Islamic Banks in Bangladesh

Topics: Sharia, Islamic banking, Bank Pages: 27 (8384 words) Published: February 25, 2011
Term Paper

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.




Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law (Sharia), principles and guided by Islamic economics. In particular, Islamic law prohibits usury, the collection and payment of interest, also commonly called riba in Islamic discourse. In addition, Islamic law prohibits investing in businesses that are considered unlawful, or haraam (such as businesses that sell alcohol or pork, or businesses that produce media such as gossip columns or pornography, which are contrary to Islamic values). In the late 20th century, a number of Islamic banks were created, to cater to this particular banking market.

An Islamic bank is a financial institution that operates with the objective to implement and materialize the economic and financial principles of Islam in the banking arena. The Organization of Islamic conference (OIC) defines an Islamic bank as “a financial institution whose statutes, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operations.” According to Islamic Banking Act 1983 of Malaysia, Islamic bank is a “company which carries on Islamic banking business means banking business whose aims and operations do not involve any element which is not approved by the religion Islam.”


1To Know about the investment modes of islamic banks of Bangladesh. 2To analyze whether the islamic banks comply shariah in making investment/financing. 3To draw the recommendation on problem & prospect of investment comlying shariah.


o It is very difficult to analyze this issue without proper knowledge about Islamic banking and economy. o As it is not conventional so it bears some complexity to understand. o Some words are in Arabic terms that make it difficult.

o Although we are the people of Muslim country, many of our people are not sufficient knowledge in regards of Interest and profit. o There is no specific law in our central Bank for Islamic Banking .



The special feature of the Investment policy of the bank is to invest on the basis of profit-loss sharing system in accordance with the tenets and principles of Islamic Shariah. Earning of profit is not the only motive and objective of the Bank’s investment policy rather emphasis is given in attaining social goal and objective in creating employment opportunities.

Specially, Islami Bank Bangladesh Limited is firmly committed to implement and materialize the economic and financial principles of Islam in the banking arena and to establish justice in the trade, commerce, and industry and build socio-economic infrastructure, create opportunities for employment and income generation and property alleviation, contribute to the socio-economic enlistment and sustained economic growth of the country by providing different types investment facilities.

Investment Modes



Bai-Mudarabaha may be defined as a contract between a buyer and a seller under which the seller sells certain specific goods (permissible under Islamic Shariah and the Law of the land), to the buyer at a cost plus agreed profit payable in cash or on any fixed future date in lump-sum or by installments. The profit marked-up may be fixed in lump-sum or in percentage of the cost price of the goods. Types of Murabaha:

In respect of dealing parties Bai-Murabaha may be of two types. 1. Ordinary Bai-Murabaha
If there are only two parties, the seller and the buyer, where the seller as an ordinary trader...
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