Md. Fariduddin Ahmed, a prominent figure in the realm of Islamic banking, underscored the fundamental principles and concepts that drive the advancement, nurturing, and implementation of Islamic modes and mechanisms within the financial sector.
In a recent interview with 抖阴精品 Business magazine, the former managing director and chief executive officer of Islami Bank Bangladesh articulated the overarching goal of contributing to the realisation of the objectives of the Islamic economy, ensuring strict adherence to Islamic principles.
Currently heading Shariah supervisory committees of various financial institutions and banks, including One Bank Limited, Fariduddin Ahmed shared invaluable insights into the intricacies of Islamic banking operations.
Delving into the details of these operations, he highlighted both the opportunities and challenges on the path to growth, covering a spectrum of topics related to Shariah banking in Bangladesh.
Fariduddin emphasised the necessity for innovation to align with the rapid evolution of technology, business, and finance.
According to him, Islamic banks are consistently reassessing their systems and procedures to adapt to the dynamic needs of the times.
He stressed that innovation is crucial to keeping pace with the rapid development of technology and the changing nature of business and finance.
The former CEO stressed the importance of client orientation, human resource development, and the incorporation of cutting-edge technology for business development and adherence to Shariah norms.
Notably, various authoritative bodies, including AAOIFI, IFSB, Shariah supervisory committees of local Islamic banks, central Shariah board, and Bangladesh Bank, have issued numerous Shariah standards, accounting standards, governance standards, and ethical standards.
In Bangladesh, Islamic banks have developed their own standard operating procedures, deposit and investment guidelines, trade product programmes, corporate governance policies, and corporate social responsibility policies.
Fariduddin noted that these standards and guidelines play a crucial role in shaping the ethical landscape of Islamic banking.
He pointed out that dual banking is gaining popularity due to the competition among Islamic banks, with the introduction of a full range of products similar to those offered by conventional banks.
The market share of Islamic banking is steadily growing in Bangladesh and globally, attributed to the demand from existing customers of conventional banks for Islamic banking products and services, as well as the higher rate of business growth and performance.
Islamic banks distinguish themselves by avoiding interest, speculation, and harmful elements in business, adhering strictly to moral values and ethical conduct.
Fariduddin highlighted the popularity of Islamic banking due to the introduction of rural development microfinance schemes and welfare-oriented investment schemes, in addition to providing SME finance.
He emphasised the pioneering role played by Islamic banks in mobilising wage earners鈥� remittances and engaging in retail banking and CSR activities.
The veteran banker emphasised that the foundational principles of Islamic banking are aimed at promoting, fostering, and developing the application of Islamic modes and mechanisms in the financial sector.
The ultimate objective is to achieve justice, goodness, and welfare in this life and the hereafter, while establishing gracious conduct in economic affairs and ensuring proper wealth distribution in society.
Riba (interest) is strictly prohibited in Islam, and Islamic banks operate within the bounds of Shariah-permissible business and services.
Each Islamic bank maintains a Shariah supervisory committee comprising Islamic scholars proficient in Islamic business and financial laws.
Despite the success and growth, Fariduddin acknowledged challenges that need to be addressed for further acceleration.
These challenges include an inadequate legal and institutional framework, lack of uniformity in Shariah standards, insufficient customer orientation, inadequate training, and education facilities, absence of a developed Islamic money and bond market, shortage of skilled and professional Islamic bankers, illiquidity of asset structure, and low exposure in profit and loss-sharing modes of investment.
Currently, Bangladesh hosts 10 full-fledged Islamic banks and branch/window-based Islamic banking in 23 conventional banks. Islamic banking controls more than 25 per cent of deposits and 28 per cent of investments in the country鈥檚 banking industry.
Fund and liquidity management by Islamic banks adhere to the Asset and Liability Management Guidelines issued by Bangladesh Bank, ensuring compliance with Shariah principles. Islamic banks also follow the CRR, SLR, and Investment Deposit Ratio fixed by Bangladesh Bank.
At present, Islamic Money Market Instruments, such as Bangladesh Government Islamic Investment Bond (BGIIB), Bangladesh Government Ijarah Sukuk (BGIS), Inter Islamic Bank Fund Market (IIFM), and Islamic Refinance Fund Account (IRFA), are available for Fund and Liquidity Management.
In terms of deposit acceptance, Islamic banks in Bangladesh operate under two modes as per Bangladesh Bank guidelines - Al-Wadiah and Al-Mudarabah Mode.
Al-Wadiah, similar to the current accounts of conventional banks, is maintained by corporates and institutions for transaction purposes, with no profit/loss sharing.
Islamic banks offer various products under Mudarabah principles, investing in the real sector of the economy while strictly adhering to Shariah norms.
Dispute resolution mechanisms, including arbitration clauses involving the Shariah supervisory committee, ensure ethical and Shariah-compliant practices are maintained throughout the banking processes.
Regular monitoring, follow-up, and maintaining strong client relationships contribute to the ethical integrity of Islamic banking, he said.