Al-Arafah Islami Bank Ltd. Islami Bank Bangladesh

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Shariah Supervisory Committee (SSC) of AIBL
Introduction

Al-hamdulillah, All praise be to Almighty Allah, the lord of all the worlds and beautiful peace and blessings be upon his Messenger Muhammad (S.) and upon his Household and righteous Companions.

Islamic Banking is operated in Bangladesh as per Instructions/Guidelines contained in the Banking Companies Act, 1991 (amended to 2013) and BRPD Circular No-15 Dated 09.11.2009, on Islamic Banking. Shariah based Banks/Windows/Units are to be evaluated/supervised, as to whether they are following the Shariah Guidelines/ Principles accordingly in addition to General Banking Guidelines/Principles requires the Board of Directors to appoint a Shariah Supervisory Committee shall have a minimum of three and a maximum of seven Members for a term not exceeding two years and each Member may be eligible for reappointment. The remuneration of the Members of the Shariah Supervisory Committee shall from time to time be determined by the Board of Directors.

Shariah Members of the Shariah Supervisory Committee sits in the General Meetings and Emergency Meetings (when necessary) to discuss the matters of the Bank to give Opinions & Directives and given solutions thereof from the view point of Shariah Principles.

The Shariah Supervisory Committee (SSC) is represented by 7 (seven) Members consisting of Muslim Religious Scholars in the country, Prominent Ulama, Faqihs having adequate knowledge is Fiqhul Muamalat (Islamic Commercial Law), Experienced Bankers and Eminent Economists nominated by the BOD of the Bank. It is mentionable that the decision of the Shariah Supervisory Committee is conclusive decision for all of the Banks, the Board of Directors is obligated to obey the Shariah decisions (Fatwas), irrespective of whether a unanimous or a majority consensus secured the decision.

It will be the responsibility of the Board of Directors of the respective Banks to ensure that the activities of the Banks and their products are Shariah Compliant. The Board of the Islamic Banks/Conventional Commercial Banks having Islamic Branches, therefore, be constituted with Directors having requisite knowledge and expertise in Islamic Jurisprudence. The Board may form an Independent Shariah Supervisory Committee with experienced and knowledgeable persons in Islamic Jurisprudence. However, the Board shall be responsible for any lapses/irregularities on the part of the Shariah Supervisory Committee.

(Ref : Guidelines for Islamic Banking BRPD Circular # 15, Dated-9 November, 2009, Article # Section-iii, Bangladesh Bank & Memorandum and Articles of Association of AIBL, Clause # 158.1. 158.2 and 158.3)
Implications & Important Duties of Shariah Supervisory Committee

Adverse consequences that may arise due to non-compliance with any Shariah Principle may be summarized as follows:

Implications

  • Direct violation of the commands of Allah (swt) and His Prophet (sm.).
  • Impede the Bank and the workforce from the Blessing or Barakah of Allah (swt) which will make the banking activities meaningless (not become 'ibadah before Allah).
  • Contravene the provisions of Bangladesh Bank's 'Guidelines for Islamic Banks 2009' which may bring adverse consequences.
  • Jeopardize or affect the Bank's reputation as an Islamic Bank.
  • With regard to 'Agreement and its Execution' would render the contract between the Bank and Customer null and void under the perspective of Shariah. Therefore, any profit gained from this contract would be considered as non-halal.
  • Income generated from a Shariah non-compliant transaction is not recognized as the Bank's regular and Halal Incomes. In the event where the Bank receives non-halal income unintentionally, the amount is to be channeled to the Bank's CSR activities as advised by the Shariah Supervisory Committee.

Important Duties of SSC

  • To advise the Company on the operations of its Banking Business in order to ensure that they do not involve any element which is not approved by the Islamic Shariah.
  • To give their views on any matter referred to it by the Board of Directors or by the Chairman or by the Bank Executives.
  • To sit in the meeting of the Board of Directors and give their views when requested.
  • To act as arbitrators when so appointed.
  • To impart Islamic Training and Teachings to the Bank Officials and to the comply with any other directions imposed by the Regulatory Authority from time to time.
  • The Shariah Supervisory Committee of the Bank plays a vital role in framing and exerting policy for strict adherence of Shariah Principles in all activities of the Bank since its very inception with a complete assurance that all transactions are free from Riba (Interest).
  • Ensuring Shariah based & Compliant Modes & Scheme before introducing any new product to the Bank.
  • SSC certifies Shariah Compliance on the Annual Report of the Bank and Reports to BOD, Management and specially Shareholders to the AGM.
  • Shariah Supervisory Committee gives necessary instructions to rectify the Laws in implementing Shariah Guidelines into the Banking Operations time to time & when required/requested.
    • (Ref : Guidelines on Internal Control and Compliance in Banks, Bangladesh Bank & Bye-Law, Shariah Supervisory Committee, AIBL)

Shariah Supervisory Secretariate & Shariah Inspection

The Shariah Supervisory Secretariate works by Shariah Secretary, Muraqibs (Shariah Inspectors)/Officers/Staffs mainly for Shariah Inspection to all Branches and helping to implement the Fatawas and Guidance of SSC. The Secretary liaises with SSC and BOD and handles other activities according to Bye-Law of SSC. The Muraqibs (Shariah Inspectors) submit the Inspection Reports to Shariah Secretariate, Management and SSC to assure Shariah Compliance. As per decision of the Shariah Supervisory Committee, Shariah Secretariat starts for Shariah Inspection to all the Branches of the Bank.

Al-hamdulillah, The Secretary of SSC and The Muraqibs of SSC being divide into different teams & inspect all Branches of the Bank. They made & sent the Shariah Inspected Report to the respective Branches and collected their views and after that they submit the same to the Shariah Supervisory Committee's Meeting to segregate and finalize the Doubtful Income. After the completion of Shariah Inspection of all Branches they finalize the Doubtful Income and inform the Total Amount to the Board of Audit Committee to take administrative action against the same Branch's Manager and Investment In-charge providing Charge Letter. Moreover, before finalizing the Annual Balance Sheet of the Bank Total Doubtful Income becomes segregate from the Total Investment Income of the Bank for avoiding distribution the same to Depositors as Profit. Shariah Supervisory Secretariate does some works are as below :

  • Arrangement of Shariah General Meeting, Emergency Meeting to discus the matters of the Bank to give opinions & directives and solutions thereof from the view point of Shariah Principles when required.
  • Arrangement for deploying Shariah Inspection Team to conduct Shariah Inspection of all Branches of the Bank and different division of HO like FAD, ID, Treasury and Subsidiary Company of the Bank (AIBL CMSL) from Shariah point of view to detect & segregate the Doubtful Income of the Bank and to ensure of Shariah Compliance in all operations of the Bank and approved the Bank's Annual Balance Sheet thereof.
  • To submit of Shariah Supervisory Committee's decision to the Board of Audit Committee for taking necessary administrative action against respective Branch's Manager & Investment In-charge.
  • Arrangement of Day-Long Shariah Training Program Zone wise for the Investment & Foreign Exchange related Officials of the Branch who did not get any training of Shariah earlier to increase Shariah awareness and to Shariah Implement in AIBL properly.
  • Arrangement of client's Get-together Zone/Branch wise of the Bank for developing awareness for Shariah Compliance in Investment & Islamic Banking, even Shariah awareness program in the time of Shariah Inspection among the all Officials in all Branches of the Bank to stop bad practice of adjusting the old/overdue investment by creating factitious new investment-without actual Buying & Selling of goods to the clients.
  • Shariah Report, views and opinions & suggestions has to prepare independently before finalizing Annual Report of the Bank.
Objectives and Areas of Shariah Inspection

Shariah Inspection should be conducted based on the Shariah non-compliance Risk Rating to mitigate the above Shariah non-compliance Risk. Shariah inspection to be conducted for achieving the following objectives:

  1. To increase monitoring and mentoring the Shariah violating Branches.
  2. To conduct frequent Shariah Inspection in the violating Branches.
  3. To bring maximum investment under Shariah Inspection and to cover maximum areas of Shariah Compliance.
  4. To maximum the utilization of working hour of the Muraquibs of the Shariah Secretariate.
  5. To introduce Shariah Rating of the Branches.

The area of Shariah Inspection presently covers the following activities of the Bank Branches:

  1. All contract, Transaction, Policy, Product, Memorandum and Articles of Association, Other Manuals, Financial Statement and Circulars issued by Head Office from time to time.
  2. Investment activities of the Branches.
  3. Foreign Exchange activities of the Branches.
  4. General Banking activities of the Branches.
  5. Personnel Management.
  6. All investment invested by the Head Office directly.
  7. Others.

To determine the individual Branch's Shariah non-compliance risk position based on operational performance, 100 marks may be allotted as per the categories mentioned in the Guidelines on Internal Control and Compliance in Banks by Bangladesh Bank. On the basis of the score obtained on the method mentioned earlier, the Branches may be divided into the following Three Categories in every year :

  1. High Shariah non-compliance risk bearing Branches;
  2. Medium Shariah non-compliance risk bearing Branches and
  3. Low Shariah non-compliance risk bearing branches.

Primarily the Branches which obtained a score of 30 or above, may be treated as High Risk Branches, the Branches which obtained a score from 15-29.99 may be treated as Medium Risk Branches, and the Branches which obtained a score of 0.00-14.99 may be treated as Low Risk Branches. It is mentionable here that, these risk indicator slabs of considering a Branch as High/Medium/Low Shariah non-compliance risk bearing may be changed from time to time if necessary.

Depending on gravity of deviation from Shariah Compliance, the Secretary of SSC will categorize the Branches/Windows into High, Medium and Low risk categories and the frequency of Shariah Inspection shall be as under :

Risk Category

High
Medium
Low

Frequency of Shariah Inspection

Half-yearly
At least once a year
As decided by Shariah Board/SSC

The Shariah Inspection should check at least a percentage of the Income of the Bank/Windows as decided by the Shariah Board/SSC. The Shariah lapses are to be categorized in two categories; viz. Major Violations and Minor Violations. All the violators (especially those with major violations) must be sanctioned appropriately, which will help the Bank to become more Shariah Compliant. Repeat offenders are to be dealt with severely to stop recurrences of Shariah violations.

 

(Ref : Guidelines on Internal Control and Compliance in Banks, BRPD Circular # 03, Date : 8 March'2016, Bangladesh Bank)

Motivational & Training Initiative of the SSC

Shariah Supervisory Secretariate arrange always countrywide Divisional based Daylong Shariah Training/Workshop Program to increase awareness among the employees of the Bank regarding Shariah Compliance and the Members of Shariah Supervisory Committee, Secretary and Muraqibs of the Secretariat were trainer thereof. Besides, They arrange motivational program to increase Shariah awareness among our Officials during the visit/inspection of our all Branches also. They distribute Shariah Manual on Islamic Banking and Islami Banking : Shariah Nitimala Books among the employees of our Branches those who did not receive earlier. Some Books like, Translation of The Al-Quran, Tafsir, Hadith and Islamic Banking purchase by the Shariah Secretariate to enrich the Library of Shariah Supervisory Secretariate.

Important Shariah Opinions for the Shareholders to the AGM

Bismillahir Rahmanir Rahim
Honorable Shareholders of Al-Arafah Islami Bank Ltd.
Assalamu Alaikum Wa Rahmatullahi Wa Barakatuhu

As a Shariah Supervisory Committee we examine all the Banking activities to see whether all Shariah Laws, Guidelines, Directions and Fatwas given by the Shariah Supervisory Committee from time to time have been complied with by the Bank or not. On the other hand it is the responsibility of the Management of the Bank to ensure Shariah Compliance thereof. On completion of the examination Shariah Supervisory Committee places an Independent Report based on Islamic Shariah before the Shareholders as some opinions:

  • On completion of the Shariah Inspection SSC has found that more or less all the activities, transactions and deals have been in accordance with the Shariah Principles and Regulations.
  • Distribution of profits among various Mudaraba Depositors has been done in line with the Mudaraba Principles as per Sahibul Mal, i.e. as per the contractual agreement between the Bank and the Depositors.
  • Since the Bank does not pay any Zakat on the money of the Depositors and Shareholders the responsibility of paying Zakat thus lies with the respective Depositors and Shareholders.
  • Although all the activities have been in terms with Shariah Principles nevertheless due to ignorance of the obligation of abiding by some internal and international regulatory bindings and lack of proper due diligence there has been few cases where the means of the income earned have not been approved by the Shariah. This has been termed as Doubtful Income and the Bank has been advised to separate the same from its Total Basic Income and spend it on the basis of Shariah prescribed ways. This money is not to be distributed among the Depositors or any Shareholder as Profit or Dividend.

May Allah (swt) forgive all our mistakes that have been done intentionally & unintentionally and accept all our good deeds for His sake and give us Tawfiq to do more and more activities beneficial to mankind, Ameen.

Members of Shariah Supervisory Committee, AIBL
Mufti Sayeed Ahmad Muzaddedi
Chairman
Mufti Muinul Islam
Member
Mufti Shahed Rahmani
Member
Mawlana Mohammad Abdul Hai Nadvi
Member
Mohammad Abul Hossain Al-Azhari
Member
Alhajj AZM Shamsul Alam
Member
Al-Hajj Abdus Samad
Member (By Holding of Position)
Md. Abdur Rahim Khan
Secretary

(Md. Abdur Rahim Khan)
Senior Vice President & Secretary
Shariah Supervisory Committee

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