Islami Bank Bangladesh Limited (IBBL): An Ethical Banking Model for Social and Welfare Activities in Bangladesh -By Lutfun NAHAR

Bangladesh is one of the largest Muslim countries in the world. The people of this country are deeply committed to Islamic way of life as enshrined in the holy Quran and the sunnah. Bangladesh is the third largest Muslim country in the world with around 135 million populations of which 90 percent are Muslim. The hope and aspiration of the people to run banking system based on Islamic principle came into reality after the OIC recommendation at its foreign minister meeting in 978 at Senegal to develop a separate banking system of their own. After 5 years of that declaration, in 983, Bangladesh established its first Islamic bank. This study gives knowledge background of Islamic banking growth, history and products being most or least valued by customers in comparison to conventional banks to provide theoretical background to the reader. Islamic banks being a novel phenomenon are construed as those financial intermediaries that mobilize resources according to the direction of shariah teachings by using Islamic financial instruments. This fast growth of a new type of business in such a tight market and falling economics attracts everyone towards it. As the products are not very different from conventional banks but still this sector is growing with so fast pace, as well as they play an important role in social welfare activities which attract me to choose the topic. This study has covered an organization overview of welfare activities of Islami Bank Bangladesh Limited (IBBL) starting from the welfare application to protest disbursement. This study will help us to know about the shariah compliance in welfare. Basically, Islami Bank is profit based organization not interest based like conventional bank. This article will also help us to difference profit and interest. And, it will disclose the strength and weakness of welfare.

Islamic Banking as a Model

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 area. 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 operation”. According to Islamic banking act 1983 of Malaysia Islamic bank is a company, which carries on Islamic banking business. Islamic banking business means banking business whose aims and operations do not involve any element which is not approved by the religion of Islam.

The Concept of Conventional Banking  

1. “A bank is dealer in debt – his own and of other people” –Crowther
2. “we can define a bank as an institution whose debts are widely accepted in settlement of other people’s debt to each other” – Sayers
3. “A commercial bank is dealer in capital or more properly a dealer in money. He is intermediate party between the borrower and the lender. He borrows from one party and lends to another and the difference between the terms at which he borrows and those at which he lends form the source of his profit”. – Prof. Gilbert.

The major welfare activities perform by the Islamic bank and conventional bank…

Welfare Activities of Islami Bank Bangladesh Limited (IBBL):

Welfare is a condition of having good health, comfortable living and pleasant working conditions. Hence, it can be said that welfare services are those which ensure conditions of having good health, comfortable living and working conditions, which are generally one’s basic needs. Islam views work as the primary means of earning and acquiring income and wealth. As such, a well-known example may be cited here, recall a beggar who approached the Prophet Muhammad (Pbuh) for alms, he (the beggar) was asked to bring what he had in his house. Accordingly, the man brought a blanket. The Prophet (Pbuh) asked him to sell it out and buy an ax, which could then be used to cut wood from the jungle to sell at the market for income. Thus, instead of begging, he could be self-reliant which more dignified life than begging is. Therefore, in the Islamic way of life, productive and remunerative work (employment and self-employment) and consequently real income becomes the primary source for buying necessities such as food, clothing, shelter, household goods, transportation, fuel and medicines.

But if real income is not sufficient to purchase necessities of life, then welfare services become essential in a society to maintain the minimum standard of living of the people. In fact, in every society, there are many people who lack the necessary income and, consequently, face inadequate lifestyles due to unemployment and under-employment. Their condition cannot improve if welfare services remain absent and concentration wealth remains in certain segments of society. The Quran states the principle that “wealth should not circulate only among the rich”.

The Quran also encourages people to contribute generously to social welfare and helping the needy in society. This is again clearly stated, “They will ask you as to what they should spend on others. Say (O Muhammad): whatever of your wealth you spend shall be for your parents, and for the near of kin, and the orphans and the needy and the wayfarer; and whatever good you do, verily, God has full knowledge thereof”. Thus, the Quran establishes the general principle of generous welfare spending while encouraging sacrificial levels of spending perhaps for social crises and for conditions demanding high financial support. Thus, Islam calls for the meeting of the basic needs of the poverty groups through welfare services, which might include –

1. Care for others and
2. Zakat

Care for Others

Siddiqi (1995, pp.2-3) mentioned that care for others, or helping behavior, is another cardinal principle of Islamic economic behavior. It tempers the self-interest that is ingrained in human nature to ensure survival. It is a natural concomitant of trusteeship, since one serves the Master by caring for His people. The Prophet, peace be upon him, said: “Mankind are God’s dependents, so the most beloved of people in the Sight of Allah are those who do good to His dependents.” (Mishkat, Bab-al-Shafqahwa’l-Rahmah ‘Helping behavior is required because of the interdependent nature of manhood life. There is no fulfillment in life without interaction with others; individual facility requires socialization. The exclusive pursuit of self-interest in social relations is counter-productive; it defeats its own purpose. Men serve their individual and collective interest best when each individual care for the welfare of others while striving to protect and promote his own interest. This is what religion teaches. Those who deny it, deny religion.

Allah says, “Thus, when they are told, ‘Spend on others out of what God has provided for you as sustenance’, those who are bent on denying the Truth say unto those who believe, ‘Shall we feed anyone whom, if (your) God had so willed, He could have fed (Himself)? Clearly, you are but lost in effort” [36: 47]. “Have you observed him who denies religion? That is, he who repeals the orphan, and urges not the feeding of the needy?” [107: 1-3].

Zakat

Zakat is one of the five pillars of Islam. In a broad sense, it is only for social welfare purposes as specified by the Quran: “The Zakat is (meant) only for the poor and the needy, those who collect the tax, those whose hearts are to be won over, for the freeing of human beings from bondage, for the relief of those overwhelmed by debts, for the cause of God (all priority social needs), and for the wayfarer: (this is) an ordinance from God and God is all-knowing, Wise” [9:60].

Haq (Ibid, p.179) mentioned, that “the first verse on Zakat [73: 20] was revealed in the early Meccan period signifying the importance of welfare expenditures in the Islamic Scheme of life. Since the Muslims were a relatively small group without formal installations, Zakat was given privately, without specific rules or rates. It was essentially used for two purposes: to assist the indigent and the poor and to buy the freedom of those, in slavery or bondage. In the initial Madanian period, Zakat was given both privately to needy individuals and families as well as to the state.

Islamic banks, as a part of the Islamic economic system, are being operated with the objective to implement the economic and financial principles of Islam. “The objective of Islamic banking is not only to earn profit, but also to do good and bring welfare to the people” According to Islam, money, income and property belong to Allah and this wealth is to be used for the good of the society (IBBL 1995, p.7) It was mentioned earlier that welfare service might include (i) care for others and (ii) Zakat. Islamic banks take care of others through QardHasan (benevolent loan) financing transactions. It also mobilizes Zakat resources.

1. Qard Hasan (Benevolent Loan)

Since interest on all kinds of loan is prohibited in Islam, a loan, which is to be given in accordance with the Islamic principle, must be, by definition, a benevolent loan (QardHasan), i.e. a loan without interest. It must be granted on the grounds of compassion; to remove the financial distresses caused by the absence of sufficient money in the face of dire need. Since banks are profit-oriented organizations, there is not much scope for the application of this technique. However Islamic banks also play a socially useful role. Hence, they make provisions to provide QardHasan besides engaging in income generating activities. However, practices differ in this respect. “Some banks provide the privilege of interest free loans to the holders of investment accounts at the bank. Some other banks have the provision to provide interest free loans to needy students and other economically weaker sections of the society. Yet, some other banks provide interest free loans to small producers, farmers, entrepreneurs who are not qualified to get financing from other sources. The purpose of these interest-free loans is to assist them in becoming financially independent or to assist in raising their incomes and standard of living”.

Islamic banks of Pakistan provide QardHasan loans without service charges Islamic banks can charge the cost of disbursement, account maintenance and recovery of these QardHasan loans, though they cannot realize excess profits. The method and schedule of repayment of these loans are determined at the time of funding the request. However, the bank must keep in mind what is convenient to its customers.

1. Mobilization of Zakat

A pioneering experiment putting the principles of Islamic banking into practice was conducted in Mit-Ghamr in Egypt from 1963 to 1967, in which three types of accounts were operated. A Zakah account was one of them. The Zakah account attracted the stipulated amount of Zakah for redistribution amongst the poor.  Since Islamic banks follow the rules of The Islamic Shariah, they have to pay Zakah on their own resources (capital assets etc.), which paved the way for mobilization of financial resources for the needy and poor.  “An Islamic bank accumulates its Zakah in the Zakah fund and distributes amongst the poor as per Islamic Shariah”.

• Income Generating Programs

Access to required finance and other related inputs may help many to become self-employed. In absence of such opportunity the unemployed youths entangle themselves in various anti-social activities. Islami Bank Foundation has, therefore, taken up the following Self-employment projects:

1. Rickshaw
2. Sewing
3. Small Trade
4. Rural Health Work
5. Milch Cow/Goat rearing
6. Poultry Keeping

Educational Programs

Education is the backbone of a nation. Awareness building, skill training, and access to information-all depend on education. But it is regrettable that the rate of literacy is still very low in Bangladesh. Most of the children are deprived of the light of education due to poverty, lack of sufficient educational institutions, non-availability of text books and equipment etc. In a ward, the unfavorable socio-economic conditions are responsible for this chaotic situation. The Foundation has, therefore, taken up the following Programs to improve the country’s educational scenario:

1. Financial support to Educational Institutions
2. Scholarship/lump grant for poor and Meritorious Students
3. Support to Model ForqaniaMaktab

Health and Medicare Programs

Health and Medicare facilities are the basic and fundamental rights of each individual but most of the people of our country are still deprived of it. The Foundation has, therefore, taken up the following Programs to extend health, Medicare and sanitation facilities to the urban and rural areas:

1. Establishment of Medical Centers
2. Supporting Charitable dispensaries
3. Lump-sum help for medical treatment
4. Tube well Installation
5. Sanitary Latrine construction etc.

Such Assistance is also extended to the members of Rural Development Scheme (RDS) of IBBL. Under Health and Medicare Programs preventive measures have also been taken. Special steps have been taken for construction of sanitary latrines and installation of tube wells in the villages covered under to whom Islami Bank Bangladesh Ltd. is providing finance for income generation activities.

Humanitarian Help Programs

These programmed aims at providing help to distressed people who are unable to meet their basic needs like food, clothing, shelter and medicine. The old widow and children without guardians get preference. Besides, the programmed extends assistance to orphanages, provide fund for the marriage of poor girls, assist indebted people, help distressed wayfarers etc.

Relief and Rehabilitation Programs

Participation in relief and rehabilitation activities in natural disasters and in emergency forms an important programmed of Islami Bank Foundation. During calamities like flood, tornado, tidal surge etc. the Foundation mobilizes its own people as well as donates to the relief fund opened at the government level. The Foundation also tries its best to extend hands of assistance and co-operation to the Muslim brethren elsewhere in the world.

Dawah Programs

One important objective of Islami Bank Foundation is to disseminate the true knowledge and teachings of Islam. The Foundation has, therefore, taken up various schemes to enlighten the common people as well as the elite and make them familiar with the concept of Islam. Islamic research magazines and other Islamic Literatures are being distributed among the Academicians, Journalists, Justices, Lawyers, High Officials, Bankers, Literatures and important Libraries and Institutions of the country. This function is also working among the prisoners for their moral reform.

Islamic Bank Hospital

With the objective of providing low-cost curative services to the less affluent segment of the society, the Foundation has so far set up Hospitals at three Divisional Headquarters in Dhaka, Rajshahi and Khulna. Services of eminent general practitioners and specialists in various fields of treatment like Medicine, Surgery, Gynae, Pediatric, E.N.T. Urology, Neuro-surgery, Skin, Orthopedic etc. are harnessed in these hospitals. Standard diagnostic, medical and surgical equipments are in used in these hospitals. The Foundation plans to establish Hospitals at each Divisional Headquarters of the country.

Islami Bank Medical College, Rajshahi

The number of Doctors in Bangladesh is not sufficient compared to the total population. The Govt. Medical Colleges are also a very few and a good number of meritorious students cannot get admitted into the Govt. Medical Colleges due to insufficient number of seat capacities. Though some private medical colleges have been established mostly in and around the capital but the tuition fees and other charges are so high that the students of poor and middle-class families cannot afford it. Keeping in view the objective to enable the students of poor and middle-class families to be a doctor, Islami Bank Foundation has established a medical college in Rajsahi, a metropolitan city of northern part of the country. In the meantime, the classes of the students of 1st 2nd and 3rd batch are going in full swing. The construction work of the hospital building at Naodapra, the own site of the college, is also going on.

Community Hospital

Besides establishing Hospitals at the Divisional Headquarters, IBF has a plan to assist local initiatives in setting up Hospitals at District level. Establishment of Four such Hospitals is planned during 1999.

Monoram: Islami Bank Crafts & Fashion

The project has been taken up as a sales outlet of home-made garments, handicrafts and other items produced by the distressed women. The main objective of the project is to create conducive and healthy atmosphere in which women can contribute to the family income by working within the limits of Shariah.The other objective of this project is to develop designs of women-wear, which will conform, to the principles of decency and modesty as laid down by Islam and at same time compare well with the modern-day-fashions.

Islami Bank International School and College

As Dhaka, the capital of Bangladesh, is turning to be a MegaCity, a large number of English Medium Schools are creeping up which follows curriculum not conforming fully to the need of the country. As an attempt to combine modern education (which are secular) with religious education for a total development of the children, Islami Bank Foundation has established an English medium ModelSchool and College in Dhaka. Establishment of a Bangla medium school affordable by lower and middle class economic strata of the society is also being envisaged.

Islami Bank Physiotherapy and Disabled Rehabilitation Centre

In Bangladesh there are a great number of unfortunate disabled persons who have no other means to maintain themselves without resorting to beggary. The burden of the society might be lessened and these people can be helped to become self-reliant through imparting special skills. Keeping this in view, Islami Bank Foundation has decided to rehabilitate these unfortunate disabled persons through establishing a centre named “Islami Bank Physiotherapy and Disabled Rehabilitation Centre” This Centre while making temporary arrangement for food and shelter for the disabled, will arrange for health checkup, physiotherapy and occupational therapy and look for job placement through internship in various factories and trading houses.

Bangladesh Sangskritic Kendra (Cultural Centre)

Culture is very important leading factor of a nation. A nation is considered developed which is culturally advanced. Now-a-days, no state is conquered through applying physical force but through ideas, thinking, norms, belief etc. Like many other Muslim countries, the elite, affluent section and new generation of Bangladesh are presently motivated by western culture which is very harmful for the nation. Islami Bank Foundation has, therefore, established “Bangladesh Sangskritic Kendra (CulturalCentre) in Dhaka for upholding and promoting national culture and heritage of the country. Islami Bank Foundation, through its various welfare activities, has been working to serve the destitute and distressed people as well as for the socio-economic development of the country. Islami Bank Foundation wants to expand the on-going projects throughout the country and also wishes to undertake new ones for the overall development of the country. The Foundation is looking forward for sincere assistance and co-operation from philanthropic persons and institutions from home and abroad to materialize its noble and cherished objectives. Zakat and Donations may be credited to Islami Bank Foundation Account Nos. 02101005 (Zakat) and 02101014 (Donation) maintained with lslami Bank Bangladesh Ltd., Head Office Complex Branch, 40, Dilkisha Commercial Area, Dhaka-1000, Bangladesh.

Islami Bank Institute of Technology

The large number of unemployed youth of the country may be turned as assets through taking up Human Resource Development (HRD) Programmed. The youths with skills in various sectors of technology may become self-employed in the land and can also get employment opportunities abroad. Islami Bank Foundation has, therefore, established 3 Technical Institutes, two in Dhaka and another in Bogra, which are rendering training facilities in Computer, Secretarial Science, Driving, Electrical, Refrigeration and Air Conditioning, Radio & TV, Tailoring and Garments etc.

Recommendations

Islami Bank Bangladesh Limited (IBBL) is a leading bank in our country. It follows Islamic law and principles. Islami teaches us to contribute in social activities and help the society. For developing the society islami bank does lot of activities. People of our country are helped by many ways by the Islami Bank Bangladesh Ltd.

• But they have not advertised their welfare activities properly. As result people does not know about their activities. So, it is very necessary to publicity the welfare activities.
• In their Website they can add more welfare activities that they do.
• Before donating to poor people, they have to ensure that they help those people whose are really poorer and needy people.
• Before investment welfare oriented they must have to ensure about customer details background.

Islami bank doing their business effectively as a result now their name become into top 1000 bank list. So, they know better than to us about their activities which are best for them. Their welfare activities are contributed in social development.

There is no basic delineation over Islamic and conventional welfare activities. Each branch officer is expected to deal with both systems and the main different between the financial welfare activities of commercial banks are based on the interest, and according to the concept of the Shariah, on the other hand the Islamic banking system works according to the concept of the partnership that emerged between the banks a needy people or other institute. Islami Bank Bangladesh Limited has several foundations, medical center, educational institution etc. By this way they served many people in different way. Poor people or needy people get medical service, students get scholarship to improve their future Zakat fund help poor people to upgrade their living standard. They follow Islamic principle and islam teach us to do welfare activities for the human being they take many initiatives to do the work for society. So, by CSR activities they help both our society as well as people in our country.

Islami banks can satisfy most of the efficiency conditions if they can operate as a sole system in an economy. On the other hand, does not satisfy any of the efficiency conditions analyzed in the presend study. However, when Islami bank start operation within the conventional banking framework, their efficiency goes on decreasing in many dimensions. The deterioration is not because of islami bank’s own mechanical deficiencies; rather it is the efficiency blunt operation of the conventional banking system that puts a negative impact on the efficient operation of Islamic bank. This does not mean that the survival of Islamic banks operating within the conventional banking framework is altogether threatened. Evidence from Bangladesh indicates that Islamic banks can survive within the banking framework by switching over from PLS to trade related modes of financing.

Even under the framework, Islamic banks can operate with certain level of efficiency by applying in a reasonable percentage the PLS-modes the distinguishing features of Islamic banking. This has been possible in some countries of the Muslim world where the management of Islamic banks was cautions about possible impacts of every policy measure. Particularly, the management of these banks was judicious in selecting sectors as major of their operations. Sudan Islamic bank is a typical example in this respect. Islamic banks in Bangladesh have much to learn from experience of this successful bank.

Having been considered the pro-efficiency character of Islamic banking and its beneficial impacts on the economy, government policy in Muslim countries should be in favor of transforming system into Islamic banking. From the practical implementation of customer dealing procedure during the whole period of our practical orientation in IBBL. We have reached a firm and concrete conclusion in a very confident way. We believe that our realization will be in harmony with most of the banking scholar. Performing of IBBL during the last five years has been proved that with strong desire and will power one achieve whatever target they may have. Almost all the leading banks in our country have various extra facilities in offer for the customers in comparison with IBBL.

The writer is the BBA student of Manarat International University (MIU), Dhaka, Bangladesh. She can be reached at lutfunnaharmiu41@gmail.com