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Opinion: A Quintessence of Need Based Banking vis-à-vis Greed Based Banking

By S. M. Anisur Rahman, The Financial Express

Islamic Finance

Any kind of effort aiming at a definite goal can’t go in vain. The launching of Islami Bank Bangladesh Limited (IBBL) in Bangladesh and its  present status, unflappable existence standing on a firm feet seems to be the resultant of a great endeavour exerted by a group of luminaries. IBBL, unlike other financial institutions, is going ahead with a perpetual vision and a noble mission. It has not reached at the apex of success overnight through the miraculous touch of Aladin’s lamp. It has come into the foray through welfare oriented program which is obvious in the country for years.

IBBL has recently fulfilled its 30 years, keeping the welfare banking as its topmost priority. Over the last 30 years Islami Bank Bangladesh Limited has been substantially contributing towards national development of Bangladesh through diversified investment. It has provided 50% of our total investment of Tk.37,600 crore in the industrial sector. IBBL alone financed  more than 25% of total textile & spinning industries in Bangladesh. SME investment of Tk.17,500 crore is the highest in the Banking sector.

IBBL is the 7th largest among the 2100 Micro finance institutions working in the country. It has the highest exposure in Import, Export financing and the largest Remittance handling Bank over the years. Besides financing in large Industries, SME, facilitating trade & commerce, it is also working for betterment of mass people through Rural Development Scheme since 1995. IBBL has employed 25% of its 12,500 human resources in RDS operation who work for the poverty alleviation of rural people. IBBL works for financial inclusion, employment generation & women empowerment through country wide network of 280 Branches.

The corporate logo of the Bank also reads ‘Pioneer in Welfare Banking’. In fact IBBL has introduced a new era in the Banking industry in Bangladesh. Its deposit-credit policy and schemes are designed in such way as to ensure human welfare. It works for materializing distributive justice based on the guidance of the Quran i.e. “Wealth should not rotate only among the riches”(Sura Hashor,Verse-7). It is trying to establish ‘NEED BASED’ banking in place of ‘GREED BASED’ system. It does not make any investment in environmentally hazardous projects and morally harmful sectors to facilitate sustainable development. IBBL in its three decades of operation has not financed in tobacco industry despite its high profitability.

Let’s demystify the concept of Need Based Banking and Greed Based Banking:

Goals & Objectives of Need Based Banking:

  1. The main objective of need based banking is to help in building development and helping welfare of the human being by ending exploitation and injustice from the society through the directives of the Almighty Allah.
  2. Need based banking aims at maximizing profit controlled by moral filter. As a result it does not support  the business on items harmful for societies though there are possibilities to earn more there against.
  3. Need based banking encourages investment in production of essential as well as in social welfare sector. It  makes coordination with social development and economic development. It has clear social commitment.
  4. To ensure equitable distribution of wealth and to establish socio-economic justice is the ultimate concern of need based banking.

Greed Based Banking

On the contrary, greed based conventional banking does not think about as much economic and social responsibility as the need based banking does. They do not consider social factors or aspects rather it gives more importance on earning profit. There is no commitment and undertaking in conventional banking system to make coordination with social development and economic development. Moreover, there is no justification or consideration whether the business is good or bad in conventional banking system. Earning interest is the main motive of this system.

However, need based banking is completely separate and distinctive from greed based conventional banking in regard to its principles, objectives, goals, procedures and methodologies. IBBL inculcates the features of need based banking:

  1. It aims at maximizing profit but subject to Shariah restrictions.
  2. It gives due importance to the public interest. Its ultimate aim is to ensure growth with equity.
  3. It wants to establish a welfare-oriented banking system
  4. It extends co-operation to the poor, the helpless and the low-income group for their economic upliftment
  5. It strives to play a vital role in human development and employment generation.
  6. It contributes towards balanced growth and development of the country through investment operations particularly in the less developed areas.

In reply to an interview with The Quarterly Wheel regarding the superiority of Islamic Banking over conventional banking  Mr. Mohammad Abdul Mannan, Managing Director, IBBL said:

“Islamic economic system has its own philosophy for addressing economic problems of human being. The objective of Islamic economic system and for that matter Islamic Banking system is to ensure welfare of the common people. The ultimate goal of Islamic Banking is to establish socio-economic justice, maximize welfare and contribute towards making a better world for all. Islamic financial system has got filtering mechanism that made it superior to its counterparts. Conventional financial system is largely driven by the GREED of a few people. In contrast Islamic financial system is NEED based and welfare oriented. The earth can not fulfill the greed of one person while the basic need of all the creatures can be met by the available asset on the earth.”

IBBL as the need based bank comprises among other features, the following sine qua non as outlined by Umar Chapra:

Adherence to public interest: Activity of commercial banks being primarily based on the use of public funds, public interest rather than individual or group interest will be served by Islamic commercial banks.  The Islamic banks should serve public interest and realize the relevant socio-economic goals of Islam. They should play a goal-oriented rather than merely a profit-maximizing role and should adjust themselves to the different needs of the Islamic economy.

Multi-purpose bank: Need based bank will be universal or multi-purpose banks and not purely commercial banks. These banks are conceived to be a crossbreed of commercial and investment banks, investment trusts and investment -management institutions, and would offer a variety of services to their customers.

Work as catalyst of development: Profit-loss sharing being a distinctive characteristic of an Islamic bank fosters closer relations between banks and entrepreneurs. It helps develop financial expertise in non-financial firms and also enables the bank to assume the role of technical consultant and financial adviser, which acts as catalyst in the process of industrialization and development.

In the light of above features we can state that IBBL has remarkably contributed to the financial sector of the country and socio-economic uplift of Bangladesh. The Bank’s contribution to industrialization, agricultural and rural development, poverty alleviation, remittance collection, women empowerment and others fields of the national economy, earned a good reputation for the bank in the country and abroad.

Modus Operandi of IBBL as replica of Need Based Banking:

The global financial crisis of 2008 has exposed the flaws of the conventional banking system. In the US, more than 200 lenders collapsed during the first two years of the crisis. Experts have opined that the greed based system caused the biggest recession in human history.

At the backdrop of global economic recession the principles of Islamic economics and banking have swayed the conscience of world economic literature. It has stunned the western world particularly for the uniqueness of Islamic financial systems. It has reiterated that the objective of Islamic banking is not only to earn profit, but to do good and welfare to the people. Islam upholds the concept that money, income and property belong to Allah and this wealth is to be used for the good of the society.

Mohammad Abdul Mannan, Managing Director of Islami Bank Bangladesh Limited (IBBL) says “We need to change the financial system from greed based to need based. The current system has helped concentration of global wealth into the hands of a few while the vast majority of the people remained deprived.”

Being the 1st Shariah based Bank in Southeast Asia, IBBL incorporates maximization of welfare as its main objective that has led it to win the trust of people. Since inception IBBL has been active in offering financial services to the doorstep of all classes of the society through its unique deposit products and diversified investment schemes. IBBL gets itself involved in interest free banking that does not consider money as a commodity rather it believes in transactions backed by real assets. IBBL works for wealth distribution among less privileged people. From objective standpoint of Shariah its target is individual’s economic development in every sphere.

Today Islamic banking is recognized as one of the most effective mechanisms in realizing socio-economic objectives or Maqasid Al Shariah of Islamic Economics. Objectives like Achievement of falah ,fair and equitable distribution ,Provision of basic human needs, Establishment of social justice, Circulation of wealth and elimination of exploitation can be achieved  through Islamic Banking operations. IBBL,the archetype of need based banking has declared objectives to cater for achieving shariah objectives. These are practiced with due diligence while dealing with customers irrespective of depositors or borrowing investors.   Let’s see how IBBL contributed to the socio-economic development of Bangladesh, need of the mankind observing the maqsid al shariah of Islamic Economics.

Established in 1983, the bank has successfully introduced various schemes with a view to eradicating poverty, uplifting the helpless section of the society, and establishing a financial justice in balancing between the rich and the poor.

Welfare-Oriented Deposit Products

Islami Bank gives special importance on savings. The objectives and principles of the Savings Policy of the Bank are:

  • To encourage people to save for self and for the country as a whole.
  • To develop a sustained savings’ habit among the people.

The following special deposit schemes of IBBL indicate clearly its contribution to social cause & necessity.

Mudaraba Waqf Cash Deposit

Responding to a noble cause, this Account may create cash waqf at a time or may start with a minimum deposit of Tk.1,000/- and the subsequent deposit shall be made by installments in thousand Taka or in multiple of thousand Taka. Profit of this account is utilized for social and human welfare as per instruction of the account holders.

Mudaraba Muhor Savings

As per Islamic Shari‘ah, it is fard for a husband to pay Muhorana to his wife. The Bank introduces this account to facilitate payment of Muhorana. Any conscious husband may open account in the name of his wife on monthly installment basis.

Mudaraba Hajj Savings

Introduced a scheme in the name & style “Mudaraba Hajj Savings Scheme” to facilitate the intending Muslims to perform Hajj properly at appropriate age. This is purely a savings Scheme for Hajj.

Mudaraba Special Savings (Pension) Scheme

Considering the increase demands from the people of all walks of the country special and attractive savings scheme namely ‘Mudaraba Special Savings (Pension) Scheme’ to save money depending on their ability when they normally retire from their active economic life.

Besides, IBBL has two more attractive deposit products namely Students Mudaraba Saving Account and  Mudaraba Farmers Saving Account.


The special feature of the Investment Policy of the Bank is to invest on the basis of profit-loss sharing system in accordance with the tenets and principles of Islamic Shari,ah. Earning profit is not the only motive and objective of the Bank’s Investment Policy rather emphasis is given in attaining social good and in creating employment opportunities.

Contribution of IBBL to Industrialization

IBBL has contributed significantly to the development of industrial sector of the country. It is the only bank that has deployed 50.73% of its total investment in industrial sector and out of which export-oriented garment industries occupied 44.85%. In addition to large scale industries, bank also finance medium and small scale industries keeping its primary focus on need based industry.

IBBL contributed greatly to garment industries, textile sector, drug and pharmaceuticals industry, housing industry, agro-based industry, electricity & power industry, transport sector, information technology industry and so on.

SME Investment

IBBL, with a view to help less developed entities and to gear up overall economic development of the country, has been continuing SME financing. The Bank management has adopted a new SME Policy comprising 2(two) special schemes namely Women Entrepreneurs’ Investment Scheme and Non-Resident Entrepreneurs’ Investment Scheme for boosting up of SME investment.

Welfare-oriented Investment Schemes

In addition to the normal commercial and industrial investment operations, IBBL since its inception, has taken up various schemes like Rural Development Scheme, Transport Investment Scheme, Car Investment Scheme, Small Business Investment Scheme, Micro-Industries Investment Scheme, Investment Scheme for Doctors, Household Durables Scheme, Housing Investment Scheme, Real Estate Program, Agriculture Implements Investment Scheme, Mirpur Silk Weavers Investment Scheme, etc

The schemes are implemented and expanded to meet the specific and welfare oriented needs of different groups of people. The objectives of these schemes are to raise the standard of living of low-income group, development of human resources and creation of avenues for self-employment. . Besides, the Bank is financing various economic groups in different sectors in both urban and rural areas for upliftment of their economic condition.

Micro-Investment Activities under RDS & UPDS

Rural Development Scheme (RDS) was introduced in 1995 to meet investment needs of agriculture and rural sector and create opportunity for employment generation and raise income of the rural poor to alleviate poverty. So far, out of 280 branches, 207 carry out RDS activities in 61 districts of the country. The Bank launched another micro-investment scheme for urban poor in 2012 in the name of “Urban Poor Development  Scheme (UPDS)” on pilot basis under its 10 urban branches. These two schemes enables IBBL to achieve financial inclusion of poor women of rural & urban areas.

CSR (Corporate Social Responsibilities) Activities

Islami Bank Limited(IBBL) being one of the best corporate citizen of the country, has been conducting social-welfare activities i.e Corporate Social Responsibility(CSR)  on a wider scale directly through its banking activities and through its fully owned subsidiary ,Islami Bank Foundation (IBF) which  has been working with unique and special programmes for the welfare of distressed humanity and to make poor, downtrodden, landless and asset less people self-reliant. IBBL believes that CSR is not charity but a responsibility to be discharged to the society.

As a pioneer  of welfare oriented Banking System, IBBL’s contribution in discharging Corporate Social Responsibilities is the highest among all the banks of Bangladesh. IBBL has taken several initiatives at the individual and organizational level for improving the lives of less fortunate, marginalized or underprivileged segments of the community. CSR expenditure of IBBL stood at Tk.309 million (US $ 4 million) in 2012 encompassing (i) education, (ii) health, (iii) humanitarian and disaster relief, (iv) sports, arts & culture, and (v) women empowerment.

Besides Islami Bank Foundation has some special projects for CSR activity, these are:

  • Monoram: Islami Bank Crafts & Fashion
  • Service Centre
  • Islami Bank Institute of Technology
  • Islami Bank Physiotherapy and Disabled Rehabilitation Centre
  • Centre for Development Dialogue
  • Bangladesh Sangskritic Kendra (Cultural Center)
  • Islami Bank hospital
  • Community hospital


IBBL, as the  lone Bangladeshi Bank, has made Bangladesh proud of being among the best 1000 banks in the world, ranked by ‘The Banker’, the UK’s premier financial  magazine.

IBBL is the proud recipient of the ‘SAFA (South Asian Federation of Accountants) Corporate Governance Award for 2010 & 2011’, ‘SAFA Award for Best Presented Reports-2011’, ICAB’s (Institute of Chartered Accountants of Bangladesh) ‘SAARC Anniversary Award for Corporate Governance-2011’ & ‘ICAB Best Presented Annual Report-2011’, and ICMAB’s (Institute of Cost and Management Accountants of Bangladesh) ‘ICMAB Best Corporate Award for 2011 & 2012’, The “Business Asia’s  ‘Most Respected Company Awards 2012’, Exclusive economic weekly “The Industry’s the Best Rated Bank Award 2010,2011& 2012, Reputed USA-based Financial Magazine The Global Finance’s the Best Islamic Financial Institution of the country for the years 2008, 2009, 2010 & 2011, which are the obvious recognitions of the Bank’s sustained success in every aspects of its operations.


Since inception IBBL has been addressing the banking need of the mass people. The bank finances to the underprivileged people to be engaged in productive fields utilizing their merit and competencies. Social and economic wellbeing through equitable distribution of income is the prime working area of the bank. All the investment (loans and advances) schemes of the bank are targeted to the greater socio-economic welfare of the common people in Bangladesh.

Thus, IBBL has created a favourable image about Islamic banking among the people and promote the lofty ideals of Islam in the fields of economics and banking and to reach the people of all walks of life and bring home to them the concept of Islamic banking. In doing so, it has unveiled a new horizon and ushered a new hope towards materialising a long cherished dream of the people of Bangladesh for doing their banking transactions in line with what is prescribed by Islam.

Enriched with ample success, IBBL, more regrettably, falls prey to the media. By breeding resentment and rousing public grudge through disseminating misinformation is really unexpected and culpable. Snatching nation’s attention from the fact a tiny bourgeois group tries to smirch the glory of IBBL. IBBL is not a tenuous tentacle surrounded by a porous border rather protected by people’s spontaneous and heartfelt support. It is high time we delved into the recess of IBBL which emits only the history of success. IBBL itself defend its position through the achievements which are apparent. It is now the Bank of all people.

However, IBBL is marching unremittingly towards maturity from the nascent stage with a number limitations. After all it is undoubtedly a silver lining in the cloud while the state run Banks are on the brink of bankruptcy one after another. IBBL, a prototype of need based banking has been catapulted to a new height of becoming an alternative paradigm for sustainable socio-economic development.

*About the Author: S. M. Anisur Rahman is working in Islami Bank Bangladesh Limited and may be reached at anis_ dueng@yahoo.com. The views expressed in the article are the author’s own and not necessarily the organisation he represents.

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