This presentation discusses the history and evolution of Islamic Banking and the characteristics of it.

1. Islamic Banking

2. Submitted to
Sayma Sadia Shawon
Assistant Professor
Department of Business Administration

3. Meet the team
Incredible Squad
Nijam Uddin Ahmed 2019731023
Junayed Ahmad Sojib 2019731029
Parvej Ahmed Khan 2019731044
Sonia Akhter 2019731045
Md. Jahin Hasan Zisan 2019731087

4. Introduction
 Islamic banking is defined as banking system which is in consonance with
the spirit, ethos and value system of Islam and governed by the principles laid
down by Islamic Shariah.
 An Islamic bank is a financial institution whose status, rules and procedures
expressly state it’s commitment to the principle of Islamic Shariah and to the
banning of the receipt and payment of interest on any of it operations.

5. Philosophy of Islamic Banking
 Not dealing in transactions involving interest/riba.
 Not being associated with transactions having the element of
Gharar or Maiser or the subject matter of which is invalid.
 Focusing on generating returns through investment tools
which are Shariah compliant as well.
 Operating on the basis of sharing the risk.

6. History of Islamic Banking in Bangladesh
1. Submitting a comprehensive report with a set of
recommendations to initiate the process of setting up Islamic
banks in Bangladesh on January, 1981.
2. Organizing a two day seminar on 18-19 March, 1981 and
taking up the recommendations.
3. Issuing a letter for opening separate Islamic banking counter
in state owned banks on experimental basis on 4th April, 1981.
4. Taking part in an international seminar on Islamic Banking
and Insurance on June 9-11, 1981 by a senior official.

7. History of Islamic Banking in Bangladesh(cont’d)
5. Holding a one-month long full-time residential course on 6
October 1981 at Sonali Bank Staff College.
6. Taking the decision to introduce Islamic banking in all
branches of six state-owned commercial and two specialized
banks on 16th October, 1982.
7. Establishment of the first Islamic bank “Islami Bank
Bangladesh Limited” on March 13, 1983.
8. Having total 10 Islamic banks as of now.

8. Objectives
Primary Objectives
• To promote, foster and develop the application of Islamic
principles, law and tradition in the business sectors.
Objectives when viewed from the context of its role in economy
• To offer contemporary financial services in conformity with
Islamic Shariah.
• To contribute towards economic development and prosperity
within the principles of Islamic justice.
• To facilitate efficient allocation of resources.
• To help achieving stability in the economy.

9. Distinguishing Features of Islamic Banking
 Abolition of interest (Riba)
 Adherence to public interest
 Multi-purpose bank
 More careful evaluation of investment demand

10. Riba and Its Basic Features
Riba
In the Shariah, Riba technically refers to the premium that must be
paid by the borrower to the lender along with the principal amount as
a condition for the loan or for an extension in its maturity.
Most Important feature
• It is the positive and definite result of money when changed.
Basic features
• It must be related to loan.
•A prefixed amount of money to be paid when due.
•A time is fixed for the repayment and
•All these elements for repayment are taken as conditions for loan.

11. List of Islamic banks of Bangladesh

12. 12
Advantages of Islamic banking
 Justice and fairness
 Banking for all
 Transparency
 Ethical and Moral Dimensions
 Discouraging Speculation

13. Discounting techniques of Islamic bank
Musharaka/Shirkat
Mudaraba
Murabaha
Bai-Muajjal
Bai-Salam
Ijarah (Leasing)
Hire Purchase
Others

14. 14
Differentiation between banks and Islamic banks
Points of Distinction Banks Islamic Banks
Functions and
operating mode
• Based on manmade
principles.
• Based on the principles
of Islamic Shariah.
Fundamental function • Lending money and
getting it back with
interest.
• Participation in
partnership business.
Aims at maximizing
profit
• Without any restrictions. • Subject to Shariah
restrictions.
Guarantee • Has to guarantee all its
deposits.
• Strictly speaking, and
Islamic bank can not do
that.
Defaulters • Charging additional
money (compound rate
of interest) in case of
defaulters.
• Having no provision to
charge extra money from
the defaulters.

15. Suggestions and Potentialities
1. Islamic Banking Act
2. Incorporating Islamic Banking in Educational Institution
Curriculum.
3. Higher Training
4. Updating and Revising Islamic Banking Guidelines
5. The Central Bank Shari’ah Board
6. Research and Development (R&D) Activities
7. Practice of Uniform Procedure
8. International Branding

16. Conclusion
Islamic banks not only survived without interest but also was helpful in achieving the
objective of development by-
 Increasing supply of risk capital in the economy
 Facilitating capital formation, growth of fixed assets and real sector business activities
Therefore, proper measures should be taken to convert the potentialities of Islamic bank
into strength to improve our economic condition.

17. Thanks