Islami Bank Bangladesh Limited (IBBL) the first interest free Islamic Shariah based bank in Bangladesh incorporated on 13 March 1983 as a public limited company under the Companies Act 1913. The bank obtained license from Bangladesh bank on 28 March 1983 and started banking operations on 30 March 1983 through its main branch at Dhaka, which was formally inaugurated later, on 12 August 1983. The bank is a joint-venture enterprise of 22 private sponsors of Bangladesh, the government of Bangladesh, Islamic Development Bank, and 13 banks and financial institutions of the oil-rich Middle Eastern Muslim Countries.
Background of Islami Bank Bangladesh Limited
IBBL started its banking operations with an authorized and paid up capital of Tk 500 million and Tk 67.50 million respectively. The capital is divided into ordinary shares of Tk 1,000 each. The paid up capital of the bank was enhanced to Tk 640 million in 2001. Of the 79,500 ordinary shares of the bank in 1985, foreign sponsors, including the Islamic Development Bank (IDB), owned 56,000, while 23,500 shares were owned by local sponsors and the general public. investment corporation of bangladesh was allocated 20% of bank’s issued capital, but the corporation subscribed shares of Tk 0.5 million only. The bank is listed with both Dhaka and Chittagong Stock Exchanges.
IBBL conducts businesses on the basis of Islamic Shahriah and the modes of transaction include Mudaraba, Musharaka, Hire Purchase ( under Shirkatul Melk), Bai-Murabaha, Bai-Muajjal, and Bai-Salam. The bank also provides all other kinds of commercial banking services to the customers observing the provisions of the Bank Company Act 1991, Bangladesh Bank’s directives and the principles of Islamic Shariah.
A 23-member board of directors oversees the aggregate business affairs of the bank. The executive president is its chief executive officer. In December 2001, the bank had 121branches and a total of 3,060 employees including 145 executives. There is a 10-member Shariah Council for the bank to ensure the compliance of Islamic rules in all spheres of its banking and financial activities. IBBL has a training as well as a research institute in Dhaka.
The volume of deposits of the bank in December 2000 was Tk 31,536.5 million. Deposit-mix included Mudaraba savings deposits, Mudaraba special notice deposits, Mudaraba term deposits ranging from 6 months to 36 months, Mudaraba Hajj savings deposits, Mudaraba special savings (pension) deposits and Mudaraba savings bond of 5 and 8 years.
The investments (lending) of the bank are partnerships, profit sharing, capital in affiliated projects, real estates, housing, transport, agriculture, export-imports, trade and commerce and other economic activities. Such investments in December 2000 were Tk 29,529 million. In addition, the bank has investments in other income generating assets like company shares and such investments totaled Tk 34.15 million. The bank lends money to its directors and executives (insider lending) under Shariah principles. As of December 2000, investments (lending) of the bank in industrial sector covered 174 projects in garments sector, 91in textiles, and 174 in other industries. Total investments of the bank in the industrial sector stood at Tk 9,849.80 million on 31 December 2000. With the increases in the bank’s investments (lending), the amount of non-performing classified investments had also increased over time. Total classified loans amounted to Tk 2,844.3 million (9.63% of total) in December 2000. Total assets of the bank excluding off-balance-sheet items were valued at Tk 39,366.09 million on 31 December 2000, when the off-balance-sheet items accounted for Tk 8,914.24 million. The volume of foreign exchange business handled by the bank in 2000 was Tk 49,860.00 million, which comprised import financing (Tk 25,327.00 million), export servicing (Tk 16,889.00 million) and remittances (Tk 7,644.00million). The bank has correspondent relationships with approximately 750 foreign banks and financial institutions.
The bank earned net profits of Tk 330.24 million in 2000. During the same year, it received Tk 2,530.2 million as dividends/profits from its profit-loss sharing investments (lending) and it paid Tk 1,846.9 million on its deposit holdings. Total operating incomes of the bank in the year stood at Tk 3,207.81 million and its total operating expenditures were Tk 2,530.54 million.