An Exploratory Study of Islami Bank Bangladesh Ltd: Entrepreneurship, Investment and Poverty Alleviation Perspectives

Abstract

One of the significant developments in the Islamic financial system in the last three decades has been the emergence of a number of Islamic Banks in almost all the Muslim as well as in some non-Muslim countries. The motivation for the establishment of these institutions came from a desire to formulate and recognize their social, economical and in particular financial activities on a non-riba (interest) basis. Islam, as a complete code of life, encourages all types of business activities to achieve material well being. Of course, these attempts have to be based on the principles of “Islamic Shariah". The vice associated with the institution of interest ( riba) is clearly a means of exploitation. Islam is dead against riba (interest). According to Islamic Shariah Muslims are not allowed to give or take riba in any financial transaction. Before the emergence of Islamic Banks, Muslims were in a great problem to save money as well as to take loan from western style banks. In both the cases they had to face the problem of interest. Their Islamic believes prevented them from dealing that involved interest or usury. Yet Muslims need banking services as much as anyone needs and for many purposes, to finance new business ventures, to buy a house, to buy a car, to facilitate capital investment, to undertake trading activities and to offer a safe place for savings. In no way Muslims are averse to legitimate profit as Islam encourages people to invest money in halal business ventures instead of keeping their money idle. Making money from money is not acceptable in Islam. The Holly Qur’an makes it very clear that whatever is above the loaned amount one has no right to charge it or pay it. As far as financial dealings are concerned any increase on the original loan money, which is predetermined, whether it is simple or compound, is riba. Again, any increase whether it is borrowed for business purposes or production and consumption purposes, weather it is among the individuals or between people and government or government and government, is riba and forbidden in Islam (Ahmed, 1995: 3). Money is only a medium of exchange, a way of defining the value of a thing. It has no value in itself and therefore, should not be allowed to give rise to more money through fixed interest payments, simply being put in a bank or lend to someone else. The human efforts, initiative and risk involved in a productive venture are more important than money. Money is a potential capital rather than capital, meaning money becomes capital only when it is invested in business. Thus money advanced to a business as loan is regarded as debt of the business and not entitled to any return (i.e. interest). In Islam money presents purchasing power which is considered to be the only proper use of money. This purchasing power without undergoing the intermediate step of it being used for the purchase of goods and services. (Nida-ul-Islam, 1995). Muslim economists have pointed out that it is an historical accident that interest has become the kingpin of modern banking. The practice of interest has been condemned by foremost thinkers in human history and by all Biblical religions. Aristotle also criticized the "barren" nature of money and vehemently commented on the institutionalization of interest, which he described as “birth of money from money". Among the followers of Islam the institution of interest has always been regarded highly ignoble because the holly Quran strictly prohibits interest based transactions of all forms in view of divine injunction against riba.