Cruel mischief over past several years causes sorry state of Islamic banking

The Islamic banking (IB) and financial institutions sector in Bangladesh witnessed a cruel mischief over the past several years, causing its present sorry state.

Islamic banks, which once remained in a strong position in the country, have now landed in a worse situation due to such vicious acts, former Managing Director (MD) of Islami Bank Bangladesh PLC Mohammad Abdul Mannan observed on Tuesday.

"Such mischief, such a ruthless culture of malpractice to destroy the country's Islamic banking sector has never taken place in world history," he told a workshop.

He was addressing as a panellist of a research workshop on 'Pricing of Islamic Banking Products in a Dual Banking Environment of Bangladesh', organised by the Bangladesh Institute of Bank Management (BIBM) at its conference centre in the city on Tuesday.

Comparing the wilful attack on Buddhist civilization in the subcontinent, Mr Mannan said the country's Islamic banking had been similarly attacked in the last several years.

The top banker, who is now Chairman of Board of Directors of the First Security Islami Bank, had been forced to resign from the MD position of the then IBBL at gunpoint in 2017 before S Alam Group took over the control of the bank, the largest Shariah-based bank in the country.

Before January 2017, the excess liquidity of the IBBL was over Tk 250 billion, he said, indicating the bank's then strong position.

Highlighting on the inner strength of Islamic Banking, he said that it is high time the sector turned around for which events like research workshops could help a great deal.

Bangladesh Bank (BB) Deputy Governor and Chairman of BIBM Executive Committee Nurun Nahar inaugurated the workshop as chief guest, joining virtually.

BIBM Director General Dr Md Akhtaruzzaman chaired the programme while Managing Director & CEO of Shahjalal Islami Bank Mosleh Uddin Ahmed, and Shariah-based banking expert Dr Md Anwar Hosain Molla were present as panellists.

Addressing the participants, Ms Nahar expressed hope that the Islamic banking sector would turn around soon from the current sorry state.

Referring to the success of such a banking sector, she said that yet many developed countries have been following the model of Islamic banks in Bangladesh.

Highlighting on challenges, Mr Anwar Hosain Molla said Islamic banking officials have to work in an internal dual environment inside a conventional bank, in addition to the dual market situation.

'Niat' or intention is important for introducing IB, he said, adding: "However, some banks have introduced Islamic banking only to attract or retain customers."

Although 30 per cent of the banking sector is Shariah-based, the central bank's circulars are solely focused on conventional banking, he said and called for separate circulars on the same issue.

Mr Mosleh Uddin Ahmed said unless every rule and guidelines are prepared by the regulator, Islamic banking cannot flourish in full swing. Even after 42 years of IB activities in the country, a full-fledged shariah banking guideline has not been prepared, he added.

Currently, many common people believe that the IB is a fraud, he said, suggesting an external Shariah-based organisation to audit a bank to ensure Shariah there.

BIBM Associate Professor Dr. Md. Mahabbat Hossain presented a draft research report which was co-authored by BIBM Associate Professor Md. Alamgir, Bangladesh Bank Director (Statistics) Dr. Muhammad Amir Hossain and a researcher at INCEIF University of Malaysia Mezbah Uddin Ahmed.

According to the draft research, the dual obligation of Islamic banks and financial institutions to Shariah and regulatory authorities introduce complexity into their pricing models and operational strategies.

The report is expected to be finalised incorporating suggestions and other inputs from the participants.

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