Daffodil International University
Faculties and Departments => Business Administration => Business & Entrepreneurship => BBA Discussion Forum => Topic started by: Rozina Akter on June 19, 2014, 02:35:04 PM
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At the very beginning of Islamic banking in the country there were only full-fledged Islamic banks, not any 'Islamic window.' With a substantial growth in business of the Islamic banks and the growing demand from customers the conventional banks also introduced financial tools and products in compliance with Sharia and thus the 'Islamic Windows' emerged.
Fifteen conventional banks now run Islamic banking through specialised branches. These Islamic windows of conventional banks are no exception to those elsewhere in the world.
Some people doubt whether such Islamic windows fully comply with Sharia. They raise a question as to whether these organisations are truly Islamic, when their capital is not completely halal or permissible from the Sharia point of view. Secondly, many customers also believe that conventional banks are involved in many non-permissible activities from the Sharia point of view such as usury and speculating on derivatives.
In order to tackle the challenges they faced initially, conventional banks established separate divisions within, namely Islamic Banking Divisions under which Islamic windows were opened. These divisions are independent and appointed religious bodies (Sharia Supervisory Committees) supervise their operations and authorise and inspect their financial products. The Islamic windows of conventional banks have now earned a considerable amount of confidence of clients and started competing with full-fledged Islamic banks. However, there still exits a sense of suspicion and mistrust among some clients about genuineness of Islamic windows of conventional banks and their Islamic products. The banks have taken this attitude of such clients seriously and they have taken the following measures to address this mindset of clients:
l One of the main distinguishing characters of an Islamic bank is interest-free banking. Islamic banks have their own principles, tools and techniques of operation. Therefore, the funds of Islamic banking windows are kept separate from those funds, which have not been mobilised by following Sharia provisions. The funds mobilised through Islamic windows are not commingled with the funds of the deposits mobilised through conventional branches. This is done through maintaining separate accounts, books, and records and this compliance is disclosed to the customers through annual reports, prospectuses, websites and other promotional materials.
l An Islamic window has an independent Sharia supervisory committee consisting of prominent scholars, who are highly qualified to issue fatawa or religious rulings on financial transactions and have considerable experience and knowledge about modern financial dealings and transactions. This committee freely gives opinions and endorses all contracts, dealings, transactions and investment activities through monitoring, supervision and close scrutiny of contracts, transactions and other procedures.
l A sufficient number of trained Islamic bankers have been recruited for management. Adequate training programmes are arranged for staffs at all levels from the senior management to the branch level. It is being ensured by banks that employees having proper knowledge about investment operations of Islamic banking are recruited at the branch level.
l Banks follow and comply with the standards set by the Bangladesh Bank (BB) for operation of Islamic banking. The BB can follow the standards and guidelines set by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB). The AAOIFI and the IFSB are internationally-recognised bodies for Islamic banking practitioners and the collective personal reasoning of the AAOIFI and the IFSB are highly important for a uniform set of Islamic banking practices globally. Many countries in the world have followed these standards. Conforming to these standards will help Islamic windows avoid confusion, misunderstanding and ambiguity and ensure clarity and sound Islamic banking practices.
The views of regulators about permissibility of Islamic windows vary from country to country. Malaysia (for retail banking), Qatar and Lebanon do not allow Islamic banking widows except full-fledged Islamic banks. On the contrary, Ethiopia is a country where only Islamic windows are allowed, not full-fledged Islamic banks. In Oman, windows are allowed only through standalone branches. The rest of the countries in the world, where Islamic banking exists, allow conventional banks to open Islamic windows. Recently, Pakistan, which allows both Islamic windows and full-fledged Islamic banks, has made a provision that a bank will have to obtain a written approval from the State bank of Pakistan before opening each Islamic window and provide the regulator with additional details on staffing, training and marketing arrangements.
Bangladesh belongs to the category which allows both full-fledged Islamic banks and Islamic windows of conventional banks. However, the BB, which is the main regulatory authority in the country, has now decided not to allow any new Islamic bank or Islamic window of conventional banks until formation of a Central Sharia Supervisory Council. In Bangladesh, each bank has its own Sharia Supervisory Council and follows Sharia rules as they wish, since Sharia laws vary from country to country. The BB currently regulates the Islamic banks by following each bank's Sharia Supervisory Committee norms and therefore formation of such a council will enhance the scope of strict enforcement of related laws and monitoring of their activities and promote a unified code of conduct under Sharia norms.
Islamic windows of conventional banks are now providing Islamic banking services to a greater section of Islamic banking customers. The regulators should allow Islamic windows alongside full-fledged Islamic banks. Not allowing Islamic windows of conventional banks, which is practised in many countries, is against the views of many contemporary scholars, who argue that Sharia-compliant transaction contracts should not be confined to a certain group of people and should be permitted for anybody, willing to conduct dealings in accordance with Sharia. When it is possible to run full-fledged Islamic banks in the conventional economic system, it is equally possible to run Islamic windows of conventional banks as long as the Sharia conditions stipulated for them are fulfilled.
The author is working in a private bank in Bangladesh and has a post-graduate degree in Islamic Banking, Finance and Management from the United Kingdom.
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Informative sharing. Thank you :)
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:)