ISLAMIC BANKING IN BANGLADESH

Submitted By Submitted To
1. Jonayed Kabir (111-141-389) Nusrat Farzana
2. Shakhawath Hossain(111-141-017) School of Business & Economics
3. Tanvir Islam(111-133-008)
4. Golam kibriya(111-122-145)
5. Samnil Arefin ( )
ISLAMIC BANK BANGLADESH LTD.

Islami Bank Bangladesh Limited is a Joint Venture Public

Limited Company engaged in commercial banking
business based on Islamic Shari'ah. It was founded by
Saudi and Kuwaiti investors.

 established on the 13th March 1983

 63.09% foreign shareholding
 total 285 Branches
 manpower are 11,381
Equity 50,556.47 Million

Deposit 681,352.25 Million

Reserve fund 31,029.05 Million

Paid up capital 1,609,91 million

shareholder are 33686

capital 20,000 million

 PRODUCT

• IBBL mobilizes deposits through different types of accounts.

Al-Wadeah Accounts
I. Take the permission from the customer
II. No interest or profit but guaranteed to pay back
III. Minimum deposite 10,000/-
Mudaraba Accounts
i. Bank is 'Mudarib' and customers are 'Shahib Al-Mal‘
ii. Distribute 65% from the investment income.
iii. Guranteed to pay back
 MUDARABA ACCOUNTS

-Mudaraba Term Deposit Account -Mudaraba Muhor Savings Account

-Mudaraba Special Notice Account -Mudaraba NRB Savings Bond Account

-Mudaraba Hajj Savings Account -Mudaraba Foreign Currency Deposit Account

-Mudaraba Special Savings (Pension) Account -Students Mudaraba Savings Account

-Mudaraba Savings Bond -Mudaraba Farmers Savings Account

-Mudaraba Monthly Profit Deposit Account

 SERVICES
• Remittance card
• Mudaraba NRB Savings Bond (MNSB) Scheme
• Locker service
*New market Branch *Kawran Bazar Branch *Head Office Complex Branch *Farmgate Branch

• SME service Micro

Medium
i. Small Enterprise services Service Concern
Service Concern 5lac tothan
1 cr.5 lac 10-25
Service Concern 1Less
cr. to 50 cr. Less
50 -100than 10
Trading
TradingConcern
Concern 5Less
lac to 1cr5 lac
than 10-25
Less than 10
ii. Medium Enterprise Trading Concern 1 cr. To 50 cr. 50 - 100
Manufacturing 50 lac to 10 cr. 25-99
Manufacturing
Manufacturing 5 lac
10 cr. to
To5030lac
cr. 10 --24
100 250
iii. Micro Enterprise concern
concern
concern
iv. Cottage Industry

Less than 5 lac Not more than 10 including family member

 Problems faced by Islamic Banking all over the world

 The problem of forward contact and foreign exchange market

 Restrictions of Shariah Islamic banking can not cover the risk of Exchange fluctuation by forward
contract.

 For this reason Islamic banking face more risk in foreign exchange
market compare with commercial bank.

 Unfamiliarity with the Islamic Banking System

 The first problem, many people in the Muslim and non-Muslim

world do not understand what Islamic banking actually is.

 Islamic banking run by the Shariah Councils and it define what is and what is not Islamic
banking, and what is and what is not the acceptable way to do business.
Portfolio Management
 Not enough interest-free instruments in Islamic money and capital market.
 Islamic banks can improve term transformation if there is an interest-free bond market or a
secondary market for Islamic financial papers.

The Regulatory Authority

 The relationship between Islamic banks and monetary authorities is a delicate or weak.
 Islamic banks operation base on a profit and loss share basis (PLS), which actually do not come
fully under the existing civil laws.
Absence of Liquidity Instruments
Many Islamic banks has lack of liquidity instruments such as treasury bills and
other marketable securities.
This problem arises because of Islamic banks work under different operational
procedures from the central banks.

Islamic banks have so far not used the media (tv, magazine, social media)
appropriately for publicity of their activities.
“PROBLEM SPECIFIC TO ISLAMIC BANKING IN
BANGLADESH”
Absence of Islamic Money Market

 For absence of Islamic money market in Bangladesh, the Islamic banks cannot invest their
surplus fund for short term.
 All Government Treasury Bills, securities and BB Bills are interest bearing. So the Islamic banks
cannot invest the permissible part of their Security.
 As a result, Islamic banks deposit their whole reserve in cash with Bangladesh Bank. Similarly,
the liquid surplus also remains uninvested.

 So it is a loss for Islamic banks too.

Relationship with Foreign Banks
 An important issue facing by Islamic banks in Bangladesh is organizing their relationships with
foreign banks.
 More generally, how to conduct international operations. Because most of the foreign bank
belong to interest rate process.

Shortage of Supportive and Link Institutions

 Any system depends on a number of link institutions and same thing happen for Islamic banks.
 Bangladesh hasn’t enough Islamic related institution yet.
 Islamic banks 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.
FUTURE PERSPECTIVE OF ISLAMIC BANKING

• Growth scenario for Islamic banking

• Muslim population are improving
• Currently, in terms of assets
• Providing a level playing field
FUTURE PERSPECTIVE OF ISLAMIC BANKING

• Optimistic assumption
• Muslim populations welcome Islamic banking
• Still room for new institutions
FUTURE PERSPECTIVE OF ISLAMIC BANKING

• Value of Islamic banking by 2020

• Two potential sources growth of Islamic banking.
• Considerations into account
ADVANTAGES OF ISLAMIC BANKING

Promotes Financial Justice

Financial Inclusion
Reduces the Impact of Harmful Products and Practices
Strengthens Financial Stability
Ethical and Moral Values
 INTERNATIONAL PERSPECTIVE OF ISLAMIC BANKING

Experienced rapid expansion growing at more than 10% annually.

A report by the (IMF) (2015) observes that, the banking sector dominates Islamic
finance sector making up about 80% of Islamic finance.
Many European Countries have also adopted Islamic finance.
THE STATUS OF GLOBAL ISLAMIC BANKING INDUSTRY

Region Banking Assets

Asia 203.8
GCC 564.2
MENA (exc. GCC) 633.7
Sub-Saharan Africa 20.1
Others 54.4
Total 1476.2
 AT PRESENT THERE ARE ISLAMIC BANKS IN THE FOLLOWING
COUNTRIES
01. Afghanistan 17. Gambia 33. Pakistan

02. Algeria 18. India 34. Palestine

03. Albania 19. Indonesia 35. Philippines

04. Argentina 20. Iran 36. Qatar

05. Australia 21. Iraq 37. Russia

06. Bahamas 22. Jordan 38. Saudia Arabia

07. Bahrain 23. Kazakhstan 39. Senegal

08. Bangladesh 24. Kibris Turkish Republic 40. South Africa

09. Brunei 25. Kuwait 41. Sudan

10. Cayman slands 26. Lebanon 42. Switzerland

11. Cyprus 27. Liechtensten 43. Thailand

12. Denmark 28. Luxembourg 44. Tunsia

13. Djibouti 29. Malaysia 45. Turkey

14. Egypt 30. Mauritania 46. U.A.E.

15. Germany 31. Morocco 47. U. K.

16. Guinea 32. Niger 48. S. S. A.

49. Yemen.
Bangladesh Shilpo Rin Sangsha
(BSRS)
 HISTORY

• Bangladesh Shilpo Rin Sangsha (BSRS) was established in 31st October, 1972
through a presidential Order to provide credit facilities and other assistance to
industrial concerns and to encourage and broaden the base of investment in
Bangladesh.
• Pakistan Industrial Credit and Investment Corporation Limited (PICIC), Investment
Corporation of Pakistan (ICP) and National Investment Trust (NIT).
• 16th March, 1987 Investment Advisory Centre of Bangladesh IACB merged with
BSRS.
• Starting authorized and paid up capital was 100 cr. and 6.25 cr.
 SERVICE AND FUNCTIONS

• BSRS provide medium and long-term credit facilities in both foreign and local
currencies to private sector industrial project.

• It provides underwriting, bridge financing and debenture financing assistance to

public limited companies.

• Commercial banking- deposit mobilization, issue of pay order and SDR, collection
of cheques and other negotiable instruments.

• Sale and purchase of ICB unit certificates, saving certificates and prize bonds;

• Trading of securities in primary and secondary markets.

 MANAGEMENT

• The management of BSRS is vested in a 9-member board of directors, including a

chairman and a managing director appointed by the government.

• It has nearly 200 employees, including executive officers of different cadres.

• BSRS has 20 operational departments under 4 divisions at its head office in Dhaka
and commercial branch.
 STATE OF FINANCIAL HEALTH OF BSRS

• the external sources have dried up. It now relies on locally generated funds,
mainly through collection of arrears, to carry out its operation at a small scale.

• On 30 June 2004, the total cumulative disbursement of loans and advances

provided by the Sangstha amounted to Tk 642.50 crores. Of its total loan about
90% was classified as non-performing loans.

• It may said that BSRS has largely become dysfunctional.

ANY QUERY???
THANK YOU EVERYONE!!!