M Azizul Huq (1935-2020) was undoubtedly a pioneering figure who made unique contribution in the early stages of the establishment of Islamic banks in Bangladesh. He started his banking career with Habib Bank in1958 in Karachi, Pakistan. Since then, he has worked at National Bank of Pakistan and Sonali Bank, Bangladesh before starting his Islamic banking career by joining Islami Bank Bangladesh Limited (IBBL) as the Founder Chief Executive in 1983. Later, he also had the rare opportunity to serve successively as the Founder Chief Executive of Social Investment Bank Limited (Now Social Islamic Bank Limited- SIBL), and Islamic Finance and Investment Limited (IFIL). During 1985-94, he taught Islamic Banking and Finance at the University. He received training in Islamic Banking and Economics under direct supervision of Ahmed El-Najjar, who is globally recognised as the father of Islamic Banking, at the Al-Azhar University, Egypt. He was the first recipient of the prestigious annual Islamic Banking Award introduced by the Central Shari'ah Board of Islamic Banks of Bangladesh (CSBIB) in 2005. Almost all Islamic banks and Islamic windows and branches of conventional banks have taken his advice. For this, he is arguably recognised as the father of Islamic Banking in Bangladesh.
The above two paragraphs, in a nutshell, encapsulates the salient features of M. Azizul Huq's lifelong journey and career in banking over six decades. He was not only a distinguished Islamic banking practitioner, but also an outstanding thinker and erudite intellectual. He contributed scholarly pieces on Islamic banking, its philosophy, foundations, operational principles, and development. These works were scattered in different places. Although Huq had expired in November 2020, it was through the painstaking efforts of M. Azizul Huq Centre, established by his family members, that the book titled "Bangladesh Marches Towards Islamic Banking" was published in February 2023 based on a compilation of 12 scholarly works of M. Azizul Huq written between 1980 and 2019, along with a brief biography of the author.
In the preface, Mrs. Jahan Ara Huq, the author's wife, has aptly described his dream and dedication to establish Islamic banking. Azizul Huq was a dreamer and doer. For the sake of review, the contents of the book are broadly divided into two parts. 5 articles belong to the first group which was written before the establishment of Islamic banking in 1983 and the rest 7 articles were written later on. In his 1980 article on - Interest Free Islamic Banking (p.13-15), Huq presented his visionary ideas of establishing full-fledged Islamic banking with a bold statement that defines the necessary condition of the establishment of Islamic bank. In his words: "Islamic bank presupposes an Islamic society and an Islamic polity". From a historical perspective, he showed us that Muslims were the forerunners of banking and the modern monetary system. With their unflinching faith in the Almighty Allah, they continued their commercial and business activities without interest or usury for centuries. The author believed that Islamic baking was possible within the context of present-day problems and complexities and for this to happen, a dedicated team of experts needed to sit down and draw up the details as to how to set up an Islamic Bank.
Huq noticed some common misgivings among the scholars as well as the general people regarding Islamic baking. In his 1982 article (p.24-46), he clarified some of those misgivings from socioeconomic points of view. He touched upon various intellectually challenging issues including inflation vs interest, profit vs interest-based banks, interest vs saving, profiteering, profitable vs socially desirable projects, social environment for Islamic banking in Bangladesh etc. He convincingly argued for Islamic banking as a road to social justice. According to him, Islamic banks can ensure social justice because of strict pre-investment appraisal from shari'ah point of view and the profit-sharing mode of operations to promote risk sharing. Moreover, interest-free loan (Qard al Hasanah) and Zakat Pool from Islamic banks' own resources were effective tools for establishing a caring society. Interest-free loan was used to finance education, hospitals, low-cost housing, public transport etc. while zakat was used to finance high social priority but economically not viable projects. He further described the role of shari'ah based banks in the promotion of zakat-based society. From an analysis of economic profile, he argued that the amount of zakat from the rich 25 per cent people can reach up to Tk. 25,000 crore and if this amount of zakat is given to 23 per cent hardcore poor for five years continuously, poverty can only be found in the museum.
In his 1983 article that bears the book's title (p.62-74), Huq explained the attitude of the Bangladesh government as well as the trend of public opinion towards Islamic banking. He found that the majority of Bangladeshi Muslim population have a total abhorrence for interest, about one-third of bank deposits are in the interest-free accounts and many potential clients do not at all come to the Riba-based banks only to avoid interest. After the establishment of Islamic bank, he wrote on the possible impacts of Islamic banking in 1985 (p.16-23). He defined Islamic Bank as a dealer in equity as opposed to Conventional Bank as dealer in credit and argued that Islamic banking is more resilient than its conventional counterpart in terms of financing the rural and institutional sectors and more effective in controlling inflation than conventional banks.
As a pragmatic figure, Huq was always aware of the operational challenges of Islamic banking in Bangladesh. In his 1995 article (p.146-161) (at that time only two banks out of over 30 financial institutions followed Islamic banking model), he identified that Islamic banks were operating in Bangladesh under constant threat of low profitability and willful defaults because of the absence of legal framework for Islamic banking, shortage of support institutions and trained manpower, and absence of interest-free securities. He then placed Mudaraba based mutual fund as an investment solution to earn income and pay dividend to certificate holders. In his 2010 article (p.187-191), he discussed ten (10) reasons for which interest-based banking needs urgent reform. These include: collateral-oriented lending, poor-to-rich allocation of resources, collecting deposits from retail market while investing them into wholesale market, higher earning of borrower-entrepreneurs using depositors' money, continuous transfer of real purchasing power from the depositors to borrowers. Conventional bank does not share any loss of borrowers but earns income though them making injustice to the entrepreneur-borrower. In his 2012 article (p. 109-145), he presented two separate frameworks for profit payout to Mudaraba depositors, as practised in Bangladesh: Weightage-based framework and Income Sharing Ratio (ISR)-based framework. After his experience over the years and a serious study of various applications of Mudaraba principle, he concluded with a conviction that ISR based framework is superior over the Weightage-based framework.
Two articles were devoted to discuss the recent developments of Islamic banking in Bangladesh and the way forward. The 2010 article (p. 162-178) discussed shari'ah banking from Bangladesh perspective. He gave credit to various initiatives of the government and the central bank, Bangladesh Bank, as well as the role of organisations at the private level i.e., Islamic Bank's Consultative Forum (1995) and Central Shariah Board for Islamic Banks of Bangladesh (2001) for the growth of Islamic banking in Bangladesh. He recommended for setting up a unified vision, standardisation and uniformity in shari'ah compliance, capacity building, promoting academic courses on Islamic banking including Diploma/ MBM in Islamic banking, apex training institute for all Islamic banking and finance institutes for a coherent and sustainable development of the Islamic finance ecosystem aiming at greater contribution to the economy.
Huq discussed on Islamic banking in Bangladesh as the promising agenda for the 21st century in his 2019 article (p.75-92). He described the Islamisation process of banking in 3 models of Islamic Banking: born Islamic banks, converted Islamic banks, and banks with dual operations. He also noticed that the present-day bankers have only limited attention to the mechanism of Islamic banking which cannot solve global socioeconomic problems. He, therefore, urged Islamic banking practitioners to pay attention to the objectives (maqasid) of Islamic banks.
I am sure the book will be an important addition to the global repository of knowledge on Islamic banking. It is a must read for those interested in the genesis, impact and growth of Islamic banking in Bangladesh for the last four decades.
Foyasal Khan is an economist based in Dhaka and a PhD holder in economics from International Islamic University Malaysia.