Concept of Islamic Banking System in Bangladesh

Abstract

The main purpose of this study is to understand the concept of the Islamic banking system and Islamic banking in Bangladesh. Islamic Banking systems prohibit interest or riba. The concept of riba (usury) and what is riba are also discussed in this paper. The history of Islamic banking in Bangladesh is briefly discussed where Islami Bank Bangladesh being the pioneer of Islami bank of southeast Asia commenced its operation in 1983. It is also very important to know the difference between the conventional bank and Islamic bank which has been compared in this project paper. Conventional banks use interest as a means of their earnings, however, as interest is prohibited in Islam, Islamic banks use equity basis profit and loss-sharing products and services to generate income and sustain the financial industry. Different schemes, modes, term, source of funds, and how they utilize the funds to generate profit has been elaborately discussed in this thesis paper. 10 banks in Bangladesh completely follow the Islamic Sharia in their operation. Their products and service, history, mission, vision, and objectives are briefly discussed. Lastly, How Islamic banks are performing in Bangladesh has been discussed with quantitative data.