At the start of its expedition, 70% of its capital came from foreign investors.
The country’s premier private sector financial institution, Islami Bank Bangladesh Limited, has recently undergone substantial alterations within its Board of Directors. These shifts, detailed in the shareholding report released for July of the present year, also comply with regulatory requirements by being submitted to stock exchanges.
According to available information, Arabsus Travel and Tourist Agency, a Saudi Arabia-based company holding 9.99% shares in Islami Bank, communicated their decision to relinquish their directorial responsibilities through a letter dated July 5. Following due processes, the bank approved this request during a board meeting convened on July 26. Worth highlighting is the prior directorship of Musaid Abdullah A Al-Rajhi, who had a longstanding role at Islami Bank.
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This transformation is part of a larger shift within the Middle East investor group, encompassing 11 entities such as the Islamic Development Bank (IDB), Kuwait Finance House, Al-Rajhi group, and Dubai Islamic Bank.
Earlier, in June, three corporate shareholders—Armada Spinning Mills, Kingsway Endeavors, and Uniglobe Business Resources—ceased their involvement with Islami Bank after divesting their shares. Collectively, these organizations held an 11.07% stake in the bank’s ownership.
A notable appointment in June involved Ahsanul Alam, representing JMC Builders, as a shareholder director within the bank.
Islami Bank: A Profile
Founded in 1983, Islami Bank Bangladesh Ltd (IBBL) emerged as a pioneering private bank of its time. It commenced its journey guided by the mantra-“Pioneer of Welfare-Oriented Banking”.
The bank extended its financial services to both export-oriented industries and projects dedicated to reducing poverty.
At the start of its expedition,70% of its capital came from foreign investors. However, things started to take a toll when the ownership was changed in 2017 which led to a decrease in foreign ownership to 32%. Foreigners began to exit shortly after the transition plan became apparent.
Islami Bank has 394 branches and 228 sub-branches and, in the Dhaka, and Chittagong stock exchanges, the number of shareholders stands at 33,686.
Uniglobe Business Resources divested its entire stake of 4.67%, equivalent to 7.52 crore shares in the bank. This action was accompanied by the withdrawal of directorship, a step supported by the submission of a formal letter to the bank. The directorship held by Major General (retd) Abdul Matin, representing the firm, was approved for withdrawal during a board meeting convened by the bank.
Kingsway Endeavors, possessing a 4.39% stake equivalent to 7.07 crore shares also took the decision of stepping down from its directorial role. Salim Uddin represented the company as a director and the bank swiftly granted approval for this action.
The Armada Spinning Mills, owning a stake of 2.01% equivalent to 3.24 crore shares also penned a letter to the bank on 18 June, expressing to exit from the directorial role. During its board meeting on 19th June, the bank granted approval for this resignation. Professor Nazmul Hossain had been serving as the representative director of Spinning Mills when this decision was made.
Moreover, Islami Bank’s other sponsor, Islamic Development Bank, modified their nominee director, contingent upon approval from the Bangladesh Bank.
Factors Driving Foreign Director Resignations
After the transfer of ownership took place, the bank’s financial crisis escalated dramatically due to mismanagement and internal conflicts.
The bank encountered a major crisis in 2022 when the bank extended a TK 900 crore loan to an individual merely a month after his trading company’s establishment, and within a span of 10 days since applying. There are other extremely rapid loan endorsement and distribution cases, with no requirement for collateral or credit reports in any of these instances. In the latest audit conducted by the Bangladesh Bank, it has been that the S Alam Group, the entity in charge of Islami Bank borrowed a staggering 30,000 crore from the bank.
Unusual levels of loans granted to non-standard customers, approved in remarkably swift timeframes, coupled with inconsistent leniency towards collateral regulations, raise suspicions that the bank has been taken over either by its owner or by well-conducted business magnates.
Market experts have noted that the bank’s shares were involved in block trading on the DSE, contributing to substantial transactions in the bank’s shares during the last quarter. A combined total of 14.63 crore shares were exchanged, having a value of 477 crore, where the sellers were identified but no confirmation of the buyers was found.
The balance of deposits and the credit cycle is thrown off due to the presence of money laundering and loan defaulting. In simpler terms, there are no regulatory duties mandating the conversion of debt into investment within Bangladesh. If the trends of defaults, misappropriation, and loan fraud persist within a bank as observed in the case of Islami Bank, the logical outcome would be the bank’s declaration of bankruptcy. The only exception would be if external interventions such as a public bailout, artificially sustain its operations.
Previously, both Oriental Bank and The Farmers Bank were rescued through such means. The question remains: Can Islami Bank navigate these challenges and avoid a path similar to its counterparts?