uttaa, |
7. | Md. Mukhlesur Rahman Member Secretary , Shariah Council | Islami Banking & Al-Arafa Islami Bank Jigasha & Jabab May 2006 |
8. | Shude & Islami Banking What, Why, How. | |
9. | www.islamic.banking.com | Islamic Banking |
