shariah compliance and islamic banking in bangladesh

Shari’ah compliance in Islamicbanking

An empirical study on selected Islamic banksin Bangladesh

Hafij UllahDepartment of Business Administration, Faculty of Business Studies,International Islamic University Chittagong, Chittagong, Bangladesh

AbstractPurpose – The purpose of this paper is to evaluate the Shari’ah compliance status of the Islamic banksin Bangladesh.Design/methodology/approach – The research was based on both primary and secondarymaterials. The primary data were gathered through sample questionnaire survey and personalinterviews by the researcher; the secondary data were obtained from Qur’an, Hadiths, differentcirculars/letters, manuals, research books and journals, annual reports, Web sites of the sample banks.Statistical tools and techniques like weighted average, percentage, SD, variance and correlationbetween Shari’ah violation score and bank-specific attributes were used applying statistical softwareStatistical Package for Social Science (version 17.0).Findings – Shari’ah compliance status of the Islamic banks in Bangladesh is in a vulnerable condition,Shari’ah compliance status highly varies among the Islamic banks, and Shari’ah violation is high ininvesting activities because of lack of knowledge, lack of sincerity in complying Shari’ah, poor attentionin Shari’ah audit and Shari’ah research and lack of strong Shari’ah supervisory board comprisingfull-time skillful members.Practical implications – Among others, the major policy implications of this study are as follows:regulatory bodies and Shari’ah board members are expected to have guidelines from this study to findtheir limitations and to determine their future responsibilities; executives and Employees are expectedto get the idea of present state of Shari’ah compliance and to identify their weaknesses in this regard;clients and other stakeholders are expected to have guidelines to choose the better Islamic banks toperform banking transactions; and the researchers in Islamic banking may usefully use the issuesraised in this article for more comprehensive studies in Islamic banking and Shari’ah compliance.Originality/value – The paper opens a new avenue in justifying the status of Shari’ah compliancewith a new dataset and correlating Shari’ah violation score with bank-specific attributes.

Keywords Bangladesh, Islamic banking, Shari’ah compliance, Shari’ah violation

Paper type Research paper

1. IntroductionShari’ah is regarded as the foundation of Islamic banks and, hence, no Islamic bank canfunction without Shari’ah compliance because if anyone or any bank does not followIslamic Shari’ah, he/she cannot be recognized as Muslim and that bank cannot be treatedas Islamic bank (Al-Quran, 5:44). However, in some cases, it is observed that Islamicbanks cannot perfectly comply with Islamic Shari’ah due to economic systems,Government rules and regulations due to lack of knowledge and seriousness of the

The current issue and full text archive of this journal is available atwww.emeraldinsight.com/1753-8394.htm

IMEFM7,2

182

International Journal of Islamic andMiddle Eastern Finance andManagementVol. 7 No. 2, 2014pp. 182-199© Emerald Group Publishing Limited1753-8394DOI 10.1108/IMEFM-06-2012-0051

http://dx.doi.org/10.1108/IMEFM-06-2012-0051

employees, lack of research and development and lack of sufficient rules andregulations.

Abbas et al. (2009) stated that the distinct feature of Islamic banking is the existenceof Shari’ah board that comprised of religious scholars. This board exerts influence onthe operation of an Islamic bank. Abbas et al. (2009) and Iqbal et al. (1998) hold that newproducts for the Islamic banks cannot be introduced without prior permission andapproval from the Shari’ah board. Siddiqi (2006a) said that the Shari’ah experts do havea very significant role in the contemporary practice of Islamic banking, much more thanin the context of early days of the Islamic economic project. However, Siddiqi (2006b)identified few limitations of the present Shari’ah supervisory practices such as:

• Shari’ah experts have been doing what their training equips them to do, and theyhave been doing it well, but unfortunately their training is no longer well-designedto serve the Maqasid al-Shari’ah in circumstances very different from theenvironment reflected in the books they study;

• lacking proper institutional arrangements for training to do the task, with itsnecessary backup in terms of fundamental research, instances of malfunctioninghave been increasing in recent years causing anxieties in the market and raisingthe possibility of a backlash in terms of consumer rejection;

• the trend of focusing on duplicating conventional financial products through akind of Islamic financial engineering started in 1990s and came to dominate thescene in the new century. The most important areas seem to be Sukuk (duplicatingbonds) and tawarruq (duplicating bank loans);

• the current practice of Shari’ah advisement/auditing, buttressed by occasionalhearings given to economists, is vulnerable to mal-function; and

• to appreciate part of the complexity, let us remember that economists were alwayscalled on to assist the Shari’ah experts by the sponsors of Shari’ah boards/advisories.

Iqbal et al. (1998) said that lack of institutional framework, Islamic banking laws andsupervisory framework limits the scope and functions of Islamic banks and they alsostated that in most countries Islamic banks are put under the supervision of the centralbank of the country and are given the same treatment as given to conventionalcommercial banks. Therefore, Islamic banks are bound to perform some activities (e.g.keeping deposits with central bank) which are contrary to Islamic Shari’ah andsometimes they cannot enjoy or participate in some programs (e.g. taking loan fromcentral bank as lender of last resort) arranged by central bank because of Shari’ahcompliance. As there was no study in this area in Bangladesh, the paper aimed atevaluating the Shari’ah compliance status of the Islamic banking companies inBangladesh.

The remainder of the paper is organized as follows. Section 2 presents the literaturereview. Section 3 states the objectives of the study. The research methodology isoutlined in Section 4. Section 5 discusses the limitations of the study. Sections 6-7present the results and analysis. Section 8 provides recommendations and Section 9provides implications of the study. Finally, Section 10 presents directions to furtherstudy and Section 11 states the conclusion.

183

Shari’ahcompliance in

Islamic banking

2. Literature reviewShari’ah is the Arabic word for Islamic law, also known as the Law of Allah. The termShari’ah itself derives from the verb Shara’a, which according to Dictionary of the HolyQur’an connects to the idea of “spiritual law” (5:48) and “system of divine law; way ofbelief and practice” (45:18) in the Qur’an (Omar, 2010). Shari’ah has certain laws whichare regarded as divinely ordained, concrete and timeless for all relevant situations.There are four sources of Islamic Shari’ah:

(1) interpretations of the Qur’an (The Holy Book of the Muslims consisting of therevelations made by God to the Prophet Muhammad (pbuh) during hisProphethood of about 23 years);

(2) interpretations of the Sunnah/Hadith (After the Qur’an, the Sunnah is the mostimportant source of the Islamic faith and refers essentially to the Prophet’sexample as indicated by his practice of the faith);

(3) Ijma, consensus amongst scholars (Consensus of the jurists on any issue of fiqhafter the death of the Prophet (pbuh)/collective reasoning); and

(4) Qiyas/Ijtihad analogical deduction (individual reasoning).

Islamic banks are Islamic because of performing their activities as per the guidelinesof Islamic Shari’ah and basically the Shari’ah is the main guiding principles fordirecting all operations of Islamic banks (Siddiqi, 1983; Ahmad, 1984; Siddiqi, 1985;Khan and Mirakhor, 1986; Ahmad, 2000; Siddiqui, 2001). The findings of the studiesof Ahmad and Haron (2002), Naser et al. (1999), Metawa and Almossawi (1998),Rashid et al. (2014) and Archer and Karim (2002) showed that Shari’ah compliance orreligion is the single most important factor for choosing Islamic banks and Shari’ahcompliance guarantees the credibility of Islamic banks and inspires confidence inthe shareholders and stakeholders (Briston and El-Ashker, 1986; Tomkins andKarim, 1987; Karim, 1990b; 1990a; Banaga et al., 1994; Bhambra, 2002; Rammal, 2006;Ghayad, 2008; Laldin, 2008). The studies of Chapra (1992) and Ariff (1988) identified thatIslamic banks are interest-free banks and Chapra and Khan (2000) stated that thoughIslamic banking systems appear like interest-based instruments, they are not so, asthere are significant differences between the two for a number of reasons. Finally, thestudies of Jalil and Rahman (2010), Imam and Kpodar (2010), Rarick (2009), Bidabad andAllahyarifard (2008) and Abdul Rahman (2007) also noted that cruelty and injustice inthe financial system due to Riba is removed and socioeconomic development is ensuredby introducing the Halal ways of doing business e.g. Musharkah, Mudharbah, Bai’Salam and Ijarah.

But the study of Malik et al. (2011) argued that much of the financing offered byIslamic banks actually bear a closer semblance to debt instruments than toprofit-and-loss sharing and Yusof and Fahmy (2008) stated that the most commonargument against contemporary Islamic banking in Malaysia is that there is “nodifference at all” without changing the name and documents and using “profit rate” inIslamic banking instead of interest rate. Moreover, recent researches about theIslamicity of the current Islamic finance model have created a lot of doubts regardingShari’ah compliance and attainment of Shari’ah objectives. The study of Meera andLarbani (2009) confirmed that the current model operating similar to conventionalbanking, violates Shari’ah, therefore, hinders the attainment of the objectives of Islamic

IMEFM7,2

184

law. Again and Yousef (2004), Abozaid and Asyraf (2007), Meera and Dazuljastri (2005)and Kuran (2004) have cast doubts in the Islamicity of the current operations of Islamicbanks today. Furthermore, Iqbal (1997) believed that Islamic banking should emphasizeon prohibition of interest and Maulana Taqi Usmani was reported to have said that 85per cent of the Sukuk (Bonds) issued worldwide are un-Islamic. (BBC News, December11, 2009). According to Usmani (2008), most of the Sukuk in the market are notShari’ah-compliant and these so-called Islamic products are Shari’ah-compliant in theirform but not in their spirit. Similarly, Febianto (2010) expressed that Islamic banks oftendescribe themselves as being providers of ethical financial services and more efficientthan the conventional counterparts, but in reality the practice does not always complywith Islamic ethics. Chong and Liu (2009) also found that theoretically Islamic bankingis profit-and-loss sharing (PLS) system but practically it is not very different fromconventional banking. Their study on Malaysia revealed that only a negligible portionof Islamic bank financing is strictly PLS-based and that Islamic deposits are notinterest-free, but are closely pegged to conventional deposits.

Iqbal and Molyneux (2005) expressed that though the objective of establishingIslamic banking is to provide Shari’ah-compliant (i.e. interest-free) banking but thesebanks are not religious institutions but profit-oriented organizations. The studies ofAbdullah (1996), Ansari and Memon (2008), Meera and Dzuljastri (2005), Obaidullah(2008) explained that the rates of interest are taken into account when the mark-up onMurabaha transaction is determined, as inflation is measured and rates of interest arecompared to each other. Based on this statement, they ultimately argued that thedetermination of profit rate in the Murabaha financing is based on the rate sat byconventional banks and the dependence on LIBOR (London Inter Bank Offered Rate)shows the existence of interest in Murabaha financing concept (Usmani, 2002).Similarly, Hassan (2012) found that the Shari’ah reviews were found not to be effectivelyimplemented by the Shari’ah boards and hence, there is a dire need for Islamic banks andtheir Shari’ah boards consciously reconsider their present approaches and behaviors(Kahf, 2004).

Regarding impediments to Islamic Shari’ah compliance, Ahmad and Hassan (2007)opined that the most important issue is the lack of a well-defined regulatory andsupervisory framework for Islamic banks for their effective functioning in line with thetenets of Shari’ah, that is, following the same policy guidelines for Islamic andconventional banking by the Bangladesh Bank. Though Jordan, Gambia, the UAE,Yemen and Kuwait have separate law for Islamic banks, but Qatar, Bangladesh andPakistan have no Islamic banking law, although Islamic banking is an important part ofbanking sector in these countries. In Malaysia and Sudan, the central bank also has acentral Shari’ah board, but separate Shari’ah board is not available in other countriesthat are practicing Islamic banking. Another problem faced by the Islamic banking isthe shortcoming of qualified professionals at all levels who have the knowledge of bothconventional banking and Islamic laws (Malik et al., 2011; Grais and Pellegrini, 2006).According to a survey by the Khaleej Times (2008), there are only 250-300 Shari’ahscholars out of which around 15-20 are most sought for which the Shari’ah boardstend to be overburdened and the approval process becomes difficult andunpredictable (Malik et al., 2011). Chapra and Khan (2000) and Chapra and Ahmed(2002) identified the limitations of time and supportive staff of Shari’ah Scholars inperforming their tasks effectively. Fatwa shopping, tempting or influencing or

185


Islamic banking

invisible hand of management on the decision of Shari’ah Supervisory Board,different interpretation of existing Shari’ah rulings (Grais and Pellegrini, 2006;Ullah, 2012) and lack of specially-designed Shari’ah-complaint financial products(Koch and Stenberg, 2010) were found to instigate Shari’ah violation.

3. Objectives and research questions of the studyThe main objective of the study is to analyze the status of Shari’ah compliance of someselected Islamic banks in Bangladesh. To attain the main objective, the followingspecific objectives are set:

• to have an idea of the needs for Shari’ah compliance in general and specifically inbanking;

• to find out the intensity of Shari’ah violation in Islamic banks in Bangladesh;• to identify the limitations and causes for which the Islamic banks are handicapped

to full compliance with Shari’ah in Bangladesh; and• to recommend some measures to remove Shari’ah non-compliance in Islamic

banks in Bangladesh.

4. Methodology of the studyThe study is based on both primary and secondary data. Primary sources of datainclude opinions of respondents against given questionnaire and face-to-faceconversation with the selected senior executives. Out of seven Islamic banks inBangladesh, four Islamic banks (57.14 per cent of the population) were taken as sampleconsidering their size based on number of branches and age from the year ofestablishment.

Primary data were based on the opinions of 334 respondents, having 121 from IslamiBank Bangladesh Limited (IBBL), 79 from Al-Arafah Islami Bank Limited (AIBL), 63from Export Import Bank of Bangladesh Limited (EXIM) and 71 from Shahjalal IslamiBank Limited (SJIBL) distributed as per the size of the bank. Two set of questionnaireswere distributed to each respondent. First set concentrated in collecting data regardingimportance of Shari’ah, impediments to Shari’ah compliance, Shari’ah audit andShari’ah research and prospects of Islamic banking. Data were collected based on5-point Likert scale as, 2 � strongly agree, 1 � agree, 0 � neutral, �1 � disagree and�2 � strongly disagree, and then mean of the score and percentages of opinions werecalculated for the purpose of analysis.

Second set of questionnaires concentrated in collecting data regarding degree ofShari’ah violation scaling as 0 � not occurred, 1 � very rarely occurred, 2 � rarelyoccurred, 3 � moderately occurred, 4 � highly occurred and 5 � very highly occurred.Common Shari’ah violation areas were identified through literature review and on thebasis of the opinions of pilot survey. After collecting opinions of the respondents,weighted average, percentage, SD, coefficient of variation (CV), total Shari’ah violationscore of the sample banks were calculated based on the average opinion and then acorrelation matrix was constructed showing association between Shari’ah violationscore (SVS) and bank size (total assets [TA], gross revenue [GR] and number of branches[NOB]), number of Shari’ah Board Members (SBM), return on assets (ROA), return oninvestment (ROI), net profit margin (NPM) and investment– deposit ratio (IDR) of 2010of the sample banks.

IMEFM7,2

186

Secondary sources of data include Qur’an, Hadiths, different circulars/letters,different manuals, research books and journals, annual reports and Web sites of thesample banks.

5. Limitations of the studyDuring the study, researcher faced some limitations some of which are as follows:

• Researcher has limitations of knowledge in Islamic banking and economy.• Books on Shari’ah were mostly written in Arabic which is an obstacle to the

researcher.• Researcher faced scarcity of resources like funds, books, journals and research

papers for the purpose of the study.• Bank officials are very busy and, therefore, it was very difficult to manage them

for taking interviews for the study.• Study on Islamic banking is somehow new and banking is a vast area which

requires more time for an in-depth study. But the researcher, beyond his regularduties, had some time constraint.

6. Analysis of the opinion survey6.1 Importance of Islamic Shari’ahFrom Table I, average score of opinions regarding giving first priority in Shari’ahcompliance is 1.715 which indicates that maximum respondents strongly agreed in this

Table I.Opinion of the seniorexecutives regarding

importance of Shari’ah

Question/opinion IBBL AIBL EXIM SJIBL Average SD V

Shari’ah compliance is the first priorityin performing all the transactions ofIslamic bank 1.74 1.68 1.66 1.78 1.715 0.055 0.003Higher authority takes sufficientprograms to provide Shari’ahknowledge to the officers 0.79 0.44 0.56 0.54 0.583 0.148 0.022More training programs are necessaryto provide Shari’ah knowledge to theofficers and to make them more awareabout Shari’ah compliance 1.58 1.62 1.76 1.60 1.640 0.082 0.007Officers/Executives always provide100 per cent efforts to comply Shari’ahin all transactions 0.44 0.34 0.40 0.48 0.415 0.060 0.004Officers/Executives are enoughknowledgeable to comply Shari’ah inall transactions 0.51 0.50 0.48 0.62 0.528 0.063 0.004More clients are attracted to IslamicBanks in Bangladesh for Shari’ahcompliance of the banks 1.62 1.67 1.58 1.54 1.603 0.056 0.003More clients are attracted to IslamicBanks in Bangladesh for earning moreprofit by the banks �0.12 �1.22 �1.16 �1.26 �0.940 0.548 0.301

Source: Own survey on senior executives of the sample Islamic banks July-September, 2011

187


Islamic banking

regard. Specifically, on an average 76.05 per cent strongly agreed and 22.16 per centagreed that Islamic banks under study provide first priority is Shari’ah compliance inperforming all transactions of the Islamic banks. But on the other hand, 28.14 per cent ofthe employees opined that higher authorities do not arrange sufficient programs formaking employees more knowledgeable in Shari’ah. The average score of opinions of0.583 and 0.415 of statements 2 and 3 respectively also indicate the poor position ofhigher authorities and employees for 100 per cent Shari’ah compliance. Morespecifically, 50.90 per cent of the employees negatively or neutrally responded regardingproviding sufficient efforts for 100 per cent Shari’ah compliance.

As per the opinions regarding knowledge of the executives on Shari’ah compliance isalso a matter of frustration. The average score of 0.528 indicates poor knowledge of theofficers in Shari’ah. Though 61.98 per cent positively agreed but 26.64 per centrespondents negatively replied in this point that they are not sufficientlyknowledgeable. Average score 1.64 of statement 3 of Table I indicates that the officers ofthe Islamic banks need more training to provide Shari’ah knowledge. On an average,98.50 per cent responded positively including 64.97 per cent strongly agreed to providemore training on Shari’ah compliance. Iqbal et al. (1998) also mentioned that manymanagers of Islamic banks are not very well trained in the use of Islamic modes offinance and unfortunately very little effort has been made to meet these requirements.Average score of opinions of 1.603 of statement 6 and �0.94 of statement 7, respectively,revealed that clients of Islamic banks are attracted to these banks because of Shari’ahcompliance but not because of earning much profit. On an average, 94.91 per centexecutives think that more clients are attracted to Islamic Banks in Bangladesh forShari’ah compliance of the banks, while 69.16 per cent strongly agreed in this regard.Hence, Shari’ah compliance seemed to be the prime cause of attraction of the people. Onthe other hand, 34.14 per cent of the executives think more profit earning capacity is thecause of attracting more clients but 65.86 per cent responded negatively in this regard.

6.2 Impediments to Shari’ah complianceIqbal et al. (1998) said that Islamic banking institutions all over the world try to benefitfrom the institutional framework that support conventional banking, but they sufferfrom the lack of institutional support specifically geared to their needs. Iqbal et al. (1998)also identified that the commercial banking and company laws in most of the Islamiccountries were fashioned on the Western pattern and the provisions of conventionalbanking laws narrow the scope of activities of Islamic banking within conventionallimits. Average scores of 0.883, 0.780 and 1.058 of statements 1, 2 and 3, respectively, ofTable 2 indicate that Government rules and regulations, Bangladesh Bank’s rules andregulations and interest-based economy of Bangladesh are impediments to Shari’ahcompliance by the Islamic banks in Bangladesh. More specifically, 82.04 per cent of therespondents blamed Government rules and regulations, 68.86 per cent respondentsblamed Bangladesh Bank’s rules and regulations and 88.02 per cent respondentsblamed interest-based economy of Bangladesh as major impediments to Shari’ahcompliance.

Average score of statements 4, 5, 6 and 7 of Table II indicate, respectively, thatShari’ah compliance is not an impediment for competition with the modern banks;promoters of the Islamic bank are not more interested to profit earning instead ofShari’ah compliance; employees of the bank are not more interested to profit earning

IMEFM7,2

188

instead of Shari’ah compliance; and 100 per cent Shari’ah compliance is not impossible.More specifically, on an average, 23.95 per cent executives agreed that Shari’ahcompliance is an obstacle for competition with the conventional banking, while the rest76.05 per cent responded negatively or neutrally.

Regarding statement 5 in Table II, the negative responses of 85.03 per centrespondents reveal that the promoters of the Islamic Banks are not more interested toprofit earning instead of Shari’ah compliance. Regarding statement 6 in Table II, thenegative responses of 54.19 per cent respondents also divulge that employees of thebank are not more interested to profit earning instead of Shari’ah compliance. But 33.53per cent of the employees positively opined in this point. Comparing the average scoresof statement 5 and 6, it can be said that promoters of the Islamic banks are moreinterested to Shari’ah compliance than employees of the Islamic banks. Regardingstatement 7, on an average 29.04 per cent respondents agreed that 100 per cent Shari’ahcompliance is impossible but 61.97 per cent negatively responded in this regard where8.98 per cent showed neutral attitudes. Finally, on an average 82.04 per cent executivesincluding 26.95 per cent strongly agreed that Shari’ah compliance is comparativelyeasier in a Muslim majority country like Bangladesh.

6.3 Shari’ah audit for Shari’ah complianceShari’ah audit is a must to ensure effective Shari’ah compliance of Islamic banking andthe objective of a Shari’ah review (audit) is to ensure that the activities carried out by anIFI do not contravene the Shari’ah (AAOIFI, 2003). Average score of statement 1 in

Table II.Opinion of the seniorexecutives regarding

impediments to Shari’ahcompliance


Govt. rules and regulations sometimescreate obstacle in complying Shari’ah 0.87 0.92 0.98 0.76 0.883 0.093 0.009Bangladesh Bank’s rules andregulations sometimes create obstaclein complying Shari’ah 0.62 0.72 0.98 0.80 0.780 0.152 0.023Shari’ah compliance is sometimesdifficult due to Interest basedEconomy of Bangladesh 1.17 1.16 0.98 0.92 1.058 0.127 0.016Shari’ah compliance is an impedimentfor competition with the modernbanks �0.53 0.08 �0.50 �0.24 �0.298 0.283 0.080Promoters of bank are more interestedto profit earning instead of Shari’ahcompliance �0.96 �0.82 �0.86 �0.92 �0.890 0.062 0.004Employees of the bank are moreinterested to profit earning instead ofShari’ah compliance �0.85 �0.46 �0.72 �0.58 �0.653 0.169 0.029100 per cent of Shari’ah compliance isimpossible �0.53 �0.40 �0.40 �0.32 �0.413 0.087 0.008Shari’ah compliance is comparativelyeasier in a Muslim majority countrylike Bangladesh 0.98 0.82 0.88 0.84 0.880 0.071 0.005

Source: own survey on senior executives of the sample Islamic Banks July-September, 2011

189


Islamic banking

Table III reveals that existing Shari’ah audit system is not sufficient in ensuringcompliance of Shari’ah at all levels of the Islamic banks. The negative responses of 67.07per cent executives, while 11.98 per cent strongly disagreed, recognize that existingShari’ah audit system is not sufficient. Regarding statement 2 in Table III, positiveresponses of 87.12 per cent executives including 54.19 per cent strongly agreedemphasized that branch level Shari’ah audit is to be given more emphasis for moreaccurate Shari’ah compliance of the banks.

Shari’ah audit is of utmost important to ensure Shari’ah compliance in spite of havinggood intension. The survey reveals that the following limitations of Shari’ah audit arehampering Shari’ah compliance of Islamic banking:

• shortage of manpower for audit purpose;• shortage of knowledgeable auditors;• time limitation for inspector;• lack of adequate logistics,• non-utilization of modern techniques;• misunderstanding among the Muraqibs and the Officials;• lack of full time Muraqibs;• different in practice for different mode of investment and items;• Shari’ah auditors and Muraqibs are not proficient in English; and• non-preservation of records properly against transaction at Branch level.

6.4 Shari’ah research for Shari’ah complianceThe main sources of Islamic Shari’ah are Qur’an and Hadiths where Islamic rules andregulations are briefly ascertained for unforeseeable future. But new problems arearising for which Islamic Shari’ah research is a must to face the challenges ahead.Shari’ah research is very important for Islamic banks to develop guidelines for the areas

Table III.Opinion of the seniorexecutives regardingShari’ah audit andShari’ah research


Existing Shari’ah Audit system issufficient in complying Shari’ahat all levels of the bank �0.65 �0.88 �0.82 �0.82 �0.793 0.099 0.010Branch level Shari’ah Audit is tobe given more emphasis for moreaccurate Shari’ah compliance ofthe bank 1.34 1.54 1.50 1.48 1.465 0.087 0.008There is some lake of specificShari’ah guidelines regardingmodern banking areas/issues 1.05 1.10 1.20 1.18 1.133 0.070 0.005More Shari’ah Research is to bedone to formulate new guidelinesfor creating new avenues forIslamic Banking 1.62 1.66 1.70 1.58 1.640 0.052 0.003


IMEFM7,2

190

where Islamic banks cannot finance or operate their business. On an average, 90.12 percent employees agreed that there is some lack of specific Shari’ah guidelines regardingmodern banking issues, while 11.98 per cent strongly agreed. Hence, the positiveresponses of 96.11 per cent executives, while 66.17 per cent strongly agreed, divulge thatmore Shari’ah research is to be done to formulate new guidelines for creating newavenues for Islamic banking. Regarding Shari’ah research, Iqbal et al. (1998) expressedsimilar opinion. They mentioned that “in the area of research, Islamic banks, neitherindividually nor as a group spend enough amount on research and development”.

7. Shari’ah violation and its association with bank-specific attributesOpinions of the respondents regarding Shari’ah violations in the selected areas(Abdullah, 2011 and Saleh, 2011) of Islamic banking were analyzed (Tables A1-5) and itwas observed that comparatively high Shari’ah violation occurs in case of receivinggoods delivery by investment client in lieu of the bank officer (4.422), taking signature ofthe client in blank agreement form (2.220), taking cash memos after investment (2.082),preserving agreement form without date and witness (1.998), having no evidence ofgoods received by the branch from the sellers (1.963), having no evidence of goodsreceived by the client from the branch (1.800), taking cash memos before investment(1.664), taking cash memos of purchased goods in the clients’ name instead of the bank(1.312), providing cash credit to the client directly or indirectly (1.029) and having nosignature of the branch manager in agreement form (1.015).

Having summation of all the average opinion of the respondents, total Shari’ahviolation score was calculated which is 11.110 of IBBL, 17.879 of AIBL, 39.306 of EXIMand 37.605 of SJIBL. Based on the literature of Ahmed (2009), Ullah (2013) andAl-Baluchi (2006), the following correlation matrix was constructed to test thehypothesis that there is a significant association between SVS and bank size (TA, GRand NOB), number of SBM, ROA, ROI, NPM and IDR.

From the above correlation matrix, it can be observed that correlation between totalassets and gross revenue; between ROI and number of branches; correlation betweenShari’ah violation score and IDR; correlation between ROA and IDR; and correlationbetween ROI and net profit margin may be an issue while collinearity across the othervariables are not. Table IV shows a large amount of significant collinearity (p � 0.01)between ROI and number of branches (�.999). Other significant but relatively weaker

Table IV.Association between

Shari’ah violation scoreand bank attributes of the

sample banks

Correlations matrixSVS Log of TA Log of GR NOB SBM ROA ROI NPM IDR

SVS 1.000Log of TA �0.574 1.000Log of GR �0.427 0.986* 1.000NOB �0.783 0.941 0.877 1.000SBM �0.034 0.835 0.915 0.612 1.000ROA 0.941 �0.708 �0.587 �0.903 �0.214 1.000ROI 0.788 �0.929 �0.862 �0.999** �0.591 0.915 1.000NPM 0.663 �0.859 �0.811 �0.946 �0.567 0.870 0.957* 1.000IDR 0.986* �0.687 �0.555 �0.872 �0.175 0.977* 0.877 0.774 1.000

Notes: * Correlation is significant at the 0.05 level (two-tailed); ** Correlation is significant at the 0.01 level (two-tailed)Source: own analysis using SPSS software

191


Islamic banking

coefficients (p � 0.05) are reported for the correlation between total assets and grossrevenue (0.986), between Shari’ah violation score and IDR (0.986), between ROA and IDR(0.977) and between ROI and net profit margin (0.957).

As there is a positive correlation between Shari’ah violation score and IDR, therefore,it can be said that the higher is the IDR the higher is the possibility of Shari’ah violation.In other words, it may be said that Shari’ah violations are occurred mostly in theinvestment areas in Islamic banking in Bangladesh. It also can be observed from theabovementioned Shari’ah violations that most of the violations are minor in nature andcould be avoided if the branch management were a bit careful and alert.

8. Recommendations of the studyOn the basis of the findings of the study, the following measures are recommended forofficials, clients and management whose active participation is a must for successfulShari’ah compliance of the Islamic banks in Bangladesh:

• Islamic banks need to increase Shari’ah knowledge and commitment to Shari’ahcompliance of the employees for increasing Allah fearing and adherence to theIslamic Shari’ah in personal, family, social and political life.

• Islamic banks should boost up the sincerity and devotion of the employees forShari’ah compliance in general ledger, documentation and involvement in buyingand selling process directly.

• Islamic banks should increase their assistance for the clients in acquiringknowledge regarding Shari’ah, modes of investment, Islamic banking andeconomy and in building good relationship with the suppliers.

• Islamic banks need to appoint Islamically knowledgeable sufficient employees,provide logistic support and introduce reward/punishment for Shari’ahcompliance/non compliance.

• Islamic banks should give more emphasis on branch level Shari’ah inspection andShari’ah compliance and holding weekly or monthly review meeting at branchlevels to evaluate Shari’ah compliance of the branch.

• Islamic banks should empower the Shari’ah Council by increasing the number ofMuraqibs and by appointing full-time Shari’ah supervisors and auditors.

• Islamic banks need to spend more for research in developing Islamic moneymarket and Islamic instruments alternative to the hedging, arbitrage, swapping,forward booking, etc.

9. Implications of the studyAmong others, the major policy implications of this study are as follows:

• regulatory bodies and SBM are expected to have guidelines from this study to findtheir limitations and to determine their future responsibilities;

• executives and employees are expected to get the idea of present state of Shari’ahcompliance and to identify their weaknesses in this regard;

• clients and other stakeholders are expected to have guidelines to choose the betterIslamic banks to perform banking transactions; and

IMEFM7,2

192

• the researchers in Islamic banking may usefully use the issues raised in thisarticle for more comprehensive studies in Islamic banking and Shari’ahcompliance.

10. Directions to further studyThe present study highlighted few issues of Shari’ah compliance in Islamic banking andproposes the following areas for further study, in this regard:

• analyzing and justifying the autonomy, powers and functions of Shari’ah boardand its members for successful Shari’ah compliance;

• Shari’ah compliance in Islamic banking branches of the traditional interest-basedbanks; and

• comparative study of Shari’ah compliance in Islamic banks and Islamic bankingbranches of the traditional interest-based banks.

11. ConclusionShari’ah compliance is an indispensable function of the Islamic banks and theIslamic banks under the present study in Bangladesh are mostly found to complywith the Shari’ah. All the Islamic banks under study are, more or less, violatingIslamic Shari’ah, and it is expected to be easy to avoid these violations if the higherauthority and branch management give adequate attention and duly motivate theiremployees. Finally, if Islamic banks can fully comply with Shari’ah, hopefully theywill improve their business and services at a saturated level of satisfaction, infuture, Inshallah.

ReferencesAAOIFI (2003), Accounting, Auditing and Governance Standards for Islamic Financial

Institutions, AAOIFI, Manama.Abbas, S.Z.M., Rahman, R.A. and Mahenthiran, S. (2009), “Ultimate ownership and performance

of Islamic Financial Institutions in Malaysia”, Asian Finance Association Conference,available at SSRN: http://ssrn.com/abstract�1392833 (accessed 21 April 2009).

Abdul Rahman, A.R. (2007), “Islamic banking and finance: between ideas and realities”, TheInternational Islamic University Malaysia Journal of Economics and Management, Vol. 15No. 2, pp. 123-141.

Abdullah, M. (2011), Shari’ah Lapses and Irregularities and Role of Officials in Implementation ofShari’ah, Lecture Notes for Shari’ah Training, IBTRA, Bangladesh.

Abdullah, S. (1996), Islamic Banking and Interest, E.J Brill, New York, NY, p. 84.Abozaid, A. and Asyraf, W.D. (2007), “The challenges of realizing maqasid al-shariah in Islamic

Banking and Finance”, International Conference on Islamic Banking and Finance Researchand Development, IIUM Malaysia.

Ahmad, A.U.F. and Hassan, M.K. (2007), “Regulation and performance of Islamic banking inBangladesh”, Thunderbird International Business Review, Vol. 49 No. 2, pp. 251-277.

Ahmad, K. (2000), “Islamic finance and banking: the challenge and prospects”, Review of IslamicEconomics, Vol. 9 No. 1, pp. 57-82.

Ahmad, N. and Haron, S. (2002), “Perceptions of malaysian corporate customers towards IslamicBanking Products and Services”, International Journal of Islamic Financial Services, Vol. 3No 4.

193


Islamic banking

http://ssrn.com/abstract=1392833

Ahmad, Z. (1984), Concept and Models of Islamic banking: An Assessment, In Islamization ofBanking, Karachi.

Ahmed, A.A. (2009), Compliance of Financial Disclosure in Corporate Annual Reports ofBanking Sector in Bangladesh, Unpublished PhD Dissertation, University of Rajshahi,Bangladesh.

Al-Baluchi, A.E.A. (2006), The Impact of AAOIFI Standards and Other Bank Characteristics onthe Level of Voluntary Disclosure in the Annual Reports of Islamic Banks, School ofManagement University of Surrey, UK.

Ansari, M. and Memon, F.A. (2008), “Is Islamic Banking Really ‘Islamic’?”, Islamic Finance News,Vol. 5, pp. 24-27.

Archer, S. and Karim, R.A.A. (2002), Islamic Finance Innovation and Growth, Euro-money Booksand AAOIFI, London.

Ariff, M. (1988), “Islamic banking”, Asian-Pacific Economic Literature, Vol. 2 No. 2, pp. 48-64.

Banaga, A., Tomkins, C. and Ray, G. (1994), External Audit and Corporate Governance in IslamicBanks: A Joint Practitioner-Academic Research Study, Avebury.

Bhambra, H. (2002), Supervisory Implications of Islamic Finance in the Current RegulatoryEnvironment, in Archer, S. and Karim, R.A.A. (Eds), Islamic finance: the regulatorychallenge, John Willey, Singapore, pp. 198-212.

Bidabad, B. and Allahyarifard, M. (2008), “Assets and liabilities management in Islamic Banking,Bijan Bidabad”, available at: www.bidabad.com/doc/alm-english.pdf (accessed 21 May2011).

Briston, R. and El-Ashker, A. (1986), “Religious Audit: could it happen here?”, Accountancy,Vol. 98 No. 1118, p. 120.

Chapra, M.U. (1992), Islam and Economic Challenges, The Islamic Foundation, Leicester.

Chapra, M.U. and Ahmed, H. (2002), “Corporate governance in Islamic financial institutions”,Occasional Paper No. 6, Islamic Research and Training Institute, Islamic DevelopmentBank, Jeddah.

Chapra, M.U. and Khan, T. (2000), “Regulation and supervision of Islamic Banks”, OccasionalPaper No. 3, Islamic Research And Training Institute, Islamic Development Bank, Jeddah.

Chong, B.S. and Liu, M.H. (2009), “Islamic banking: interest-free or interest-based?”, Pacific-BasinFinance Journal, Vol. 17 No. 1, pp. 125-144, available at: http://dx.doi.org/10.1016/j.pacfin(accessed 12 March 2007).

Febianto, I. (2010), “The ethical perspective on the practices of Islamic Banking”, available at:http://papers.ssrn.com/sol3/papers.cfm?abstract_id�1672140 (accessed 8 October 2011).

Ghayad, R. (2008), “Corporate governance and the global performance of Islamic banks”,Humanomics, Vol. 24 No. 3, pp. 207-216.

Grais, W. and Pellegrini, M. (2006), “Corporate governance and Shari’ah compliance in institutionsoffering Islamic Financial Services”, Working Paper 4054, November, World Bank PolicyResearch.

Hassan, A.F.S. (2012), “An empirical investigation into the role, independence and effectiveness ofShari’ah boards in the malaysian Islamic Banking Industry”, Unpublished PhD Thesis,Cardiff University.

Imam, P. and Kpodar, K. (2010), “Islamic banking: how has it diffused?”, IMF Working Paper No.10195, International Monetary Fund, available at: www.imf.org/external/pubs/ft/wp/2010/wp10195.pdf (accessed 21 May 2011).

IMEFM7,2

194

http://www.bidabad.com/doc/alm-english.pdf

http://dx.doi.org/10.1016/j.pacfin

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1672140

http://www.imf.org/external/pubs/ft/wp/2010/wp10195.pdf

http://www.imf.org/external/pubs/ft/wp/2010/wp10195.pdf

Iqbal, M. and Molyneux, P. (2005), Thirty Years of Islamic Banking: History, Performance andProspects, Palgrave Macmillan Publishers, London.

Iqbal, M., Ahmad, A. and Khan, T. (1998), “Challenges facing Islamic Banking, Islamic Researchand Training Institute, Islamic Development Bank”, Occasional Paper No. 1, (1st ed.), ISBN:9960-32-065-0.

Iqbal, Z. (1997), “Islamic financial systems”, Finance and Development, Vol. 34 No. 2,pp. 42-45.

Jalil, M.A. and Rahman, M.K. (2010), “Financial transactions in Islamic Banking are viablealternatives to the conventional banking transactions”, International Journal of Businessand Social Science, Vol. 1 No. 3, pp. 219-233.

Kahf, M. (2004), “Success factors of Islamic Banks: based on a study of the actual conduct of someIslamic Banks”, Brunei Symposium on Islamic Banking and Finance, Brunei.

Karim, R.A.A. (1990a), “The independence of religious and external auditors: the caseof Islamic Banks”, Accounting, Auditing and Accountability Journal, Vol. 3 No. 3,pp. 34-44.

Karim, R.A.A. (1990b), “Standard setting for the financial reporting of religious businessorganizations: the case of Islamic Banks”, Accounting and Business Research, Vol. 20No. 80, pp. 299-305.

KhaleeJ Times (2008),“Islamic banks enjoys double digit growth”, KhaleeJ Times.Khan, M.S. and Mirakhor, A. (1986), “The framework and practices of Islamic Banking”, Finance

Development, 3, No. September, pp. 32-36.

Koch, C. and Stenberg, L. (2010), The EU and the GCC: Challenges and Prospects under theSwedish EU Presidency, Gulf Research Center, ISBN 978-9948-490-01-2, United ArabEmirates, Dubai.

Kuran, T. (2004), Islam and Mammon: The Economic Predicaments of Islamism, PrincetonUniversity Press, NJ.

Laldin, M.A. (2008), “Roles and responsibilities of Shari’ah scholars in Shari’ah advisory servicesseries-part 1 of 2”, The Halal Journal, Vol. 11 September-October, pp. 54-56.

Malik, M.S., Malik, A. and Mustafa, W. (2011), “Controversies that make Islamic bankingcontroversial: an analysis of issues and challenges”, American Journal of Social andManagement Sciences, ISSN Print: 2156-1540, ISSN Online: 2151-1559, doi:10.5251/ajsms.2011.2.1.41.46© 2011, ScienceHu�, available at: www.scihub.org/AJSMS (accessed17 October 2011).

Meera, A.K.M. and Dzuljastri, A.R. (2005), “Islamic home financing through musharakahmutanaqisah and al-bai bithaman ajil contracts: comparative analysis”, Journal of TheInternational Association for Islamic Economics, Vol. 9 No. 2, p. 7.

Meera, A.K.M. and Larbani, M. (2009), “Ownership effects of fractional reserve system”,Homanomics, Vol. 25 No. 4, pp. 101-116.

Metawa, S.A. and Almossawi, M. (1998), “Banking behaviour of Islamic bank customers:perspectives and implications”, International Journal of Bank Marketing, Vol. 16 No. 7,pp. 299-313.

Naser, K., Jamal, A. and Al-Khatib, L. (1999), “Islamic banking: a study of customer satisfactionand preferences in Jordan”, International Journal of Bank Marketing, Vol. 17 No. 3,pp. 135-150.

Obaidullah, M. (2008), Islamic Finance for Micro and Medium Enterprises, Center for IslamicBanking, Finance and Management, University Brunei Darussalam.

195


Islamic banking

http://www.scihub.org/AJSMS

Omar, A.M. (2010), “Dictionary of Holy Qur’an, NOOR foundation-international, 13”, 2nd ed,Library of Congress Control No.: 2005298281, Reprinted in February 26,DIGIT ISBN:978-0-9632067-94, ISBN: 0963206796.

Rammal, H.G. (2006), “The importance of Shari’ah supervision in Islamic financial institutions”,Corporate Ownership and Control, Vol. 3 No. 3, pp. 204-208.

Rarick, C.A. (2009), “Islamic finance: an alternative in the global financial market?”, SocialScience Research Network available at: http://ssrn.com/abstract�1332793 (accessed 21May 2011).

Rashid, M., Hassan, M.K. and Ahmad, A.U.F. (2014), “Quality perception of the customers towardsdomestic Islamic banks in Bangladesh”, Journal of Islamic Economics, Banking andFinance, Vol. 5 No. 1, pp. 109-131.

Saleh, S.A.M. (2011), Shari’ah Lapses, Shari’ah Lapses/Irregularities found in Islamic BankingOperations and Effective Action Plan for Prevention of Shari’ah Lapses, Lecture Notes forShari’ah Training, IBTRA, Bangladesh, pp. 50-59.

Siddiqi, M.N. (1983), Issues in Islamic banking, The Islamic Foundation, Leicester.Siddiqi, M.N. (1985), Partnership and profit-sharing in Islamic law, The Islamic Foundation, Leicester.Siddiqi, M.N. (2006a), “Shari’ah, Economics and the Progress of Islamic Finance: The Role of

Shari’ah Experts”, Concept paper presented to stimulate discussion at the Pre-ForumWorkshop on Select Ethical and Methodological Issues in Shari’ah-Compliant Finance, 21April, Seventh Harvard Forum on Islamic Finance, Cambridge, MA.

Siddiqi, M.N. (2006b), “Islamic banking and finance in theory and practice: a survey of state of theart”, Islamic Economic Studies, Vol. 13 No. 2.

Siddiqui, S.H. (2001), “Islamic banking: true modes of financing?”, New Horizon, May-June.Tomkins, C. and Karim, R.A.A. (1987), “The Shari’ah and its implications for Islamic financial

analysis: an opportunity to study interactions among society, organization, andaccounting”, The American Journal of Islamic Social Sciences, Vol. 4 No. 1, pp. 101-115.

Ullah, M.H. (2013), Accounting and Reporting Practices of Islamic Banks in Bangladesh,Unpublished M. Phil Thesis, University of Chittagong, Bangladesh.

Ullah, S. (2012), Fatwa Repositioning: the Hidden Struggle for Shar’a Compliance within IslamicFinancial Institutions, Unpublished PhD Thesis, University of Southampton, UK.

Usmani, M.I.A. (2002), Meezan Bank’s Guide to Islamic Banking, Darul Ishaat Urdu, Pakistan,p. 126.

Usmani, M.T. (2008), “Sukuk and their contemporary applications”, available at:www.iefpedia.com (accessed 12 January 2012).

Yousef, T.M. (2004), “The Murabaha syndrome in Islamic finance: laws, institutions and politics”,in Henry, C.M. and Wilson, R. (Eds), The Politics of Islamic Finance, Edinburgh UniversityPress, Edinburgh, pp. 63-80.

Yusof, E. and Fahmy, E. (2008), “Are Islamic banks in Malaysia really ’Islamic’?”, MPRA Paper No.20901, available at: http://mpra.ub.uni-muenchen.de/20901/ (accessed 23 February 2010).

AppendixTable AI shows opinion of the senior executives regarding Shari’ah violations related to cashmemo. Table AII shows opinion of the senior executives regarding Shari’ah violations related toreceiving of goods delivery. Table AIII shows opinion of the senior executives regarding Shari’ahviolations related to agreement. Table AIV shows opinion of the senior executives regardingShari’ah violations related to charging profit or collection of rent. Table AV shows opinion of thesenior executives regarding other Shari’ah violations.

IMEFM7,2

196

http://ssrn.com/abstract=1332793

http://www.iefpedia.com

http://mpra.ub.uni-muenchen.de/20901/,

Table AI.Opinion of the seniorexecutives regarding

Shari’ah violations relatedto cash memo


Cash memos of purchase of goods are takenin the clients’ name instead of the bank 0.053 0.234 2.632 2.328 1.312 1.357 1.841Branches do not preserve cash-memo of thegoods purchased 0.017 0.131 1.712 1.572 0.858 0.908 0.825Undated cash memos are taken 0.679 0.842 0.711 0.925 0.789 0.115 0.013Cash-memos are taken before investment 0.877 1.477 1.884 2.417 1.664 0.651 0.423Cash Memos are taken after investment 1.734 1.917 2.494 2.181 2.082 0.331 0.109Cash Memos do not have signature of theseller 0.034 0.072 0.217 0.161 0.121 0.083 0.007Bank officers sign in the cash-memo as sellers 0.011 0.122 0.622 0.878 0.408 0.411 0.169


Table AII.Opinion of the seniorexecutives regarding

Shari’ah violations relatedto receiving of goods

delivery


Investment client receives goods in lieu ofthe bank officer 4.062 4.339 4.711 4.577 4.422 0.285 0.081There is no evidence of goods received bythe client from the branches 0.012 0.288 3.384 3.517 1.800 1.910 3.647There are no evidences of goods received bythe branch from the sellers 0.014 0.828 3.449 3.561 1.963 1.812 3.283


Table AIII.Opinion of the seniorexecutives regarding

Shari’ah violations relatedto agreement


The signature of the client is being taken inblank Agreement form(s) 1.867 2.106 2.634 2.272 2.220 0.322 0.104Agreement form(s) are being preservedwithout date and witness 0.062 0.889 3.656 3.384 1.998 1.793 3.216Agreements do not contain the signature ofthe branch managers 0.119 0.216 1.939 1.784 1.015 0.981 0.962

Source: Own survey on senior executives of the sample Islamic Banks July-September, 2011

197


Islamic banking

Table AIV.Opinion of the seniorexecutives regardingShari’ah violations relatedto charging profit orcollection of rent


Profit is charged before buying andselling 0.000 0.117 0.142 0.088 0.087 0.062 0.004Profit is charged more than one time onthe same buying and selling/deal 0.000 0.061 0.116 0.051 0.057 0.048 0.002Profit is charged at the adjustmentstage covering profit for the excesstime of investment recovery instead ofcharging with the cost price at the salestage 0.000 0.122 0.145 0.116 0.096 0.065 0.004Profit is charged by creating Bai-Muajjal investment if there is anydelay/non-receipt/lower Amount ofreceipt against the sale proceeds ofexport L/C 0.064 0.283 0.631 0.427 0.351 0.239 0.057Profit is charged on stock lot withoutbuying and selling of the same 0.011 0.088 0.144 0.106 0.087 0.056 0.003In case of pre-shipment Musharakafinancing, pre-determined profit in lieuof actual profit earned is charged 0.017 0.121 0.414 0.284 0.209 0.175 0.031Rent for “gestation period” is chargedbefore the asset becomes ready forincome generation 0.311 0.622 0.933 0.817 0.671 0.272 0.074Some times Rent on rent is charged 0.021 0.056 0.127 0.093 0.074 0.046 0.002In case of conversion of investment, theprevious debt is considered bank’sequity. At the time of conversion ofBai-Muajjal and Bai-MurabahaInvestment (previous investment) toHire Purchase, rent is charged withoutestablishing ownership of the bank onthe asset 0.042 0.073 0.174 0.119 0.102 0.057 0.003

Source: Own survey on senior executives of the sample Islamic Banks July-September, 2011

IMEFM7,2

198

About the authorHafij Ullah has completed his BBA and MBA and is currently an MPhil fellow at the University ofChittagong. Hafij is an Assistant Professor, Doctorate of Business Administration, InternationalIslamic University, Chittagong, Bangladesh. He has more than seven years of teaching experienceat undergraduate and post-graduate levels. Hafij has 12 research publications published innational and international journals. Hafij Ullah can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] visit our web site for further details: www.emeraldinsight.com/reprints

Table AV.Opinion of the seniorexecutives regarding

other Shari’ah violations


Negotiation was not held between theclient and the branch to purchasegoods 0.156 0.667 1.057 0.917 0.699 0.396 0.157The client makes advance paymentfor goods then banks make fullpayment of the goods on behalf of theclient and subsequently, the clientgets back the advanced money fromthe seller 0.108 0.179 0.434 0.335 0.264 0.148 0.022Goods are purchased from the sisterorganizations of the client 0.309 1.096 1.311 1.188 0.976 0.453 0.205Telegraphic Transfer (TT), DemandDraft (DD), and Pay Order (PO) areissued in favor of the client who putsignature on the application form ofTT, DD and PO in lieu of the branchofficers 0.053 0.122 0.334 0.434 0.236 0.178 0.032At the time of encashment of PO theclient attest the signature of the sellerin lieu if the branch officer 0.116 0.211 0.311 0.217 0.214 0.080 0.006To adjust the previous dues of theclients, new investment is createdshowing factious buying and selling 0.229 0.284 0.458 0.611 0.396 0.174 0.030Cash credit is provided to the clientdirectly or indirectly 0.037 0.116 2.167 1.796 1.029 1.111 1.234Letter of authority is not taken fromthe client for selling the goods underdealership 0.051 0.139 0.206 0.154 0.138 0.064 0.004Creation of Baim-WES Bills (stocklot) 0.044 0.061 0.157 0.295 0.139 0.115 0.013


199


Islamic banking

mailto:[email protected]

mailto:[email protected]

shariah compliance and islamic banking in bangladesh

Documents