Islami Bank is one of the prominent names in Bangladesh’s banking sector. Established on March 30, 1983, this bank has grown over the past four decades to become the largest private commercial bank in Bangladesh. Founded as a joint venture between domestic entrepreneurs and foreign shareholders, the bank operates on the principles of Islamic Shariah, earning a significant reputation both nationally and internationally. According to the bank’s annual report, as of December 31, 2023, Islami Bank alone received 5 billion dollars in remittances, accounting for 23 percent of Bangladesh’s total remittances that year. Additionally, during the same period, Islami Bank held about 9.5 percent of the total deposits in Bangladesh’s banking sector. However, in recent years, there has been a noticeable increase in the bank’s abnormal loan disbursements. Reports often surfaced about large loans being granted to a specific business group in violation of regulations. In fact, in 2024, Bangladesh’s largest commercial bank faced a liquidity crisis and had to seek assistance from the Bangladesh Bank. This situation began in 2017 when one of Bangladesh’s largest business groups, S Alam Group, seized control of Islami Bank. In this article, we’ll explore how S Alam Group took control of Islami Bank.
Overview
In the 1970s, when Islamic banking was introduced in various countries through conferences of finance ministers and Islamic economists from several Muslim countries, Bangladesh also felt the need for it. As a result, in April 1981, the Ministry of Finance in Bangladesh sent a letter to the Bangladesh Bank, advising all state-owned banks to open a separate branch for Islamic banking as a pilot project. In November 1982, a delegation from the Islamic Development Bank (IDB) visited Dhaka to explore the possibility of establishing an Islamic bank in Bangladesh through a joint venture. During this time, the IDB expressed interest in capital investment in the Islamic bank. Consequently, on March 30, 1983, Islami Bank Bangladesh was established as the first Shariah-compliant bank in Bangladesh. At that time, foreign investors held 70% of the capital in the bank, including contributions from Saudi Arabia and Kuwait.
Since its establishment, the bank has opened 394 branches as of 2023, with nearly 3,000 ATM booths across the country, along with a shared ATM network of over 12,000. Over time, the bank has become one of the largest banking networks in the country. In 2012, the bank’s total loans amounted to BDT 34,047 crore, deposits were BDT 41,784 crore, and remittances received were BDT 30,091 crore. Additionally, the bank facilitated import business worth BDT 28,458 crore and export business worth BDT 19,709 crore. According to The Daily Star, since 2012, the bank has consistently ranked among the top 1,000 banks in the world, as listed by the UK-based economic magazine “The Banker.” On the other hand, in just one decade, the bank’s deposits grew to BDT 153,000 crore by 2023. At the same time, the amount of disbursed loans increased to BDT 141,000 crore.
However, since December 2021, this largest private bank in the country has been suffering from a liquidity crisis. At that time, the bank stated that the crisis was mainly due to the withdrawal of a large amount of deposits. The situation became so dire that the bank had to receive collateral-free loans from the Bangladesh Bank as part of special cash assistance to continue its loan and investment activities. However, despite the liquidity crisis, the bank continued to disburse loans, most of which went to one of Bangladesh’s largest conglomerates, S Alam Group. Of the BDT 141,000 crore in loans disbursed by the bank, nearly BDT 75,000 crore was given to various subsidiaries and associated companies of S Alam Group. These loans were repeatedly granted in violation of the Bangladesh Bank’s regulations. The situation began in 2017 when S Alam Group took control of Islami Bank, one of the most shocking events in the history of Bangladesh’s banking industry. But how did S Alam Group take control of Islami Bank?
The Hostile Takeover
The conspiracy to seize control of Islami Bank began primarily when the Awami League government came to power in the 2009 elections. It had long been rumored that Islami Bank was affiliated with the political party Jamaat-e-Islami, which was opposed to the ruling party. As a result, many members of the ruling party had been urging the government to free the top banking institutions from the influence of Jamaat-e-Islami. To solidify their power, some influential members of then the ruling party started planning to take over Islami Bank. They accused the bank of financing terrorism, using a 2012 report from the US Senate’s Permanent Subcommittee on Investigations. After the 2001 Twin Towers attack, US authorities began to take a strong stance against terrorist financing worldwide and were investigating HSBC Bank. During that investigation, the names of two Bangladeshi banks, Islami Bank Bangladesh (IBBL) and Social Islami Bank (SIBL), also appeared in the report due to their transactions with HSBC.
Using that US Senate report as a weapon, then the state minister for home affairs claimed in a statement to the media in 2013 that 8 percent of Islami Bank’s financing was linked to terrorism. Without any concrete evidence, such a statement from the country’s state minister sent shockwaves through the banking sector, the ready-made garments industry, export-import activities, and many other sectors both domestically and internationally. In 2012, Islami Bank held BDT 41,784 crore in total deposits, which accounted for over 7.5% of the total deposits in the banking sector. The bank also received over BDT 30,000 crore in remittances, which accounted for over 27.5% of the country’s total remittance receipts. Additionally, the bank was involved in financing nearly 10% of Bangladesh’s total imports and over 10.5% of its total exports. In response to the minister’s remarks, then the governor of the central bank held an emergency meeting with representatives of major foreign banks, urging them to continue doing business with IBBL despite the minister’s statements. However, by that time, the damage had been done, and the path to taking over the bank had been paved. Demands arose from various quarters for the appointment of independent directors to the bank.
Although the government’s term was nearing its end and elections were approaching, no directors were appointed to the bank that year. After winning the 2013 elections, the ruling party began planning to seize control of the bank once again. According to TBS, initially, there were plans to appoint three to four independent directors who were politically neutral and professional, but this plan could not be implemented until 2015. Meanwhile, in May 2016, Bangladesh Bank Governor Atiur Rahman abruptly resigned, taking responsibility for the hacking of 101 million dollars from the central bank. A few months after his resignation, in May, four independent directors were appointed to the board of Islami Bank Bangladesh, laying the foundation for the bank’s takeover. Among them were 81-year-old founding managing director of Islami Bank, M Azizul Haque, Chairman of the Marketing Department at Chittagong University, Professor Syed Ahsanul Alam, former managing director and chief executive of Pubali Bank, Helal Ahmed Chowdhury, and Director General of Islamic Foundation, Shamim Mohammad Afzal. One of these directors, who was appointed under the influence of the ruling party, repeatedly raised objections to Islami Bank’s audit reports.
At the same time, the Chittagong-based conglomerate S.Alam Group began buying shares of Islami Bank through various shell companies. At the time of the bank’s founding, nearly 70% of its shares were held by foreign investors, but by 2016, foreign shareholders had decreased to 58.46%, while local shareholders had increased to 41.54%. Seven companies associated with S.Alam Group purchased shares in the bank and gained the power to appoint their own directors. However, when these companies appointed their directors, no questions were raised by the Bangladesh Bank about the ownership, operations, or sources of funds for these companies. No action was taken by the Bangladesh Stock Exchange or the Securities Commission either. These companies were registered within a year of buying the shares. The companies that purchased shares in Islami Bank were Excel Dyeing and Printing Limited, Armada Spinning Mills Limited, ABC Ventures Limited, Grand Business Limited, Platinum Endeavors, Paradise International Limited, and Blue International. In this way, S.Alam Group managed to acquire one-fifth of the bank’s total shares.
However, the most unprecedented and sensational event in Bangladesh’s banking history occurred on January 5, 2017. On that day, several officers of the country’s military intelligence agency, DGFI, called the chairman, vice-chairman, and managing director of Islami Bank and took them from their residences to the agency’s headquarters in Dhaka Cantonment. There, they were forced to sign pre-written resignation letters. Within a few hours, a board meeting of the bank was convened at a hotel owned by the military. In that board meeting, the successors of the forcibly resigned officials were determined. In the board meeting, Arastu Khan, a former bureaucrat and representative of Armada Spinning Mills, was appointed as the new chairman of Islami Bank. Additionally, Mohammad Abdul Hamid Miah, the managing director of Union Bank, was appointed as the new managing director of IBBL. Through this process, S Alam Group effectively established a loyal faction within the bank. According to media sources, some senior officers of the central bank played an assisting role in this endeavor. Among them was the then Deputy Governor SK Sur Chowdhury, who has also been accused of assisting former NRB Global Bank and Reliance Finance Limited Managing Director PK Halder in embezzling nearly 10,200 crore BDT from four non-banking financial institutions. Interestingly, Reliance Finance is entirely owned by S Alam.
To solidify his control over the bank, S Alam Group owner Saiful Alam Masud utilized his political influence in this unprecedented event, which involved the inclusion of a state intelligence agency and was described as an unusual incident by the London-based The Economist. The sudden resignation of the bank’s chairman, vice-chairman, and managing director within a day, and their immediate replacement by newly appointed board members, raised suspicions among the bank’s employees and other shareholders. Fearing further troubles for the bank, many shareholders began selling their shares, which S Alam Group promptly purchased. The Islamic Development Bank (IDB), one of IBBL’s key sponsors, decided to sell nearly 5 percent of its shares following this sudden change. IDB’s stake in Islami Bank decreased from 7.5 percent to 2.5 percent. Currently, S Alam Group controls approximately 82 percent of the bank’s shares. According to the Banking Companies Act, an individual, family, or group cannot own more than 10 percent of the shares in a single bank. However, after seizing control of Islami Bank, S Alam Group acquired ownership of 131,891,216 shares through 24 companies, amounting to nearly 82 percent (81.92%) of the bank’s total shares.
The Aftermath
Since gaining control of the bank in 2017, S Alam Group Chairman Saiful Alam Masud has been using it as a personal wealth generator. To make this process smooth and unquestionable, he began placing family members, close associates, and loyalists in top positions within Islami Bank and other banks under his group’s control. Over the past seven years, he has recruited nearly 10,000 employees across various branches of the bank. According to Daily Samakal, he took out approximately 75,000 crore BDT in loans from Islami Bank through various shell companies.
For instance, S Alam Group alone secured a record 23,300 crore BDT in loans from the bank’s Khatunganj branch. This includes 10,083 crore BDT to S Alam Refined Sugar Mill and S Alam Steels Mill, 3,968 crore BDT to S Alam Super Edible Oil Limited, and 3,694 crore BDT to S Alam Vegetable Oil Limited. Other companies that received loans include S Alam Cold Rolled Steels Limited (1,356 crore BDT), Adil Corporation (1,789 crore BDT), Sadia Traders (984 crore BDT), and Century Food Products (1,421 crore BDT). Additionally, Daily Samakal reports that Islami Bank’s offshore banking unit has a total loan portfolio of 1.7 billion dollars. Out of this, 1.5 billion dollars in loans (equivalent to 18,000 crore BDT or the budget of a metro rail project) were disbursed to various companies affiliated with S Alam Group. Islami Bank officials have identified several companies directly affiliated with S Alam Group, even though the loans were issued under different names. Among these is the Masud Printing and Packaging Industry in Chittagong, which alone withdrew 19,603 crore BDT from Islami Bank’s Khatunganj branch. Over the years, S Alam Group has been using the bank as its personal wallet. However, after the fall of the government on August 5, when a company under the group’s control attempted to withdraw loan money from the bank, the bank blocked the transaction. Despite ample evidence of S Alam’s rampant financial irregularities, the central bank’s failure to take action and instead provide support raises questions about its credibility. It remains to be seen how the ‘Interim Government’ will bring S Alam Group’s plundering to justice.
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