Islamic Bank After The Coup

Islamic Bank after the coup

"It's like the Midas effect in reverse," says Badiul Majumdar of shujan, 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.

Fears that the boardroom coup would drag down a comparatively well-managed institution

in a sector marred by political meddling and cronyism now appear to have been justified.

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-eIslami, 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. Leading figures from the Jamaat were sentenced to imprisonment or hanging

If anything, it is surprising it took Sheikh Hasina and her Awami League eight years to go after Islami—

especially given allegations, including from America's government, that it was linked to terrorist organisations.

(The bank has denied the accusations and an official investigation launched in 2017 has yet to publish anything.)

A second purge last year replaced more suspected Jamaat sympathisers with government allies.

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.

The report highlighted loans to six companies belonging to Nassa Group, a giant of the garment industry,

which it says were granted without taking the required collateral and ignoring the fact that there were several Nassa subsidiaries that had defaulted in the past.