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Despite challenges, Islami Bank’s growth continues

Published : Tuesday, 9 July, 2024 at 12:00 AM  Count : 865
Faruk Ahmed
“Truth will ultimately prevail where there are pains to bring it to light," George Washington, the first President of the United States wrote in a letter dated June 21, 1794, to Frederick County delegate Charles MynnThruston. In this letter, Washington responded to Thrustons warning about a "powerful faction" in Kentucky seeking to separate from the United States and align with Britain.

This timeless quote has been echoed nearly three decades later by the remarkable success of Islami Bank Bangladesh PLC which was widely criticised recently for some pitfalls. Despite facing significant challenges, the bank has recently grabbed news headlines by achieving tremendous growth, proving that persistent efforts to uncover and uphold the truth can lead to extraordinary outcomes.

Several months ago, leading dailies criticised Islami Bank Bangladesh (Islami Bank) for its performances. Recently, the issue was revisited in the news. The Daily Star, the countrys largest circulated English daily, reported that Islami Bank has surpassed Sonali Bank, the largest state-run commercial bank, to become the top lender by deposits, totalling Tk 153,456 crore in 2023.The Daily Observer first brought up the issue last month.

Jana Kantha, another leading vernacular daily, has provided even more encouraging reports. According to the Daily, Islami Bank Bangladesh has outperformed all public and private banks in most banking performance indices. The report states that the bank added Tk 6,350 crore in new deposits during the six months ending in June 2023 amounting to Tk 159,792 crore- more than 9.00 per cent of the total banking deposits in the country.

Deposits are the lifeblood of banking institutions, enabling them to extend loans and investments that generate revenue. A bank must secure new deposits by attracting additional customers to lend more. Without deposits, there can be no loans; in other words, deposits create loans. Islamic Term Deposits operate on the Shariah principle of Commodity Murabahah (cost-plus-sale), where the bank identifies a specific asset to use as the underlying asset for the sale and purchase transaction with the customer. According to the published reports, these robust Sharia-based deposit buffers have enhanced the banks resilience against shocks and also enabled the bank to investmore to spur the countrys economy.

IBBs investment increased 9.50 per cent to Tk 1600,266 million in 2023 despite the harsh global business environment while its total assets increased by 10.52 per cent- higher than the industry average mainly due to its higher recovery rate- nearly 99 per cent from SMEs and agriculture. IBBs investment in small and medium industries (CMSME) was the highest allocation among the banks with an impressive 20.23 per cent growth over the year and stood at Tk 32,377 crore in 2023.

Trust is like a vase: once its broken, it can be repaired, but it will never be the same. This is crucial because consumer trust in banking influences behaviour, driving loyalty and creating revenue opportunities when nurtured properly, or leading to risks if customers disengage. The impact of mistrust is particularly evident during financial difficulties. People trust Islami Bank not only for its Sharia-based banking principles, which emphasise profit and loss sharing and prohibit interest collection and payment but also for its commitment to these values.

Unlike conventional finance, plagued by opacity and inequity, a former CEO of a private commercial bank said Islamic banking boasts a transparent structure devoid of intricate black boxes that demand a genius to unravel. Islami Bank Bangladesh has emerged not merely as a religious sentiment but as an innovative force, driven by its welfare-centric business model that attracts investments from the Muslim population while catering to diverse financial preferences. So, the success of IBB was inevitable.

According to a central bank official, Islami Bank Bangladesh achieved remarkable growth due to its purpose-driven approach, proactive strategies, and greater transparency.In this digital era, Islami Bank has increased customer engagement by improving its range of digital services. This has broadly been a success, with growing numbers of consumers across all demographics regularly interacting through apps and other means of digital engagement.

He mentioned that the Islami Bank secured the top position (40.74%) in remittance mobilisation amounting to Tk 353.48 billion during October-December 2023 thanks to its CELLFIN APP that helps millions of expatriate Bangladeshi to remit money instantly to their family, firms and friends.

Another aspect of Islami Banks rebound is its strategic investment in rural areas, which yields higher returns. The bank targets millions of women, small traders, and vendors, both Muslim and non-Muslim, who trust Islami Bank, deposit their money for higher returns, and repay their investments promptly, resulting in a nearly 99 percent recovery rate. However, many media outlets have overlooked this strength, instead focusing on a portion of the banks operations that the CEO claims is misleading.

In conclusion, both the media and banks should focus on sustaining the growth of Islamic banking through responsible media intervention. The media profoundly impacts public perception and can play a pivotal role in correcting misconceptions. Timely and thoughtful media engagement is essential for deepening public understanding of Islamic banking, attracting a wider audience, and supporting the sectors sustainable development in Bangladesh.

The writer is a senior financial journalist who conducted a bank rating of the countrys 22 private commercial banks in 2000



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