Dhaka, Bangladesh (BBN)- The world, in the last few years, has gone through a deep financial crisis, from which it has not fully recovered yet, Ahmad Mohamed Ali, president of the Islamic Development Bank (IDB) group has said.
“This crisis exposed the shortcomings of the conventional financial system characterized by excessive speculation and highlighted the need to have a new and alternative financial paradigm, which is built on the principles of justice, risk sharing, less speculation and direct linkages with the real economy,” the IDB president said while addressing at a seminar held in a local hotel on Sunday.
The ‘Seminar on Shaariah Banking: Bangladesh Perspective’ was organised by the Islamic Banks Consultative Forum (IBCF), a forum of the Islamic Banking Industry of Bangladesh.
By linking with the real economy, Islamic finance puts emphasis on financing productive activities and avoiding socially undesired actions, he added.
“Islamic finance also prohibits ethical norms that ensure fairness and transparency, as well as financial stability and contributes to growth of the real economy,” Dr. Ali explained.
He also said the Islamic financial services industry is also expanding its scope by including microfinance, which has been designed to give low income individuals in communities quick and easy access to socio-economic services, opportunities for self-employment and thus the chance to uplift themselves out of poverty.
“The very concept of microfinance was implemented in Bangladesh and afterward spread to other parts of the world,” the IDB president noted.
He also said Bangladesh as one of the major founders of IDB is the largest beneficiary of IDB Group financing and has received IDB Group financing of $11.5 billion including project financing, and technical and special assistance operations.
The IDB has also developed the Member Country Partnership Strategy (MCPS) for Bangladesh, 2013-16, in close consultations with public and private sectors, academia, civil society and development partners in the country.
“This MCPS exercise is aligned with the country’s needs and priorities underlined in the Sixth Five Year Plan and Bangladesh Vision 2021,” the IDB president noted.
As a result, three key pillars and two crosscutting areas have been identified for future partnership between the IDB Group, the Government of Bangladesh, and the private sector, according to the IDB president.
These pillars include improving infrastructure, sustainable agriculture and rural development, and primary and secondary education and vocational training.
Besides, the cross cutting areas include private sector development and Islamic finance, capacity building and reverse linkages.
Dr. Ali also said the government of Bangladesh has undertaken several important steps for Shariah banking to progress in the country.
“These frameworks would be important not only for the development of Shariah banking industry, but ultimately for the growth and development of the economy through influx of additional foreign direct investment, and employment generation,” he observed.
AHM Mustafa Kamal, planning minister, urged the bankers to invest more in education sector for human development.
He also sought BDT 20 billion from the Islami Bangladesh Limited (IBBL) to build the Padma Bridge.
Abdul Mannan, state minister for ministry of finance, said the government will prepare a law for Islamic banking and its draft will be finalized consultation with the stakeholders.
Shariah based Islamic banking already constitutes about a fifth of the total banking market in Bangladesh, according to Bangladesh Bank (BB) Governor Atiur Rahman.
“Shariah based Islamic banking and finance has come to be recognized as a mainstream activity not just among Muslim majority countries but also in the broader arena of global finance; gaining ground in the post-global financial crisis years because of its in-built risk sharing, speculation-averse, value driven features yielding financial and real sector stability outcomes superior to those of conventional banking,” the central bank chief noted.
Dr. Rahman also said a shariah compliant mode of refinance support from BB’s Export Development Fund (EDF) has placed Islamic banks in level playing field with conventional banks in export financing. “Introduction of similar shariah compliant refinance support against SME and other thrust sector lending by Islamic banks is also underway.”
M. Azizur Huq in his key note paper said the Islamic banking industry is one of the faster growing sectors of the international financial system. “Islamic finance has advanced to become an attractive alternative to the conventional financial system.”
He also said Islamic banks in Bangladesh can and should work together for a unified vision of a poverty free and developed the country in line with the central bank’s mission of ‘promoting financial inclusion for inclusive growth’.
Among others, Kazi Akram Uddin Ahmed, president of the Federation of Bangladesh Charmers of Commerce and Industry (FBCCI), Abul Hasan Chowdhury, former state minister for foreign affairs, Professor Abu Nasser Muhammad Abduz Zaher, chairman of the IBCF and chairman of the Islami Bank Bangladesh Limited (IBBL), AK Azad, chairman of the Shahjalal Islami Bank Limited, Mohammad Abdul Mannan, managing director of the IBBL, Mohammad Haider Ali Miah, managing director and chief executive of the EXIM Bank Limited, Rezaul Haque, chairman of the Social Islami Bank Limited and AKM Nurul Fazal Bulbul, convenor seminar preparatory committee of the IBCF spoke on the occasion.
Islamic finance commenced in Bangladesh in early nineteen eighties with just one Islamic commercial bank. By now there are eight Islamic banks run wholly on Shariah principles.
Besides, as many as seventeen conventional banks, including one globally active foreign bank, are running Islamic banking branches or windows side by side with their conventional banking, according to the central bank statistics.
BBN/SSR/AD-29Apr14-11:58 pm (BST)