My internship Report on Shahjalal Islami Bank

1. Overview of Islamic Banking System
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Shahjalal Islami Bank
2. Overview of Islamic Banking System
2.1 Definition of Islamic Banking
Islamic banking means any commercial which carries on Islamic banking business and grips
a legal warrant. Islamic banking business means banking business whose aims and actions do
not include any sector which is not acceptable by the Faith of Islam.
So, if a bank by clarification, avoids interest on its all dealings, but does not keep itself away
from additional Haram (banned) jobs, like investment to pork meat business, intoxicating
drink manufacturing, gambling, etc. is not an Islamic, but all Islamic banks must be interest
free. Islamic bank, thus, can also be well-defined as a profitable organization which does not
pay or accept interest on any of its actions in any structure and all movements track to the
viewpoints of Islamic Shariah.
2.2 Objectives of Islamic Banking
The aim of Islamic Banking is not only to earn profit but also to do good and welfare to the
people. Islam keeps the concept that money, earnings and assets belong to ALLAH and this
wealth is to be used for the good of the society. The main philosophies of Islamic Banking
are as follows:
• To conduct interest free banking.
• To establish participating Banking instead of Banking on debtor-creditor association.
• To invest through different modes legalized under Islamic Shariah.
• To accept deposits on profit-loss sharing base.
• To establish welfare preoccupied with Banking System.
• To prolong action to the poor, helpless and low income group for their economic
enlistment.
• To promote in achieving the ultimate goal of Islamic economic system.

2. Overview of Islamic Banking System
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Shahjalal Islami Bank
2.3 Salient Features of Islamic Banking
The Islamic banks have some distinguishing features, among which, the followings are
important. Islamic banks:
• Are financial institutions
• Are committed not to pay or receive riba on any of their operations and to operate
in accordance with the principals of Islamic Shariah.
• Imply zero rate of interest, but not zero rate of return; earn profit / loss from their
investment and distribution the same to PLS- depositors and shareholders.
• Earn profit, but avoid profiteer ting which is prohibited in Islam,
• Are production and value oriented rather than security oriented,
• PayZakat,
• Have Shariah Board to examine their activities and operations.
2.4 Role of Bangladesh Bank in Promoting Islamic Banking in Bangladesh
However, there is no complete Islamic Banking Act for leading, monitoring and managing
the Islamic banks in Bangladesh, some Islamic banking supplies have already been combined
in the amended Banking Companies Act, 1991 (Act No. 14 of 1991). Bangladesh Bank did
not set up any distinct Division at its Head Office to device, guide and control the task of the
Islamic banks. Payment and control of the Islamic banking operations are accompanied by
the Bangladesh Bank as per the general tactics bounded for the conventional banks. So,
certifying process of Shariah philosophies in the Islamic banks are being led by their own
Shariah Councils. The role of Bangladesh Bank in controlling, guiding and supervising the
Islamic Banks in Bangladesh in accordance with Islamic Shariah is very irrelevant. In
observing the Shariah operation status of the Islamic banks, Bangladesh Bank examines only
the report of the particular banks' Shariah Councils. However, the examiners and supervisors
of Bangladesh Bank are not equally familiar with the actions of the different operational
practices of the Islamic banking. This is because of the fact that there is no distinct Segment
to look into this key matter.

3. Overview of Islamic Banking System
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Shahjalal Islami Bank
2.5 Difference between Islamic Banking and Conventional Banking
In Islamic Banking the main dissimilarity with conservative Banking is that Islamic Banking
cannot deal with interest matter and con not deal with Haram Business. Point wise
differences between Islamic Banking and conservative Banking Transactions are
Summarized below:-
ISLAMIC BANKING CONVENTIONAL BANKING
Islamic Banking are to follow Quaran,
Sunnah, Ijma and Kias i.e. Shariah in all the
business transactions including Accounting
Entries.
Conventional Banking follows man made
practice and rules.
They cannot engage in any interest in the
transactions/Haram(prohibited) business.
They conduct their Transactions on interest
basis and also engage in Haram (prohibited)
business.
If any interest is including/ entered in the
operations of the banks it should be
excluded from the regular income of the
bank.
Interest is their main income.
If any income is earned violating Shariah
principles that cannot be included in the
distributable income of the bank.
They do not follow Sharia rule and
regulation
In Musharaka investment, income
cannot be accounted for on accrual basis.
For delay of investment, in case of Bai-
Mudaraba and Bai-Muajjal investment
further amount of profit cannot be changed.
In conventional banking there is no practice
of Musharaka Investment
No such Bai-Muraba and Bai-Muazzal
investment in conventional Banks. They
charge interest / penal interest for delay in
payment
Islamic Bank is to pay Zakat on its reserves. They do not pay any Zakat on reserves.
Islamic Banks are to pay a certain agreed
amount of Investment Income (agreed in
percentage) to the Mudaraba Depositors.
They do not pay a certain amount to the
depositor from their Investment income,
rather they pay fixed rate of interest
irrespective of Investment Income.
Mudaraba Depositors are to share the loss, if
any, incurred out of Investment market from
Mudaraba deposits.
Their depositors do not share any loss or
profit.
Table: Difference between Islamic Banking and Conventional Banking