Islamic Banking in Bangladesh

16. March 2010 · 3 comments · Categories: Islamic Banking in Bangladesh, Islamic Banking News · Tags: , , ,
Islami Bank of Bangladesh

The Islami Bank tower in Bangladesh

Islamic Banking Blooms in Bangladesh

Courtesy of IslamOnline.net
By Ferdous Ahmad, IOL Correspondent

DHAKA — The globally-booming Islamic finance is making strides and gaining popularity in Bangladesh, with experts predicting that the shari`ah-compliant industry will continue in steady steps to become the mainstream banking system in Muslim South Asian nation.

“The future of the Islamic banking systems is so bright,” Mominul Islam Patwary, Chairman of the executive committee of Islami Bank Bangladesh Limited, told IslamOnline.net.

The Islamic banking is seeing impressive growth in Bangladesh

Bangladesh entered the Islamic banking system only in 1983, with the establishment of Islami Bank Bangladesh.

Since then, five more full-fledged private Islamic banks and 20 Islamic banking branches of conventional banks have been established.

Patwary says that his bank is now one of the top performer banks in terms of business and profits among the 48 commercial banks operating in the country.

“Islamic Bank Bangladesh Limited has gained first position in the all private banks in term of deposits, investment, export & import and remittance collection.”

According to the Bangladesh Bank (BB), the central bank of the country, the deposits of the Islamic banking systems are now 25 percent of all private banks deposits and its investments are 30 percent.

Bahauddin Mohammad Yousuf, vice chairman of Al-Arafah Islamic Bank, has an explanation for Bangladesh’s Islamic finance boom.

He says that for a Muslim, whose religion prohibits earning or paying interests, Islamic banking makes it possible to operate interest-free business.

“People of this country are religious,” Patwary, of the Islami Bank, agrees.

Islam forbids Muslims from usury, receiving or paying interest on loans.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

Shari`ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.

Bangladesh is the world’s third largest Muslim majority country, with Muslims making up more than 80 percent of the nation’s 148 million population.

New Order

Bankers believe that the Islamic banking is set for even more progress, if a law governing Islamic Banking policies is introduced.

“If an Islamic banking Act is introduced, the Islamic banking systems will even further flourish,” Patwary said.

Experts predict that with the rapid rise of Shari`ah-based systems, the industry will ultimately turn to be the financial mainstream in Bangladesh.

“The interest-free Shari`ah-based systems will be mainstream Banking and the conventional banks will be the minority systems in the OIC countries including Bangladesh within 2002,” M Azizul Haque, a leading expert on Islamic banking in Bangladesh, told IOL.

Azizul Haque, who is also chairman of the Shari`ah Council of Dhaka, believes that Bangladesh will follow the rest of the world to the Islamic banking sector.

He explains that the growth rate of Islamic banking in the OIC countries for example is 15 to 20 percent while that of conventional banks is 10 to 15 percent.

Islamic finance is one of the fastest growing sectors in the global financial industry.

In defiance of the credit crunch, the global Islamic finance market has grown about 15 percent in each of the past three years, and is now worth about $700 billion worldwide.

Currently, there are nearly 300 Islamic banks and financial institutions worldwide.

Its assets are predicted to grow to $1 trillion by 2013.

Azizul Haque expects that higher growth rates in the next decade will force the global financial systems to Islamic banking.

“There is not any sort of apprehension regarding the success of Islamic banking,” the renowned economic expert said.

“Capitalization could not solve the global economic problems.

“The world is looking for a new economic order. Islamic economic system will be that new economic order.”

Islamic banking in the Philippines

01. March 2010 · 1 comment · Categories: Islamic Banking in Philippines · Tags: , ,
Development Bank of the Philippines

Development Bank of the Philippines

Ignacio Bunye of Speaking Out wrote a recent article on the increasing interest in Islamic banking in the Philippines.

Until recently, he says, Islamic banking was little known in the Philippines, in spite of the fact that The Philippines actually pioneered in Islamic banking with the creation of the Al-Amanah Islamic Investment Bank of the Philippines in 1973.

Now, however, interest seems to be rekindling. The Development Bank of the Philippines recently obtained full control of Al-Amanah Islamic Investment Bank by acquiring the national government’s 69 percent stake in the bank.

The bank plans to expand their operations in majority-Muslim Mindanao, and they have sent 15 banking executives to Malaysia to be trained in Shari’ah-compliant Islamic banking.

Here is the story in full:

Islamic banking in the Philippines

By Atty. IGNACIO BUNYE
February 28, 2010, 4:02pm

Not many of us are aware that there is such a concept as Islamic banking, and that there is actually a special bank for our Muslim brothers and sisters.

In a country like the Philippines where there is a significant Muslim population, this financial system is indeed very important.

Islamic banking pertains to a system of banking that is consistent with the principles of Sharia (Islamic law). In this type of banking system, the collection and payment of interest, which Muslims refer to as “riba,” is strictly prohibited.

Islam forbids transactions involving interest because of its teachings that all income must be determined by the supply of work associated with the factors of production.

It emphasizes that if money is lent for interest, capital is consequently augmented without any effort. Profit-Loss sharing in Islam encourages Muslims to invest their money and become partners in order to share the profits and risks of the business.

Islamic law prohibits investing in sectors contrary to Islamic values such as gambling, alcohol, tobacco, the arms industry and pornography.

In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller and resell it to the buyer at a profit, while allowing the buyer to pay the bank in installments.

The Philippines actually pioneered in Islamic banking with the creation of the Al-Amanah Islamic Investment Bank of the Philippines in 1973. Al-Amanah even antedated the establishment of the Dubai Islamic Bank in 1975.

However, for a variety of reasons, principally lack of expertise in this new field and lack of general public awareness, Al-Amanah failed to really take off the ground.

In the 1980s, the Government of Malaysia and Bank Negara began actively promoting Islamic banking in Malaysia. The following decade saw the development of a regulatory regime for Islamic Financial Institutions by the Central Bank of Bahrain.

Financial institutions and products designed to comply with the central tenets of Sharia are among the fastest growing segments of the global financial industry. The number of Islamic financial institutions worldwide now exceeds three hundred, with operations in 75 countries and assets in excess of US$400 billion.

Islamic banking has also been estimated to be growing by as much as 20% a year, largely fuelled by wealth from oil.

With these developments, interest in Islamic banking has been rekindled. With Monetary Board approval, the Development Bank of the Philippines recently obtained full control of Al-Amanah Islamic Investment Bank by acquiring the national government’s 69 percent stake in the bank.

Forward-looking DBP President Rey David sees in Al-Amanah a new opportunity for DBP to expand its SME operations in Mindanao as well as other banking services to include remittances especially from the Middle East.

DBP has already sent 15 top executives to Malaysia to hone up their skills in Sharia banking.

Rey David believes that under new management, the refurbished and rebranded Al-Amanah could serve as gateway to Brunei, Indonesia, Malaysia and to the economies of other Muslim countries.