A banking system that is based on the principles of Islamic law (also known Shariah) and guided by Islamic economics. Two basic principles behind Islamic banking are the sharing of profit and loss and, significantly, the prohibition of the collection and payment of interest. Collecting interest is not permitted under Islamic law. Where the conventional banking follows conventional interest-based principle.

1. Welcome to
The
Presentation
Prepared By
Md. Shahinuzzaman,
BBA 6th
Batch,
Patuakhali Science and Technology University

2. A Comparative study on Islamic
Banking in Bangladesh
(A Case Study on IBBL and City
Bank Ltd)

3. A banking system that is based on the
principles of Islamic law (also known
Shariah) and guided by Islamic economics.
Two basic principles behind Islamic banking
are the sharing of profit and loss and,
significantly, the prohibition of the collection
and payment of interest. Collecting interest is
not permitted under Islamic law. Where the
conventional banking follows conventional
interest-based principle.
Islamic Banking

4. Islamic Bank Vs Conventional
Banks in Bangladesh

5. SL Name of Bank Year of
Incorporation
Listing
Status
Year of
Listing
1. Islami Bank Bangladesh Limited (IBBL) 1983 Listed 1985
2. ICB Islamic Bank Limited (ICBIBL) 1987 Listed 1990
3. Al-Arafah Islami Bank Limited (AAIBL) 1995 Listed 1998
4. Social Islami Bank Limited (SIBL) 1995 Listed 2000
5. Export Import Bank of Bangladesh Limited
(EXIM)
1999 Listed 2004
6. First Security Islami Bank Ltd. (FSIB) 1999 Listed 2008
7. Shahjalal Islami Bank Limited (SJIBL) 2001 Listed 2007
8. Union Bank Limited (UBL) 2013 ------ ------
Islamic Banks’ Year of
Incorporation and Listing

6. Principles of Islamic banking
Mudharabah
Wadiah
Musharakah
Murabahah
Ijar

7. Overview of Islami Bank
Bangladesh Limited (IBBL)
 1st
Islamic principles and shariah
based bank in Bangladesh
Started in 1983
 About 12000 employees
 295 Brances

8. Overview of City Bank Ltd.
City Bank is one of the oldest
private Commercial Banks
started their operations in 1983.
 Started with only Taka 3.4 crore
worth of Capital, which now is a
respectable Taka 330.77 crore as
capital & reserve.

9. Comparison between traditional
and Islamic banking system-

10. Comparison between traditional
and Islamic banking system-

11. Comparison between traditional
and Islamic banking system-

12. Comparison between traditional
and Islamic banking system-

13. Comparison between conventional and
Islamic banking system (IBBL) on the
basis of Deposit:
 AL-WADIAH : In conventional banking system it is
known as current account. Some conventional banks give
interest to these accounts. Some conventional bank
also opens this account in personal name of their
customer.
 MUDARABA: In conventional banking system it
is known as savings account. Some conventional
bank gives interest to this account. Conventional
bank opens this account only in name of individuals.

14. Call deposit scheme: In conventional banking system it is
known as deposits pension scheme account. Conventional bank
gives interest to this account. That’s why conventional bank can
ensure the actual amount to be paid to their customers. There is
no product specially designed for hajj in conventional banking
system because interest income is prohibited (HARAAM) in
Islam.
Time Deposit: In conventional banking system it is known as
fixed deposits. As like other accounts conventional bank gives
interest to this account. To open this account in conventional
bank one individual needs at least taka 50000. There is no need
for saving account or current account to open this kind of
account in conventional banking system.
Comparison between conventional and
Islamic banking system (IBBL) on the
basis of Deposit:

15. Comparison between conventional and
Islamic banking system (IBBL) on the
basis of Investment
Bai salam: In conventional banking system is
known as letter of credit (LC). Here bank change
a fixed interest rate to their client rather than sell
it in higher price.

16. Analysis & Discussion
“IBBL & City Bank Ltd”
Profitability :
In case of Profitability the null hypothesis has
been rejected with respect to the ratios of return
on total assets, profit expense ratio, growth of
profit and earnings per share but accepted only
for return on equity. That is performance of
Islami bank Bangladesh ltd. is superior and
indicates higher ability and therefore is an
indicator of better managerial performance to
that of City bank ltd. But ROE of City bank ltd.
is superior to that of IBBL.

17. Analysis & Discussion
“IBBL & City Bank Ltd”
Liquidity and Solvency
In case of liquidity and solvency ratios the null
hypothesis is rejected at 0.05 level of significance
because the statistical t-value is not within accepted
region for cash deposit ratio, advance deposit ratio, and
equity multiplier ratio. That is liquidity & solvency
statement is in favor of IBBL to that of City bank ltd.
The calculated value reports that IBBL takes less
financial stress and has borrowed fewer funds to convert
into asset with the share capital but higher govt. bond
investment of CITYBL indicates high liquidity and less
risk to that of IBBL.

18. Business development
Based on the calculated value the null hypothesis is
rejected at 0.05 level of significance as the statistical
t-value is not within accepted region for all of the
ratios that indicates performance of IBBL is
superior to that of City bank ltd. and making
significant contribution in the economic
development of Bangladesh.
Analysis & Discussion
“IBBL & City Bank Ltd”

19. Efficiency and Productivity
In case of efficiency & productivity, Islami bank ltd. is
more efficient than City bank ltd.because total operating
expenses to deposits ratio of IBBL is less than CITYBL it
means economies of scale is in favor of Islami bank
Bangladesh ltd to that of CITY bank ltd.
Commitment to Economy and Community
Long-term loan ratio is calculated to measure superiority
in economic commitment where the null hypothesis is
accepted at 0.05 level of significance it means City bank
ltd. is superior to that of IBBL.
Analysis & Discussion
“IBBL & City Bank Ltd”

20. Problems faced by the
Islamic banks
When depositors open an account bank provide
them a provisional rate of profit but in the time of
profit calculation bank does not provide at the
same rate.
Islamic bank does not provide fixed return to the
depositors so profit may be high or low.
lack of proper Islamic banking rules in our
country

21. Islamic bank cannot run in Shariah
prohibited sector, so its investment scope is
narrow in Bangladesh.
Islamic banks should engage in poverty
alleviation & rural development seriously,
so they could not reinvest their idle money,
as a result, profit is not increasing.
Problems faced by the
Islamic banks

22. Islamic Banks use money as a media not goods,
but conventional bank use money as a goods
There is no scope of compound interest in the
Islamic Banking system, bank charges one time
profit and it calculates on the simple basis.
In the Islamic banking system depositor get profit
on the basis of weight age if the bank earn or make
profit otherwise depositor must share loss.
Islamic banks must have to be related with the
business or investment or transaction of goods. But
traditional banks are not bound to do this.
Findings

23. There has been identified progress made by Islamic banking
sector since independence. But for gaining Better progress in
the future following steps should be taken by all Islamic
banks:
The whole financial System need to be re-organized
New banking philosophy for the Islamic Banks
Banking Policies and practices should be modernized
Policy and Strategy should be formulated
Stepping for Distributional Efficiency
Allocating Efficiency should be promoted
Government and Central bank's Responsibilities
Inter-Islamic Bank Co-operation and Perspective
Plan
Concluding Remarks

24. Thanks
for being
with us…