Al Baraka Bank Bangladesh

Al Baraka Bank Bangladesh now renamed Oriental Bank Ltd, is a joint-venture banking enterprise of Al Baraka Investment and Development Co. of Jeddah, Islamic Development Bank, a group of Bangladeshi entrepreneurs, and the government of Bangladesh. The bank was incorporated on 30 April 1987 as a public limited company to undertake and carry out banking, financial and business activities in strict compliance with the rules of Islamic Law (Shariah) relating to business activities and in particular, by avoiding usury in credit and sale transactions. It commenced banking operations on 20 May 1987 as a scheduled bank with an authorised capital of Tk 600 million and paid up capital of Tk 150 million divided into 150,000 ordinary shares of Tk 1,000 each. The authorised capital of the bank remained unchanged till 30 April 2001, while the paid up capital increased several times and stood at Tk 259.55 million in 2000. The bank is listed with the Dhaka and Chittagong stock exchanges. The statutory reserve and capital reserve of the bank amounted to Tk 386.4 million in December 2000 as against Tk 2.01 million in 1987. 
 

The management of the bank is vested in a board of directors consisting of 11 directors, a vice-chairman, and the chairman. The executive president is the bank's chief executive officer. In 2000, the bank has a total of 644 employees including 469 officers. The bank has a 3-member shariah council to ensure compliance with Islamic rules in all spheres of its banking and financial activities. In March 2001, the bank had 35 branches. Its head office is at Dhaka.

On 31 December 1987, the deposits of the bank were Tk 708.5 million. This increased to Tk 10,736.49 million in December 2000. The types of deposits accepted in the bank include mudaraba term deposits, mudaraba deposits, current deposits, contingency deposits, and deposits in other accounts. On 31 December 1987, total lending in the form of investment of the bank was Tk 413.9 million registering an investment-deposit ratio of 58.42%. The amount of investment grew each year to register at Tk 3,654.3 million in 1990 and Tk 8,760.6 million in 2000, when the investment comprised mudaraba investment - Tk 1,713.80 million, bai-muajjal - Tk 3,781.18 million, hire purchase - Tk 2,118.62 million, commodity finance - Tk 790.98 million, investment in shares - Tk 4 million and other investments - Tk 352 million. The total amount of classified investment of the bank was Tk 1,636.6 million or 30.66% of total investment in 1997 and Tk 1,252.30 million (or 14.29%) in 2000, showing an improvement in the recovery of non-performing investment. Nevertheless, the classified loans had degraded the asset quality of the bank. Major investments of the bank were made in small scale industries including garments, iron and still mills, edible oil refinery, ship breaking, specialised textile, food and beverage, real estate development, transport, trade sector and other investments.

The volume of foreign exchange business handled by Al Baraka Bank during business year 2000 amounted to Tk 4,700 million as against Tk 3,418 million in 1998. Foreign exchange business in 2000 comprised export servicing (23.4%), import financing (63.83%) and remittance facilities (12.77%). The bank has foreign correspondent relationship with 130 foreign bank/bank offices and other financial institutions throughout the world and it maintains nostro accounts with them for settling foreign exchange transactions.

The assets of the bank, excluding off-balance-sheet items, were valued at Tk 1,027.40 million in 1987 and Tk 1,1014.5 million in 2000. Growth ratio of total assets of the bank was 4.48% in 1997 and 9.77% in 2000. The off-balance-sheet assets contributed to the enhancement and improvement of the quality of the bank's assets throughout the entire period of operations. The growth ratio of the off-balance-sheet assets was 45.31% during the year 2000.

The performance of Al Baraka Bank in terms of overall profitability has been unsatisfactory as it suffered losses almost each year of its operation excepting the initial 3 years and the years between 1998 and 2000, when the bank earned a negligible amount of net profit. The factors that caused lower rate of total and net income included low interest income against high interest expenses and large operating expenses. The bank's fee-based income was also low because of limited participation in various services selling activities. Compulsory maintenance of provisions for classified loans has severely deteriorated the income level of the bank. Along with classified loans, non-recovery of interests accrued have also been responsible for its unsatisfactory level of profitably.