IslamicFinance.de

Bangladesh launched its first digital crowd-funding platform Ekdesh for raising funds and disbursing them as zakat or financial aid. Information and Communication Technology Division State Minister Zunaid Ahmed Palak inaugurated the platform via an online inauguration program. People of the country can donate to the prime minister’s relief fund, the Islamic Foundation, or other non-government organizations through this platform to help the poor people or small businesses. Several organizations like Brac, Bidyanondo Foundation, Center for Zakat Management, Centre for Rehabilitation of the Paralysed (CRP), and Sajida Foundation have already joined the platform.

Microfinance institution SAJIDA Foundation has rapidly diverted its resources and operations to tackle the pandemic from multiple frontiers. On the health front, one of its secondary-care hospitals have been dedicated to the treatment and isolation of Covid-19 patients, while the other has continued general medical services focusing particularly on maternal and child care. At the same time, nearly 2,000 field forces have reached 0.4 million microfinance members with life-saving information regarding the prevention and treatment of Covid-19. Mass awareness raising efforts have included leaflet distribution as well as household visits, while maintaining social distancing measures. SAJIDA’s members have also benefitted from a credit shield facility which supports members through loan outstanding waivers and cash benefits during emergencies.

According to a Bangladesh Bank survey, the major barriers to accessing finance in the country are minimum balance requirement, low income, staff attitudes, lack of physical access and high cost of products. Other factors like inadequate financial literacy, lack of proper documentation, lack of initiatives of banks and financial institutions, low level of technological infrastructure, lack of suitable product structure of banks, opportunity cost and high cost of products are also acting as hindrances to access to finance. In Bangladesh a large number of the adult population still remains financially excluded. The major barrier is geographical or physical access measuring the average distance from households to bank branches. Bangladesh has less than seven branches (or ATM) per 100,000 population and about 67 branches (or ATM) per 1,000 square kilometre.

According to Rehan M Shaikh, CEO of Standard Chartered Saadiq, Standard Chartered Bank (SCB) wants to bring more Islamic liquidity into the market as the demand is increasing in Bangladesh as well as in the global markets. Islamic banking has expanded three times from 2007 to 2017 in Bangladesh, with a Compound Annual Growth Rate (CAGR) of 11.6%. The Takaful sector has grown five times with a CAGR of 19.34% during this period. SCB has arranged a $32 million Diminishing Musharakah Facility for Noman Terry Towel Mills and Ismail Spinning Mills. This is the first Islamic syndication arranged by SCB Bangladesh. The facility will finance the company’s capital expenditures and support its export growth.

Ten days after losing its chairman, Islami Bank Bangladesh is preparing to lose one of its biggest sponsor shareholders. Ibn Sina Trust announced its intention to withdraw by the end of next month. The Ibn Sina Trust is the largest local corporate shareholder in Islami Bank. Its 36,077,391 shares are worth around Tk94.16 crore. A year ago, the Islamic Development Bank (IDB) sold off two-thirds of its shares, shrinking its stake in the bank to 2.1% from 7.5%. Two other foreign banks have sold out from Islami Bank in recent years. In 2014, foreign sponsor shareholder Bahrain Islamic Bank sold off all its shares, followed by Dubai Islamic Bank, which sold all its shares in 2015. Islami Bank has always had the reputation of being influenced by Jamaat-e-Islami, the Islamist political organization noted for its connection with the local collaborators of Pakistan occupation forces during the Liberation War in 1971.

In #Bangladesh seven members of Social Islami Bank’s board of directors have resigned from their posts. At the same board meeting nine new directors were appointed. Among the seven that have resigned, four were independent directors: Abdur Rahman, Abdul Muhith, Asaduzzaman and Moinul Hasan. The remaining three were shareholders of the bank. The names of the nine new directors are yet to be known. Earlier Social Islami Bank Limited (SIBL) faced what insiders claimed was a hostile takeover, when chairman and comittee chairman were replaced by Anwarul Azim Arif and Belal Ahmed. Former managing director of SIBL Shahid Hossain also stepped down and was replaced by Quazi Osman Ali. All new directors are connnected to the S Alam group, Belal is the son-in-law of S Alam Group Chairman and Managing Director Mohammed Saiful Alam.

After the top level management of Islami Bank Bangladesh Ltd (IBBL) was removed in January, a similar series of drastic changes takes place in Social Islami Bank Ltd (SIBL). SIBL Chairman Rezaul Haque and Executive Committee Chairman Md Anisul Hoque were replaced by Prof Anwarul Azim Arif and Belal Ahmed. The Managing Director of SIBL, Shahid Hossain, has also stepped down and been replaced by Quazi Osman Ali. The decision to remove the top three of the senior management and the announcement on their replacements was made at a closed door meeting of the bank’s board of directors. The changes are allegedly being backed by Chittagong-based S Alam Group that bought up shares of both banks prior to the takeover.

Islamic banking in Bangladesh is taking shape rapidly with partial practice of Shariah. Islamic banking was first introduced in Bangladesh in 1983 by foreign investors from Saudi Arabia and Kuwait. Currently, eight full-fledged Islamic banks are operating with 1,068 branches in the country. Moreover, 19 Islamic banking branches of nine commercial banks and 25 Islamic banking windows of eight commercial banks are also providing Islamic financial services. According to Md Yasin Ali, professor of Bangladesh Institute of Bank Management (BIBM), most of the Islamic Banks in Bangladesh are not Shariah compliant. Currently, there is no proper regulatory framework for strict monitoring of Islamic banking. The Islamic banks in Bangladesh have been facing excess liquidity problem, which is depriving them of being financiers in public projects.

#Bangladesh-based Social Islami Bank Limited (SIBL) plans to invest $2 million in a real estate-based private equity fund managed by the Islamic Development Bank (IDB). The bank plans to buy 200 shares of Awqaf Properties Investment Fund (APIF) for $10,000 each. A 2% stake in the fund will be enough to give SIBL a seat on the APIF board. SIBL claimed that participating in the APIF equity would benefit it in various ways. It would optimise the facilities delivered to Awqaf customers and enhance the returns to investors. According to SIBL managing director Shahid Hossain, SIBL will get 90% of net income per certificate apart from yearly dividend. The secretary of Financial Institutions Division, Eunusur Rahman, said they would place a proposal before the Cabinet committee on Economic Affairs to allow local companies invest abroad after discussions with the Finance Minister.

Finance Minister Abul Maal Abdul Muhith said that the board of directors of Islami Bank Bangladesh has been engaged in an internal row. The row is over the appointment of new staff, that Islami Bank Vice-chairman Professor Ahsanul Alam claims were made on paying bribes. Due to the row between him and chairman Arastoo Khan, two groups in the board have also been created with the 21 directors supporting either Arastoo or Ahsanul, and each group calling the other a liar. In a statement released on May 20, nine directors threatened to resign from their posts. Professor Ahsanul Alam has claimed that three directors who are abroad have also opted in support of this statement.

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.