Shake-up at Banking Sector By -Md. Hasanuzzaman

Cover Story

Islami Bank Bangladesh has undergone abrupt, major changes in its three top positions – chairman, vice chairman and managing director. It is a governmental move for taking control of the largest private banking network in the name freeing it from so called Jama’at influence.
Arastoo Khan, the former chairman of Commerce Bank has now become chairman of Islami Bank, replacing incumbent Mustafa Anowar, a freedom fighter. As a representative of Ibn Sina linked with Bangladesh Jama’at-e-Islami leaders, Mustafa Anowar was serving as the chairman of the bank. He also resigned from the post of director as well as from the post in the bank’s foundation. The board of directors also replaced the bank’s managing director (MD) Mohammad Abdul Mannan by Union Bank’s MD Abdul Hamid Mia.  This shake-up has strengthened the government’s control over the bank.
Islami Bank Bangladesh is the pioneer of Islamic banking in Bangladesh. It became incorporated on 13 March 1983 as a public limited company under the Companies Act 1913 with a 36.91 per cent local and 63.09 per cent foreign shareholders, particularly from the Middle East. The IBBL has 307 branches including 57 AD branches and three offshore banking units as well as 13,229 staffs, as of December 2015.
It is assumed that Jama’at-e-Islami-Bangladesh, the largest Islamic political party in the country, had a huge influence over the bank. But in recent years, the bank authority has strongly denied the claim of Jama’at’s dominance over the bank. Among all the government and non-government banks, Islami Bank is the largest bank in the country till present. Banker magazine of London’s Financial Times awarded it as the best bank of Bangladesh, a few weeks ago. Outgoing managing director Mohammad Abdul Mannan went London to receive the prize. In an interview with BBC in that time, he strongly denied any relation between Islami Bank and Jama’at-e-Islami. In replying the question of what is the relation between Islami Bank and Jama’at, Abdul Mannan said, “Not only with Jama’at, Islami Bank hasn’t any legal or any other kind of relationship with any other political party.”
Islami Bank has 10.7 million depositors, 27% of Bangladeshi remittances and 23% of the small and medium enterprises market. Assets, at $9.3 billion, make it nearly the size of, say, AlliedBank in Pakistan or Asia Commercial Bank in Vietnam. Bangladesh itself has shown economic strength in recent years, and Islami Bank has tapped into what is called the country’s “Two Rs” approach: ready-made garments and remittances from workers abroad. Helping with industrialization in a labor-intensive sector has generated employment even as millions of migrant workers send wages back home–either way, new customers to be had. Small firms that the bank embraced have remained clients as they grow and go into other sectors like steel and power. It notably pushes to help women entrepreneurs.
Despite its success, the bank has been dogged in recent years by suspicion that it has been used by, or even helped fund, Islamic terrorists. No intent has been proven, but Islami Bank increasingly seems to be attending to image cleanup and domestic political sensitivities. Last year, four board directors had to be replaced and a government observer put on, while the number two executive was shown the door for what the bank says was “non-compliance with a provision of …Human Resources Policy.” Mohammad Abdul Mannan said in an interview with Forbes Magazine, “The regulatory authority has never come with such allegation that Islami Bank was ever engaged in terrorist financing.”
Atiur Rahman, Bangladesh’s respected central banker until earlier this year, said that in his seven-year tenure scrutiny of Islami Bank’s operations he never found a direct link to any terrorism-related activities.
Mannan, 64, largely built this business for the company. “If you ask me whether I know GCC [Arab Gulf] countries or not, I can tell you, I have visited every village in Saudi Arabia,” he says. “Each and every village. I did not see any Saudi citizen who can name villages and areas in his country like me.” The bank dispatched Mannan there in 1995. At the time, “My chairman congratulated me as ambassador of Islami Bank in Saudi Arabia. I thought as ambassador I should have many suits. I [had some] made, and I took a very big suitcase with me,” he recalls with a chuckle. But he got there to find his prospective clients were washing cars, cleaning streets and laying bricks. He packed his suits away. Instead, one night, with a shawarma in hand and a Pepsi to wash it down, he sat on a pavement on the outskirts of Riyadh and offered food and conversation to a handful of his countrymen. They were soon surrounded by a few score, he remembers. He took the address of each person and visited them later.
That was the start. Over the next five years he would spend evenings at the giant village sheds where Bangladeshi laborers repair to eat and sleep after a workday in different desert areas. At each he would find 2,000 to 3,000 potential account holders, preparing for the day when they would return home to small nest eggs. He’d be up all night conducting these meetings. (Even today he doesn’t sleep for more than two or three hours a night, he says.) Mannan says he wrote introductions to open accounts for 70,000 depositors. All 15 members of the bank’s management committee have worked there since near its founding. Mannan, who hails from a village near Dhaka, spent his first 15 working years as a journalist in the capital (he remains an active author of history and Islamic-banking books) before joining the bank as its first press officer and working his way up the business side. “Integrity and honesty are a very costly thing in countries like ours,” he says. “Here people say employees of Islami Bank are honest, committed, dedicated.”
Even as it grew, Islami Bank did not venture into businesses that are considered haraam (off-limits), like smoking. The bank finances the import of fertilizers, for instance, but will not finance what’s used to grow tobacco, a big crop in Bangladesh. Mannan likes to tell of how, on his return from the Mideast, he was assigned to find new corporate clients. He was set on Akij Group, one of the larger Bangladeshi conglomerates, but with origins in making and selling bidis, cheap cigarettes smoked by the poor. Per Mannan, it took him two years of wooing the group away from its longtime bank before it agreed to move all its business to Islami Bank. All, that is, except for the bidi trade, which the bank declined to finance.
In 2015, the finance minister requested the foreign ministry to take initiatives to free the bank from Jamaat’s control. He also suggested that the ministry take help of the Bangladesh ambassador to Saudi Arabia. Later, the foreign minister wrote to the finance minister, mentioning that the ambassador had talked to foreign sponsors who gave assurance of providing help on the matter. “The Saudi investors in IBBL appeared positive about the above-mentioned subject, which could be considered as the expression of their solidarity and trust towards the government’s policy on Jamaat. As the subject is very sensitive, it has to be dealt with proper care, so it does not create any negative attitude among related parties, particularly the foreign investors, about our initiative,” the letter read.
The bank’s new board is comprised of 16 members. Seven of them come from the new companies, seven are independent directors and one each is from Saudi Arabia and the Islamic Development Bank. Following the latest changes, the local sponsors now don’t have any representative in the bank board.  Changes have also been made in the Islami Bank Foundation. Syed Monjurul Islam, a former secretary, has been elected chairman of the Foundation, while Shamim Mohammad Afzal, director general of Islamic Foundation Bangladesh and director of Islami Bank, has been elected its vice chairman.
Shah Abdul Hannan, former chairman of the bank, has raised some questions regarding recent sudden reshuffle in the bank’s top posts. He said, “The way in which changes have been brought, don’t suggest that there has been any honest objective behind it.”  He also said, “I don’t find any logic behind these changes. The chairman has been changed all of a sudden, he resigned. Vice chairman has been changed, he also resigned. The managing director also resigned. And a totally newly appointed person, who has joined the board only a few days ago, has become chairman. …these can’t be explained in anyway. It can’t be said there has been any honest intention behind these. Obviously, there might have been some politics behind these.”
There is a strong apprehension that IBBL could face similar situation like BASIC Bank, which was once a profit making state-owned bank that eventually turned into a losing concern. BASIC is facing almost bankruptcy due to shaddy loans offered by previous board of directors led by its former chairman Abdul Hye Bacchu between 2009 and 2014.  Bacchu who was appointed on political consideration did not face any legal action by Anti-Corruption Commission despite the Bangladesh Bank and the BASIC’s internal investigations gave broad hints about Bacchu’s involvement in providing huge loans to fictitious borrowers.
The disastrous symptoms have already been started to visible. The Daily Ittefaq, a Bengali newspaper writes, after holding the post the new Chairman and Managing Director, they recruited dozens of new officials without any circular and examination which is gross violation of rules and regulations. In another report says, in a so-called recruiting process, Islami Bank completed viva voce of 75 applicants within 55 minutes.
This kind of political push at managing level and recruiting process in a most successful economic network is very dangerous. It is not free from so called Jama’at, but it is forceful grab or occupation by bandits. Now we have to wait for the news of massive loan scam.

The writer is journalist and geopolitical analyst.