...Investment Banking Under Islamic Shariah PRINCIPLES: A Case Study on Export Import Bank of Bangladesh Ltd By Md. Mostak Ali ID: 3-03-03-025 A Project Report Submitted To Professor Md. Ali Akkas Department of Management Studies In partial fulfillment of the requirements for the award of the degree of MASTER OF BUSSINESS ADMINISTRATION UNIVERSITY OF DHAKA Dhaka 1000 September, 2011 September 29, 2011 Md. Ali Akkas Professor Department of Management Studies EMBA Program University of Dhaka. Subject : ‘Submission of project paper under evening MBA program’. Dear Sir, I, Shah Salahuddin Ahamed, am one of your students in the Evening MBA Program. It is my pleasure to inform you that, I have prepared my project paper which was assigned to me in the topic of 'Investment Banking Under Islamic Shariah Principles - A Case Study on Export Import Bank of Bangladesh Ltd.’ It was quite helpful for me to complete the paper under your prudent supervision. The theoretical knowledge that I have achieved during the MBA sessions helped me a lot to understand the practical business operations in different sectors and to prepare the report smoothly as well. My special gratitude to you & the Department of Management Studies and thanks to Exim Bank Ltd. authority. I have given my best effort to analyze the Investment Banking System in Exim Bank Ltd under Islamic Shariah principals, though I have lot to know & learn about Islamic Banking...
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...GUIDELINES FOR CONDUCTING ISLAMIC BANKING Section I Introduction to Islamic Banking Islamic Banking has experienced a phenomenal growth and expansion in Bangladesh in the backdrop of strong public demand and support for the system along with its gradually increasing popularity across the world. As a result, a number of full-fledged Islamic Banks has been established, while a good number of conventional banks have come forward to offer services compliant with Islamic Shariah through opening of Islamic branches along with conventional ones. There is also a trend of conversion of conventional banks into Islamic bank. It has, therefore, become necessary to ensure that activities of the fast growing Islamic Banks are carried out properly and uniformly according to the principles of Islamic Shariah. With this end in view, Bangladesh Bank constituted a Focus group comprising representatives of the central Bank, a number of Islamic Banks and the Central Shariah Board for Islamic Banks of Bangladesh to formulate an integrated guideline for conducting banking business of the Islamic Bank/Islamic bank branches of conventional banks. Based on the recommendations of the Focus group this guideline embodying different terminologies used in Islamic Banking operations, definitions of the terminologies, the principles and modes of deposits and investments has been prepared. It also dwelt upon the issues of liquidity, maintenance of books of accounts and preparation of financial statements...
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...I. History of Islamic Banking in Malaysia Malaysia started Islamic banking in early 1980’s. Islamic Banking is especially true for Muslim world where currently Islamic banking strides at two separate fronts. At one side, efforts are also underway to convert the entire financial systems in accordance to Islamic laws (Shariah). At the other side, separate Islamic banks are allowed to operate in parallel to conventional interest based banks. Malaysia opted for the alternative gradual way of developing and implementing Islamic banking system. 1.1 Origin of Islamic Banking in Malaysia The roots of Islamic Banking in Malaysia should go back to 1963 when the government established Tabung Haji or Pilgrims Management and Fund Board. The organisatio was established to invest the savings of the local Muslims in interest free places, who want to carry out pilgrim (Haji). Tabung Haji utilizes Mudarabah (profit and loss sharing), Musharikah (joint venture) and Ijara (leasing) modes of financing for investment under the guidance of National Fatawah Committee of Malaysia. The first call for separate Islamic bank was made in 1980, in a seminar held in the National University of Malaysia. The members who attend had passed a decision requesting the government to create a special law to setup an Islamic bank in the country. Thereafter, the government had set up a National Steering Committee in 1981 to study legal, religious and operational aspects of organized an Islamic bank. The committee...
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...Contents 1 2 10 12 What is Islamic banking? Islamic banking in Malaysia Observing Shariah principles Shariah concepts in Islamic banking Frequently asked questions Glossary This booklet tells you about the basic concepts and principles of Islamic banking. What is Islamic banking? Islamic banking is banking based on Islamic law (Shariah). It follows the Shariah, called fiqh muamalat (Islamic rules on transactions). The rules and practices of fiqh muamalat came from the Quran and the Sunnah, and other secondary sources of Islamic law such as opinions collectively agreed among Shariah scholars (ijma’), analogy (qiyas) and personal reasoning (ijtihad). Islamic banking in Malaysia • The first Islamic bank was established in Malaysia in 1983. • In 1993, commercial banks, merchant banks and finance companies begun to offer Islamic banking products and services under the Islamic Banking Scheme (IBS banks). • The IBS banks have to separate the funds and activities of the Islamic banking transactions from the nonIslamic banking business (conventional banking). • You can identify an Islamic bank or an IBS bank from the logo below: 1 bankinginfo info perbankan Observing Shariah principles All Islamic banks and IBS banks have set up Shariah Committees to guide them on Shariah matters and to make sure that they function in a manner that is in line with the Shariah. In addition, the advice of the Shariah Advisory Council which is the highest Shariah body set up at Bank Negara...
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...Introduction Corporate governance refers to the method by which a corporation is directed, administered or controlled. It includes the laws and customs affecting that direction, as well as the goals for which it is governed. Corporate governance mechanisms and controls are designed to reduce the inefficiencies that arise from moral hazard and adverse selection. Corporate governance is also viewed as a process of monitoring performance by applying appropriate counter-measures and dealing with concepts such as transparency, integrity and accountability. Corporate governance requires corporations to exercise immense accountability to shareholders and the public, and also monitors the management of organisations in running their businesses. Corporate governance is normally divided into two categories, that is, self and statutory. Self-regulation involves aspects of corporate governance that are difficult to legislate. The issues in this category involve the human element, ie the independence of the board of directors, the relationship with the management and appraisal of the director’s performance. Statutory regulation, on the other hand, is the framework of corporate governance that can be explained in legal terms. The legislative and regulatory rules include: 1. Duties, obligations, rights and liabilities of directors, controlling shareholders and company officers. 2. Disclosure and transparency. Today, good corporate governance is considered vital as it promotes morality...
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...able to get accustomed to the working environment of Islami Bank Bangladesh Limited. As the internship continued, I not only learned about the activities and operations of correspondent Bank, but also gathered some knowledge about the basic business of banking in first one month of my internship period. Islami Bank Bangladesh Limited pursues decentralized management policies and gives adequate work freedom to the employees. This result in less pressure for the workers and acts as a motivational tool for them, also gives them encouragement and inspiration to move up the ladder of success. Overall, I have experienced a very friendly and supporting environment at Islami Bank Bangladesh Limited, which gave me the pleasure and satisfaction to be a part of them for a while. While working in different departments of this branch I found each and every employee is friendly to me to cooperate. They have discussed in details about their respective tasks. I also participated with their works. So I learnt the Banking operations of three departments of IBBL: (1) General Banking (2) Investment & (3) Foreign Exchange etc. While making this report I tried to discuss the activities of the Bank regarding their different Investment-modes now performing and the activities I focused on their nature. 1.1 Origin of the Report: The report named “Diversified portfolio & Performance analysis” of Islami Bank Bangladesh Limited was offered by Islami Bank Bangladesh Limited on January...
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...Term Paper on What is investment and debt/trade financing modes followed by Islamic Banks in Bangladesh. Do they conform to shariah rules. If so, how and if not, why not. Give your own conclusion/concluding remarks / recommendation. Course code: Fin-5502 Subject: Submission of Term Paper Dear Sir, I am very much delighted that I am submitting herewith my term paper titled “what is investment and debt/trade financing modes followed by Islamic Banks in Bangladesh. Do they conform to shariah rules. If so, how and if not, why not ” under the reference of my term paper for partial fulfillment of MBA Program on the Comparative Banking. As of the requirement, I have closely studied the topic and tried my best to make this paper meaningful. I believe and hope that you will find this report informative and insightful. Your valued assessment of my assignment would help me in the enhancement of my skill, knowledge and efficiency. Any further clarification, if needed, regarding the paper will be instantly responded. Regards. ___________________ Saima Sultana Acknowledgement In preparing this report, I am beholden to the most venerable teacher Mr.x, Faculty, Department of Business Administration, IIUC for his guidance and supervision for furnishing this term paper. I am very much pleased on him for his continuous encourage to undertake the term paper, to collect, analyze data and finally editing, presentation of...
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... The idea of Islamic banking was initiated and brought up by some economists who were conscious about socio economic development of Muslim nations based on Islamic principles. It was based on noble vision and objective of Islamic banking base on profit and loses sharing principle. The foundation of Islamic banking theory that they proposed was based on mudaraba and musharakah contracts as mechanism to operate Islamic banking system. “The early contributions on the theory of Islamic banking were only discussed as part of the subject in Islamic economic system. For example, the book by Qureshi on Islam and the Theory of Interest (Qureshi (l946)) which looked upon banking as a social service that should be sponsored by the government like other public institutions such as public health and education.2 His view was based on the point that the bank could neither pay any interest to account holders nor charge any interest on loans advanced. He also suggests the possibility for both Islamic banks and entrepreneur to create a partnership. No mention was made of profit-sharing.” Other economists were come up with different ideas at earlier stages such “the principle of mudarabah was appealed systematically by Uzair (l955). His main contribution lay in suggesting mudarabah as the main premise for 'interest less banking'. However, his argument that the Islamic bank should not make any capital investment with its own deposits rendered his analysis somewhat...
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...International Journal of Islamic Financial Services Vol. 2 No.1 REGULATION OF ISLAMIC BANKING IN BANGLADESH : ROLE OF BANGLADESH BANK Abdul Awwal Sarker As regards the supervision and inspection of the banks in Bangladesh, an equal treatment is being followed for all banks including the Islamic ones by the Bangladesh Bank. In some cases, Bangladesh Bank has given some special provision for the Islamic banks. Yet, for the smooth development and operation of the Islamic banking, Bangladesh Bank should devise the separate regulatory and supervisory guidelines for the Islamic banks and non-bank Islamic financial institutions. 1. Banking System of Bangladesh The banking system of Bangladesh is composed of a variety of banks working as Nationalized Commercial Banks (NCBs), Private Banks, Foreign Banks, Specialised Banks and Development Banks. However, 28 out of 50 banks in Bangladesh are private, of which only 5, namely Islami Bank Bangladesh Limited, Al-Baraka Bank Bangladesh Limited, Al-Arafah Islami Bank Limited, Social Investment Bank Limited, and Faysal Islamic Bank of Bahrain E.C. have been operating as Islamic banks. Besides these full-fledged Islamic banks, two conventional banks in the private sector namely the Prime Bank Limited and Dhaka Bank Limited, have opened two full-fledged Islamic banking branches and Islamic Banking Counter respectively to deal with the Islamic banking business parallel to their conventional operations. The operations and accounts of these...
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...Proposal on Islamic Banking Table of Contents TOC \o 1-2 1) Research Title PAGEREF _Toc \h 3 2) Introduction to the Research Topic and Main Research Question PAGEREF _Toc1 \h 3 3) Literature Review Outline and Detailed Research Questions PAGEREF _Toc2 \h 5 3.1) Introduction PAGEREF _Toc3 \h 5 3.2) Background of Islamic Banking PAGEREF _Toc4 \h 5 3.3) Features of Islamic Banking PAGEREF _Toc5 \h 6 3.4) Determination of Whether Islamic Banking is a Matter of Semantics PAGEREF _Toc6 \h 8 3.5) Detailed Research Questions PAGEREF _Toc7 \h 10 4) Ethical Considerations PAGEREF _Toc8 \h 10 References PAGEREF _Toc9 \h 12 Bibliography PAGEREF _Toc10 \h 17 1) Research Title “Islamic Banking: A Matter of Semantics?” 2) Introduction to the Research Topic and Main Research Question Islamic banking is denoted as a banking system, which is mainly governed by the principles that have been formulated by the Islamic Shariah (Hasan, 2012). In general, the term Islamic banking is not only typically based on evading internet-based transactions that are strictly prohibited under the law of Shariah, but also discards any sort of unsocial or unethical practices (Ahmed, 2011). With this concern, it can be affirmed that Islamic banking is regarded as the procedure of transforming predictable money lending into transactions that are fundamentally based upon real as well as tangible services (El-Gamal, 2006). This banking system, if...
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...FREQUENTLY ASKED QUESTIONS (FAQs) ON ISLAMIC BANKING Prepared by Mr. Imran Ahmad Mr. Ghulam Shabbir Islamic Banking Department State Bank of Pakistan Karachi. PART 1: RIBA AND INTEREST......................................................................................... 4 Question No. 1). What is Islamic Banking? ................................................................................................ 4 Question No. 2). What is the philosophy of Islamic banking?.................................................................... 4 Question No.3) What is Meant By Riba? .................................................................................................... 5 Question No.4) What is interest? Is there any difference between interest and Riba? ............................ 5 Question No. 5) What are the different kinds of Riba?.............................................................................. 6 Question No. 6). What are the revelations/verses in Holy Quran regarding prohibition of Riba/interest? ........................................................................................................................................................................ 7 Question No. 7) What are the sayings/Ahadith about Riba/Interest? .................................................... 10 Question No.8) Are there any injunctions against Riba/usury in religious texts other than Holy Quran? .......................................
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...Critical assessment of four financial instruments in the Islamic financial markets Raja Shahridatul Dewa Binti Raja Musa C070187 This project paper is a partial fulfillment of Module IB2001of Part 2 of Certified Islamic Finance Professional (CIFP) INCEIF September 2008 Critical assessment of four financial instruments in the Islamic financial markets Raja Shahridatul Dewa Binti Raja Musa Abstract There has been remarkable growth in the Islamic finance industry and seen double-digit growth in recent years. Increasing numbers of Islamic financial institutions are attempting to penetrate the international markets in meeting the global demands for Islamic finance. This calls for the development of innovative Islamic financial instruments which are shariah compliant that represent as alternatives to conventional instruments covering areas of Islamic banking, Islamic insurance, Islamic equities and Islamic bonds/sukuk. A parallel development of Islamic financial markets should also take place that look into the aspect of liquidity and cash flow management. At the same time legal and regulatory requirements are needed to ensure the smooth functioning of Islamic financial institutions. Given the uniqueness of the operations and transactions comprising contractual arrangements and instruments, it is critical for Islamic financial institutions to identify specific risks...
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...About Al Baraka | | Al Baraka Islamic Bank B.S.C. (c) - Bahrain (AIB - Bahrain) established 1984 in Bahrain and up the years has pioneered the development of Islamic banking and finance. The Bank is registered with the Bahrain Ministry of Industry &, Commerce CR no. 14400 and is licensed by Central Bank of Bahrain (CBB) as an Islamic Retail Bank, with an authorized capital of US$ 600 Million, of which US$ 122 Million has been issued and fully paid.AIB - Bahrain is one of the Banking Units of Al Baraka Banking Group's (ABG). ABG is a Bahraini Joint Stock Company listed on Bahrain and Dubai stock exchanges and one of the well-known leading international Islamic banks. It has been rated by Standard & Poor's as BBB- with a short-term rating of A-3. ABG offers retail, corporate and investment banking and treasury services strictly in accordance with the principles of the Sharia'a. The authorized capital of ABG is US$1.5 billion, while the total equity amounts to about US$ 1.8 billion. The Group has a wide geographical presence in the form of subsidiary banking Units in 14 countries, which in turn provide their services through more than 400 branches. These banking Units are Jordan Islamic Bank/ Jordan, Al Baraka Islamic Bank - Bahrain, Al Baraka Bank Limited/ Pakistan, Banque Al Baraka D'Algerie/ Algeria, Al Baraka Bank Sudan/ Sudan, Al Baraka Bank Ltd/ South Africa, Al Baraka Bank Lebanon/ Lebanon, Al Baraka Bank Tunisia/ Tunisia, Al Baraka Bank Egypt/ Egypt, Al Baraka...
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...January/February 2009 Volume 25, Number 1 The Evolution Of Islamic Finance In Southeast Asia: The Case Of Malaysia (1) Rika Nakagawa, Institute of Developing Economies, Japan ABSTRACT The purpose of this paper is threefold: to explain why the Islamic financial system was introduced in Malaysia; to outline how the Malaysian government has promoted this system; and to analyze the development of the Islamic financial system with a specific focus on the banking sector. In Malaysia, the first Islamic bank, Bank Islam Malaysia Bhd., was established in 1983. One turning point of the Islamic financial system in the country was the Financial Sector Master Plan presented by the central bank in 2001. The government, in accordance with the plan, has taken a strong initiative in the development of an Islamic financial system. As a result, the country has succeeded in promoting a comprehensive Islamic financial system, banking and insurance sectors and capital markets. In the banking sector, this paper reveals that the profit-sharing system does not seem to be popular in this country although the reward system is central to Islamic Finance. In order for further development of the Islamic financial sector, the reasons why the percentage of contracts under the profit-sharing system is small need to be analyzed. Keywords: Islamic Finance in Malaysia, Financial Sector Master Plan, New Economic Policy, Bank Islam Malaysia Bhd., Islamic Banking Scheme INTRODUCTION I n the globalized economy, large...
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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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