ISLAMIC BANKING SYSTEM

Department: USB

Section: 01
SUBMITTED BY Nasrin Akter ID: 082011081 Sadia Afrin ID: 082011094 Tanzila Islam ID: 082011086 Tasniya Hoque ID: 082011085 SUBMITTED TO Shahriar Kabir Lecturer Financial Markets and Institutions ULAB

12/28/2011

Letter of Transmittal

December 28, 2011 Shahriar Kabir Lecturer Financial Markets and Institutions ULAB

Subject: Request to Accept Term Paper regarding Islamic Banking System Dear Sir, We are very pleased to submit the term paper on Islamic Banking System. We were assigned to prepare and submit this term paper as the partial fulfillment of the course Financial Markets and Institutions (Course Code: Bus 421). We have tried our best to prepare this term paper perfectly. Nevertheless, this paper has been suffered by time and other resource limitation. We will be obliged, if you kindly accept this term paper. We are ready to make you clear regarding any confusion or further clarification from this term paper.

Sincerely yours,

Nasrin Akter (On the behalf of all the group members)

Table of contain
Title Page no

Executive summary ....4 Introduction ....5 History.............5 Features of Islamic bank..6 Who follow...6 Who are the customers .6 Principles of Islamic banking6 Worldwide Islamic banking ..7 Activities of Islamic Banks ...8 Financial transaction terminology meaning .9 List of Islamic banks in Bangladesh ...12 Market status of Islamic banking in Bangladesh ....17 Controversy .19 Recommendation .20 Conclusion ...21

REFERENCES..23

Executive summary
Islamic banking system is interest free banking which is organized and operates in according to the Islamic laws. Like commercial conventional banking system there is no fixed rate of return. This system is guided by Islamic Economic and more concern to profit and risk sharing. Islamic banking system focuses not only on the economic and financial aspects of transactions, but also give equal emphasis on the ethical, moral, social, and religious dimensions, to enhance equality and fairness for the good of society as a whole. Islamic Development Bank (IDB) was established in 1975 with the hope to provide funding to projects in the member Muslim countries. (Warde, I. 2000) The present membership of the IDB consists of 56 countries. Condition for membership is that the country should be a member of the Organization of Islamic Cooperation (OIC). Bangladesh is a member of OIC from 1974. IDB and OIC are the most important organization those playing vital role in growth of Islamic financial system. Practice of Islamic banking system started in Bangladesh with the establishment of the Islami Bank Bangladesh Ltd (IBBL) in 1983. IBBL is considered as the first interest-free bank in Southeast Asia. At present there is eleven banks who practicing Islamic banking system in Bangladesh. But there is huge controversy about there is no bank that follows right and exact practice of Islamic banking system. The number of banks in all now stands at 49 in Bangladesh. Out of the 49 banks, four are Nationalized Commercial Banks (NCBs), 28 local private commercial banks, 12 foreign banks and the rest five are Development Financial Institutions (DFIs). Commercial banking system in all countries of the world is mainly follow the model in European banks; but practice of Islamic banking in European countries is getting hard after 9/11incident as this practice linked up with terrorism matters. So that Islamic banks which wish to operate in non-muslim countries face difficulties in complying with rules. Matter of concern is to create and capture demand big name banks such as Citigroup, HSBC, and Deutsche Bank are developing Islamic banking sectors. In Bangladesh present market Islamic Banks deposits accounts belongs to account category of Taka 10,000.00 and below represented by 5.84% for Islami Bank Bangladesh Limited, 9.04% for Al Baraka Bank Bangladesh Limited , 0.03% for Al-Arafah Islami Bank Limited , 0.01% of Social Investment Bank Limited. Terrorism issues that facing European country Islamic banking followers might be going to face by Bangladeshi that system follower. In 21 July, 2011 Bangladesh bank warned Islamic banks regarding terrorist financing and money laundering as there is claim of that kind access. This claim was done basis of the observation of financial market crisis when conventional banks was in problem but Islamic banking was in flexibility; that reason is explained by Bangladesh Bank Governor Atiur Rahman. Islamic Financial Services Board giving more emphasize in that concern and following of guidelines for Islamic banking provided by Bangladesh bank. Our expectation to the Islamic banks is that they will be more conscious about the right practice of Islamic banking and they will be offering all the features to not only give benefit to clients, but also be benefited by this banking system. The profit sharing approach of Islamic banking can be so useful to allocate resources easily and very fast.

Introduction
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Islamic banking system is interest free banking which is organized and operates in according to the Islamic laws. Like commercial conventional banking system there is no fixed rate of return. This system is guided by Islamic Economic and more concern to profit and risk sharing. Before we discuss about the system, market situation, problems and prospects of Islamic Banking, we want to discuss some issues such as definition, history and objective. In general we can say Islamic Banking is a financial institution that operates with the objective to implement and materialize the economic and financial principles of Islam in the banking field. The Organization of Islamic consultation (OIC) defined an Islamic Bank as - a financial institution whose statutes, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operations. The objective of Islamic Banking is not only to earn profit, but also to do well and bring welfare to the people. Islam banking system support and ensure wealth proper utilization in Shariah is happening for the good of the society. (Akram, 2011)

History
Starting of Islamic banking practice is very ancient. It is said by the scholars during early market economy when the prices of goods and services are determined in a free price system and an early form of mercantilism were developed between the 8th-12th centuries, which some refer to as Islamic capitalism. The monetary economy of the period was based on the widely circulated currency the dinar, and it tied together regions that were previously economically independent. But that practice more expand in the late 20th century that a number of Islamic banks were formed to apply these principles to private or semi-private commercial institutions within the Muslim community. It is also said in early fifties in Islamic communities there was huge practice for Islamic Banking in place of Interest Free Banking. During early seventies there was the institutional participation and that time held a Conference of the Finance Ministers of the Islamic Countries. Both the involvement of institutions and Government led to the application of theory to practice of the Islamic Banking. In this process the Islamic Development Bank (IDB) was established in 1975. The Dubai Islamic Bank is the first private Islamic Bank set up in 1975, by a group of Muslim businessmen from several countries. (Warde, I. 2000) Nasser's Social Bank was the first modern Islamic bank which established in Egypt in 1970. At the first meeting of the Islamic Organization Conference (IOC) held in Jeddah in 1973. In this meeting profit-and-loss sharing system (PLS) was first discussed and after that many Islamic banks were founded under this system. (Warde, I. 2000) Practice of Islamic banking system started in Bangladesh with the establishment of the Islami Bank Bangladesh Ltd (IBBL) in 1983. IBBL is considered as the first interest-free bank in Southeast Asia. At present there is eleven banks who practicing Islamic banking system in Bangladesh. But there is huge controversy about there is no bank that follows right and exact practice of Islamic banking system. (Banglapedia)

Feature of Islamic banking

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Islamic banking system focuses not only on the economic and financial aspects of transactions, but also give equal emphasis on the ethical, moral, social, and religious dimensions, to enhance equality and fairness for the good of society as a whole. Fundamental feature of Islamic banking:

It is interest or riba free as interest is forbidden in Islam Contribute towards a more equitable distribution of income and wealth Increase equity participation in the economy and strongly equity-oriented System is multi-purpose and not purely commercial

Those features are common to all banks.

Who Follow
Actual followers of this system are Muslim majority country banks, which more concern to Islamic financial principles practice. But from last few years commercial banks of both Muslim and European countries started sub section for Islamic banking system by impressed of this system proper application of wealth distribution and to attract Muslim religion segment to increase their client rang and profit.

Who are the Customers

Target customer of Islamic Banks is not from certain geographic area, main customers are common people who bear trust in this banking system. People of all categories of Islamic religion living are the major customer of Islamic banks. For example, individuals, small and large business peoples majority of who bear shariah laws sentimental.

Principles of Islamic Banking

Though Islamic banking has the same thought as conventional banking to make money by lending out capital and depositing, but the organism and rules are quite different. Principles of Islamic banking are strictly followed according to Islamic Law Shariah terminology in all of its actions and deeds. Some of those principles we listed below:

First of all we want to mention about compensation or return, it without due consideration. It is based on profit-and-loss sharing system (PLS) Avoidance of economic activities involving speculation (ghirar). Introduce an Islamic tax, Zakat. Discouragement of the production of goods and services which contradict the value pattern of Islamic (Haram)

Those principles of Islamic banking create its distinctive religious identity.

Worldwide Islamic banking

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Islamic Development Bank (IDB) was established in 1975 with the hope to provide funding to projects in the member Muslim countries. (Warde, I. 2000) The present membership of the IDB consists of 56 countries. Condition for membership is that the country should be a member of the Organization of Islamic Cooperation (OIC). Bangladesh is a member of OIC from 1974. IDB and OIC are the most important organization those playing vital role in growth of Islamic financial system. Dubai Islamic Bank considered as the first modern Islamic bank established in 1975. In the ten years since the establishment of the first private commercial bank in Dubai now more than 50 Islamic Banks have doing their operation. Two more private banks were founded in 1977 first one is Faisal Islamic Bank in Egypt and Sudan and another one is by Kuwaiti Government named Kuwait Finance House. In most countries establishment of Islamic banking was done by private initiative. But in Iran and Pakistan system was organized in 1981 by government initiative and covered all banks in the country. It is said more accurate practice of Islamic banking system is happen in Middle-east countries where Islamic law is fully followed in every aspect of living. Iran, Saudi Arabia and Malaysia consider as the biggest sharia laws followers in Islamic banking system. The Banker (an international financial affairs publication) published its latest authoritative list of the Top 500 Islamic Finance Institutions with Iran topping the list. Seven out of ten top Islamic banks in the world are Iranian according to the list. But in our country this practice is not that much appropriate and not highly rule followed. . in those Middle-east countrys investments businesses are required to avoid transactions related to forbidden or haram things, such as weapons, alcohol, tobacco, gambling and pork. According to The Economist journal Global Islamic Banking is growing at a rate of 10-15% per year. Islamic banks have more than 300 institutions spread over 51 countries, including the United States. Also stated sales of Islamic bonds rise by 24 percent in following years. Worldwide Islamic banks are offering new products like credit cards, savings accounts, mortgages, loans, trust funds; with the basic conventional banking products. The Oman Investment Forum in October 2011 stated all conventional banks in Oman can offer Sharia-based financial services upon approval from the Central Bank of Oman . (CBO, 2011) Our neighbor country Pakistan a number of local and foreign scheduled banks has started Islamic banking operation. , their economist also expecting Islamic banking will capture 12% of the deposit market by 2012. (Salman, 2007) Commercial banking system in all countries of the world is mainly follow the model in European banks; but practice of Islamic banking in European countries is getting hard after 9/11incident as this practice linked up with terrorism matters. So that Islamic banks which wish to operate in non-muslim countries face difficulties in complying with rules. Matter of concern is to create and capture demand big name banks such as Citigroup, HSBC, and Deutsche Bank are developing Islamic banking sectors.

Activities of Islamic Banks

Islamic banking is different in their application than other commercial banking systems. We can categorize service offering of Islamic banks in different categories. In the Islamic banking system there are three kinds of deposit accounts: current, savings and investment.

Figure: 1
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From this diagram (Figure: 1) we can understand the transaction areas of Islamic banking.

Financial transaction terminology meaning

Current accounts: Current or demand deposit accounts are virtually the same as in all conventional banks, deposit is guaranteed. Savings accounts: depositors allow the banks to use their money but they obtain a guarantee of getting the full amount back from the bank. Banks adopt several methods of inducing their clients to deposit with them but no profit is promised. Investment account: Investment deposits are accepted for a fixed period of time and the investors agree in advance to share the profit or loss in a given proportion with the bank. Capital is not guaranteed. Returns are variable and dependent on bank performance. For financing and operation Islamic banks mainly use investment, trade and lending tools with several sub ways. Musharakah: Musharakah (joint venture) is an agreement between two or more partners, whereby each partner provides funds to be used in a venture. Profits made are shared between the partners according to the invested capital. Mudarabah: Mudarabah is a special kind of partnership where one partner gives money to another for investing it in a commercial enterprise. Murabahah: This concept refers to the sale of goods at a price, which includes a profit margin agreed to by both parties. Ijarah: Ijarah means lease, rent or wage. Generally, Ijarah concept means selling the benefit of use or service for a fixed price or wage. Istisna: lstisna is the second kind of sale where a commodity is transacted before it comes into existence. It means to order a manufacturer to manufacture a specific commodity for the purchaser. Bai Salam: Means contracts in which advance payment is made for goods to be delivered later on.

Mark-up: Bank buys an item for a client and the client agrees to repay the bank the price and an agreed profit later on. Leasing: Bank buys an item for a client and leases it to him for an agreed period and at the end of that period the lessee pays the balance on the price agreed at the beginning an becomes the owner of the item.

Hire purchase: Also called Ijarah thumma al bai, bank buys an item for the client and hires it to him for an agreed rent and period, and at the end of that period the client automatically becomes the owner of the item. Sell-and-buy-back: Client sells one of his properties to the bank for an agreed price payable now on condition that he will buy the property back after certain time for an agreed price. Letters of credit: Bank guarantees the import of an item using its own funds for a client on the basis of sharing the profit from the sale of this item or on for mark-up basis. Loans with a service charge: Bank lends money without interest but they cover their expenses by levying a service charge. No-cost loans: Bank is expected to set aside a part of their funds to grant no-cost loans to needy persons such as small farmers, entrepreneurs, producers, etc. and to needy consumers. Overdrafts: Also provided to a certain maximum which in some cases free of charge.

Other banking services such as money transfers, bill collections, and trade in foreign currencies at spot rate in such cases where bank's own money is not involved, service are provided on charges basis. Other Islamic Financial Transaction Terminology

Bai' al 'inah: Sale and buy-back agreement Bai' bithaman ajil: late payment sale Bai' muajjal: Credit sale Musawamah: Negotiation of a selling price between two parties without reference by the seller to either costs or asking price Hibah (gift): This is a token given voluntarily by a bank to its customer in return for a loan

Istisna: kind of sale where a commodity is transacted before it comes into existence. Musharakah (joint venture): A relationship between two parties or more, of whom contribute
capital to a business, and divide the net profit and loss pro rata.

Qard hassan/ Qardul hassan: also called good loan or benevolent loan which extended on a
goodwill basis, bank is only required to repay the amount borrowed.

Sukuk: Islamic bonds

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 Takaful: Islamic insurance Wadiah (safekeeping): Where a bank is act as a keeper and trustee of funds. Wakalah: power of attorney
Those operations of Islamic banking system happen all over the world

Deposit and investment procedure

Ba Depo Posi Nega Investment Pr nk sitor tive /Asset ofi t

Figure: 2

From this figure 2 we can imagine the situation where bank collect fund from the depositor after discussion of all term of contract. Then invests funds in assets or projects and manages its operations. Investment can generate positive or negative profits. Positive Profits will be shared between Depositor and Bank as per a Contract percentage an in case of negative profit as investment value gone down, depositor might collect his or her deposit.

List of Islamic banks in Bangladesh

The number of banks in all now stands at 49 in Bangladesh. Out of the 49 banks, four are Nationalized Commercial Banks (NCBs), 28 local private commercial banks, 12 foreign banks and the rest five are Development Financial Institutions (DFIs).
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The total number of banks in Bangladesh is 50 and those are categorized according to type bellow:

Categories Commercial banks state owned commercial banks Islamic banks Specialized development banks

Number 25 4 11 7

From the total 47 banks, seven are completely Islamic banks, nine have Islamic banking branches and eight have Islamic banking windows. (Star Business Report, July 22, 2011)

In Bangladesh there is 11 Shariah based Specialist Islamic Banks. Some are Local and Foreign owned Profit Oriented & Shariah based Islamic Banks working in economy are: 1) Islami Bank Bangladesh Ltd(IBBL) 2) ICB Islami Bank Ltd 3) Al-Arafah Islami Bank Ltd(AIBL) 4) Social Islami Bank Ltd(SIBL) 5) EXIM Islami Bank Ltd 6) First Security Islami Bank Ltd 7) Bank Al-Falah Ltd 8) SAMIL BANK LTD 9) Shahajalal Islami Bank Ltd 10) FAISAL BANK LTD 11) AL-RAJI BANK LTD Some interest based conventional private has opened separate Islamic banking branches and operations in Bangladesh like Dhaka Bank Ltd, AB Bank Ltd, HSBC and they call it AMANAH, Standard Chartered Bank they call the system SADIK, Bank Asia Ltd, Standard Bank Ltd, Trust Bank Ltd all of them are running that mechanism successfully.

Services of different Islamic Banks

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Bank Name

Banking Services

Personal Banking-Deposite Scheme Al-Wadeeah Current Account, Mudaraba Savings Account, Mudaraba Special Savings (Pension) Account, Mudaraba Hajj Savings Account, Mudaraba Savings Bond Scheme, Mudaraba Foreign Currency Deposit Scheme (Savings), Mudaraba Waqf Cash Deposit Account, Mudaraba Monthly Profit Deposit Scheme, Mudaraba Muhor Savings Deposit Scheme.

International Banking Deposit & Credit Scheme SME Banking Foreign Currency A/C Islami Bank Bangladesh Limited Rural Credit Micro Credit Industrial Financing

Islami Bank Bond

Retail / Personal Banking Foreign Remittance

Credit Facilities and Programme

Utility Service Micro Enterprise and Special Credit Shahjalal Islamic Bank Limited

Rural Banking & Credit Programme

Merchant Banking Personal Banking International Banking Deposit & Credit Scheme SME Banking Foreign Currency A/C Rural Credit

Al-Arafah Islami Bank Limited

Micro Credit Industrial Financing Bond Personal Banking

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Source: Banks Annual Report

Organization structure of islamic banks:

Chairman

Board of Directors Managing Director

Sponsors

Executive Vice President/ Company Secretary Senior Vice President Senior Vice President Senior Vice President

Vice President

Senior Asst. Vice President

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Asst. Vice President

First Asst Vice President

Executive Officer

Senior Officer

Trainee Senior Officer

Officer Trainee Officer

Market status of Islamic banking in Bangladesh

Form about one and half decade Islamic banks have been operating in Bangladesh. Islamic banks have improved a new dimension in banking initiated on religious standard. The industry is growing at an astounding rate over the last four decades Global Islamic financial services industry grew at a rate of 10-15%. In past few years Islamic banks are practicing successful operation with large volume of assets. For example, following four Islamic banks number of asset volume indicating strong market stability. Bank Islami Bank Bangladesh Limited Asset volume Capital of this bank is Tk. 500 million paid-up capital of Taka 317.98 million

Al Baraka Bank Bangladesh Limited

capital of this bank is Tk. 600 million paid-up capital of Tk. 259.553 million

Al-Arafah Islami Bank Limited

Capital of this bank is Tk. 1000 million paid-up capital of Taka 207.06 million
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Social Investment Bank Limited

Capital of this bank is Tk. 1000 million paid-up capital of Taka 120.00 million

Bangladesh Bank from 2010 develops some Islamic Monetary and Saving instruments for example they brought Islamic shares. (BB, 2010) The cash reserve requirement (CRR) for the banks has been fixed at 5.50% of their total demand; it is also stated by Bangladesh bank CRR would not be less than 5.00% in a single day. Statutory liquidity ratio for the Islamic banks is re-fixed by 10.50%. Present market Islamic Banks deposits accounts belongs to account category of Taka 10,000.00 and below represented by 5.84% for Islami Bank Bangladesh Limited, 9.04% for Al Baraka Bank Bangladesh Limited , 0.03% for Al-Arafah Islami Bank Limited , 0.01% of Social Investment Bank Limited. (Md. Abdul, 2006)

Chart: 1 Source: IBBL annual report 2010

Now a day Islamic banks concentration in SME landing compare to commercial banking is capturing a stander percentage, which is shown in chart 1.

Chart: 2

In this fiscal year Islamic banking sector has 17.83 percent (chart: 2) of total deposits in the banking
sector. Their investment is 18.45 percent and the ratio in total banking assets is 15.11 percent. (Star business report, july22, 2011)

Practice of Islamic banks in Bangladesh increasing day by day, but Islamic banking market sometimes the General people failed to understand the real difference between Islamic Banking and
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conventional Banking, so that customer wellfair concern Islamic banking system face several problems. Some common problems of Islamic banking system are: Absence of Islamic Money Market

Unfamiliarity with the actual Islamic Banking System Absence of Liquidity Instruments

Absence of Suitable Long-term Assets

Shortage of Supportive and Link Institutions for investments

Organizing Relationship with Foreign Banks Long-term Financing Terrorism issues that facing European country Islamic banking followers might be going to face by Bangladeshi that system follower. In 21 July, 2011 Bangladesh bank warned Islamic banks regarding terrorist financing and money laundering as there is claim of that kind access. This claim was done basis of the observation of financial market crisis when conventional banks was in problem but Islamic banking was in flexibility; that reason is explained by Bangladesh Bank Governor Atiur Rahman. Islamic Financial Services Board giving more emphasize in that concern and following of guidelines for Islamic banking provided by Bangladesh bank.

Controversy
There are many controversies about Islamic banking, which we may face in the market. In 2004 there was a protest against being offensive about interest banking. It happened in Pakistan on 16 June by an Islamist political party MMA. Some people refers that the bank interest was not un-Islamic. It is also said that without interest, getting foreign loans and achieving the desired progress is impossible. But others also say that the council of Islamic ideology had decreed that interest is haram in Islamic society, in any form of it. According to the common economic definition of interest, we can find out that interest is also called the time value of money. In this situation, some Islamic banks charge for the time value of money. The Muslim community has criticized these types of institutions. According to the Liarah concept a fixed fee is added to the amount of the loan. This amount must be paid to the bank with the loan. The amount has to be paid to the bank, however, the loan generates a return on the investment or not. This amount is called as profit, not interest. The improper application of the principle of Mudarabah caused some Islamic banks to be criticized by others. According to principle of Mudarabah, it is sharing of risk. But some banks do not follow
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it. They share only the profit, and a very little emphasis has been given to the risk. So, the Muslim community considered that strict legal actions should be taken against these Islamic banks. Most of the clients of the Islamic banking system are in the developed countries. But 60% of Muslims are living under poverty level and they are not getting the benefit of Islamic banking. Most of the financial institutions of Islamic banking services are owned by Non-Muslims. So, services given by them are already under question. This is now needed to be declared, that will the NonMuslim controllers be able to establish the actual Islamic banking system into their banks or not. Another question arises always, that is Islamic banking really Islamic or not and it is a matter of debate among the Muslim community. This has also become a caution that, some of the branches of Islamic banks do not offer all the features of Islamic banking as they need to follow. It has also been observed that they are not running the models as they were started with and some banks restrain their actual profit, to avoid giving share of profit to the savings account holders. Some Islamic banks borrow capital from Bangladesh Bank in exchange of interests.

Recommendation
To avoid the controversies about Islamic banking and have a sound Islamic banking culture in countries several steps can be taken. If we talk about Microfinance, then we can say that it is compatible with Islamic banking. As Microfinance is dedicated to save poor peoples soul, it is having the similar destination like Islamic banking. Interest on Microfinance is now avoidable by crating microfinance hybrid. This hybrid will follow the main frame system of Islamic banking. Mudarabah, Musharaka and Murabahah can be included into the Islamic banking system and they will be according to Shariah of Islamic constancy. If we can make this happen, the Islamic banking system will be more effective and useful. To avoid the ignorance of following all the features of Islamic banking, strict legal action can be taken. That should be strictly observed and necessary steps should be taken immediately against the financial institutes, who are considering themselves as Islamic banking institution and do not follow the features at the same time. In the developing Muslim countries and in the undeveloped countries, the Islamic banking system should be practiced more in a huge form and it might help those countries to develop in a rapid manner. The governments of the countries should be active and alert about this dispute. Profit and risk should be equally shared by the bank and the clients, so that in near future the clients of the Islamic banking system will be more benefited and the amount is clients of this banking system will be increased in a huge number.

Conclusion
After the overall discussion about Islamic banking, it can be said that Islamic banking system is the practical application of Islamic principles and Islamic law in banking, to develop the Islamic economy. This is a profit and loss sharing principle by Islamic Shariah.
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This system strictly avoids interest and considers it as haram. As Islamic banking system is committed to reduce the disparity among people and establish justified economy, it can be said that Islamic banking system is the road which takes us to the destination of perfect trading system, developed economy, established industries, and lots of employment opportunities. So, we need to start practicing the Islamic banking system in the right and incorrect way. Only then we will be able to have the proper advantages from this banking system. Islamic banking is not negligible or a temporary banking system. It is permanent and perfect system, which can lead us to a better economic environment. We should keep researching on this banking system. If we do that, we will be able to have new, effective and innovative ideas of banking keeping Islamic Sariah in our mind. If so many countries will start practicing this phenomenon, then banking financial network will be very strong among all the countries and then the trading among countries will be easier and profitable. Our expectation to the Islamic banks is that they will be more conscious about the right practice of Islamic banking and they will be offering all the features to not only give benefit to clients, but also be benefited by this banking system. The profit sharing approach of Islamic banking can be so useful to allocate resources easily and very fast. So, keeping these type of advantages and attributes in mind we all should practice Islamic banking in our daily life and establish it as a generalized banking system all over the world.

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REFERENCES 1. 2. 3. 4. 5. 6. Muhammad Akram (May-2011), PROSPECTS OF ISLAMIC BANKING: REFLECTIONS FROM PAKISTAN, Australian Journal of Business and Management Research Vol.1 No.2 Dr. Zeinab Mohamed El-Gawady (2008), "Possibility of Cooperation between Islamic Banks and Conventional Banks" Rezwan (july 05, 2005) Islamic Banking in Bangladesh The 3rd world view Salman Ahmed Sheikh (11/8/2007) Critical Analysis of the Current Islamic Banking System Accountancy Star business report,july22,2011 BB warns Islamic banks Daily Star Warde, I. (2000). "Islamic Finance In The Global Economy". Edinburgh: Edinburgh University Press

7. CBO, October 11, 2011 "Islamic banking open to all commercial banks, says CBO". 8. Banglapedia Islamic Banking in Bangladesh) 9. Md. Abdul Awwal Sarker, 2006 ISLAMIC BANKING IN BANGLADESH: PERFORMANCE, PROBLEMS & PROSPECTS International Journal of Islamic Financial Services Vol. 1 No.3 10. International Journal of Business and Management August, 2009 11. Bangladesh Bank annual report 2010 12. Website: http://bankinfobd.com/banks/19/First_Security_Bank http://bankinfobd.com/blog/hsbc-amanah-a-global-islamic-financial-service

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