Vol. 5 Num 324 Tue. April 26, 2005  

Islamic banking guideline soon: BB governor

The central bank is formulating a guideline to regulate Islamic banking operation, Bangladesh Bank (BB) Governor Fakhruddin Ahmed said yesterday.

The guideline will help the rapidly growing Islamic banking sector develop further, the BB governor said.

He was speaking at a seminar on modernisation of Islamic banking organised by the Institute of Hazrat Mohammad (PBUH), an Islamic institute for research and propagation of the teachings of the prophet, at Osmani Memorial Hall in Dhaka.

"Although the Islamic banks are performing well," the governor said, "the banks have a long way to go."

The central bank is now working with a focus group to prepare a draft of Islamic Banking Act and the group has been formed with representatives from the central bank as well as the Shariah-based banks.

State Minister for Finance and Planning Shah Mohammed Abul Hussain stressed the need for research to find out harmony between the conventional and Islamic banking systems.

He said the general people do not have adequate knowledge about the potential of Islamic banking system. "So, it should be popularised among the general people," the state minister observed.

Dr MA Mannan, former chairman of Social Investment Bank Limited, said although more than 20 years have passed by after the introduction of Islamic banking in Bangladesh, an Islamic banking act is yet to be formulated.

"For the sake of promoting Islamic banking in Bangladesh, an Islamic banking act should be formulated immediately," he said.

In his welcome address, Chief Advisor to the institute Lt Gen M Nooruddin Khan (rtd) said the purpose of the seminar is to discuss and deliberate on the development of Islamic banking in Bangladesh as well as abroad.

"Interest-free Islamic financial products are fast becoming the preferred products in the global banking industry attracting both Muslims and non-Muslims due to the provisions of risk sharing and ethical standards by the system," he said.

The Asian Bankers' Forum estimates that the size of the global market of Islamic banking is between $200 billion and $300 billion and growing at an annual rate of 15 percent, he informed the seminar.

Grown from its roots in the Middle East, the banking system has now expanded to the South and South East Asia, Europe, Canada and the USA, he said.

Bangladesh Bank permitted establishment of Islamic banks in the country in 1983 and the same year the first Islamic bank named Islami Bank Bangladesh Limited began its operation.

Currently, seven Islamic banks are operating in Bangladesh. Besides, six conventional banks are operating 14 Islamic banking branches in the country.

CM Koyes Sami, managing director of Oriental Bank Ltd, and Dr Monowar Hossain, former chairman of BIDS, presented the keynote papers at the seminar, which was also addressed by Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) President Abdul Awal Mintoo, Dr AM Muazzam Hussain of BRAC University, Professor Rafiqul Islam Mollah of North South University and Abdur Raquib, executive president of Islami Bank.