Efficiency of conventional and Islamic banks

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Results and Findings

The findings suggest no significant differences between the overall efficiency of conventional and Islamic banks. However, it was noted that, on average, banks are more efficient in using their resources compared to their ability to generate revenues and profits. The average bank lost an opportunity to receive 27.9 percent more revenue, given the same amount of resources. Similarly, the average bank lost the opportunity to make 20.9 percent more profits utilising the same level of inputs. Clearly there is substantial room for improvement in cost minimisation and revenue and profit maximisation in both banking systems. The size and age factor did not significantly influence the efficiency scores in both banking streams.

This research is substantially different from the prior work in this area in three main ways. First, it investigates cost, revenue, and profit efficiency, whereas previous studies focus on cost, profit, or cost and profit efficiency. Also, no previous studies have compared conventional and Islamic banks. Second, this study distinguishes differences among big versus small, and old versus new banks, which allows more detailed insights on the efficiency issue. Third, the age issue in Islamic banks has been addressed, so far undocumented.

The principles and working procedures of Islamic banks are completely new and different from the conventional banks. There is an inevitable need for training of the employees of the banks to orient and attune them to the new system of Islami banking. To cater to this need, Islami Bank training and Research Academy (IBTRA) was established in 1984, soon after the inception of the Bank.

The activity of IBTRA covers both training and research on various aspects of Islamic banking. The Academy developed a rich library of its own with a treasure of valuable books on different subjects including Islamic economics, banking, comparative philosophies and journals of home and abroad and research articles and documents. Employees of the Bank, learners and researchers have been taking full advantage of the library.

The Academy edited books on "Readings in Islamic Banking" and "Investment Operations". It also edited and published a brochure on "Investment and Trade Opportunities in Bangladesh."

Keeping in view the existing and future training requirement of the Bank and also to generally cater such needs of different Islamic banking & financial institutions of the region, the management of Islami Bank Training and Research Academy has been placed at the disposal of an Academic Council consisting of 3 Directors of the Board, Management Executives of the Bank, Shariah scholar, renowned academicians and representatives of reputed institutions engaged in the training of bank officials of the country.

The Academy conducts training courses, and workshops. The courses include Islamic Banking, Banking Law and Practice, Investment Operations and Management, Foreign Trade and Foreign Exchange, Shariah Based Audit and Inspection.

Besides, orientation, induction, foundation and motivation courses on different subjects are also conducted round the year. In addition to conducting regular training courses, it arranges seminar on Islamic economics and banking and such other related topics of current interest.

Apart from this, an "Executive Development Program" has been introduced at the Head Office of the Bank in Dhaka since 1988 for enriching knowledge and thought process and developing professional skill of the Executives. This program has proved to be effective and now being extended outside Dhaka. The Academy conducts internship courses for the students of different Departments of various Universities of the country.

The Bank introduced annual award for the best three students of the Department of Banking and Finance of Dhaka University who secure 1st class 1st, 2nd and 3rd with 'Islam! Banking' as special subject from the year 1994.

Besides, a motivational program has been introduced since 1987 for the clients of the Bank. Client-orientation program are arranged at different branches for disseminating the concept of Islamic economics and banking and to acquaint the clients with the operations of Islamic banking system, 'the Bank, in 1993, co-sponsored a 3-day international Seminar on 'Islamic Common Market' in which scholars, economists, bankers, industrialists and representatives of trade bodies of 15 countries participated. The Bank, with the collaboration of International Association of Islamic Banks (IAIB), organized an International Seminar on Islamic Banking in1985 and another international Seminar on Islamic Banking and insurance in 1989.

Islami Bank Training and Research Academy has introduced Diploma in Islamic Banking since 1998.

2.8 Management and Internal Organization Management of IBBL

Islamic Bank Bangladesh Limited is managed by a 24-member Board. Of the Directors, 8 are foreigners and 16 are local. The Board of Directors forms a 9 member Executive Committee for efficient operation of the Bank. Besides, a Management Committee looks after the affairs of the Bank.

Management Approach and leadership style

IBB follows participate leadership approach. Work accomplishment is from committed people with interdependence through a common stake in organization purposed with trust and respect. They are the managers who display in their actions the highest possible dedication both to people and to work. They are the real term managers' who are able to mesh the service needs of the enterprise with the needs of the individuals.

Technology at Islam Bank Bangladesh (ltd.)

With rapid change in communication banking worldwide has experienced a tremendous transformation and it is continually being shaped to suit the changes of industrialization of the society. Unfortunately, Bangladesh have missed much of the excitement and we are virtually unaware of the improvements in banking services in other developed countries.

IBBL has now brought a part of that development made through improved computer and communication technology. Clients of IBBL Bank will now enjoy service quality that is quite upgraded and to some extent unique.

Corporate culture

Ideology, Values, Beliefs, Philosophy, etc.

They have a standard set of rules for ethical guidelines. The core idea of it is to "Do the right thing". The right thing may not be obvious at all the time. They are to took after the community and serve them, avoid conflict of interest whenever possible. The idea at the Citicorp is to build a congenial atmosphere and encourage teamwork and progress collectively.

IBBL as a good corporate citizen abides by a set of core values. Some can be classified as traditional values such as security, trust worthiness, integrity and confidentiality. Others are perhaps more temporary. They reflect IBBL Bank Ltd's commitment to its customers to be.

  • Responsive to their needs
  • Flexible in approach
  • Professional in manner
  • Always striving excellence.

The major corporate philosophy of IBBL Bank Ltd. Is to efficiently manage the risk involved and maintain the stability of the bank to the greatest extent possible.

2.8.1 Shariah Council: Shariah Supervision

Shariah Council of the Bank is playing a vital role in guiding and supervising the implementation and compliance of Islamic Shariah principles in all activities of the Bank since its very inception. The Council, which enjoys a high status in the structure of the Bank, consists of prominent ulema, reputed banker, renowned lawyer and eminent economist.

Members of the Shariah Council meet frequently and deliberate on different issues confronting the Bank on Shariah matters. They also conduct Shariah inspection of branches regularly so as to-ensure that the Shariah principles are implemented and complied with meticulously by the branches of the Bank.

Opportunity & threats of IBBL

Problems and prospects of Islamic banking in Bangladesh

Despite tremendous popular support spectacular success in terms of mobilization of deposit and distribution of profit Islamic banking in Bangladeshi yet to achieve the desired level of success due to the absence of appropriate legal framework for carrying.

Islamic Banking operations in the country. All the government-approved securities in Bangladesh are interest bearing. Besides, Islamic Money Market in Bangladesh is yet to develop. As a result the Islamic banks, which are committed to avoid interest, cannot invest the permissible part of their Statutory Liquidity Reserve and Short Term Liquidity in those securities.

Inspire of the present limitations, Islamic-banking system has tremendous potentiality and prospect in Bangladesh. Firstly, the successful launching and needs to an Islamic Money Market in the country. Thirdly Islamic banks have brought together many depositors and entrepreneurs under their fold and coverage. These depositors and entrepreneurs so long avoided interest-based banking on grounds of religious injunctions.

The gradual and successful globalization of Islamic banking coupled with growing awareness of the people about its financial and social benefits makes it clear that the next century is going to be the century of Islamic banking.