Are Shari’ah Governance and Risk Management Important? A case of Islami Bank Bangladesh Ltd
June 28th, 2018
By Md Akther Uddin, PhD
This paper studies Shari’ah governance and risk management practices in the biggest Islamic bank in Bangladesh, Islami Bank Bangladesh Ltd (IBBL). The study is descriptive and comparative in nature. We have analyzed existing literature to compare Shari’ah governance framework and used secondary data to understand the risk management practices in IBBL. The results indicate that Shari’ah governance differ across regions and legal institutions but uniformity is recommended to further develop the Islamic Financial Institutions (IFIs) in both Muslim and non-Muslim countries. In Bangladesh, IBBL follows the AAOIFI standards in Shari’ah governance and has maintained high standard so far. However, the situations in other Islamic banks are not very satisfactory. IBBL has developed comprehensive risk management framework but still face significant investment and credit risk with growing non-performing loan and excess liquidity risk due to limited short-term investment opportunities. The study could help policy makers to develop comprehensive shari’ah governance and risk management framework in IFIs across the world.