...1. Introduction History of Islamic Business Transaction Without a doubt, the history of Islamic Banking is quite interesting. Since the medieval era (1,000 – 1,500 AD), businesspeople in the Middle East engaged in financial transactions. At this time though, these transactions used the same financial principles as the Europeans. Early History of Islamic Banking Since the Arabs of the Ottoman Empire traded extensively with people in Spain, they also developed certain no-interest financial systems that worked on a profit and loss sharing method. These systems, in turn, financed trade and other business affairs. When the Middle Eastern and Asia began to be more important trading partners for various European companies, the Europeans opened banks in these countries – with many of these banks based on the interest-bearing financial system. As the trading relationship with the Europeans continued to play an important role, these types of financial institutions began to be more prominent outside of Europe. However, even when local trading business owners used these commercial banks, they often only transferred money between accounts. Both borrowing and depositing money was limited as the local population wanted to refrain from partaking in interest-bearing transactions. Further, certain co-operative institutions based on the original profit and loss sharing model still existed, but only in certain locations. As economic demands increased, avoiding banks was not an option...
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...paper focuses on the prospect and growth potentials of Islamic banks in Bangladesh as perceived by Islamic and conventional bankers. The study noted that there is a high demand for interest-free banking services from a segment of people in Bangladesh who have a strong desire to abide by the rules and principals set by Shariah. Along with religious requirement, economic exigencies provide a new outlook to the role of banking in promoting investment/ productive activities, influencing distribution of income and adding stability to the economy. The Islamic banking sector is, however, criticized on several grounds by the Conventional bankers. The banks are believed not to apply the rules of Shariah completely. Islamic banks are said to include interest in their dealings to compete effectively with the Conventional banks. Moreover, conventional banks offering Islamic banking as a parallel service are thought to do so only to add to their profitability, by attracting people who value the Shariah based system by enjoying the advantages of the special treatments from the Central bank. According to the survey, suitable and supportive legal framework would facilitate better growth of this sector. Moreover, the lack of an inter-bank money market and sufficient supportive and link institutions in the sector, act as impediments to growth of Islamic banking. Also, banks perceive the availability of training and education on Islamic banking to be inadequate in Bangladesh. To deliver superior services...
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...Responsibility in Islamic Banks of Bangladesh Quazi Sagota Samina* The evolution of Shariah based profit –loss sharing centered Islamic banking, worldwide has changed the thought of financial institutions even of the developed countries in the west. On the other hand the recognition of importance of corporate social activities in the business organizations as well as in financial institutions has accelerated the significance of Islamic banks as in Islam these CSR practice have been emphasized in different ways. Likewise the Islamic financial institutions all over the world, Islamic banks in Bangladesh are also being engaged in various social activities as a part of their responsibilities. In this study it has been tried to find out whether the Islamic Banks of Bangladesh are adhering to the prescribed forms of the CSR activities or not. This paper is mainly designed based on the CSR forms to be followed by Islamic banks as has been prescribed by Farook (2007) in his study “On Corporate Social Responsibility of Islamic Financial Institutions” under the light of Islamic Shariah. The research found compliance to the mandatory forms by the 6 full fledged sample Islamic banks in Bangladesh whereas variety in involvement in recommended forms of CSR activities by considering the scenario of banks from 2007 to 2011. The study also finds a strong positive correlation between CSR expenditure and sample banks’ deposit, loan and profitability. Keyword: Corporate social responsibility, Islamic banking...
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...8th International Conference on Islamic Economics and Finance Prospects and Problems of Islamic Banking from Bank’s Perspective: A Study of Bangladesh Dr. Muhammad Z Mamun 1 This paper focuses on the prospect and growth potentials of Islamic banks in Bangladesh as perceived by Islamic and conventional bankers. The study noted that there is a high demand for interest-free banking services from a segment of people in Bangladesh who have a strong desire to abide by the rules and principals set by Shariah. Along with religious requirement, economic exigencies provide a new outlook to the role of banking in promoting investment/ productive activities, influencing distribution of income and adding stability to the economy. The Islamic banking sector is, however, criticized on several grounds by the Conventional bankers. The banks are believed not to apply the rules of Shariah completely. Islamic banks are said to include interest in their dealings to compete effectively with the Conventional banks. Moreover, conventional banks offering Islamic banking as a parallel service are thought to do so only to add to their profitability, by attracting people who value the Shariah based system by enjoying the advantages of the special treatments from the Central bank. According to the survey, suitable and supportive legal framework would facilitate better growth of this sector. Moreover, the lack of an inter-bank money market and sufficient supportive and link institutions in the sector, act...
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...Takaful, or we can called it as Islamic Insurance, is a concept whereby a group of participants mutually ensure each other against loss or damage. Each participant carry out his / her obligation by contributing a certain amount of donation (or tabarru) into a fund, which is managed by a third party. The third party is the takaful operator. The takaful operator will pay out the funds accordingly to its participants in the event of loss or damage suffered. Any surplus is paid out only after the obligation of assisting the participants has been carried out. Through this principle, takaful operates as a protection and profit sharing venture between the takaful operator and the participants. Nowadays, Malaysia has achieved significant milestones...
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...CONVENTIONAL AND ISLAMIC BANKS OF BANGLADESH Banks conventionally fulfill the supreme responsibility of being a financial intermediary between the deficit and surplus unit of the economy. Liquidity risk refers to the excessive transaction cost, excessive loss of value and excessive exertion of time that banks have to face at the time of allocating liquidity to the third party when stipulated. Because of the unique constitutional features and regulatory conformity with the Shariah principle Islamic banks have to exert much more to manage liquidity. The core objective of this very research is to assess the extent of liquidity risk associated with financial institutions especially banks and to evaluate the concurrent liquidity risk management (LRM) along with a comparative analysis between conventional and Islamic banks of Bangladesh. The researcher has tried to investigate the significance of firm's size, net working capital, return on equity, capital adequacy and return on assets on liquidity Risk Management in case of Conventional and Islamic banks of Bangladesh. Secondary data had been the major stimulus of the research covering five year 20062010. For Islamic banks, a model estimation to predict the liquidity risk level was proven to be successful but the module failed to generate the desired result in case of the conventional banks. Moreover, net working capital in case of Conventional banks and size of the business in case of Islamic banks was found...
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...978-1-922069-19-1 Prospects of Islamic Banking in Bangladesh Md. Maruf Ullah and Md. Shahnur Azad Chowdhury In a developing country like Bangladesh, the Islamic banking system as a whole has a vital role play in the process of economic development. The study has been concentrated on “Prospect of Islamic Banking in Bangladesh”. The paper mainly emphasizes on analyzing the performance of Islamic banks and it has also identified some problems & opportunities and provided some suggestions. It has been tried to provide some information about future performance. The study also noted that there is a high demand for interest-free banking services from a segment of people in Bangladesh who have a strong desire to abide by the rules and principals set by Shariah. Along with religious requirement, economic exigencies provide a new outlook to the role of banking in promoting investment productive activities, influencing distribution of income and adding stability to the economy. Moreover, conventional banks offering Islamic banking as a parallel service are to add to their profitability, by attracting people who value the Shariah based system by enjoying the advantages of the special treatments from the Central bank. According to the survey, suitable and supportive legal framework would facilitate better growth of this sector. For a continued expansion of the Islamic Banking system, however, a number of issues that pose serious problems for Islamic banks will need to be carefully addressed...
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...In an Islamic capital market (ICM) market transactions are carried out in ways that do not conflict with the conscience of Muslims and the religion of Islam. Here, there is assertion of religious law so that the market is free from activities prohibited by Islam such as usury (riba), gambling (maisir) and ambiguity (gharar). The ICM is a component of the overall capital market in Malaysia. It plays an important role in generating economic growth for the country. The ICM functions as a parallel market to the conventional capital market, and plays a complementary role in the Islamic banking system in broadening and deepening the Islamic financial markets in Malaysia. The Shariah Advisory Council (SAC) was established in May 1996 to advise the...
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...Outline 1. The Banking System ............................................................................. 1-2 2. The Functions and Responsibilities of Monetary and Non-Monetary Institutions ............................................................................................. 1-6 3. The Functions and Responsibilities of Non-Bank Financial Intermediaries...................................................................................... 1-16 4. Other Institutions / Bodies.................................................................. 1-30 5. Summary and Conclusion .................................................................. 1-34 Practice Questions ...................................................................................... 1-35 Learning Objectives What you should achieve after completing this chapter: • Understand the importance of the Malaysian financial system; • Be able to apply the relevant statutory and regulatory provisions governing the Malaysian banking system; • Appreciate the functions and responsibilities of monetary and non-monetary institutions, together with non-bank financial intermediaries; • Gain knowledge of the role of Bank Negara Malaysia; and • Understand the scope of the regulatory framework within the Malaysian financial system. © Institut Bank-Bank Malaysia 1-2 CCP-FSPC The Malaysian Financial System 1. 1.1 The Banking System Brief history of the Malaysian financial system 1.1.1 Evolution Trade has been...
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...The Evolution of the CPA Practice Introduction According to Pepe (2011), everyone understands that accounting is the mode of communication in business. It is the channel through which investors and businessmen get to understand whether their investments are worth it or not. It helps in giving the value of an investment at any given time. The contemporary accounting practice and methods are quite diverse. However, they have not been so since the beginning. According to Waweru (2010), there are numerous changes that have marked the evolution of accounting. This research paper seeks to look into the accounting evolution process. Reese and Janes (2012) indicate that accounting has changes both in terms of accounting theories, as well as application of technology in accounting. Therefore, when looking at the history and evolution of accounting, it is imperative to look at the changes that have occurred. These changes are both in theory, and the application of technology in accounting. It is also worth looking at the various accounting theories that have come up. These have to be related to the changes in technology, higher literacy levels, and more complex business operations which call for the review of accounting practices. The need to protect the interest of the public is also a chief reason why changes in the accounting practice needed to occur. This essay looks at the changes both in practice and application of technology. Evolution in Theory and Practice According to...
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...FATWA ON BANKING AND THE USE OF INTEREST RECEIVED ON BANK DEPOSITS BY UMAR IBRAHIM VADILLO October 2006 FATWA Fatwa on Banking | The Use of Interest Received on Bank Deposits Table of Contents 1. Introduction ........................................................................3 2. The Issue .............................................................................7 3. Understanding Riba ...........................................................10 3.1 A world shaped by Riba.................................................... 10 3.2 What is Riba? ................................................................. 11 4. The Misunderstanding of Riba............................................20 4.1. Religious reformism and capitalism ................................... 20 4.2 The Islamic Reformers ..................................................... 23 4.3 The followers of Reda ...................................................... 27 4.4 The misunderstanding of Riba an-nasiah today.................... 28 4.5 Equating Riba to interest in a loan ..................................... 33 4.6 Islamic Banking .............................................................. 34 4.6.1 Islamic Banks are banks ............................................. 34 4.6.2 Murabaha: what it is and what it is not ......................... 38 4.6.3 How the Islamic Bank’s version of the contract of Murabaha came into being ..............................................................
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...International Journal of Islamic Financial Services Vol. 1 No.3 ISLAMIC BANKING IN BANGLADESH: PERFORMANCE, PROBLEMS & PROSPECTS Md. Abdul Awwal Sarker Islamic banks can provide efficient banking services to the nation if they are supported with appropriate banking laws, and regulations. This will help them introducing PLS modes of operations, which are very much conducive to economic development. It would be better if Islamic banks had the opportunity to work as a sole system in an economy. That would provide Islamic banking system to fully utilize its potentials. Studies show that Islamic banks can not operate with its full efficiency level if it operates under a conventional banking framework, their efficiency goes down in a number of dimensions. The deterioration is not because of Islamic bank’s own mechanical deficiencies. Rather it is the efficiency-blunt operations of the conventional banking system that puts obstructions to efficient operation of Islamic banks. This does not mean that the survival of Islamic banks operating within the conventional banking framework is altogether threatened. Evidences from Bangladesh indicate that Islamic banks can survive even within a conventional banking framework by which over from PLS to trade related modes of financing. The Genesis of Islamic Banking in Bangladesh At birth, Bangladesh inherited an interest based banking system, which was introduced here earlier when the country was a part of British Colony. Since its...
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...The needs to revisit the gold dinar as a monetary stability has been voiced out by many scholars and ulama’s since 1970s. The resistance towards the interest economy could be the major motivation for the comeback of gold dinar. The prohibition of interest is not only mentioned in the Quran but the Bible and Torah. The gold prices are indeed relatively stable compared to other commodity prices, exchange rate movement and the stock market index. Manipulation of currencies and the impact toward one economy could be reduced because of the fact that gold does not inflate in value as it is a commodity and, thus has an intrinsic value. The counterfeiting would be checked if gold coin were used. By sing dinar and elimination of interest, Islamic country would have a stable currency and monetary systems, money supply growth can be expected not to overshoot growth in the real sector, thus eliminating the inflationary pressure in the economy. If all these exchange rates are eliminated by means of a single currency like...
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...FATWA ON BANKING AND THE USE OF INTEREST RECEIVED ON BANK DEPOSITS BY UMAR IBRAHIM VADILLO October 2006 FATWA Fatwa on Banking | The Use of Interest Received on Bank Deposits Table of Contents 1. Introduction ........................................................................3 2. The Issue .............................................................................7 3. Understanding Riba ...........................................................10 3.1 A world shaped by Riba.................................................... 10 3.2 What is Riba? ................................................................. 11 4. The Misunderstanding of Riba............................................20 4.1. Religious reformism and capitalism ................................... 20 4.2 The Islamic Reformers ..................................................... 23 4.3 The followers of Reda ...................................................... 27 4.4 The misunderstanding of Riba an-nasiah today.................... 28 4.5 Equating Riba to interest in a loan ..................................... 33 4.6 Islamic Banking .............................................................. 34 4.6.1 Islamic Banks are banks ............................................. 34 4.6.2 Murabaha: what it is and what it is not ......................... 38 4.6.3 How the Islamic Bank’s version of the contract of Murabaha came into being ..............................................................
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...six members and the following there are the names and IDs of our group members. Name: Mahmudul Reza ID: 1420621030 Name: Ahamad Mostofa Montasir ID: 1330348030 Name: Sazid Ahmed ID: 1410066630 Name: Shithi Samad ID: 1410566630 Name: Tanvir Hossain ID: 1320196030 Name: Lutful Kabir Sadi ID: 1220319030 Letter of Transmittal 09 December, 2014 To KH.ASEF SAFA KABIR Lecturer NSU Business School North South University Plot-15; Block-B;Basundhara,Dhaka Subject: Submission of project report on manager of AL-ARAFAH ISLAMI BANK (AIBL) Dear Sir, With due respect, we would like to submit an exclusive Report on Analytical Review of Management. The report deals with whole activities of General Banking in this Bank. We tried our level best to make the report meaningful and informative. As the time was limited, the report could not be done more comprehensively and analytical. However, we expect that you would enjoy the report. It would be very kind of you to examine our project work and give us suggestions to further enhance our skills for future prospect. Sincerely, Team: MAXIMUM SYNERGY, Section 05, School of Business (B.B.A) North South University...
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