Finance Minister Ama Muhith has sought explanation from Bangladesh Bank about allegations of foreign investors of Islami Bank Bangladesh Limited (IBBL). The Islamic Development Bank (IDB) alleged that the IBBL board made the recent high-level changes in the absence and without consent of foreign shareholders. Two foreign investors including IDB hold 52% shares of the IBBL. At the board meeting January 5, former bureaucrat Arastoo Khan was elected chairman of IBBL. Changes were also brought to the posts of managing director and heads of various committees of the bank and also to chief of the Islami Bank Foundation. At present, of the 16 board of directors, seven are independent directors, seven from little known companies and two are foreign sponsors’ representatives.
Islami Bank Bangladesh Limited had five independent directors, of whom four have been dismissed in the last few months. These men are: NRM Borhan Uddin, AKM Sadrul Islam, Md Belayet Hossain and Md Abdus Salam. The bank’s board of directors refrained from renewing the tenures of these four because of government directives. Banking industry analysts believe the government’s directive is part of its plan to appoint four directors of its own choice. They believe the government is taking control of Islami Bank through several major changes including the board of directors. Last week freedom fighter engineer Mostafa Anwar replaced Abu Nasser Muhammad Abduz Zaher as the chairman.
There is a lack of understanding of Islamic finance, so people misunderstand or underestimate the topic. Islamic finance deals with financial aspects in our day-to-day activities, and forms a very small part of Islamic law (Shariah). Islamic finance tries to achieve - insofar as the financial sector is concerned - mostly the preservation and protection of property. However, financial products in line with Shariah are not miraculously different from conventional ones, but there are subtle differences. Islamic financial institutes aspire to objectives greater than the accumulation of wealth. They aim for social stability and progress. An Islamic financial system also plays a major role in wealth distribution through Zakat, Waqf etc. Individuals as well as the society as a whole can benefit from Islamic finance.
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.
The Anti-Corruption Commission (ACC) of Bangladesh has filed 12 cases against 53 officials of five banks and the Bismillah Group for their alleged involvement in the embezzlement of funded loans worth over Tk9.9bn. The list of the accused included 13 people from Bismillah Group, 12 Janata Bank officials, eight Prime Bank officials, seven Premier Bank officials, five Jamuna Bank officials and eight Shahjalal Islami Bank officials. According to the probe report, Bismillah Group, in association with the bank officials, embezzled the money through loans against trust receipts using names of fake foreign buyers. They secured cash incentives against fake export documents, taking advantage of inland bills purchases and overpricing non-existing export items. The inquiry also found that the group laundered money abroad.
Most of the conventional banks in Bangladesh are increasingly becoming interested in starting Islamic banking to get more deposits. Bangladesh Bank (BB) is not, however, allowing banks to convert into Islamic banking or even open such branches because of not having a central sharia council to regulate this particular brand of banking. NCC Bank and Southeast Bank have applied to the central bank for permission to convert into full-fledged Islamic banking. Several other banks have sought permission to open Islamic banking branches. The central bank decided not to allow it until formation of a central sharia council. The norms of the Islamic banks in Bangladesh vary as each bank is following sharia rules according to their choice since sharia laws vary from country to country.