Islamic banking is a concept based on Sharia principles. According to verse 275 of Surah Al-Baqarah in the Holy Quran, Muslims are prohibited from charging interest. Generally, Muslims strive to adhere strictly to their religious scriptures, resulting in efforts across all levels to distance themselves from interest. This has made Islamic banking highly popular in predominantly Muslim countries.
The History of Islamic Banking in South Asia Region:
In the South Asian region, discussions on Islamic banking have been prevalent for quite some time. In 1983, Bangladesh saw the establishment of its first Islamic bank, Islami Bank Bangladesh Limited (IBBL). IBBL was the first Sharia-compliant bank in South Asia, founded by investors from Saudi Arabia and Kuwait. Initially registered under the Companies Act of 1913 in Bangladesh, IBBL later became known as Islamic Bank Bangladesh PLC.
Islamic Banking System Features:
Islamic banking is now achieving the highest growth globally, including in South Asia and other countries worldwide. Its fundamental principles include profit-loss sharing and the prohibition of interest payments from borrowers and investors. These are the distinctive features and primary attractions of Islamic banking. Alongside, it operates as an economic system managing banking and business activities in accordance with Islamic law and policies. Islamic banking adheres strictly to the principles of Shariah law in business and commerce. Among its core principles, the prohibition of taking interest and the sharing of profit and loss are paramount. Almighty Allah, the Lord of the Universe, states in the Holy Quran in Surah Al-Baqarah, "I have made business lawful and interest unlawful.
Several fundamental nuances of Shariah-based banking are crucial considerations in the operation and acceptance of Islamic banking services or economic activities. These include establishing trust based on divine guidance, fundamental differences between interest-based and Islamic economic systems, structuring transactions based on real assets, capital, and entrepreneurship. These aspects must be adhered to in the practice of Shariah-based banking systems.
Renowned social scientist Ibn Khaldun stated, "Islamic economics is a social science related to the public welfare." The comprehensive management of global resources in accordance with the policies and methods of Allah, the Creator, constitutes the Islamic economic system. Furthermore, another eminent economist, Dr. M. Nejatullah Siddiqi, contends that Islamic economics equips Muslim thinkers to confront contemporary economic challenges. Numerous other prominent economists worldwide have defined Islamic economics in various ways. Essentially, the goal of Islamic banking is to establish Islamic economics. Islamic economics entails financial transactions based on Quranic teachings and the Sunnah. In essence, the comprehensive management of global resources in accordance with the policies and methods of Allah, the Creator, constitutes Islamic economics.
Financial Arrangements in Islamic Banking System:
1.
Mudarabah
2.
Musharakah
3.
Murabaha
4. Ijara
The Emergence and Evolution of Islamic Banking System in Bangladesh:
Islamic banking began its journey in Bangladesh in 1983 with
the establishment of "Islami Bank Bangladesh Limited," known as
Southeast Asia's first interest-free bank. Registered on March 13, 1983, as a
public company under the Companies Act 1913, it operates within the confines of
Islamic banking principles. Currently, Bangladesh hosts ten full-fledged
Islamic banks alongside conventional banks offering Islamic banking services
through Islamic banking windows. For example, City Bank operates "City
Islamic," United Commercial Bank offers "UCB Taqwa," and Mutual
Trust Bank provides "MTB Yakin." Additionally, even foreign
commercial banks like Standard Chartered Bank in Bangladesh operate Islamic
banking services under the name "Siddik Islamic Banking.
