Bangladesh approves Islamic financial instruments

In a bid to accelerate the country’s economy, Bangladesh has launched a new interest-free financial instrument pertaining to Islamic Shari‘ah, highlighting the need for a strong Islamic Shari‘ah board or council to operate and supervise the new instrument.

“This Islamic Investment Bond is good financial instrument for islamic bondBangladesh economy,” Professor Mujahidul Islam, senior teacher and former chairman of the banking department of Dhaka University, told OnIslam.net.

“But there are some problems, so this kind of bond is not popular in Islamic banks, financial institutions and among people as well,” he added.

He opined that this bond fund should be invested in power sector, water treatment plants and any other profitable and economically viable projects which contribute to the welfare of the country and accelerate the economy.

Prof Islam added that in order to guarantee success of the new bond, the government must establish a monitoring and advisory committee which combines the efforts of Shari‘ah experts, Muslim scholars and bankers.

“We got good response in this bond from all Islamic Banks. At this time a good number of bonds has already been issued, but this money is not invested in appropriate segments,” Bishnu Pada Shaha, General Manager of Debt management department of Central Bank of Bangladesh, told OnIslam.net.

Interest free a new financial instrument Islamic Investment Bond has been started in January 2015 with Islamic Shari‘ah laws in Bangladesh.

The new Bangladesh Government Islamic Investment Bond (BGIIB) is expected to play a pioneering role in accelerating the Bangladesh economy.

Islam forbids Muslims from usury, receiving or paying interest on loans.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.

Shari‘ah-compliant financing deals resemble lease-to-own arrangements, layaway plans, joint purchase and sale agreements, or partnerships.

Investors have a right to know how their funds are being used, and the sector is overseen by dedicated supervisory boards as well as the usual national regulatory authorities.

Applied for the first time in Bangladesh, the new bond was dealt with on trial and error basis, Shaha said.

“We need more amendment about this bond regulation, to issue and invest in proper and viable projects,” he added.

Maulana Samawan Ali, member secretary of First Security Islamic Bank, echoed similar concerns.

“There is no Shari‘ah board or council of government or the Bangladesh Bank to operate Bangladesh Government Islamic Investment Bond in accordance with Islamic laws and guidelines,” he told this OnIslam.net.

He opined that the government should constitute a Shari‘ah board or council which includes leading Ulemas and Muslim scholars to supervise the government’s Islamic bond in accordance with Islamic Shari‘ah guidelines.

“Creating this Islamic Investment Bond is a good decision of the government. This fund will great contribution to the economic development of Bangladesh to invest all kind of development project, Mohammed Shahid Ullah, Senior Vice President and Chief Financial Officer of Islami Bank Bangladesh Ltd., told this OnIslam.net.

Bangladesh government introduced interest-free Islamic investment bond in 2004 as a new window of investment by the country’s Islamic banks and financial institutions.

Last year, Bangladesh government amended Islamic investment bond rules to widen the borrowing and investment opportunities for large projects by Islamic banks and financial institutions.

Bangladesh government has formulated a guideline for Islamic Bond under the Public Debt Act 1944.

Around two billion US dollars have already been invested by Islamic Banks in this profit loss share based BGIIB fund since its launch in Bangladesh.

Leading the way, Islami Bank Bangladesh Ltd has invested around 1.6 billion dollars alone.

– onIslam.net


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