Achievements, Impacts and Prospects: Bangladesh

The success of the Islamic Bank of Bangladesh needs to be assessed against the primary objectives laid down at the time of its inception, which were as follows:

1. To run all its activities strictly as per Islamic Shar'iah;
2. To establish the Bank on sound financial footings;
3. To help Islamize banking and economic system of the country; and
4. To make contribution towards the welfare of the society.

Looking from this perspective, the IBBL has many successes and achievements. These are summarized below:

• IBBL is the pioneer institution for the introduction of Islamic banking in Bangladesh. Its success has imbibed other sponsors at home and abroad to establish similar banks in Bangladesh. Three national and one international Islamic banks have since been established in the country. A private sector conventional bank has also established two full fledged Islamic banking branches.
• It has successfully mobilized deposits from a section of people who hitherto did not make any deposit with interest based banks.
• The products, which are offered by IBBL through its 107 branches, located at important centres all over the country and their spontaneous acceptance by the people proves the superiority of Islamic banking.
• IBBL’s market share of deposit, investment and ancillary business is steadily increasing. The Bank, though still small, handles more than 10 per cent of the country's export and import trade. Among the contemporary commercial banks in the country, its position is first in respect of mobilization of deposits, deployment of fund and earning profit.
• At the initiative and drive of IBBL, several universities in Bangladesh have introduced courses on Islamic Banking and Finance. The Bank has organized a good number of national and international seminars on Islamic Banking and Economics. On its continuous persuasion to allow formation of Islamic Insurance Company, the government is inclined to grant license for establishing Islamic Insurance Company shortly.
• The Bank has contributed 850 million Taka as income tax to the government exchequer on its net profit over the last 15 years.
• It also heads Bangladesh Association of Banks (BAB) which provides a platform to ventilate the standpoints on issues of the private sector banks.
• IBBL has taken initiative to form an Association of Islamic Banks in Bangladesh for furtherance of the causes of Islamic banking.
• For carrying out social welfare activities, a foundation called Islami Bank Foundation has been set up. The Foundation has taken up a number of countrywide schemes and a sum of Taka 260 million has so far been spent for this purpose. Some important areas covered by the Foundation are:

Resource generation: It aims to train rural health workers and to fund poultry, pisciculture, cottage industry, small trading, in addition to providing rickshaws, sewing machines etc. The objective is to enhance income and employment generation activities. (See Annexure-F).

Education Support: Scholarships and stipends are awarded to the poor and meritorious students under this scheme.

Health and Sanitation: Aims to establish child and maternity care centres and charitable dispensaries, provide grants for medical treatment of the poor, install tube-wells for the supply of drinking water and provide sanitation facilities for the rural people. Other than this, the Foundation has set up proper hospitals to provide treatment at reasonable cost.

Humanitarian Assistance: Assistance is provided to the poor, disabled persons, families affected by river erosion and for marriage of poor girls.

Emergency Relief Operations: People affected by natural calamities are helped under this scheme.

Social Welfare: The Foundation has been establishing permanent service centres in coastal areas and off-shore islands to be used for the purpose of integrated social development as well as safe shelter during natural disaster.

Human Resource Development Program: The foundation has established several centres for imparting vocational training and nursery schools. Mosque-based income generating centres and prisoner rehabilitation projects are also expected to be initiated in the near future under this program.

Promotion of Religious Activities: Financial assistance for construction, extension and renovation of mosques is provided under this scheme. In addition, Islamic literature and research magazines are distributed among academicians, journalists, judges, lawyers, high officials, bankers, and important libraries and centres of learning.

Sales Centres: The Foundation has established sales centres to encourage poor women folk for self employment and for marketing home made garments, handicrafts and other items produced by them.

• IBBL is amongst a few in the country who maintain prescribed capital. It is now 11.39 per cent capitalized bank on its risk weighted assets as against 8 per cent as per BIS standard adopted in Bangladesh since 1996.
• IBBL have better asset quality amongst the state owned and local contemporary private commercial banks.
• It is amongst only a few in the country maintaining adequate provisions against non-performing assets as per criteria set by the Central Bank under the Financial Sector Reforms Program prescribed by the World Bank.
• The Bank is the 5th largest player amongst all the banks of the country in respect of handling foreign exchange business.
• IBBL have the largest network of branches (numbering 106) amongst the contemporary private banks (four more branches will be opened within June 1999 raising the number to 110).
• The only Bank in the country spending more than Tk. 20 million on an average per annum for socio-economic uplift of the less fortunate and down trodden.

Source: Experiences in Islamic Banking: A Case Study of Islami Bank Bangladesh, Institute of Policy Studies. Republished with permission.