BD Islami Bank: A Comprehensive Guide to Shariah-Compliant Banking

Bangladesh Islami Bank Limited (IBBL) pioneered Islamic banking in Bangladesh. Established in 1983, IBBL operates under Islamic Shariah principles, offering modern banking services that align with Islamic values. With over 317 branches and a significant focus on technological advancement, IBBL has emerged as a trusted financial institution for millions of Bangladeshis. In this article, we will explore various aspects of Bangladesh Islami Bank, including its services, features, and the advantages of its online banking platforms.

What is Bd Islami Bank?

Overview of Islami Bank Bangladesh Limited

Bangladesh Islami Bank Limited was founded on March 13, 1983, making it the first commercial bank in the country to operate on Islamic Shariah principles. Over the years, it has grown into one of Bangladesh’s largest private commercial banks, providing a wide range of services, including online banking, ATM services, and investment opportunities. The bank is headquartered in Dhaka and has a significant presence locally and internationally.

Key Information About IBBL

• Name: Islami Bank Bangladesh Limited
• Founded: March 13, 1983
• Headquarters: Dhaka, Bangladesh
• Industry: Banking and Financial Services
• Branches: 317 branches across Bangladesh
• SWIFT Code: IBBLBDDH
• Website: islamibankbd.com
• Employees: 10,068

IBBL focuses on providing financial services that comply with Islamic laws, which prohibit interest-based transactions. Instead, the bank operates on a profit-sharing model, ensuring that its services are aligned with Islamic teachings.

Islami Bank Online Banking Services

Introduction to Islami Internet Banking

In today’s fast-paced world, digital banking is crucial, and Islami Bank Online Banking is a key component of IBBL’s offerings. Islami Bank’s online services, also referred to as iBanking, provide a seamless way for customers to manage their accounts, transfer funds, and perform various banking transactions. Through its technologically advanced platforms, IBBL has successfully debunked the myth that Shariah-based banks are not tech-savvy.

Features of Islami Bank Online Banking

IBBL’s online banking services come packed with a variety of features, designed to cater to the needs of its customers:

• Account Management: View account balances, transaction summaries, and account statements.

  

• Fund Transfer: Transfer money instantly between IBBL accounts (iTransfer) or to other banks via EFT, NPSB, and RTGS.
• Mobile and Utility Payments: Recharge mobile phones, pay utility bills, and even purchase bus and airline tickets.
• E-commerce Payments: Pay for online purchases and merchant services.
• Cheque Services: Request cheques, stop payments, and manage cheque status.
• Security Alerts: SMS alerts for every transaction for enhanced security.

For more details and to register, customers are required to visit their nearest IBBL branch.

Islami Bank CellFin Mobile App

Islami Bank CellFin is an innovative mobile application launched by IBBL, providing a wide range of digital services on-the-go. Whether you are a bank customer or not, you can register for CellFin and enjoy services like fund transfers, utility payments, and mobile recharges. This app also supports international transactions from 26 countries around the world.

SMS Banking and ATM Services

IBBL’s SMS Banking

IBBL introduced SMS Banking in 2008 to enhance its digital services. SMS Banking allows users to receive account balances, mini statements, and account information through a simple SMS format. This service is available for all online branches of IBBL, and it’s completely free, except for normal SMS charges.

• SMS Format: To get account details, customers can send an SMS in the following format: IBB <space>SERVICE <space>PIN<space>A/C Serial to 6969 (for local users) or +8801714006969 (for international users).

Bd Islami Bank ATM Banking

ATM services by IBBL were introduced in 2000 and provide convenient banking access to customers 24/7. With more than 2000 ATM booths, customers can withdraw cash, transfer funds, view mini statements, and check balances at any time.

• Transaction Limit: Customers can withdraw up to Tk. 50,000 per day.
• Service Fee: Tk. 300 yearly fee is applicable for ATM services.

Investment and Deposit Schemes

Shariah-Compliant Investment Modes

As a Shariah-based bank, IBBL offers several profit-sharing investment schemes that cater to different financial needs:

1. Bai-Murabaha: A cost-plus-profit agreement for purchasing goods.
2. Bai-Muajjal: Deferred payment system for purchasing goods.
3. Musharaka: Joint investment where profit and loss are shared.
4. Mudaraba: One party provides capital, and the other manages the investment.

Popular Deposit Schemes

IBBL also offers a variety of deposit schemes, including:

• Mudaraba Savings Account
• Mudaraba Hajj Savings Account
• Mudaraba Monthly Profit Deposit Scheme
• Mudaraba Special Savings (Pension) Account

These schemes are designed to help customers save for their future, all while adhering to Islamic principles.

Risk Management at IBBL

Managing Financial Risks

Risk management is crucial for any financial institution, and IBBL has developed a comprehensive risk management framework. The bank uses various tools, including debt to equity ratio, return on equity, value at risk, and non-performing loans, to manage financial risks. IBBL also adheres to the capital adequacy ratio to ensure that it maintains a healthy balance between risk and returns.

Bd Islami Bank IBBL Agent Banking

IBBL (Islami Bank Bangladesh Limited) introduced agent banking in July 2017 to provide essential banking services to the country’s remote and underserved areas. Agent banking allows banking activities to be conducted through appointed agents who operate independently but offer the same basic services as traditional branches. Currently, there are 2,693 agent outlets across Bangladesh, helping expand access to financial services for rural populations.

Services Provided by IBBL Agent Banking

IBBL agent banking offers a range of banking services, including:

• Account Opening: Customers can open bank accounts through agent outlets, making banking more accessible in remote areas.
• Cash Deposits, Withdrawals, and Transfers: Agents facilitate cash deposits, withdrawals, and transfers between accounts.
• Withdrawals via POS: Customers can withdraw money using Point of Sale (POS) systems at agent locations.
• Foreign Remittance Payment: Agents allow customers to receive foreign remittances conveniently.
• Utility Bill Payments: Customers can pay their gas, water, and electricity bills through agent outlets.
• Account Balance Inquiry and Statements: Agents provide account balance information and statements of account upon request.
• Cheque Books and Debit Cards: Customers can request and receive cheque books and debit cards through agent banking.
• Clearing Cheques: Agents receive cheques for clearing, providing another point of service for customers.
• Investment Disbursement and Installment Collection: Agents facilitate disbursement of investments and collect installments from customers.

However, it is important to note that transactions through cheques or foreign currency are not available at IBBL agent banking outlets.

This service helps to enhance financial inclusion by making banking services more accessible to rural populations, bridging the gap between urban and remote areas in Bangladesh.

Evolution of Islamic Banking

Emergence of Islamic Banking

In a growing and dynamic economy, a well-developed banking system is essential to channel financial resources from surplus to deficit sectors, thus fostering economic development. Conventional banks have long played a vital role by collecting public savings, offering fixed interest rates, and providing credit to entrepreneurs at higher interest rates, using the interest margin as their income. However, critics of interest-based systems point to inefficiencies, with some arguing that interest contributes to cyclical economic fluctuations, as seen during the Great Depression and other financial crises. These challenges led to the emergence of alternative banking systems, notably Islamic Banking, also known as Profit-Loss-Sharing (PLS) Banking, in the latter half of the 20th century.

Religious and Economic Motivations

The rise of Islamic banking was primarily inspired by religious obligations in Islam, particularly the prohibition of Riba (interest) in the Quran. Economists and Islamic scholars have long equated interest in conventional banking to Riba, arguing that it introduces Gharar (uncertainty), which contradicts Islamic principles of justice and fairness in financial dealings. Economically, proponents argue that interest-based systems do not promote wealth creation and are often linked to instability, stagflation, and inequitable income distribution. These religious and economic concerns spurred Muslims to reorganize financial activities according to Shariah, laying the groundwork for an interest-free financial system that promotes equitable wealth distribution and sustainable development.

Initial Experiments and Global Expansion

The concept of Islamic banking took root through several early initiatives:

1. Pakistan (1950s): The first Islamic financial institution was established in rural Pakistan by pious landlords who provided interest-free loans to small landowners. Despite initial success, the experiment failed due to limited capital and operational challenges.
2. Egypt (1960s): The Mit Ghamr Savings Bank successfully implemented Islamic banking principles, combining rural banking with Islamic values, growing into a network of local banks. This experiment eventually evolved into the Nasser Social Bank in Cairo, the first Islamic bank in an urban setting.
3. Malaysia (1963): The Tabung Hajji emerged as a financial institution for Malaysian pilgrims, addressing the need for funds untainted by Riba, thus providing a Shariah-compliant savings platform for those undertaking Hajj.

These pioneering efforts paved the way for the establishment of larger Islamic banking institutions. In 1975, Dubai Islamic Bank became the first public Islamic bank, followed by the launch of major players like Al-Rajhi Banking Investment Corporation in Saudi Arabia and the Islamic Development Bank (IDB) to promote economic development across Muslim countries. By the late 20th century, Islamic banking had expanded globally, with institutions like Dar-al-Mal-al-Islami (DMI) in Geneva and Kuwait Finance House (KFH) leading multinational operations.

Complete Islamization Efforts

Countries like Iran, Pakistan, and Bangladesh embarked on comprehensive Islamization of their financial systems:

• Iran (1979–1986): Following the Islamic Revolution, Iran progressively Islamized its banking system, eliminating interest and focusing on directing credit towards productive sectors like agriculture, industry, and infrastructure.
• Pakistan (1980s): Gradual efforts in Pakistan led to the establishment of dual banking systems, where interest-free transactions coexisted with conventional banking until a complete transition to Islamic finance was mandated in 1984.
• Bangladesh (1983): Bangladesh saw the establishment of Islami Bank Bangladesh Limited (IBBL), Southeast Asia’s first Islamic bank, following significant local and international efforts to promote Shariah-compliant banking.

Islamic banking has grown into a robust, global alternative to conventional banking systems, offering a framework that aligns with Islamic ethical norms while providing innovative financial solutions to both Muslim-majority and non-Muslim countries.

RIBA and Its Basic Features

The term “Riba” is used in the Quran to refer to any form of interest. The literal meaning of Riba is an increase, growth, or increment of anything beyond its original amount (Maududi 1979, p.84). However, not all increases are considered Riba in Islam. Profits generated through business activities are permissible (Halal), while increases charged on loans with a fixed interest rate are deemed impermissible (Haram). Thus, Riba refers specifically to the predetermined extra amount that a borrower must pay a lender along with the principal amount.

Characteristics of Riba

Muslim scholars equate interest with Riba, describing it as any premium or increment paid over the principal amount as a condition for a loan or an extension of its maturity (Chapra 1985, p.64). This predetermined return, often referred to as “interest” in conventional financial systems, is regarded as Riba and is unanimously forbidden in Islamic law. The Quran strongly condemns such practices, equating them with exploitation.

The key features of Riba are:

• Loan-Based: Riba must be related to a loan or credit agreement.
• Prefixed Amount: It involves a predetermined, fixed return on the loan.
• Fixed Repayment Time: There is a specific timeline for repayment.
• Condition for the Loan: All these elements—fixed time, amount, and repayment—are prerequisites for the loan.

Riba vs. Profit

Although some attempt to equate Riba with profit, they are fundamentally different in nature:

• Riba: A fixed and guaranteed return regardless of the outcome.
• Profit: An uncertain result based on actual business performance, post-determined after business activity.

Riba	Profit
Riba is predetermined and fixed.	Profit is post-determined and uncertain.
It does not involve risk.	It involves shared risk between the investor and entrepreneur.
Riba is Haram (forbidden) in Islam.	Profit is Halal (permissible) in Islam.

Bd Islami Bank | Types of Riba

Riba is classified into two main types:

1. Riba al-Nasi’ah: Refers to interest on loans, which is explicitly prohibited in the Quran. This involves a delayed payment with an extra charge.
2. Riba al-Fadl: Occurs in the direct exchange of commodities where the two parties exchange unequal amounts, which is also forbidden to ensure justice and fairness.

Prohibition of Riba in Islam

The prohibition of Riba is one of the core financial principles in Islamic Shariah. The Quran denounces Riba in several verses, with [2:275] explicitly stating that “those who devour Riba will not stand except as stands one whom the devil has driven to madness.” Islamic law aims to eliminate all forms of exploitation and ensure that financial transactions are free from oppression and undue gain at the expense of others.

Riba is not only a religious violation but also viewed as a major contributor to economic inequality and instability. Thus, its prohibition is intended to promote justice, fairness, and equitable wealth distribution in Islamic finance.

Liquidity Management: Concept and Types

Liquidity management refers to the process of ensuring that an organization, particularly banks, has the necessary liquid assets to meet its obligations and fund its operations. Liquidity is defined as the ability to convert assets into cash quickly, as described by Hornby (1974). This concept emphasizes the ease with which an asset can be sold or used to raise funds without significantly affecting its price. Liquid assets typically exclude inventory from the calculation of current assets. Effective liquidity management improves profitability by balancing liquidity risk and return, as highlighted by Pandey (1986).

For banks, managing liquidity is crucial because it involves anticipating the demand for funds and maintaining enough reserves to meet that demand. The goal is to ensure that the bank has sufficient cash to satisfy depositors while also maximizing shareholder wealth. Failure to maintain sufficient liquidity can lead to bank failure. Regulations like the Bank Company Act of 1991 mandate banks to maintain a specific percentage of liquid assets, monitored through the Cash Reserve Ratio and Supplementary Reserve Ratio, collectively known as the Statutory Liquidity Requirement.

Types of Liquidity

1. Short-term Liquidity: This focuses on maintaining enough reserves to meet immediate cash needs, which fluctuate with customer preferences and seasonal patterns. Banks ensure short-term liquidity by adjusting their vault cash levels through transactions with the central bank or correspondent banks.
2. Long-term Liquidity: This involves forecasting and managing the bank’s funds over a longer horizon, typically a year or more. Banks assess liquidity gaps by comparing the expected uses and sources of funds, ensuring that future liquidity needs are met efficiently.

Liquidity vs. Profitability

A key issue in liquidity management is balancing liquidity with profitability. Holding excessive liquid assets, while reducing risk, can lead to lower profits because it represents missed investment opportunities. Conversely, holding too few liquid assets can put the bank at risk of not meeting its obligations, thus creating liquidity problems. The trade-off between liquidity and profitability is recognized as a short-term issue, as noted by Koch, where higher liquidity often results in lower returns on equity and assets due to the opportunity costs of forgone investments.

Koch also highlighted that high-yield, less liquid loans offer greater returns but pose a higher risk of default or interest rate fluctuations, whereas more liquid investments like government securities offer lower returns but greater security.

General Liquidity Policies

Liquidity policies should be proactive rather than reactive. Poor liquidity planning can result in the forced sale of long-term assets or the inability to meet depositor demands, ultimately damaging shareholder value and leading to regulatory penalties. However, a flexible liquidity strategy can help seize unexpected opportunities. Koch (second edition, pp. 483-85) explained that banks historically relied on short-term self-liquidating loans under commercial loan theory, but over time, theories like the shiftability theory and liability management theory expanded the range of liquidity sources by recognizing the value of marketable securities and borrowing from financial markets.

In modern banking, both assets and liabilities are used to meet liquidity needs, with management focusing on balancing asset quality and capital structure to ensure liquidity at the lowest cost. A strong capital base and high-quality assets reduce the need for liquidity while ensuring better access to funds in the market.

ACCOUNTING SYSTEM AND MIS

Accounting System and Islamic Shariah

The accounting system in Islamic banks is more than a mere technical matter—it reflects an ideological foundation grounded in Islamic Shariah. Unlike conventional banks, where the end result may justify the means, Islamic principles require both the means and the ends to be ethically and religiously sound. This fundamental difference has led Islamic scholars to develop an accounting system for Islamic banks that aligns with Islamic values, particularly the prohibition of interest (riba). Although technical in nature, the accounting system for interest-free banks is based on Islamic principles that differ from those of conventional banks.

1. Objectives of Financial Accounting for Islamic Banks

There are two approaches to developing financial accounting objectives for Islamic banks:

a) Shariah-based Deduction: This approach develops financial accounting objectives directly from Islamic principles.

b) Shariah Testing of Contemporary Objectives: This approach starts with conventional accounting objectives and tests them against Shariah, adopting what complies and rejecting what does not.

The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has chosen the second approach, which is largely similar to Western accounting standards but includes additional provisions ensuring Shariah compliance. The objectives of financial accounting for Islamic banks include determining rights and obligations according to Shariah principles, safeguarding assets, enhancing productivity, and ensuring compliance with both Islamic values and business ethics.

2. Information from Financial Reports

Financial reports in Islamic banking must provide key information, including:

• Compliance with Shariah principles, including separating prohibited earnings and ensuring they are used for charitable purposes.
• Economic resources and obligations to evaluate liquidity, risk, and capital adequacy.
• Assistance in calculating Zakat (almsgiving), which is obligatory in Islam.
• Cash flow estimates for decision-making on investments and profit distribution.
• Evaluation of fiduciary responsibility, ensuring that funds are invested responsibly and that rates of return are reasonable.
• Disclosure of the bank’s fulfillment of its social responsibilities.

3. Concepts of Islamic Accounting

3.1 Accounting Unit: Islamic banks, as entities, are separate accounting units from their owners, with their own assets and liabilities. This concept aligns with the principles of Islamic jurisprudence (Fiqh), which permits limited liability companies, including Islamic banks.

3.2 Going Concern: Islamic banks are assumed to continue operating indefinitely unless evidence suggests otherwise, similar to conventional going concern assumptions. However, Islamic contracts such as Mudaraba (profit-sharing) and Musharaka (joint venture) are limited by specific time periods, implying special considerations for accounting.

3.3 Periodicity: Islamic banks must provide periodic financial reports, reflecting their financial status and operations. The obligation of Zakat, which is due after a year passes on wealth, supports the concept of periodic financial reporting.

3.4 Stability of the Monetary Unit: Though financial accounting uses currency as a measurement unit, the changing value of money (inflation/deflation) complicates financial rights and obligations. Islamic jurisprudence mostly supports fulfilling obligations based on the nominal amount of money rather than adjusting for changes in purchasing power, to avoid riba.

4. Accounting Practices in Bangladesh Islamic Banking

4.1 Cash vs. Accrual Accounting: Islamic jurists prefer cash accounting to avoid misrepresentation of income, particularly when interest-based income accruals are realized only partially. However, Islamic banks may use both cash and accrual accounting methods for different purposes.

4.2 Treatment of Investment Accounts: Islamic banks vary in how they treat investment accounts. Some treat them as liabilities on the balance sheet, while others classify them separately. Returns on these investments are treated differently across banks, either as expenses or appropriations of income.

4.3 Reporting Social Services: Islamic banks may report their social services differently. Some issue separate statements for funds allocated to social causes, while others disclose lump sums or provide no information at all. Islamic banks also diverge from Western practices, particularly regarding unrealized gains and their treatment of investment accounts, emphasizing actual realized profits and Shariah compliance.

In summary, Islamic banking accounting systems, though technically aligned with conventional practices in many ways, are deeply embedded in religious principles. These systems emphasize ethical transactions, transparency, and the fulfillment of social responsibilities, ensuring that all financial activities comply with Islamic Shariah.

Islamic Financial Modes and Financial Instruments

Investment involves deploying funds with the expectation of earning a positive return (Brokington 1986, p.68). These funds can be invested in either real assets, such as purchasing fixed and current assets for production, or financial assets, such as acquiring rights to receive capital gains or dividends. For instance, establishing a factory or purchasing machinery represents real investments, while depositing money in a bank or buying Mudaraba Savings Bonds or stock represents financial investments.

In Islamic finance, hoarding is discouraged, and a 2.5% annual tax (Zakat) is imposed on savings. Thus, those with surplus savings must invest in real or financial assets to avoid hoarding. When money is deposited in an Islamic bank, the bank reinvests it according to Shariah-approved methods to generate profits. Not only banks, but also individuals and organizations, can apply these Islamic investment modes to maximize wealth. Below are some common Islamic investment modes, as well as comparisons between Islamic finance and conventional banking.

A. Islamic Modes of Finance  of Bd Islami Bank

“Islamic Modes of Finance” refers to the Shariah-compliant methods and rules that govern investment activities. These activities may include trade, leasing, manufacturing, agriculture, and real estate, utilizing Shariah terms like Murabaha, Mudaraba, Musharaka, Ijarah, and Istisna. The term encompasses both the supply of money or credit by individuals or organizations and the Shariah regulations that govern such transactions.

1. Bai-Murabaha

1.1 Meaning of Murabaha

“Bai-Murabaha” is derived from the Arabic words Bai (purchase and sale) and Ribhun (profit). It refers to a contract between a buyer and seller where specific goods are sold at a cost plus an agreed-upon profit. The payment can be made immediately or deferred to a future date, in lump sum or installments. This contract must adhere to Islamic Shariah principles and the laws of the land. The profit may be either a fixed sum or based on a percentage of the cost of the goods.

1.2 Types of Murabaha

Bai-Murabaha can be classified into two types:

• Ordinary Bai-Murabaha: A direct transaction between buyer and seller, where the seller takes on the risk of selling the goods at a profit.
• Bai-Murabaha Order and Promise: Involves three parties—buyer, seller, and the bank. The bank purchases the product from the seller upon receiving an order from the buyer, then sells the product to the buyer.

While the bank serves as a financier, this process avoids resembling a traditional loan with interest (Riba), as the profits generated are based on actual trade rather than interest.

1.3 Important Features of Murabaha

Some key features of Bai-Murabaha include:

• The client offers to purchase goods from the bank at an agreed price, including the bank’s profit.
• The client promises to buy from the bank, and the bank can take collateral or security to guarantee the promise.
• The bank must first purchase the goods and assume ownership before selling them to the client.
• The bank takes responsibility for any damages or defects before delivery to the buyer.
• The price agreed upon is binding on both parties, with the profit being a flat amount or percentage of the purchase price, not tied to time to avoid confusion with interest.
• A third party can be contracted to handle goods on the bank’s behalf, under a separate contract.

These characteristics distinguish Bai-Murabaha from other Islamic investment modes, making it a transparent and structured process that aligns with Islamic principles.

Bd islami bank the ultimate guide PDF 2024

 

Conclusion (Bd Islami Bank)

Bd Islami Bank Limited is a trusted name in the Bangladeshi banking sector. As the country’s largest private bank, IBBL continues to lead the way in providing Shariah-compliant banking services while embracing modern technologies. Whether you’re looking for online banking services, investment opportunities, or secure mobile transactions, IBBL has something for everyone. For more information on how you can benefit from IBBL’s services, visit their official website or contact their nearest branch.

---

Reference:

https://evistatech.com/islamibank/ibbl-agent-banking

https://evistatech.com/islamibank/abtIBBL/islamic-financial-modes-and-financial-instruments

https://evistatech.com/islamibank/abtIBBL/accounting-system-and-mis

https://evistatech.com/islamibank/abtIBBL/liquidity-management

https://evistatech.com/islamibank/abtIBBL/investment-decisions-and-banking-efficiency

https://evistatech.com/islamibank/abtIBBL/islamic-banking-some-conceptual-issues

https://evistatech.com/islamibank/abtIBBL/evolution-of-islamic-banking

https://evistatech.com/islamibank/digital-banking/internet-banking

bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank, bd islami bank,