AB Islamic Banking Operation:
Islam is the complete code of life. It has rules and guidelines for every section of individual, social, national and international life and these guidelines are perpetual. It addresses human problems by divine solutions. Economics is an integral part of human life for which Islam gives unique guidelines. Islamic banking is an essential part of Islamic Economy. Principles of Islamic Shariah are the main guideline of Islami Banking. It avoids charging or giving interests in all its operations and aims at welfare-based banking.
To provide Islamic Banking service to the valued clients with the latest Islamic banking products, AB Bank opened it's first "Islami banking Branch" on 23rd December 2004. The branch is now located at 82, Kakrail, Ramna, Dhaka. The branch is being operated duly complying with the principles of Islamic Shariah and the guidelines of Islamic Banking, given by Bangladesh Bank, the central bank of the country as well as follow the standard rules & procedures of banking both at home and abroad and other operational procedures of the Bank.
The branch has been running its business under active guidance of a competent Shariah Supervisory Committee consisting of Islamic scholars, Ulema, Fukaha and Islamic Bankers headed by Janab M. Azizul Huq prominent Islamic banker & founder CEO of Islami Bank Bangladesh Ltd. the first Islamic Bank of South-East Asia. A dedicated team of experienced Islamic bankers has been working under his prudent guidance. We are also a member of Islamic Banks Consultative Forum (IBCF) and Central Shariah Board for Islamic Banks of Bangladesh.
Funds related to Islami Banking Branch is kept totally separate from conventional operation maintaining separate books of accounts. We also maintain separate Al-Wadiah Current Account with Bangladesh Bank to manage long term and short term funds. In brief AB’s Islamic banking operation is completely based on Islamic Shariah, free from Riba(interest) and separate from it’s conventional operation.
Basic Principles of Islamic Banking:
For our Islamic banking operation following basic principles of Islamic banking is being followed:
- Prohibition of Riba(Interest): Receipt and payment of interest is totally prohibited in Islamic banking.
- Money as “Potential” capital: Money is not a commodity, but a medium of exchange, a store of value and a unit of measurement. Money represents purchasing power and cannot be utilized to increase the purchasing power without any productive activity. Islamic finance advocates the creation of wealth through real economic activities.
- Risk Sharing: Because interest is prohibited, suppliers of funds become investors, rather than creditors. So, business relevant parties share business risk.
- Prohibition of Speculative Behavior: Islamic finance discourages hoarding and prohibits transactions featuring extreme uncertainties (Gharar) and gambling (Mysir).
- Sanctity of Contract: Islamic finance upholds contractual obligations and the disclosure of information as a sacred duty. This feature is intended to reduce the risk of asymmetric information and moral hazard.
- Shariah approved Activities: Only those business activities that do not violate the rules of the Shariah qualify for investment. For example, any investment in a business dealing with alcohol, gambling, tobacco is prohibited.
- Social Justice: Any transaction leading to injustice and exploitation is prohibited.
Deposit Products of ABBL Islamic Banking Branch:
AB Islami banking Branch accepts the following types of Deposits as per norms, rules and operational guidelines of the bank:
- Al-Wadia Current Deposit Account
- Mudarabah Short Notice Deposit (MSND) Account
- Mudarabah Savings Deposit (MSD) Account
- Mudarabah Term Deposit (MTD)
- Mudarabah Monthly Profit Deposit (MMPD) Account
- MudarabahQuartly Profit Deposit (MQPD) Account
- Mudarabah Pension Deposit (MPD) Scheme
- Mudarabah Hajj Deposit (MHD) Scheme
- Mudarabah Marriage Savings Deposit (MMSD)
- Mudarabah Cash Waqf Deposit (MCWD)
AB Bank Islamic Banking wing provides investment facilities for project finance, working capital finance, SME finance, consumer / retail baking finance etc. under following modes:
- Hire-Purchase under ShirkatulMelk (HPSM): Under this mode the Bank and the client procure assets such as machinery, building/flat, car etc. on equity participation basis. The Bank rents out its portion of assets to the client for a certain period. The client pays the rental with a part of principal amount on monthly / quarterly basis. The client gets its proportionate ownership with the payment of monthly / quarterly installments. On maturity, total ownership of the assets automatically transfers to the client as and when final payment of the account is made.
- Ijara or Leasing: This product is similar to HPSM (above). In this case equity participation may or may not exist. Ownership of the asset is not automatically transferred to the client with the payments of installments. On maturity, the bank transfers the ownership to the client on payment of certain transfer fees.
- Bai-Muajjal / Bai-Murabaha: These products are for working capital finance. Under these schemes bank purchases goods / raw materials as per requirement of the client. In case of Bai-Muajjal bank receives the sales proceeds on deferred payment basis. On the other hand, in case of Bai-Murabaha, Bank receives the sale price at the time of delivery of the goods / raw materials. Before handing over the goods / raw materials the bank generally keeps the same in its custody under pledge.
- Musharaka : Under this mode the Bank and clients jointly participate in a scheme or project. Profit is shared between the Bank and the concerned client as per pre-agreed ratio. On the other hand loss is shared according to capital ratio.
- Mudaraba: Under this mode bank finances the scheme as a Shaheb-Al-Maal (owner of the capital). Profit is shared between the two sides as per pre-agreed ratio.
Sectors of Investment:
Islamic Banking wing of the bank finances in all sectors i.e., Industry, business, Agriculture, Real Estate etc. if purpose of the investment is permissible under Islamic Shariah.
Limit of Investment:
Investment is offered to the extent of single borrower exposure limit as fixed by the Bangladesh Bank from time to time.
Foreign Trade of Islami Banking Branch:
Islami Banking Branch by complying Shariah principles and concerned rules-regulations of the country provides the following services at its foreign trade desks:
- Opening of LCs
- Post -Import Finance
- Export bill purchase and negotiation
- Pre-shipment financing etc.
AB Bank Islamic Banking has been continuously working on new initiatives, innovative services and products keeping in mind the actual needs of its valued clients and upholding the principles of Islamic Shariah.
Business Performance: AB Islami Banking Branch(Last five years)
AB Bank Islami Banking has been trying to provide excellent banking services to the valued client complying with the Shariah rules and banking norms. Day by day our business volume has been increasing which has strengthened us to provide competitive profit to the valued depositors as well as attractive investment facilities for the investment client.