National and Global Islamic Financial Architecture:

Problems and Possible Solutions for the OIC Member Countries

The Guidelines do not address all aspects of the Shariah and require Islamic banks to follow the

Shariah rules set by their respective Shariah Supervisory Committee as well as those of the

AAOIFI. The banks are required to disclose, among others, the types of Islamic deposits, the

class of Shariah contracts used (such as Murabaha, ijarah, Mudaraba, salam, istisna'a etc),

obligations to zakat payments, and income derived from Shariah non-compliant activities.

Islamic banks are also required to include Shariah Committee Reports as a part of their Annual

Reports, and the regulatory guidelines provide the minimum disclosure that should be

included in the report.

Overall, the Guidelines on accounting issues provide the minimum disclosure

requirements on Shariah related issues that should be followed by the Islamic banks. As a

result a lot of information may be absent which is vital for fair disclosure. In the

Bangladesh context, despite the requirement to comply with the BFRS, three Islamic banks

have voluntarily opted to comply with both BFRS and AAOIFI FAS.

Rating Agencies

Bangladesh Bank has 8 ratings agencies licensed by the Bangladesh Securities & Exchange

Commission (BSEC). In case banks have an international exposure they can also use the ratings

of the international rating agencies such as Fitch, Moody and Standard & Poor. Islamic banking

branches and windows of the conventional commercial banks are rated on the same basis as

their conventional counterparts. Bangladesh Bank issued a guideline on the External credit

rating under the "Implementation of Basel III in Bangladesh" on 21 December 2014 (BB 2014).

The methodology of the rating is stated as 'The capital requirement for credit risk is based on

the risk assessment made by External Credit Assessment Institutions (ECAIs) recognized by BB

for capital adequacy purposes". While the conventional Rating Agencies rate the Islamic banks

in Bangladesh, there has been no sukuk introduced to date in the country. Of the eight ratings

agencies, one (Emerging Credit Rating) has introduced ratings specifically for Islamic financial

institutions.

4.1.6. Consumer Protection Architecture

Consumer Protection and Financial Literacy

The Consumer Rights Protection Act, 2009 (Act No. 26 of 2009) (GOB 2009) was enacted in the

country to provide for the protection of the rights of consumers, prevention of anti-

consumer rights practices and for the purpose of making provisions for matters connected

therewith. Bangladesh Bank has taken steps to enhance Consumer Protection and Financial

Literacy. The second Strategic Plan 2015-2019 of Bangladesh Bank (BB 2015b) also recognizes

empowering consumers by protecting and educating consumers to be one of the key enablers

of the development of the financial sector in the country. To make its financial inclusion

initiatives fruitful and comprehensive, BB has strengthened the consumer empowerment

Al-Arafah Islamic Bank Limited stated in their financial statements that BAS/BFRS were applied 'to the extent that these do not

contradict with the applicable statutory provisions and standards issued by the AAOIFI'. Islami Bank Bangladesh Limited stated in

the annual balance sheet that 'its consolidated and separate financial statements had been prepared in accordance with the

Bangladesh Bank Circulars, IFRS adopted as BFRS, securities law, exchange regulations and standards issued by AAOIFI, as a

member of that organization'. Shahjalal Islami Bank's notes on the basis of preparation mentioned that, ' ...the financial statements

have been prepared in accordance with the 'First Schedule (Sec-38) of the Bank Companies Act 1991 ... and ... Bangladesh

Accounting Standards (BAS) and Bangladesh Financial Reporting Standard (BFRS), Standards issued by the AAOIFI and other

related laws and rules applicable in Bangladesh' (AOSSG 2010).

Emerging Credit Rating Limited, Bangladesh. Web: