The country's almost all Shariah-based Islami banks including the Islami Bank Bangladesh PLC are in extreme trouble at this moment as those banks have been facing acute crisis of funds for further investment.
As most of the Shariah-based banks do not have the money for fresh investments, the country's economic activities have been faltering blocking way to job creation.
In Bangladesh, Islami Bank Bangladesh was launched in 1983. The main principle of the bank was that 'wealth should not be concentrated in the hands of few people'. Following this principle, Islamic Bank has spread investment to the marginal level.
For this reason, several hundred thousand new entrepreneurs were created in the country with the help of the bank. Beginning operations in a very limited scale, many of these entrepreneurs transformed into conglomerates of the country. But, this largest bank of the country could not maintain its continuity of past success.
Not only the Islami Bank Bangladesh PLC, but almost all Shariah-based banks are in extreme trouble at this moment. At least seven banks in this sector have fallen into disaster due to severe lack of good governance, anonymous loans and unlimited irregularities and corruption. Failing to pay the money to depositors, the banks are now taking loans from the central bank. Loan (investment) distribution from these banks has almost stopped. All the processes of developing new entrepreneurs have been blocked.
Describing how he was affected by the collapse of the bank, Shahidul Islam from Shantibagh, one of the investors of Islami Bank, said, "We have various businesses in the agriculture and livestock sectors. In this case, Islami Bank was our main investor. But in the last few years, we have not got any working capital from the bank. This has affected us commercially."
"Moreover, the countries of rich economy like Europe and America, including Asia, no longer accept any letter of credit (LC) from Islami Bank. We have also faced losses due to not being able to open LCs as per demand."
Those concerned say that the disaster of Islamic banks, which is the result of irregularities and corruption that occurred in the last few years, has created a major crisis in domestic capital development.
The institutions that were established with the financing of these banks in the past are no longer getting working capital. Many industries and factories have already closed due to lack of money for daily operating expenses. Most of the Shariah-based banks do not have the money to make new investments. This has not only stalled the country's economic activities but also blocked the path to job creation.
Apart from Islami Bank Bangladesh, the other Sharia-based banks in the country are Al-Arafah Islami Bank, Social Islami Bank, Exim Bank, Shahjalal Islami Bank, First Security Islami Bank, Union Bank, Standard Bank, Global Islami Bank and ICB Islamic Bank. Of these, six banks were under the control of the S Alam Group. Only Shahjalal Islami Bank, Exim Bank and Standard Bank were outside the control of the group. After the interim government took office, Bangladesh Bank dissolved the boards of directors of seven Sharia-based banks.
According to the central bank, at the end of September last year, the amount of deposits in Islamic banking was Tk 4,36,667 crore, which is 25 per cent of the total deposits in the country's banking sector. At the same time, the amount of investment (loans) in this type of banking was Tk 4,70,443 crore, which is 28 per cent of the total investment of the country's banks. That is, the balance of loans disbursed is much higher than the deposit balance of the banks.
A senior official of Islami Bank Bangladesh said, 'Since its establishment until 2016, Islami Bank was on the right track. But after that, only one person took the deposits collected from all over the country. That is why Islami Bank is in such danger.' He said, 'Thousands of industries and factories have been established in the country with the financing of Islamic Banks. But these industries have not received working capital for several years.
The liquidity crisis and investment stagnation of Islamic banks have affected the credit growth of the entire banking sector. The monetary policy for the first half of the current 2024-25 fiscal year (July-December) targeted 9.8 percent credit growth in the country's private sector. But this growth was achieved only 7.28 percent by the end of December. This stagnation in credit distribution in the private sector still continues.
In addition to core banking activities, foreign banks are also stopping opening letters of credit (LC) to the country's Sharia-based banks due to the image crisis of Islamic banks.
Bangladesh Chamber of Industries (BCI) President Anwar-ul Alam Chowdhury Parvez said, "Islamic banks have a higher loan-to-deposit ratio than scheduled banks. As a result, they have provided more benefits to customers.
Since they have been able to provide more facilities to customers, now if the bank closes for any reason, the customers will be more affected. Thus, the collapse of Islamic banks is creating a crisis in domestic capital development.
Among the Sharia-based banks, the boards of First Security Islami Bank, Union Bank and Global Islami Bank were fully controlled by the S Alam Group. According to the central bank, the group has taken more than 80 percent of the total invested money in these three banks. A special audit has found that these loans were issued in the names of various anonymous organizations.
Mohammad Abdul Mannan, chairman of the reconstituted board of First Security Bank, said, "Islamic banking is not just a procedural matter. The objective matter of this type of banking is more important. Most of the Sharia-based banks in the country have been established only for the purpose of business or looting. The people who owned or were on the boards of these banks had no feeling for Islamic banking. Therefore, their conscience or values did not prevent them from embezzling the people's deposits."
