Islamic finance has emerged as the ultimate solution to the poverty due to its unique methodology based on Islamic Shariah. It has already put its strong foot in Bangladesh and now posed to be the main driver of the poverty stricken Asian economy.
Mohammad Abdul Mannan, an Islamic banking expert and Managing Director of Islami Bank Bangladesh Limited (IBBL) said this during his talk with The Daily Observer.
IBBL is the bright example of the success of Islami finance as the bank could find a niche market within a span of time in a market place where the total banking system was over burdened with huge bad assets, he said.
"Now IBBL is identified as a pro people bank for its pioneering contribution to the poor, new entrepreneurs, women and SMEs with the highest amount of investment in agriculture and rural development", Abdul Mannan said.
In terms of quality of assets, rate of returns, it has been rated as the top private bank of Bangladesh and leader of financial inclusion. The bank obtained many recognitions both from foreign and local watch dogs for its outstanding performance and efficiency in operations.
The first part of the views of IBBL chief was published Tuesday where he claimed that interest based greedy banking would be kicked out by interest free participatory banking in the coming days.
The IBBL started its operations in 1983 as the first Islami bank of South Asia following a series of steps after Bangladesh signed the Charter of Islamic Development Bank In August 1974, and committed itself to reorganise its economic and financial system as per Islamic Shariah.
Meanwhile, IBBL has found a strong footing with its strong capital base in the country's banking sector where a total of 56 banks are competing each other for a limited market share. The bank's property and assets has increased remarkably thanks to its low level of investment classified and increasing income driven by robust foreign trade, excellent remittance income and high rate of returns against its investments.
The IBBL's total assets stood at Tk 600.94 billion as on June 30, 2014, compared to Tk 549.98 billion during the corresponding year of last year while its non banking assets rose to Tk 12.88 billion from 4,5.45 billion.
"Profit-loss sharing business, production-oriented and growth promoting policy, innovative technology based products and quick and round the clock online service helped the IBBL to remain at the top position in the country's banking race", the managing director of the bank said.
Islami Bank offers the highest rates of returns to its customers and has been playing the pioneering role in rural economic growth with excellent performance in other areas of financial inclusion.
"Our vision is to always strive to achieve superior financial performance, be considered a leading Islamic Bank by reputation and performance", IBBL Managing Director said describing the performance of his bank.
"Our goal is to establish and maintain the modern banking techniques, ensure soundness and development of the financial system based on Islamic principles", he said.
Under consumer financing, the IBBl finances to the individuals for meeting their personal. family and household needs. The bank has taken up various welfare oriented investment Schemes
IBBL has introduced its online Banking service since 2006. Being the largest in online connectivity among all the branches we are capable of providing the better customer service to our clients.
With a substantial growth in business of IBBL and the growing demand from customers the number of Islami banks has increased to 18 in the country within a few years while 15 conventional banks also introduced financial tools and products in compliance with Shariah through specialized branches.
But some people doubt whether such Islamic windows fully comply with Shariah. They raise a question as to whether these organisations are truly Islamic, when their capital is not completely Halal or permissible from the Shariah point of view.
Secondly, many customers also believe that conventional banks are involved in many non-permissible activities from the Shariah point of view such as usury and speculating on derivatives. But IBBL chief Mohammad Abdul Mannan denied to make any comment on this issue right now.
" Time has not come to make any comment on this issue. But in a nut shell, I can say they are doing well and more banks will come to follow them", he said.
During the talks, Mohammad Abdul Mannan, an Islamic banking expert also expressed his ideas and thoughts on the future of Islami finance and banking now has become a focal point in the global financial market.
In this context, Mr. Mannan said the Islamic finance and banking has already captured a sizeable portion of the share in the global market. "Because, Islami finance is a response to both religious and economic exigencies for its unique methodology and ethics", he said.
Asia presents huge developmental potential for Islamic finance given the untapped potential in India, Bangladesh and Indonesia, Mr. Mannan told the daily.
"The most important is that this Islamic finance can be utilised for greater integration of Asian financial markets with the real economy and for improvement of the economic balance between emerging and frontier markets", he said.
With a wide professional experience both at home and abroad from marketing to development of Shariah based Islamic finance products, Mohammad Abdul Mannan assumed the charge of the IBBL chief executive officer of the bank in May 2010.
A fellow of Malaysia based International Centre for Leadership in Finance (ICLIF) and associated with different national and international professional bodies, Mr. Mannan is is a prolific writer on Bangladesh studies and Islamic Banking and has got to his credit a good number of books.
At present, he leads the Task Committee of Islamic Banks Consultative Forum, the apex body of Shariah based financial institutions in Bangladesh and working as the Vice Chairman of Association of Bankers Bangladesh, the highest body of banking professionals of the country.
Islamic banking, for its profit-loss sharing character, is conceived as more production-oriented and growth promoting than its conventional counterpart. This is because the bank's earnings are directly linked to the earnings generated from the venture financed by it", Mr. Mannan said replying to a question about why his bank could earn impressive growth in the fragile banking system of Bangladesh.
"We provide need based service, while conventional banks are doing greedy business and charge high interest. We are not a bank like liaise fairs era, but a bank who offers customers to do partnership business and finance the project without any interest", he said.
In this regard, IBBL chief said replacement of interest with the principle of profit-loss sharing has increased the horizon of investment opportunity in an economy like Bangladesh. It also promotes efficient allocation of financial resources, ensures equitable distribution of income and promotes stability in the economy, which encourage the people to do business with IBBL.
"Thus, Islamic banking has become an efficient financial method from most of the macroeconomic measures of efficiency", Mr. Mannan noted.
He said Islamic banks have already popped up in some Western countries, such as the Kuwait-backed Bank of London and the Middle East (BLME). This geographic expansion is expected to continue both to cater to Muslim consumers and to find new investment opportunities for large, cash-rich Islamic banks in the Middle East and Asia.
"Having thus grown across all component segments in Asia too, as at end-2013 the region's Islamic finance assets totalled about $391.2 billion, equaling 22 per cent of Islamic finance assets worldwide", IBBL chief said quoting from a report prepared by a Middle East based financial institution published recently.
Asia's Islamic finance asset composition is characteristically balanced - in particular, among Islamic banking and Islamic bonds sectors - with Islamic banking accounting to 49 per cent of aggregate Islamic financial assets in Asia, followed by financial certificates (45 per cent), Islamic funds (5 per cent) and Takaful (1 per cent), a co-operative system of reimbursement in case of loss, the report said.
Quoting the latest report of Islamic Financial Services Board (IFSB), an international standard-setting organization, Mr. Mannan said Islami banking has already put its strong footings in the global financial markets with impressive growth trends since the last decade.
According to the report, the Islamic finance's experienced a growth of 17.04 per cent in 2013, and an impressive average growth of 20 per cent since 2009, driven by consumers demand. This has contributed a lot in promoting innovation and growth of world economy mostly in South Asia.
Analysts at Standard & Poor's predicted that assets held by Islamic banks in the world continue to grow by more than 15 per cent per year, and the potential size of Islamic financial markets could reach several trillion dollars in the coming days.
The demand for new Islamic investments is expected to outstrip supply by as much as $100 billion by 2015, an imbalance that could translate to much-needed liquidity in some tight markets, the report said. In this context, IBBL chief pointed out that the basic principles and ethics of Islami banking have propelled its growth when the global economy was depressed by slow down. The world has now been expe?riencing operation of as many as 250 Islamic banks and financial institutions in more than 50 countries, Muslim and non-Muslim.
Mr. Mannan said international banks such as HSBC, Crédit Agricole, and Standard Chartered have established Shariah-compliant banking divisions, and advised corporations and governments on issuing Sukuk and other financial products.
The British Prime Minister David Cameron announced in 2013 that the United Kingdom will issue a £200 million ($327 million) Islamic bond, or Sukuk, making it the first non-Muslim country to tap into Islamic financing. "Companies in the United States are also considering Islamic finance to fund business ventures and infrastructure projects", Mr. Mannan said.
"Islamic finance and banking is no longer just a theory or dream. It is now a reality, albeit an emerging, evolving and fast growing reality", Abdul Mannan said and explained the concept of Islami banking and the reasons behind its impressive growth.
"In view of their religious and ethical commitment, Muslims have never compromised to the concept of riba. For 1200 years, they have developed and successfully managed a thriving economy on a riba free basis. They were a major actor in the arena of the world economy', he said.
Islamic finance stands for a equity sharing and stake taking. It operates on the principle of a variable returns based on actual productivity and the performance of the project-specific or general, individual or institutional, private or public.
"Islam wants the economy, its major monetary and business dealings, to move from a debt based relationship to equity based and stake taking economy, while there is scope for debt based transactions on the principle of Qard Hasan, the overall thrust of the economy would be toward equity based and risk sharing arrangements", he noted.
"This is a revolutionary change as it calls for a new psychology and a new approach to the economy", Mr. Mannan said.
This is distinct from the capitalist approach where the whole economy is geared for making money by manipulating, managing and creating money and serving the interest of the renter class, he said noting that this is the root cause of exploitation in the society and leads to the grossly inequitable distribution of income and wealth in the economy.