Standard Bank violating Shariah law

Standard Bank Limited, a newly-converted Islamic bank, is violating the guidelines set by the Bangladesh Bank (BB) for Shariah-based banking institutions.

According to sources, the bank’s managing director lacks experience with Islamic banking procedures, and the chairman of the board of directors also chairs the Shariah Supervisory Committee.

According to section 3 of the BB’s guidelines for conducting Islamic banking, “The Board may form an independent Shariah Supervisory Committee with experienced and knowledgeable persons in Islamic Jurisprudence.”

However, none of the five members of Standard Bank’s Shariah Supervisory Committee is knowledgeable persons in Islamic Jurisprudence. Moreover, the committee is headed by the chairman of the board of directors Kazi Akram Uddin Ahmed.

The other four members are Kazi Khurram Ahmed, also a member of the board of directors, Muhammad Saifullah, associate professor, department of Islamic studies, Asian University of Bangladesh, Fariduddin Ahmed, former managing director of Exim Bank, and Kazi Muhammad Ibrahim, Head Mohaddis of Jameah Qasemiah Kamil (MA) Madrasha, Narsingdi.

Of them, Kazi Ibrahim is currently in prison and has reportedly been dropped from the Shariah Supervisory Committee but his name is still on the bank’s website as a member.

Speaking on the matter, Moulana Abdus Shaheed Naseem, a member of the Shariah Supervisory Committee of First Security Islami Bank Limited (FSIBL) said that, BB’s regulation does not specifically state that a bank chairman cannot also be the chairman of a Shariah Committee.

“However, when the chairman of a Shariah Committee and the board of directors are the same person, there is a difficulty with following Shariah law. There is no such practice in the rest of the world.”

Meanwhile, Abu Yusuf of the Accounting and Auditing Organization for Islamic Financial (AAOIFI) said: “Internationally Islamic banks follow AAOIFI guidelines, under which the members of the board of directors cannot be a member of the Shariah Committee.”

Contacted, Kazi Akram Uddin Ahmed said that he did not want to be on the Shariah Committee. “I will move away as soon as I find a suitable person. It would have been a problem if I hadn’t been on the sharia board when the bank was converted from conventional to Islamic.”

He added that Kazi Ibrahim was dropped from the Shariah Committee due to his incarceration and as such his name would also be removed from the website.

Meanwhile, according to sub-section 10 of section 2 of BB guidelines, “The Chief Executive (CE) would be a professional combined with at least three years Islamic banking experience.”

However, according to sources, Standard Bank’s Managing Director Khondoker Rashed Maqsood has vast experience in conventional banking but has no Islamic banking experience.

In this regard, Khondoker Rashed Maqsood said that the central bank had no objection when the bank acquired its permission to conduct operations according to Islami Shariah.

Contacted, Serajul Islam, spokesperson of the central bank said: “Khondoker Rashed Maqsood was already the bank’s managing director before the conversion; hence the law will not apply to him. This is only applicable in the case of appointing a new managing director.”

Standard Bank Limited (SBL), was incorporated in 1999, and transformed into a full-fledged Shariah-based bank on January 1, 2021.

The bank went public on the capital market in 2003. It gave a 2.5 percent cash dividend and a 2.5 percent stock dividend in 2020.

In the previous year, the share price fluctuated between Tk7.90 and Tk11.90. The profit of the bank in 2020 was Tk 108 crore, down from Tk 150 crore in 2019.