The Perceived Need for and Practical Implication of Overall Bank Management at First Security Islami Bank Ltd.
Islamic banking is the systems of financial intermediation that avoids receipt and payment of interest in its transactions and conducts its operations in a way that it helps achieve the objectives of an Islamic economy. Before 1970’s the term Islamic financial system or Islamic banking was relatively a new idea for the Muslim world. But 15%-20% per annum rapid growth in Islamic banking since 1970s to date and development of a complete banking system in comparison to their counterparts is a major success. Now Islamic banks are operating in approximately 75 countries of the world.
Bangladesh is the third largest Muslim country in the world with around 160 million populations of which 90 percent are Muslim. The hope and aspiration of the people to run banking system on the basis of Islamic principle came into reality after the signing on the accord of Islamic Development Bank in 1974. After 8 years of that signing, in 1983, Bangladesh established its first Islamic bank. At present, out of 49 banks in Bangladesh, 7 full-fledged Islamic Banks and 19 Islamic Banking branches of 9 conventional banks are working in the private sector on the basis of Islamic Shariah.
First Security Islami Bank Ltd. (FSIBL) is one of the leading Islamic banks in Bangladesh. It was incorporated in Bangladesh on 29 August 1999 as a banking company. The Bank converted its banking operation into Islamic Banking based on Islamic Shariah from traditional banking operation on 01 January 2009. First Security Islami Bank Ltd. has an authorized capital of Tk.1, 000 Million and paid up capital of Tk.3, 400.32 Million. FSIBL is run by the collaboration of Board of director, Shariah board, management committee, human resource development etc.
FSIBL’s fund mobilization happens from mainly AL-Wadiah and Mudarabah savings and term deposits and they are utilized in different investment securities and projects. They also provide letter of guarantee, credit, and many special schemes. The bank has to face many types of risks i.e. investment risk to liquidity, market, operational risks etc. But the bank has developed their modern risk management procedures. They have an asset liability committee and they follow Basel-2 and stress testing techniques too.
FSIBL has shown a positive growth over the years. In the last five years they have seen positive growth rate in terms of total capital, statutory reserve, paid up capital, remittance, total assets, deposits, investments, and profit. Despite these the bank is lag behind from some other leading Islamic Banks as well as conventional banks in terms of ROA, ROE and net profit margin. As a whole the total Islamic Banking sector is not as successful as conventional banking system in Bangladesh because of lack of national guidance and help, gap between Islamic ideas and practices, absence of Islamic inter-bank money market, proper marketing etc. In order to improve the situation FSIBL as well as other Islamic banks as a whole should focus on, reducing the gap between the ideals and actual practice of Islamic banks, new and timely products, and services, new sectors to invest, rural areas etc. Also all Islamic banks should come forward to help each other and adopt a perspective for improving the Islamic banking system of Bangladesh and Bangladesh bank should take initiatives for the promotion of Islamic banking in Bangladesh considering its pro-development role.
1.1 Origin of the Report
This report is prepared as an academic requirement for the course ‘Islamic Banking and Investment’ under the supervision of Mr. Mohammed Sawkat Hossain, Lecturer and Course teacher, Department of Finance & Banking, Jahangirnagar University.
1.2 Research Question, Objectives, and Scopes of the Report
The main research question of this report is
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