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Home > BusinessWorld > Features > August 2001 > Full Story

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Islami Bank Bangladesh Ltd

Corporate Report

Islami Bank Bangladesh Limited introduced unconventional way of banking business in the country. It started its operation in 1983 and ended the initial year of operation with a total deposit of Tk 14.41 crore. The deposit amount rose to Tk 3533.44 crore on June 30, 2001 registering a substantial growth.


The investment portfolio of the bank is extended at 2.50 per cent for agriculture and rural investment, 18 per cent for industrial term investment, 13 per cent for industrial working capital, 10 per cent for housing and real estate, 4 per cent for transport and communication, 0.05 per cent for electricity, gas, water and sanitation services, 2 per cent for storage, 43 per cent for import, export and local trade and trade related activities, 1 'per cent for poultry and dairy, 2 percent for rural development scheme, 2.50 per cent for other special schemes, 0.50 per cent for micro-industry and one per cent for other productive purposes.


The overall recovery rate of the bank is 93 per cent. Islami Bank has introduced small business schemes micro industries finance, under the bank finances projects with limit upto Tk 30,000.


Islami Bank functions in a market where interest based conventional form of banking covers about 90 per cent of the banking sector. Islami Bank works with the concept of interest-free banking and it has proved that the new banking with interest free concept could be successful and expanded in the country.


The Bank introduced projects like Rural Development Scheme, an investment project that conforms to social responsibility for the downtrodden in rural areas as its prime priority. The Rural Development Scheme has been designed to help improve the living standard of people, particularly the women in rural areas. The Rural Development Scheme is an unprecedented success in social upliftment by means of empowering the downtrodden through economic emancipation. The bank uses depositors' funds in interest-free ways in rural areas where downtrodden people are susceptible to several evil designs of interest groups.


About 86 thousand people in rural areas, 90 per cent of whom are women, are now being covered under the Rural Development Project. Among them, about 72 thousand have already fully adjusted the disbusred fund. The recovery rate is about 99.7 per cent. The bank disburses Tk 3000-15,000 under the project per person. More than Tk 90 crore have been disbursed so far under the Rural Development Scheme. The project is now being operated in about 2200 villages in 45 districts through 21 branches.


The bank is planning to open some new branches in rural areas to add further pace to its Rural Development Scheme. The scheme allows investment in production of 21 various agro and agro-related products, food, cereal and cash crops, off-farm activities like dairy, cow fattening, goat rearing, poultry, shopkeeping, peddling, rural transport like, rickshaw, rickshaw-van, cart etc, irrigation equipment, hand tube-well, housing materials etc.


The bank has a subsidiary, the Islami Bank Foundation. The Foundation is engaged in social welfare activities, side by side taking care of the requirement of sanitation, medicare and education of the villages through integrated area development approach.



The other schemes of the bank include housing investment scheme, car investments, investment for doctors, small business schemes, agriculture implements investment scheme, silk weavers investment schemes, micro industries investment scheme etc.


The bank is determined to practice Islamic banking which is an alternative to conventional banking. It prefers investing in productive initiatives by best utilisation of people's savings. But Murabaha, title being pledged with the bank and Bai Muazzal, title being pledged with the client under hypothecation are the two major modes of Islamic banking. About 41 percent and 21 per cent of the Islami Bank's total investment portfolio are ivnested in those modes respectively.


The bank achieved successes in mobilising deposits and distributing profits. The management of the bank maintains that there is still tremendous potential of expanding Islamic Banking in the country. It has already established that banking without interest is feasible in the country. The bank now expects to contribute to the development of an Islamic Money Market in the country.



Source : The New Nation


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