Principles and Practices of Investment Modes of Islamic Banking
| Abstract: The objective of the study is to gather practical knowledge regarding general banking system, investment and foreign exchange system and its operation. By pictorial description it is tried to find out the variation from various departments, particularly investment. Other objectives of the report are to identify the various types of existing services rendered by the SIBL. understand the prevailing mechanism of modes of finance of SIBL. Study the performance of modes of finance of SIBL. Highlight the major characteristics of modes of finance of SIBL. Understand the basic difference in relation to conventional bank. 1.1 Introduction:
Today’s world is changing very rapidly as new business are emerging by placing the old ones. Towards the end of century, let alone a millennium, people feel a growing uneasiness about the future. Many countries suffer from chronic high employment, a persistent deficit and deteriorating purchasing power. Like the other business, banking practices are also changing at an incredible pace. Every decade calls upon company management to think freshly about its objectives, strategies and tactics. In the banking industry, community branch banks have long been the marketing channels through which customers deposit money and make payments.
Banking plays an important role in the economy of any country. In Bangladesh Muslim consist more than 80% of its population. These people possess strong faith on Allah and they want to lead their lives as per the construction given in the holy Quran and the way shown by the prophet Hazrat Mohammad (Sm). But on Islamic banking system was developed here up to 1983. The traditional banking is fully based on interest it is commonly meant as commercial banks. But interest is absolutely prohibited by Islam. The main aim of traditional banking is to earn profit by borrowing and lending money in exchange of interest. As a result there is an unfair competition among the bankers and among the customers.
Under conventional framework a bank borrows to lend and it mobilizes savings/ deposits by borrowing from savers and lends those deposits to productive interest on deposits and advances respectively. The banks generally maintain a difference is known as interest-spread which is the main income of an interest-based bank. In the Islamic banking system the bank receives no interest. In this case Islamic bank receives its entire deposits from the investment of the clients on the basis of profit-sharing. So, it is clear that in case of the traditional banking systems, a fixed percentage of interest, irrespective of income earned is paid to the depositors. The depositors of Islamic bank are never deprived of excess income, which the bank may make at the end of year. Not only has this traditional bank given fixed interest rate even when they incur operational loss. The critics of Islamic banking system are of the opinion that both are found same in terms of deposits mobilization and advances investment.
Social Investment Bank Limited holds the leading position in Islamic sector banking arena of Bangladesh. SIBL became operational on 22nd November 1995 with a clear manifesto to demonstrate the operational meanings of participatory economy, banking and financial activities as an integrated part of an Islamic code of life. It is an alternative concept of Islamic Banking with a unique human face approach to credit and banking based on interest free economics and financial transactions and income generating program for the millions of the urban and rural poor and a profitable investment options for the rich to invest, earn and live in a better society with greater security and peace at the operational level. SIBL is operating three sector banking such as Formal, Non formal and voluntary sector. SIBL is beginning a new era of Islamic banking having social, ethical and moral dimension in each of its...
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