Islamic Financial Institutions: International and National
1. Islamic Development Bank (IDB)
a. Establishment
The idea of establishing an international financial institution for Muslim counties was discussed in the late 1960s by the Organization of Islamic Conference (QIC) Working papers were circulated and proposals made, but no concerted action was taken until the first meeting of the Finance Ministers of the Islamic countries held in Jeddaha 1393H (December, 1973).
The second conference of finance ministers held in August 1974 adopted the Articles of Agreements establishing the Bank. The Bank began functioning on 15 Shawal 1395H (20th October 1975).
b. Objectives
The establishment of the Islamic Development Bank was aimed at contributing to economic development and social progress of its member countries by reinforcing economic co-operation among them, assisting in the development of Islamic economics, banking and finance, and promoting the economic and social welfare of Muslim communities in non-member countries. In order to realize the abòve objectives, the IDB is empowered by its Articles of Agreement to engage in the following activìties.
1. Participation in equity capital of productive projects and enterprises in member countries.
2. Investment in economic and social infrastructure projects in member countries by way of participation or other financial arrangement.
3. Extending loans to the private and public sector for the financing of productive projects, enterprises, and programs member countries.
4. Establish and operate special funds for specific purposes including a Fund for assistance to Muslim communities in non-member countries.
5. Operate trust funds.
6. Accept deposits and raise funds in any other manner.
7. Assist in the promotion of foreign trade especially in capital goods, among member countries. .
8. Suitably invest funds not needed in its operations.
9. Provide technical assistance to member countries.
10. Extend training facilities for personnel engaged in development activities in member
countries.
2. Accounting And Auditing Organizations for Islamic Financial Institttions (AAOIFI).
The Accounting Standards for Islamic Banks are prepared by the ‘Accounting and Auditing Organization for Islamic Financial Institutions . (AAOIFI)’, which was established in accordance with the agreements signed by Islamic Financial Institutions on 26 February 1990 in Algiers during the meeting of Islamic Banks and Financial
Institutions. AAOIFI was registered on 27 March 1991 in the state of Bahrain as an international autonomous non profit making a corporate body.
The objectives of AAOIFI are as follows:
j. Develop the accounting, auditing and banking practices thought relating to the activities of Islamic Financial Institutions
ii. Disseminâte the accounting and auditing thought relating to the activities of Islamic Financial Institutions and its applications through training, seminars, publication of periodical newsletters, preparation of research and other means.
iii. Prepare, promulgate and interpret accounting and auditing standards for Islamic Financial Institutions in order to harmonize the accounting practices adopted by these institutions in the preparation of their financial statements, as well as to hatmonize the auditing procedures adopted in auditing the financial statements prepared by Islamic Financial Institutions.
iv. Review and amend the accounting the auditing standards for Islamic Financial Institutions to cope with developments in the accounting and the auditing thought and practices.
v. Prepare, issue, review and adjust the statements and guidelines on the banking, investment and insurance practices of the Islamic Financial Institutions,
vi. Approach the concerned regulatory bodies, Islamic Financial Institutions, other financial institutions that otTer Islamic Financial Services, and accounting and auditing firms in order to implement the accounting and auditing standards, as well as the statements and guidelines on the banking, investment and insurance practices of
Islamic Financial Institutions that are published by AAOIFI.
The structure consists of:
i. a General Assembly,
ii. a Board of Trustees,
iii. an Accounting and Auditing Standards Board,
iv. an Executive Committee,
v. aShari’ahßoard, and .
vi. a General Secretariat to be headed by a Secretary- General.
The Membership of AAOIFI, Consists of:
i. Founding members
ii. Non-founding members
iii. Observer members.
3. Islamic Research and Training Institute (IRTI)
Islamic Research and Training Institute (IRTI) was established in 1981 to undertake research, training and knowledge generating activities on economic, financial and banking issues. It organizes seminars and conferences on various subjects in collaboration with national, regional and international institutions. It also undertakes information gathering activities such as the development of the Information system for use in the field of Islamic economics, banking, and finance, as well as management of databases on Muslim” experts and trade information and promotion.
The research activities of IRTI include organizing and conducting basic and applied research for developing models and methods for application of Shari’ah in the fields of economics, banking and finance. IRTI also develops human capital capacities in Islamic economics to meet the research and training needs of Shari’ah observing institutions in member countries, The research output of IRTI takes various forms, such as research
papers, background and discussion papers, seminar proceedings, lectures, and articles published in the IRTI journal “Islamic Economic Studies” which is a refereed bi-annual journal published in Arabic, English, and French.
4. International Association of Islamic Banks (IAIB) .
The Origin ,
The International Association of Islamic Bànks (IAIB), was established as a technical advisory institution for Islamic banks which began to grow up and spread all over the world as a reflection of the intent of the Muslims at community as well as national levels to introduce the economic tenets of Islamic particularly in the field of Islamic banking. It was founded on the 7th Ramadan, 1397(H) corresponding to 21 August, 1977. The text of
documents was approved and deposited with the Islamic Development Bank, Jeddah. It received acceptance from the 9th Islamic Conference of Foreign Ministers held in Dakar, Senegal on 24-28 April, 1978. The Conference recommended that the member states of the Organization of Islamic Conference (QIC) fully support the Association. The text of the agreement. to establish the Association was submitted to the OIC, which in turn
distributed the text to all its member states in’ 1978. The Association was given an observer status by the OIC. Consequently, the Association has been represented at all the conferences of Islamic Foreign Ministers since the 9th conference, and has also attended the Islamic Summits from the 3rd onwards as an observer. It has been playing an active role in the meetings of the central banks and monetary agencies of Islamic countries as
well as in the meetings of specialized bodies of the OIC in the field of banking and insurance.
The Objectives of the Association
However,’ the specific objectives of IAIB are given below.
a. Provisions of technical assistance and sharing of experience with those Islamic communities that wish to establish Islamic banks at request.
b. Follow up of procedures for establishing Islamic banks at the local and international levels and support of their activities and assistance in their development.
c. Laying down foundations for cooperation, coordination and sharing of experience among Islamic banks as well as exchange of information and data relating to positions and obligations of customers on the strictly confidential basis provided that such information shall be confined to member banks and not be circulated to non- members. The Association shall also assist member banks to overcome obstacles and sort out problems facing Islamic banks, without interfering in their executive affairs.
d. Representing common interests of Islamic banks at all levels and defending interests of member banks.
e. Endeavoring to facilitate flow of funds among Islamic banks.
f. Seeking to coordinate and standardize banking systems and procedures relating to Islamic banks’ activities.
g. Enhancement and development of performance of Islamic banks’ staff members.
h. Provision of advice and undertaking studies of projects relating to Islamic banks together with offering proposals for attracting funds and identifying the role of Islamic banks in that respect.
j. Assumption of mediation and arbitration roles for Islamic banks according to procedures formulated by the Board of Directors of the Association. ,
j. Undertaking researches on issuance in banking, money and credit at the local and international levels proposing viable resolutions of the same, in order to enable Islamic banks face those problems.
k. Staging campaigns with the objective of enhancing awareness and propagating Islamic systems and transactions.
The IAIB pursues its objectives through four main organs, namely
5. Islamic Financial Services Board: (I F S B)
Established in Kualalumpur Malaysia in the year 2003 to promote the development of a prudent and transparent Islamic financial services industry through introducing new, or adapting existing, international standards consistent with Shari’ah principles, and recommend these for adoption, to provide guidance on the effective sûpervision and regulation of institutions offering Islamic financial products and to develop for the Islamic financial services industry the criteria for identifying, measuring, managing and disclosing risks, taking into account international standards for valuation, income and expense calculation, and disclosure, to liaise and cooperate with relevant organizations currently setting standards for the stability and the soundness of the international monetary and financial systems and those of the member countries, to enhance and coordinate initiatives to develop instruments and procedures for efficient operations and risk management, to encourage cooperation amongst member countries in developing the Islamic financial services industry, to facilitate training and personnel development in skills in areas relevant to the effective regulation of the Islamic financial services industry and related markets, to undertake research into, and publish studies and surveys on, the
Islamic financial services industry, to establish a database of Islamic banks, financial institutions and industry experts and any other objectives which the General Assembly of the IFSB may agree from time to time.
6. General Council for Islamic Banks and Financial Institutions, Manama, Bahrain (G CIB FI):
Established in the year 2001 for promotion of Islamic Financial Industry. Consolidation of co-operation among members of the Councils and similar Institutions in areas which serve the common objectives by using available means, providing information related to Islamic Banks and Financial Institutions and related Islamic Organizations and promotion’ of the interests of members and confronting the common difficulties and
challenges and promotion of co-operation among members and other parties, particularly regulatory authorities.
7. International Islamic Financial Market: (IIFM)
Established in 2001 in Manama, Bahrain to develop and regulate an International Financial market bašed on Shari’ah Rules and Principles.
8. International Islamic Conciliation and Commercial Arbitration Centre:
Established in Dubai UAE in the year 2005 to settle financial and commercial disputes between financial Institutions that have chosen to comply with the Shari’ah to settle disputes.
National Islamic Financial Institutions .
I. Islamic Banks Consultative Forum (IBCF).
Islamic Banks Consultative Forum (IBCF) has been established on 1st October, 1995 in Bangladesh with the objective of welfare and well being of Islamic Banks and Banks having Islamic Branches in the Country.
Objectives
The main objectives of the Forum are –
i. To establish effective interaction among all Islamic Banks & Banks having Islamic Branches/Counters/Offices (hereafter referred to as Islamic Banks);
ii. To foster and strengthen the Bond of Unity and cooperation and the relationship among Islamic Banks in the country based on the Holy Shari’åh of Islam;
iii. To pursue the common interests of Islamic Banks with Bangladesh Bank, Government, Semi-Government and Non-Government agencies at home and abroad based on laws of the land; .
iv. To guide/support the establishment of Islamic Money Market in collaboration with all Islamic Banks based on the Holy Shari’ah of Islam;
v. To help/establish a Common and Central Shari’ah Board in order that all Islamic Banks follow Uniform Shari’ah guidelines;
vi. To guide in the establishment of an Islamic Insurance Company with equity participation from all Islamic Banks based on the Holy Shari’ah of Islam;
vii. To help in the development of new Financial products, Treasury Bonds, Instruments, Mudaraba Bonds & Certificates by the Government Authorities within the preview of the Islamic Shari’ah.
viii. To have cordial and mutual intellectual academic, research and development activities and relations in Islamic Development Bank (IDB), International Associations of Islamic Banks(IAIB), The Accounting and Auditing Organization of Islamic Financial Institutions (AAOIFI), Islamic Research and Training Institute(IRTI) of IDB and like other Organization.
Islam Credit card: The board is carrying research on Islamic Credit Card, viii. Draft
of Islamic Bank Company Law:
The Board prepared a draft of Islamic Bank Company Law and submitted it to
Bangladesh Bank for promulgation.
3. Bangladesh Isiamic Bankers Association (BIBA):
Bangladesh Islam Bankers Association abbreviated as VBIBA! was founded in 1981 as a voluntary organization. It was formed by the wholehearted efforts of some Bankers & Economists with the basic objective of establishing Islamic Financial System Bangladesh.
The main objective of BIBA is to fight against RIBA
It’s objectives are mainly two folds:
1. Ultimate goal:
(A) To remove Interest from every sectors of life specially from banking Sector.
(B) To establish an Islamic Banking system in Bangladesh.
2. Immediate goal:
To form an integrated cadre of Bankers, Researchers, Trainers, Educationists, Intellectuals & Investors for achieving the ultimate goal.
To achieve such goals BIBA is directing various functions through Training, Research, Advices, Publications, estblishing institutive & by creating a favorable environment.
Within a short span of time, BIBA has been capable to contribute to organizing the public opinion about Islamic Banking in Bangladesh. In the meantime, BIBA has arranged training on Islamic Banking for different professionals including about 200 senior bankers. IBA has also edited a rare book namely “Readings in Islamic Banking” the first of its kind in Bangladesh.
BIBA has also taken an effort to publish a monthly representing journals as “News Letter’ aiming to supply necessary information and to organize public opinion about Islamic Banking. BIBA organized a number of seminars, symposium also in collaboration with other organization.
Finally, BIBA was successful enough to materialize its dream to establish an Islamic Bank in the country in the year 1983 where BIBA supplied the trained & motivated manpower initially without which it was difficult to function the new born Islamic Bank smoothly. So the contribution of Bangladesh Islamic Bankers Association in establishing Islamic Bank in the country is unparallel.
4. Islamic economics research bureau (IERB)
Islamic Economic Research Bureau (IERB) is a privately organized research organization with the basic objective of undertaking research on Islamic Economics and disseminating the results of such research works through various means. The IERB was founded in 1976, by a small group of dedicated Islamic thinkers and was registered in 1982.
Objectives
- To undertake research on Economics of Islam with special reference to modern and publish books on Islamic Economics and Finance.
- To develop a group of thinkers on Islamic Economic.
- To promote co-operation and good relationship with other research organizations of the
world working for the achievement of similar objectives. - To organize training program on Islamic banking and insurance.
Achievement
Holding of International Seminar on-Islamic Banking (1980), Islamic Approach to Development with Special Reference to Bangladesh (1985), Islamic Common Market (1993), Zakat and Poverty Alleviation in Bangladesh (1998), Financial Management in Islamic Perspective (2004), Islamic Alternative to Poverty Alleviation : Zakat, Awqaf and Microfinance (2007).
In addition, a number of national seminar on issues like Islamic Economics, Distribution on of Income and Wealth in Islam, 4th five-year Plan of Bangladesh, Gulf Crisis : Impact on Bangladesh Economy, Bangladesh : Future Directions and National Budget. The IERB has so far organized 350 monthly, bi-monthly, district level and regional seminars.
Publications
Thoughts on Economics, Thoughts on Islamic Banking, Thoughts on Islamic Economics; Dimension of Development in Islam, Text Book on Islamic Banking, Towards An Islamic Common Market, Money and Banking In An Islamic Framework, Nationalization and Bangladesh, Islamic Banking System, Islamic EcOnomics: Theory and Practice, Interest, Society and Economics, User in Islamic Viewpoint: Bangladesh Perspective,: Zakat and Poverty Alleviation, Women in Development, Development of SMEs :Financing from Islamic Perspective.
A number of Research and Policy Monograph has also been published both in English and Bangla.
The IERB has been publishing its quarterly journal entitled Thoughts on Economics since 1980. It is a refereed journal widely acclaimed home and abroad, It has also been listed with the Library of Congress bearing a number ISSN 0256-8586.