Wali-ur Rahman"s Remarks on Islami Bank

Wali-ur Rahman"s Remarks on Islami Bank -Zahid Zamir

Former Secretary, Ministry of Foreign Affairs and Director, Bangladesh Institute of Law and International affairs (BILIA) Ambassador Wali-ur Rahman in a seminar on terrorism held on April 16, demanded the closure of islami bank Bangladesh limited (IBBL). Although he did not mention the reasons for it closure except alleging IBBL which is not only the first generation Interest free Islamic bank in the Country but has also been successfully operating in the banking area for over 25 years with an Islamic political party in Bangladesh. Before I explain how detrimental it will be for the economy of Bangladesh, let me first mention some achievements of IBBL for the readers. The Islami bank Bangladesh Limited (IBBL) was established on March 13, 1983, is now the pioneer in the Islamic Banking in Bangladesh. The bank was sponsored by foreign institutions,, local institutions, a group of local businessmen representing various groups and other important personalities of Middle East and Europe. It carries out its business activities through more than 196 branches in both urban and rural areas. As per the provisions of the credit rating companies rules 1996, CRISL (Credit rating Information & Services Limited) has reaffirmed the long term rating of Islami Bank Bangladesh Limited (IBBL) to �AA� (Double A) because of its good fundamentals such as diversified ownership pattern, strong market share, improvement in financial performance, improvement in the quality of investment portfolio, comfortable liquidity position, experienced management team, sound HR development program, improvement in automation, wide branch network, significant involvement in corporate social responsibility activities etc. Year Deposit Investment TK. In Million Market Share (%) Tk. In Million Market Share (%) 2007 166,325.29 7.46 144,920.61 8.46 2006 132,419.40 7.24 113,575.07 7.28 IBBL has the largest market share in terms of deposit and investment among the private sector commercial banks in Bangladesh. The deposit of the banking sector stood at Tk 2,230.06 billion at the end of YE 2007 by 48 banks in the Country. The total deposit of IBBL in YE 2007 was TK. 1666.33 billion which constitutes 7.46% (in 2006 it was 7.24%) of the total deposits of the banking sector. The growth rate of deposit of IBBL was 25.61% whereas industry growth rate was 22.18%. In YE 2007, IBBL�s total investment was TK. 144.92 billion which was 8.46% (it was 7.28% in 2006) of industry investment of TK. 1,713.51 billion. The investment growth rate of IBBL was 27.62% whereas industry growth was only 10.05%. The IBBL is the first generation and one of the largest commercial banks in the country with stable performance . The financial performance of the Bank has been improving over the years in terms of Net Income, Return on Asset and Return on Equity. As far as the operating efficiency is concerned, the increase in the IBBL growth rate over the years (37.71% in 2007, 28.01% in 2006) shows the overall improved efficiency of the Bank. IBBL thorough its efficient performance in capital adequacy, good asset quality, sound management, good profitability, and strong asset base has proven to the best private commercial bank in Bangladesh. As far as the corporate governance is concerned, based on the key elements of good governance principles such as honesty, trust and integrity, openness, performance orientation, responsibility and accountability, mutual respect, and commitment to the organization, IBBL�s delegation of power, corporate management, structured HR policy, Annual training plan all of these show the practice of good corporate governance in IBBL. IBBL also carries out diverse social and philanthropic activities through Islami Bank Foundation. The foundation has been formed in order to provide financial assistance to the poor through various income generation, health care, relief and rehabilitation, education, and humanitarian programs. Islami bank hospitals are functioning in six places, two in Dhaka, 2 in Rajshahi, one in Khulna and one in Barisal. IBBL is also contributing to medical education through its Islami Bank Medical College at Rajshahi and establishing a Nursing training Institute in Rajshahi. The Islami Bank Foundation also established a health technology institute named � Islami Bank Institute of health technology�. The large number of unemployed youth of the country may be turned as assets through taking up Human Resource Development (HRD) programs in � Islami Bank Institute of Technology�. The Foundation is also operating mobile eye camp, charitable dispensaries, distressed women rehabilitation centre, service center for safe shelter during natural disaster and Monoram Islami Bank Craft and fashions has been functioning to create conducive and healthy atmosphere in which women can contribute to their family income . IBBL was awarded for several times by International & National organizations. The Global Finance, a reputed London based quarterly magazine, awarded IBBL as the best bank of the Country for the year 1999, 2000 and 2008. IBBL is one of a few banks according to CAMEL (Capital, Assets, Management, Earnings and Liquidity) rating made by the Bangladesh Bank. IBBL has managed to find a niche market of its own according to �BANK WATCH�, a New York based international credit rating agency. IBBL�s profitability trend has been quite impressive. The Bank�s ability to keep its return on Asset is well above the industry average, reflected its resilience to possible shocks in the banking systems. While the country�s banking system is burdened with bad debt portfolios and also suffers from a liquidity shortage, the IBBL has created a unique precedence by improving its reserve and deposit positions substantially, making handsome profits , and offering attractive dividends to its share holders and depositors. There is no doubt that there is a conspiracy to tarnish the reputation of the Islamic bank Bangladesh limited and thereby all interest free financial institutions in the country. The performance of IBBL and all the six interest free Islamic banks in Bangladesh along with Islamic banking counters in different conventional banks are largely contributing in the economy of Bangladesh. Not only IBBL rather Islamic financial institutions are becoming resourceful day by day. The government of Bangladesh and the Bangladesh Bank should assist the country�s Islamic financial systems to help smoothen the growth of Islamic financial system, thereby making Bangladesh specially the Capital City Dhaka the hub of Islamic financial centre like Dubai. Conventional banks in many western, as well as eastern countries after realizing the huge benefit of the Islamic banking system have opened Islamic banking windows that run parallel with interest-based windows. The study shows that conventional banks that have opened interest-free windows are able to entice many non-Muslims in the non-Muslim majority countries because the basic tenet of Interest-free Islamic banking underlines its commitment to equitable and fair distribution of money resources. Terrorist have no religion. They can have accounts in any bank. But because of some ruthless and unscrupulous individuals an institution can not suffer. As the chairman of the Jeddah based Dallah Albakarah Group and of the Bahrain based General Council for Islamic banks and financial institutions (GCIBFI) Saleh Kamel said: � Islamic banks are neither merely charities nor at all terror facades. Islamic banks should be operating under the supervision of central bank, receiving clients� deposits and investing them� there is no surplus funds to finance terror, nor do they corridors for circulation of funds among terrorists�. Political bickering and vendetta is in nothing new in Bangladesh. But it has reached a new height in the recent time. Sometime wittingly or unwittingly we bring that bickering and vendetta in the economic and other affairs that damage not only the image of the country but the economy as well. In a free market economic system , a financial institution can not be owned by any political party alone. People affiliated with any political party might form a bank following the laws as well as banking and company act of the country, but a bank whose share is traded on the stock market is owned by its shareholders and any body at any time can buy and sell the shares of the company. So demanding the closure of a giant Islamic bank in Bangladesh; which has the highest operating profit among all the private commercial banks in the country, has set a model for local and international interest free Islamic banks to follow, will cause the economy of a country like Bangladesh to collapse. In a democratic country like Bangladesh, as an individual we have the right to express our political opinions. However the expression of that right should not and must not be damaging for the image of the country and the economy of the country. Mr. Waliur Rahman might have different political opinions but as an individual who held different responsible positions of the Country should have been very cautious in expressing his political opinion in this regard. writer: teaches at York College, City University of New York and is a research fellow of IERF. He can be reached at : zzamir@york.cuny.edu