Product structure of Islamic banks in Bangladesh

Since the Islamic banking industry is still emerging in Bangladesh, it is essential to know at this stage if the products and services of Islamic banks are consistent with the practices that have been developed and universally accepted by the practitioners of Islamic banks across the globe. It is really important for Islamic banking industry in the country not only for the sake of outreach but also for the regulators to formulate policy which will enhance the credibility and international stakeholder's confidence. Until today, the development of Islamic financial products has generally been limited to the re-engineering of the conventional products to meet Shariah requirements. But there is a still scope for product innovation and differentiation.

Bangladesh Approves Islamic Instruments

In a bid to accelerate the country’s economy, Bangladesh has launched a new interest-free financial instrument, highlighting the need for a strong Islamic Shari`ah board or council to operate and supervise the new instrument. Professor Mujahidul Islam, senior teacher and former chairman of the banking department of Dhaka University, said however, that this kind of bond was not popular with Islamic banks, financial institutions and people. He opined that this bond fund should be invested in power sector, water treatment plants and any other profitable and economically viable projects which contribute to the welfare of the country and accelerate the economy.

Digital Finance in Bangladesh: Where are all the Women?

Bangladesh has long been a success story for women’s financial inclusion. But in terms of digital finance, the story is very different. Despite being identified as a “mobile money sprinter” by the GSMA, only 18% of digital finance users in Bangladesh are women, with even fewer holding registered accounts. This is perplexing, given the rapid growth of digital financial services now reaching more than 21 million registered account holders. There are a number of potential reasons, including the fact that women are less likely to have an official identification. Besides, English-language phone menus may have a disproportionate impact on women. Nevertheless, there are resources and market players available to bridge this gender gap.

Bangladesh Bank gives more time to ICB Islamic Bank for repaying Oriental Bank's debt

The central bank has extended ICB Islamic Bank's timeline by three and half years to repay the money it owes to its clients. According to central bank's figures, former Oriental Bank's financial liabilities towards it depositors stand at Tk 7.5 billion. The bank was rechristened ‘ICB Islamic Bank’ in 2007 and a scheme was initiated to pay back the money to its depositors within six and half years. In a circular issued on Sunday, Bangladesh Bank extended the tenure of the scheme by 42 months on a request from the ICB Islamic Bank.

Three banks want more time to remove same-family directors

National Bank, City Bank and Premier Bank have failed to comply with the central bank's directive to bring down the number of directors from the same family to a maximum of two. The central bank last week asked four private banks to cut the number down in seven days. Only First Security Islami Bank complied with the directive within the deadline, according to Bangladesh Bank. The three other banks sought one to three more months to comply with the directive, but the regulator extended the deadline till October 30, a BB official said. National Bank has five directors from a family. City Bank has nine directors from two families. Four directors of Premier Bank come from one family.

Islamic banks - FIs asked to participate in Shariah-based refinancing scheme

The central bank has asked Islamic banks and non-banking financial institutions (NBFIs) to participate in its newly introduced Shariah-based refinancing scheme. The advice came at a meeting with the senior executives of the Islamic banks and NBFIs with Deputy Governor of the Bangladesh Bank Abul Quasem in the chair.
At the meeting, the central bank assured the Islamic banks and NBFIs that it would provide extra fund in the scheme if necessary. Five Islamic banks have already deposited Tk 3.75 billion with the BB's newly opened account for introducing the refinancing scheme exclusively for Sharia-based banks and NBFIs.

Four private banks violate bank board rules

The four private banks’ authorities have long been violating the bank company act, putting their family members on the board of directors. According to the bank company act, 2013, the banks’ board cannot comprise more than two members of a single family. But the four banks still continue their dominion over the board of directors with their family members at the helm. These are the National Bank, the Premier Bank, The City Bank and the First Security Islami Bank.

Muhith urges banks to spend more on education from CSR funds

Finance Minister AMA Muhith on Thursday urged Bangladesh’s banking sector to spend more from their corporate social responsibility (CSR) funds on the education sector. Appreciating Shahjalal Islami Bank (SIBL) and Dutch-Bangla Bank for their CSR contributions to the education sector, the Finance Minister said these two banks believe that education has been the most contributory element to human development. He was speaking at a function arranged marking the distribution of scholarships by the SIBL at the city’s Officers Club. At the function, some 500 students from across the country received scholarships from the SIBL. Muhith also appreciated the Bangladesh Bank governor for his campaign to encourage banks to spend more on their CSR activities.

IDB offers $44m for second undersea cable

The government of Bangladesh has signed a Tk 340 crore ($44 million) loan contract with Islamic Development Bank to install the second submarine cable for the country. The installation may complete by 2016, while Bangladesh entered a consortium in March this year. Monwar Hossain, managing director of Bangladesh Submarine Cable Company Ltd (BSCCL), said BSCCL has already paid $19.2 million to the consortium from its own fund. Bangladesh will have to spend a total of $72.5 million for the new cable. The IDB will provide $44 million, while BSCCL will spend $70 million from its own fund. The rate of interest for the loans will be LIBOR+1.35 percent and the loans will have to be repaid in 13 years.

Govt to probe profits of Islamic banks

In an attempt to check financing of militancy, the government will investigate how Islamic banks, including Islami Bank Bangladesh, and other financial institutions have spent their profits till date, said State Minister for Home Affairs Asaduzzaman Khan yesterday. Intelligence personnel have been instructed to check whether there are any inconsistencies in the financial statements of the institutions, the minister added. Intelligence personnel will also intensify their vigilance in Chittagong Hill Tracts, as some NGOs in the name of Islam are carrying out suspicious activities there. The national committee will also launch a campaign against militancy involving eminent media personalities, said Asaduzzaman, adding that the government would intensify its monitoring on social media like Facebook.

Shahjalal Islami Bank director on five-day remand again

A Chittagong court yesterday placed Mohammad Solaiman, director of Shahjalal Islami Bank Ltd, on a five-day remand in a case filed for misappropriating Tk 140 crore. Solaiman was on remand for seven days once before. Referring to an investigation of the bank, Farman R Chowdhury, managing director of the bank, said Solaiman had influenced the bank to lend Tk 140 crore to SK Steel and gave false assurances about the loan and Solaiman's company Paradise Corporation took over Tk 18 crore as bribe from SK Steel for this. On April 13, the case was filed accusing Solaiman and others.

Shahjalal Bank director on remand

A Chittagong court has sent Shahjalal Islami Bank’s Director Mohammed Solaiman to seven-day police remand in a case over misappropriation of bank money. Shahjalal Islami Bank authorities had filed the case against Solaiman with the Kotwali Police Station in Chittagong on Apr 13, alleging misappropriation of Tk 1.49 billion. Later, the Anti Corruption Commission (ACC) recorded the case. ACC officials arrested him on Jun 25 in a raid on Akram Tower at Bijoy Nagar in Dhaka. After being detained following an ACC probe, Solaiman claimed he had been victimised by AK Azad, the present back chairman.

19th AGN of Social Islami Bank Limited

The 19th Annual General Meeting of Social Islami Bank Limited was held in Sylhet, Bangladesh. A 12% cash dividend for the financial year 2013 was approved by the shareholders in the AGM. Major (Retd.) Dr. Md. Rezaul Haque, the Chairman of the Board of Directors of the Bank presided over the meeting. Directors of the Bank were present. The Managing Director of the Bank Md. Shafiqur Rahman stated that SIBL maintained and achieved a stable position in 2013 despite of many challenges in all of their key areas of operations.

Bangladesh Islamic finance sector: Sukuk the missing link

Bangladesh Islamic finance industry is well developed but lacks sharia-compliant instruments such as sukuk. This is limiting further growth of the sector according to a report. Sukuk would be helpfull to diversify the funding sources and could make up for the limited scope of the Islamic money market in Bangladesh. Islamic banks that follow religious principles are now representing 18.9 percent of all Bangladeshi bank deposits.

IBBL approves dividend of 18pc

The Islami Bank Bangladesh Limited approved 18pc dividend comprising 10pc stock and 8pc cash for the Shareholders for the year 2013. This was announced in its 31st Annual General Meeting, according to a news agency. Further in the meeting, four directors were elected. The AGM was held at the Bangabandhu International Convention Centre. Prof. Abu Nasser Muhammad Abduz Zaher, Chairman of the Bank presided over the meeting. The Shariah Supervisory Committee along with shareholders and high executives of the Bank were also present at the AGM.

Banks' dividends fail to lift investor confidence

Of the 30 listed banks in Bangladesh, 13 declared higher dividends than in the previous year, eight announced lower dividends, and eight the same, according to Dhaka Stock Exchange. Dutch-Bangla Bank came up with the highest amount of dividends—40 percent cash—for its general shareholders. ICB Islamic Bank gave no dividends. With the mixed trend in dividend declaration, the banking shares were unable to draw the investors' attention in the last couple of months, as corporate declarations from the sector could not fulfil retail investors' expectations. The banks' income from lending business declined in 2013 than the previous year due mainly to the political volatility. But thanks to the central bank's move of relaxing loan provisioning rules at the yearend, the banks could recover losses.

BB to introduce Shariah-based refinancing scheme for SMEs

Bangladesh Bank (BB) will introduce Shariah-based refinancing scheme for Small and Medium Enterprises (SMEs) and other thrust sectors, Governor Dr Atiur Rahman said. Referring to the Shariah compliant mode of refinance support from BB's Export Development Fund (EDF), the governor said introduction of similar Shariah compliant refinance support against SMEs and other thrust sector lending by Islamic banks is also underway. The central bank already issued guidelines for Islamic banking in Bangladesh using an approach that delegates to the Shariah-based financing community the self-regulation and oversight of its Shariah compliance practices.

Banks default international payments

Bangladesh’s credit rating might deteriorate as well as the LC confirmation cost would rise further. This is because two local private commercial banks Prime Bank and Dutch Bangla Bank allegedly failed to repay the loans (not more than US$2 million only) from the Islamic Corporation for Insurance of Investment and Export Credit (ICIEC). Local commercial banks are now unable to repay the loans against local and foreign LCs due to stagnated business activities amid political deadlock ahead of the general election and prolonged violence. LC confirmation cost will be increased unless the local banks maintain the standard credit rating of the commercial banks.

IFIC to become Islamic bank

Bangladesh's International Finance Investment and Commerce Bank (IFIC Bank) has decided to become a full-fledged Islamic bank. The proposal has already been approved by the bank's board, and the government, being the bank’s majority shareholder, has also given clearance. The conversion is now subject to approval from different regulators. Shah A Sarwar, managing director of the bank, could not give a definite time on how long the conversion process would take. The government holds 32.75 percent of the bank, directors and sponsors 11.31 percent, institutions 33.91 percent, foreign investors 0.28 percent and the rest 21.75 percent is held by the general public.

BD becomes a role model of financial inclusion for Islamic world

Bangladesh has become a role model of financial inclusion for the Islamic financial world, said Mohammad Abdul Mannan, managing director (MD) of Islami Bank Bangladesh Ltd (IBBL). He came up with the observation while addressing the first ever ADB conference on Islamic finance for Asia held at the ADB Headquarters in the Philippines on 4-5 November.

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