Bank aims rural uplift of Bangladesh economy

Islamic Bank Bangladesh Limited (IBBL) will continue to invest in the country's rural economy as it sees strong growth potential in the rural areas and micro-finance disbursement, its top official says.

Mohammad Abdul Mannan, managing director and chief executive of IBBL, said most Bangladeshis live in villages and are largely remain out of the banking system. More than 80 per cent of Bangladesh's 80 million accounts are based in Dhaka and Chittagong cities.

"We see a strong growth in the rural areas, micro-finance and investing in the rural economy - especially in agriculture, agro-based industries. In future, we will continue to spend in financial inclusion, supporting social ventures and help the needy. Our growth will come from the key areas of the economy and rural development," Mannan told Khaleej Times in an interview during his visit to Dubai last week.

IBBL, which was established in March 1983 as the first Islamic bank in the Southeast Asia, is the largest Islamic bank in Bangladesh. There are eight full-fledged Islamic banks and 17 conventional banks with Islamic windows, out of 56 scheduled banks currently operating in Bangladesh.

Bangladesh's Islamic banking sector makes up 35 per cent of the global Islamic banking business and IBBL alone represents 25 per cent of the total Islamic banking activities in the world. IBBL has a customer base of 11 million account holders, out of a total 44 million global Islamic account holder base and a deposit base exceeding Tk640 billion ($8.2 billion or Dh30 billion) and an investment portfolio of Tk560 billion ($7.17 billion or Dh26.3 billion).

"We are the largest investor in Bangladesh's transport, readymade garments, backward and forward linking of textiles and housing sectors - the most important areas in Bangladesh economy. Our banking has a very strong social obligation, obligation to the people and to the country. That's how we see the role of an Islamic bank," Mannan said.

To a question, he said micro-finance represents four per cent of the bank's credit portfolio and is serviced by 22 per cent of IBBL manpower resources, reflecting the lender's strong commitment to the needy people.

"We are a major micro-finance institution and the largest Islamic micro-finance provider in the world. Bangladesh is the world's biggest micro-finance hub and some of our micro-credit organisations are internationally recognised and reputed. However, they all run on conventional credit system with high interest rates," he said. He said IBBL has a graduation process in microfinance and it help the students graduate from micro-finance to micro entrepreneurship and then to a small and medium enterprise entrepreneur. IBBL represents 17 per cent of the total SME borrowers of Bangladesh, he said. Differentiating his bank from conventional lenders, he said IBBL is an Islamic bank with a difference.

"Conventional banking does not serve the poor, we do. Conventional banking does not finance based on moral values or social needs. We do. They are dividend-driven. Our biggest dividend comes from empowering the people - our customers and helping the economy. As a financial institution, we remain highly profitable, despite supporting social causes," he said. To a question, he said despite high default ration amongst rural borrowers the bank is determined to support them with additional funding without any commercial interest.

"We have recently granted an additional Tk1 billion to support the rural borrowers to carry on with their projects - without any profit rate attached. We will be looking at getting back only the principal amount.