It is now more similar to the country’s other crony-ridden banks
, an anti-corruption pressure group. “Everything the government touches turns not to gold, but rather from gold to dust.” He is talking about Islami Bank Bangladesh, which was rocked in 2017 when the government sent military-intelligence operatives to force out senior executives and board members, and replaced them with figures more to its liking.
Established in 1983 as Bangladesh’s first bank run on Islamic principles, Islami thrived by handling a large share of remittances from emigrant workers and by lending to the booming garment industry. Its troubles stem from its links with Jamaat-e-Islami, Bangladesh’s largest Islamist party, which allied with Pakistan during the war of succession of 1971. One of the first acts of the current prime minister, Sheikh Hasina Wajed, after taking office in 2009 was to set up a court to try war crimes.
Bangladesh’s state-owned banks have always had government men on their boards and in management, who lend to their allies. “But now this is happening in private banks like Islami Bank, too,” says Fahmida Khatun, the director of the Centre for Policy Dialogue, a think-tank in Dhaka. According to a report by Bangladesh’s central bank, many of the loans Islami has granted have breached financial regulations.
Islami’s operating profits for 2018 were 27.7bn taka , a 14.5% increase from 2017. But net profits, with provisions against bad loans and corporate taxes deducted, are expected to be much lower. Its market capitalisation has dropped to 42bn taka, down from 59bn taka at the end of 2017. Until recently Bangladesh’s most valuable bank, it is now worth just half as much asAt the end of last year non-performing loans came to 33.2bn taka. That is just 4.3% of all loans—better than the 11.
People with political connections not only find it too easy to get loans from banks the government controls, including Islami Bank, says Biru Paksha Paul, a former chief economist at the central bank, but face little penalty for defaulting. “Wilful defaulters” have strained Bangladesh’s banks in the past three years, even as the economy has seen speedy growth. If the banking sector continues to deteriorate, will it be able to keep supporting growth? Responds Ms Khatun, “I doubt it.
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